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1Chapter 1: Distribution
Module -1
1 DISTRIBUTION
Unit Structure
1.1 Objectives
1.2 Introduction
1.3 Distribution
1.4 Different ty pes of intermediaries
1.5 Channel of distribution
1.6 Factors affecting channels of distribution
1.7 Functions performed by middlemen
1.8 Logistic
1.9 Components of logistics management
1.10 E-marketing
1.11 Online retailing
1.12 Summary
1.13 Exercise
1.1 Objectives
After completing this module students will be able to:
• Understand the various distribution channels and function performed by
various intermediaries in distribution channel
• Understand the logistics and various components of logistics
• Understand the concept e marketing and how it will helpful for the company
to increase its market share.
• Understand the current scenario of Online retailing in comparison wit h
foreign countries.
1.2 Introduction
Customer is king in today’s market. Satisfaction of customer is primary motive of
every company or manufacture. In order to satisfy the customer in is not only to
deliver the quality goods at right price but also it s hould ensure that customer
should get the goods at right time. If customer required the goods of particular
brand and it is not available in the market when he want than it will force the
customer to move to other brand available in the market. Customer pr oduction is
centralized at one place but the customer are scattered all over the world. In order munotes.in
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to tap the large customers base it in necessary for the company to have strong
distribution channel.
1.3 Distribution
1.3.1 Meaning of Distribution
Organizat ion is engaged in producing the various kinds of goods and services, all
these goods bring to the knowledge of customer by various promotional activities such as advertising, publicity etc. Just making the people aware about the introduction of new product is not enough it should actually reached the final
customer for use. Success of every company is depend s upon how fast it make the
goods available to its customer for use. Distribution channel of the company plays
very important role in this area. There are various intermediaries involve in
distribution channel who bring t he company closer to the customer. More the
intermediaries involve in distribution channel more the cost to the company but
should keep in mind that reaching product in the customer hands very fast is
necessary. If the company reduces the intermediaries in distribution channel to save
the cost of distribution and product does not reach to customer on time than all
efforts made by the company by way of promotional activities will become useless
as demand increase but lack of supply due to improper distributi on channel.
1.3.2 Definition of Distribution Channel
According to Philip Kotler – “Every producer seeks to link together the set of
marketing intermediaries is called the marketing Channel also Trade Channel or
Channel of Distribution”.
According to Mc Carthy – “Any sequence of institution from the producer to the
consumer including one or any number of middlemen is called Channel of
Distribution”.
1.4 Different Types of Intemediaries
There are various intermediaries involved in distribution channel for delivering
goods or services from its manufacturer or producer to ultimate customer. Some of
the intermediaries explained as follows.
1. Broker:
Broker is type of agent who acts on behalf the principal. He is not in physical
possession of goods; he deals as representative either for buyer or seller of
goods or services. Brokers are experts in their respective fields and companies find their services really useful in distribution of goods and
services.
2. Wholesaler:
Wholesaler is link between producer and retailer. Wholesaler generally buys
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for further distribution. Wholesaler may take the goods from producer on
credit basis and once it sold to retailer they clear their dues.
3. Retailer:
Retailer is act as a link between wholesaler and final consumer. Retaile r buys
the goods in large quantity from wholesaler and sale in small quantity to the
customers. Retailer gives the feedback about customer preference to the
wholesale who in turns inform the same to the producer or manufacturer for
better product modificat ion.
4. Sole Selling Agent:
Generally well repute firm from the local area is appointed as selling agent
for that particular area. Company appoint this sole selling agent who take
responsibility of advertised, warehoused and deliver of goods or services in
particular area.
5. Commission Agent:
Some Individuals, firm or companies are acting as buying and selling agent
for big manufacturer or producer. They buy and sale the goods on their own
account and at own risk of loss. These Individuals, firms and companies
generally called Commission Agent.
1.5 Channels Of Distribution
Distribution channels are the path selected by the company to deliver the goods to
customer in faster and convenient way. This route between company to customer
involve various intermediaries such as wholesaler, retailer etc,
Channels of distribution are classified into four categ ories.
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Channel of distribution 1 .
Producer Consumer
This channel of distribution is also called as Direct channel of distribution. This is
simplest and shortest channel of distribution as producer or manufacturer are
selling the goods or services directly to the final consumer without the inv olvement
of any intermediaries. This is very cost effective for the companies as company
save the cost of commission payable to the middlemen. Manufacture s of the goods
are in better position to control the distrib ution process. Producer sold the goods
via giving door to door service to custom er or via direct mail. Some producer
having their own retail shops from where the goods are directly sold to customer.
Example: Bata company sale their sh oes from their Bata showroom.
Channel of distribution 2
Producer Retailer Consumer
This channel of distribution is also called Retail Channel of distribution as only one
middleman i.e. Retailer is involve in this distribut ion channel. In this channel
company sell their goods or services to big retailers who do the work of making the
goods available to the final end consumer. This channel of distribution is generally
used for the distribution of consumer durables. Example Vijay sales
Channel of distribution 3
Producer Wholesaler Retailer Consumer
This is very common and mostly used channel of distribution. In this channel of
distribution two intermediaries are involve one is wholesaler and another retailer.
In this channel wholesaler purchase the goods in large quantity from the producer
and sale to the different retailers. Retailers purchase the goods from this wholesaler
and sale the same to the end consumer. This channel helps the company to distribute
the goods vary fast across the market and increase its ma rket share. As the number
of intermediaries increase it increase the cost of the company but at the same time
generate more revenue by increase in sales volume.
Channel of Distribution 4
Producer Agent Wholesaler Retailer Consumer
In this channel of distribution three intermediaries involved namely agent, wholesaler, and retailer. Here agent take responsibility to distribute the goods to
selected wholesale dealer who further distribute the goods to the retailer who in
turns make the goods available to ultimate customer. This channel is generally
followed for wider distribution of goods and services across the nation.
1.6 Factors Affecting Channels Of Distribution
Selecting suitable channel of distribution for its goods and services is challenging
task of every organization. Every company aim is to minimize the cost and munotes.in
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maximize the profit. Keeping less number of intermediaries in distribution channel
helps the company to achieve the same. There are various factors that company
should take into consideration before selecting proper channel of distribution for
its goods and services.
A. Product related fact or: Various features of the product has to be taken in to
consideration before selecting channel of distribution for the product.
a. Cost of product: If product cost is very high than small channel of
distribution is selected. Example: product like jewellery, watches small
channel of distribution is selected by company.
b. Perishable nature: Goods which are perishable in nature will generally
deliver by selecting small channel of distribution where as for FMCG
product such as soap, shampoo etc, which are produce in bulk quantity
will be deliver by using longer distribution channel.
c. Customized or standardize product: Customized product are made as
per customer specification and require direct sales channel for its
distribution. Standardize products carry similar characteristic and produce in bulk quantity and require longer channel for its distribution.
d. Technical nature: Product which are technical in nature generally
require channel of distribution which is closure to customer. For
example Electronic equipment’s a nd automobile
B. Company related factor : These factors are related to internal environment of
the company.
a. Goodwill: Goodwill of the company also affects the channel of distribution. If the company carries good reputation in the market than
it doesn’t have t o depend upon the intermediaries to increase sale, they
can sale their products from their own outlets.
b. Ambition to control distribution channel :Company which want to
control their distribution to reduce the cost and price will generally do
not depend up on intermediaries
c. Financial strength: Those companies which are financially strong
enough develop their own channel of distribution, on the other hand
financially weak companies has to relay on intermediaries.
C. Market related factor : These factors are rela ted to features of particular target
group.
a. Number of buyers: If the demand for the company’s product in the
market high, as more number of buyers then company should use
services of intermediaries to reach the customer.
b. Types of buyers: Buyer is generally classified in two categories such as
Industrial buyer and General buyer . If number of buyer is higher for munotes.in
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general category goods than more intermediaries will be involved. But
for Industrial product it requires direct sales approach hence no or less
middlemen required.
c. Buying quantity: If the customers are buying goods in small quantity
than it is necessary to involve intermediaries for its distribution.
d. Size of market: If the customer of the company is scattered geographically then company need to depend upon middlemen fo r
distribution of its product, in that situatio n larger distribution channel
is selected.
D. Competitive factor : The competition exists in market also affect the choice
of distribution channel. Sometime company follows the same channel as
followed by competitor. Some company use different dist ribution strategy
than competitor for competitive advantage.
E. Environmental factor: These factors are related with external environment in
which company operates.
a. Economic condition: Economic condition exists in market also determine the choice of distribut ion channel. In case of economic boom
when inflation is lower and income is higher, longer channel of
distribution is preferred . When country is facing recession situation
length of distribution channel is reduce.
b. Legal barriers: Some legal restriction also determines the distribution
channel for company. As per MRTP act which restrict company from
creating monopoly situation in supply and distribution channel.
c. Competitors’ channel: Most of the companies prefer to f ollow their
competitor’s approach of distribution channel to avoid risk of high cost
of distribution.
d. Fiscal structure: Fiscal structure of the country shows the financial
position of the country which reflects economic growth of country.
This fiscal struc ture across the country may changes from time to time
and it affects the cost of distribution.
1.7 Functions Performed By Middlemen
1 Feedback
Middlemen are the link between company and the ultimate consumer. They take
the feedback about company’s product from the customer and pass necessary
information to the company for suitable modification into their goods or services.
Most of the companies a lso use the services of the middlemen to get the survey
done about company’s goods or services. Company also gets the information about
competitor’s product quality and demand in market from middlemen. munotes.in
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2 Concentration on core area
Middlemen help the producer or manufacture to concentrate on their primary
function of manufacturing or producing and take the responsibility of packing,
warehousing, distribution, insurance etc. Some middlemen advertise the goods of
the company on behalf the company. These services of the middlemen help the
company to concentrate on their main area production and increase productivity of
the organization.
3 Risk of loss
Neither buyer nor sellers are ready to take the market risk for possible loss of goods
during transit or storage. It is the middlemen who take the risk of loss goods in
supply chain process. They take the responsibility of loss of goods during transit,
risk of theft, perishability and other hazards to the goods.
4 Financial assistance
Middlemen such as bank or other financial institution provide financial assistance
to the manufacturer for various working capital and fixed capital requirement.
5 Accumulation
Accumulation is important function performed by the middlemen when they
recognize change in demand for the goods across the market. They accumulate the
goods during this situation and maintain the price stability in the market.
6 Sorting
Middlemen sort out large heterogeneous products manufactured by big companies
into smaller homogeneous unit as per its quality and quantity. The main purpose
behind this is to convert the goods of large quantity into the small size which is the
need of market across the nation.
7 Promotion
Middlemen offer the promotional services to the company by displaying their
products in their outlets or offering special discounted price for particular brands.
These middlemen are in direct contact with the customer so they can promote the
product of the company to the customer more conveniently.
Test your knowledge
1. Explain the various channel of distribution.
2. What are the functions of intermediaries?
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1.8 Logistic
1.8.1 Meaning
Logistic management play very important role in distribution process. It consists
of all activities from the point of its origin to the point of consumption. The main
purpose of logistic management is to provide timely delivery of goods to the
customer for their utmost satisfaction.
According to Phillip Kotler, “Market logistics involve planning, implementing
and controlling physical flow of material and final (finished) goods from the
point of origin to the point of use to meet customer requirements, at a profit.”
Logistic activities
Logistic activities are broadly classified into two groups
I. Inbound activities : Inbound activities of logistic management deals with
effectively procurement of materials and other input from its suppliers to the
location where manufacturing activities take place. There is requirement of
continuous interaction with the supplier for proper management of inbound
activities.
II. Outbound activities: Outbound activities of logistic management also referred as physical dist ribution or supply chain management. These activities deal
with timely delivery of goods or other services from manufacturer or trader to the
customer for its final consumption. There is requirement of continuous interaction
transporter and various channel of distribution.
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9Chapter 1: Distribution
1.9 Components Of Logistic Management
Following are the various components of logistic management
1. Network design
The success of logistic management is t otally depend s upon its network
design. This network design is required to know the location and availability
of various manufacturing unit, warehouses for storage of goods etc. The
efficiency of logistic department is depend s upon this strong networking.
2. Order processing
Order processing is very important in logistic management for its fast
execution. Order processing includes various activities such as receiving
orders, recording of orders, keeping track of orders, handling etc.
Management should make sure that there should be minimum time g ap
between receipt of order and execution of order. If the order gets delay due
to any reason it result in to customer dissatisfaction and affect the goodwill
of the company.
3. Procurement
There are various activities are involved during procurement of raw materials
from its suppliers. It includes finding right supplier, order placement,
negotiation, quality inspection, transportation and storage of raw materials
etc. Here main purpose of logistic is to provide support to the various
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4. Material handling
It is very essential to handle the input materials, finished goods and other
materials properly in order to minimize the loss arise due to spoilage,
breakage etc. Logistic management helps to handle the various materials
effectively in and out of the factory premises and reduce the material handling
cost and time involved in handling the material.
5. Inventory management
The main objective of inventory management is to see that there should not
be overstocking or understocking of raw materials. Every company want to
minimize the amount of working capital blocked in inventories due to its
overstocking and at the same time a void the situation of worker lying idle as
no work due to non -availability of raw material i.e. understocking. Every
management should do the cost benefit analysis of holing the inventory and
cost associated with it such as transportation cost, storage cos t, insurance cost
etc. Logistic management help the management for timely and speedy
delivery of material whenever required which will help management to
reduce the various cost associated with inventory management.
6. Packaging and labeling
Packaging and la beling are important components of logistic management.
Pack aging means putting the product into suitable packets or container for its
safety. Attractive packing also acts as marketing strategy for the company.
Proper pack aging help s for easy handling of m aterial during transportation.
Labeling is identification mark on the product. Labeling are provides various
information about product such as date of manufacture or expiry, various
components used in product, weight, price etc.
7. Warehousing:
Warehousing or storage creates time utility. Goods are stored in the warehouse from the time of its production till the time it is required by final
consumer. Management has to take the decision about the location of
warehouse and number of warehouses requ ired. The decision is based on
distance between supply source and location of customer.
8. Transportation:
Transportation is very important components of logistic management. It
creates place utility in logistic management. Transportation is essential for
movement of finished goods from its manufacture to its ultimate consumer.
Transportation is also essential for movement of goods from suppler location
to manufacturing hub. Various mode of transportation is available such as
roadways, railways, waterways etc . Selection of proper mode of transport is
depend upon the various factors such as cost involved in transportation
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Test your knowledge
1. What is logistic? Explain logistic activities.
2. Explain the components of logistics management.
1.10 E-Marketing
1.10.1 Meaning
E marketing also called as online or internet marketing which make the use of
internet to advertise their goods or services to large number of customer. E
marketing means promoting and distributing goods over the internet. Internet
penetration has increase d a lot in past one decade. As a result of this most of the
organization has selected e marketing as one of the better mode to advertise their
goods and services.
1.10.2 Advantages of E- marketing
1. Global reach
Internet has made it possible for the company to expand its business in
oversea market. With the help of internet company not only able to get
customer from local market but also can tap the customer from national as
well as international market. It helps organization to increase market share.
2. Less costly
Internet marketing does not more investment. It saves the various cost of
company such as Rental expanse, operating expenses etc. Company only has
to purchase some amount of data on World Wide Web to operate its website
which is not more costly. In internet marketing all process is automated which
help compa ny to save inventory management cost, rental cost, and logistic
cost.
3. Available 24x7
World Wide Web never sleeps . This is one of the very important features of
internet marketing, where the advertisement is in front of target audience at
all time s. Advert isement is visible to 24 hours and all 7 days in week and 365
days in a year.
4. Easy to approach target audience
Now a days people spend most of their time on internet to search for the
product they are interested. By using sophisticated technology such as
artificial intelligence it become easy for the company to tap right audience
which is not possible in traditional marketing methods.
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5. Convenient to customer
Online shopping became very popular in recent years. Various companies
started marketing their products online. Customers are getting lot of choice
for their products. Customer can compare the price of same product on
different shopping website and finally take the decision which not only save
the money but also save the time of customer.
6. Easy data collection and evaluation
Data collection related to day to day sale is very essential for the company if
the company want to evaluate the performance of its b usiness. In E marketing
the data of all customers are easily available which help company to evaluate
its performance over the period of time and the timely action whenever
required. This personal data of the customer is also beneficial for the
company to send reminder to customer about company’s product or sending
personalized message relating to company’s offers and discounts.
7. Bulk message or emails
With the help of internet bulk message or email can be forwarded to various
customers in very short period of time and company can reach to more number of customers. When company want to send any personalized information about the product and its features to its customer this will help
company to greater extent.
1.10.3 Disadvantages of E -marketing
1. Lack of internet
E marketing is totally depend s upon the internet access. It is popular only in
the area where internet connection is strong. Till today there are certain
remote areas where either internet connection is not available or if available
it is very po or. Without internet E marketing has no role to play. It is difficult
to tap this customer who stays in this remote area . This is biggest problem of
e marketing and there is no solution for this except the availability of strong
internet infras tructure all over the country.
2. Lack of touch and feel shopping
In case of E marketing people order the goods online. They can only see the
image of the product. Buyer does not get touch and feel experience in online
shopping. Quality of the product cannot be seen upf ront in online shopping.
3. Not suitable for all product
E marketing is generally used for consumer durable goods. For perishable
goods like milk, vegetables it is not suitable. A part from these costlier goods
like jewellary, ornaments people have trust on personal shopping rather than
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4. Negative feedback
Today use of social media such as Facebook, whats app, tweeter etc. has
increased a lot. Customers who don’t like company’s product are
immediately post bad comment on social media, which spoil the reputation
of the company. Building a good reputation take a lot of time but it with some
bad or negative comment it destroyed immediately.
5. Lack of trust
During E marketing transaction customer need to provide personal details
such as cre dit card number, Mobile phone etc. Customer has a fear that their
card details ma y be get hacked and they will looses their money, therefore
customer may not like to do online shopping.
6. Cash on delivery
Cash on delivery option in e marketing has somewhere create harudle for the
companies to get 100% payment for all the products that are ordered by the
customer. Some customers are not available to take delivery and order gets
rejected or some customers are not willing take to take delivery and reject the
order.
7. Lack of skilled labour
E marketing required skilled labour who can handle all computerized and
technical work. Companies find it difficult to get this kind of supporting staff
for their work.
8. Less interest on internet
Some customers who do not trust on internet advertisement, they are less
interested in internet. E marketing is totally depend s upon internet without
which it doesn’t work.
Test your knowledge
1. Explain the advantages of e marketing
2. Explain the disadvantages of e marketing
1.11 Online Retailing
E commerce has totally changed the way in which business was done in India.
Indian E commerce industry showed remarkable growth during the past one
decade. Increases in use of smartphone and internet penetration are triggered for
the growt h of e commerce business in India. Online grocery market in India was
USD 1.9 billion in 2019 and it is expected to reach USD 18.2 billion in 2024. Indian
E- commerce industry was USD 38.5 billion in 2017 and it is expected to reach up
to USD 200 billion b y 2026. munotes.in
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Successful online retailer in India and abroad
Amazon Development Centre India Pvt Ltd
This company is simply called as Amazon. It is an American company. It has it’s
headquarter in Seattle Washington. Amazon is market leader in online retailing
worldwide with highest market capitalization. As of September 2021, Amazon
market capitalization was 1.767 trillion USD which makes it most valuable internet
based company. One of the feat ures of Amazon website is that it allows its
customer s to write a review about the product which help the other customer s to
take the prompt decision.
Flipkart Internet Pvt Ltd
Flipkart Internet Pvt Ltd simply referred as Flipkart was established in 2007 by
Mr.Sachin Bansal and Binny Bansal. Even if the company is registered in Singapore it has it’s headquarter in Bangalore. After the Amazon, Flipkart is very
popular among the Indian population for online shopping. It is very popular for
grocery shopping as well as for consumer electronics, fashion etc.
Alibaba
Alibaba was founded in 1999 in China. It is leading and internationally recognized
company in e commerce market. It is owned by Alibaba Group Holdi ng, a biggest
holding company which provided all the things online from e commerce to online
retail, internet and technology. It offer various product range from its website such
as electric and electronics, home and kitchen , consumer durables etc.
Grofer s India Pvt Ltd
This company is leader in online delivery of groceries. It was founded in 2013 by
Saurabh Kumar and Albinder Dhindsa. Headquarter of the company is located in
Gurgaon, Haryana. The main aim of the company is to deliver grocery items, fruits
and vegetables etc. on time to the customers.
Just Dial ltd
This company was founded in 1996 by V.S.S. Mani. The headquartered is located
in Mumbai, Maharashtra. It is India’s number one local search engine which
provides local search related servic es to all customers across India. Company also
offer various ‘ Search P lus’ services to its customer s such as online cab booking,
order food online, order groceries online etc.
Zomato ltd.
Zomato was founded in 20 08 by Deepinder Goyal and Pankaj Chaddah in
Gurgaon. The company was incorporated with the name “Foodiebay” in 2008 and
later on renamed as Zomato in 2010. It is one of the leading food delivery company
whose services is available in more than 24 countries and more than 10,000 cities. munotes.in
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Paytm
Paytm is owned by One97 Communications ltd. It was launched in 2010. It’s
headquarter located in Noida. Paytm offer various services to its users such as
mobile recharge, bill payment, money transfer etc. Paytm started with paytm mall
which offer various s ervices similar to Amazon, flipkart. It is among the top ten e
commerce companies in India.
1.12 Summary
This module has describe about role of various intermediaries in distribution
channel and how effectively marketing and distribution activities can be carried out
with the help of middlemen engage in distribution channel.
The increase in internet penetration has emerged the new trend of E marketing. All
companies find it is more convenient to deal with goods online as it result into
saving of various ov erhead cost and at the same time offer various benefits to its
customers. But as there are benefits of e marketing it suffer from some limitation
such as lack of trust of people on online shopping, Fraud or hacking etc.
Logistic management has also got mor e importance due to e marketing. As people
placing order from different parts of the country and delivery of goods to customer
on time became a big challenge, logistic management help to come out of this
situation.
1.13 Exercise
A. Fill in the blanks with appropriate option.
1. According to the ________ “Every producer seeks to link together the set of
marketing intermediaries is called the marketing Channel also Trade Channel or
Channel of Distribution ”
a. AMA
b. Philip Kotler
c. Mark Burgess
d. Armstrong
2. ___________ creates time utility in logistic management.
a. Warehouse
b. Transportation
c. Insurance
d. Banking
3. _________ is link between manufacturer and retailer.
a. Producer
b. Wholesaler
c. Public
d. Customer munotes.in
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4. __________provides various information about product.
a. Packaging
b. Labeling
c. Warehousing
d. Transportation
5. ________________ consist of all activities from the point of its ordering to
the point of consumption.
a. Competition
b. Marketing
c. Suppliers
d. Logistic
[Answer: 1 - (b) Philip Kotlar2 - (a) Warehouse 3 -(b) Wholesaler 4 - (b) Labeling 5-
(d) Logistic
B. State whether the following statement is true or false.
1. Goodwill of the company does not affect the channel of distribution of the
company.
2. Global reach is one to the disadvantage of E marketing.
3. Direct channel of distribution consist only manufacturer and customer .
4. Just dial is India’s No 1 local search engine .
5. E marketing is suitable for all types of product .
(True: 3, 4 False: 1, 2 , 5)
C. Match the following. Table A Table B 1. E marketing a. Time utility 2. Inventory management b. Environment factor of distribution. 3. Economic condition c. Avoid overstocking or understocking 4. Warehouse d. Place utility 5. Transportation e. 24X 7 (Answer: 1 - e, 2- c, 3- b, 4-a, 5-d)
D. Answer the following
1. What is logistic? Explain the components of logistic.
2. What are the various factors affecting channel of distribution?
3. Explain the various online retailers in India and abroad.
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17Chapter 2: Promotion
Module -2
2 PROMOTION
Unit Structure
2.1 Objectives
2.2 Introduction
2.3 Promotion Mix
2.4 Elements of promotion mix
2.5 Objectives of promotion and marketing communication
2.6 Factors affecting promotion mix decisions
2.7 Steps in designing a marketing communication program
2.8 Role of Social Media in marketing communi cation
2.9 Summary
2.10 Exercise
2.1 Objectives
After completing this module students will be able to:
• Understand the promotion mix as marketing mix and its various elements.
• Understand the objectives of promotion in marketing.
• Understand the various factor that affect the promotion mix decision of
company.
• Understand the role of emerging social media in marketing communication.
2.2 Introduction
Promotion is a marketing tool, used as a strategy to communicate between the
sellers and buyers. Through this, the seller tries to influence and convince the
buyers to buy their products or services. It assists in spreading the word about the
product or services or company to the people. The company uses this process to
improve its public image. This technique of m arketing creates an interest in the
mind -set of the customers and can also retain them as a loyal customer.
Promotion is a fundamental component of the marketing mix, which has 4 P’s:
product, price, place, and promotion. It is also an essential element pr omotional
plan or mix, which includes advertising, self and sales promotion, direct marketing
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Some methods of this procedure contain an offer, coupon discounts, free sample
distribution, trial offer, buy two items in th e price of one, contest, festival discounts,
etc. The promotion of a product is important to help companies improve their sales
because customer’s reaction towards discounts and offers are impulsive. In other
words, promotion is a marketing tool that invol ves enlightening the customers
about the goods and services offered by an organization.
Definitions of Promotion:
¾ Promotion means “media and non-media marketing pressures applied for a
predetermined, limited period of time in order to stimulate trial, increase
consumer demand, or improve product quality.” – The American
Marketing Association.
¾ “Promotion includes all the activities the company undertakes to communicate and promote its products to the target market.” -Philip Kotler.
¾ Promotion is the element i n an organisation’s marketing mix that serves to
inform, persuade and remind the market of a product and/or the organisation
selling it, in hopes of influencing the recipients’ feelings, beliefs or
behaviour. - William J. Stanton
2.3 Promotion Mix
2.3.1 Meaning of Promotion Mix
¾ The term ‘promotional mix’ is used to refer to the combination of different
kinds of promotional tools used by a firm to advertise and sell its products.
The main promotional tools or activities which make up promotion mix are
personal selling, advertising, publicity and sales promotion. These are also
known as elements of promotion mix.
¾ In the modern business world, big business firms cannot depend upon a single
promotional tool. They have to make use of all the promotional tools in
different degrees depending upon the nature of produce, nature of
competition and kinds of customers.
¾ The marketing manager is supposed to decide about the use of various
promotional activities and allocate budget for them, while taking a decision
about promotion mix, two factors need adequate consideration. Firstly, a
combination of promotional activities is to be used because any promotional
tool, used alone, may not prove fully effective.
Secondly, all promotional tools are not of equal impo rtance and their
importance may change with the change in business environment.
¾ There is no tailor -promotional mix for a firm. Every firm has to design its
own promotional mix, i.e., to determine, the various promotional tools to be munotes.in
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used for promoting the sale of its products. The most striking feature of the
promotional tools is their cross -substitutability. They represent alternative
ways to influence buyers. This substitutability calls for treating various
promotional tools in a joint decision framework.
¾ Promotional strategy is determined by the product market strategy and over-
all marketing strategy. Various combinations, types and degrees of personal
selling, advertising and other promotional tools are brought together into a
promotional mix to develop the promotional strategy. For each component of
the promotional mix, management has to set objectives, determine policies
and formulate strategies.
2.3.2 Definition of Promotion Mix
• Philip Kotler opines, “A company’s total marketing communication mix also
called promotion mix consists of specific blends of advertising, personal
selling, sales promotion, public relations and direct marketing tools that the
company use to pursue its adv ertising and marketing objectives.”
• Gary Armstrong defines promotion mix as, “A company’s promotional mix
includes advertising, personal selling, sales promotion, public relations,
direct marketing. It also includes product design, shape, package, colour,
label etc., as all these communicate something to buyer.”
2.4 Elements Of Promotion Mix
Elements of Promotion Mix
Following are various element of promotion mix
1. Advertising
The advertising is any paid form of non -personal presentation and promotion
of goods and services by the identified sponsor in the exchange of a fee.
Through advertising, the marketer tries to build a pull strategy; wherein the
customer is instigated to tr y the product at least once. The complete
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information along with the attractive graphics of the product or service can
be shown to the customers that grab their attention and influences the
purchase decision.
2. Personal Selling
This is one of the traditional forms of promotional tool wherein the salesman
interacts with the customer directly by visiting them. It is a face to face
interaction between the company representative and the customer with the
objective to influence the cu stomer to purchase the product or services.
3. Sales Promotion
The sales promotion is the short term incentives given to the customers to
have an increased sale for a given period. Generally, the sales promotion
schemes are floated in the market at the time of festivals or the end of the
season. Discounts, Coupons, Payback offers, Freebies, etc. are some of the
sales promotion schemes. With the sales promotion, the company focuses on
the increased short -term profits, by attracting both the existing and the n ew
customers.
4. Public Relations
The marketers try to build a favourable image in the market by creating
relations with the general public. The companies carry out several public
relations campaigns with the objective to have a support of all the people
associated with it either directly or indirectly. The public comprises of the
customers, employees, suppliers, distributors, shareholders, government and
the society as a whole. The publicity is one of the form of public relations
that the company may use with the intention to bring newsworthy information
to the public. E.g. Lar ge Corporates such as Dabur, L&T, Tata Consultancy,
Bharti Enterprises, Services, Unitech and PSU’s such as Indian Oil, GAIL, and NTPC have joined hands with Government to clean up their surroundings, build toilets and support the swachh Bharat Mission.
5. Direct Marketing
With the intent of technology, companies reach customers directly without
any intermediaries or any paid medium. The e -mails, text messages, Fax, are
some of the tools of direct marketing. The companies can send emails and
messages to the c ustomers if they need to be informed about the new
offerings or the sales promotion schemes.
E.g. The Shopper s stop sends SMS to its members informing about the season end
sales and extra benefits to the golden card holders.
Thus, the companies can use any tool of the promotion mix depending on the nature
of a product as well as the overall objective of the firm. munotes.in
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2.5 Objectives Of Promotion And Marketing Communication
Objectives of promotion or Marketing communication objectives are long -term
goals where marketing campaigns are intended to drive up the value of your brand
over time. In contrast to sales promotions, which are short -term inducements to
buy, communication goals succeed when you persuade customers through consistent reinforcement that your brand has benefits they want or need.
1. To Increase Awareness
¾ Increased brand awareness is not only one of the most common
marketing communication objectives; it is also typically the first for a
new company. When you initially enter the market, you have to let
people know your company and products or services exist.
¾ This might include broadcast commercials or print ads that depict the
image of your company and constant repetition of your brand name,
slogans and jingles. The whole objective is to become known and
memorable.
¾ Established companies often use a closely related goal of building or
maintaining top- of-mind awareness, which means customers think of
you first when considering your product categ ory.
2. To Change Attitudes
¾ Changing company or brand perceptions is another common
communication objective. Sometimes, misconceptions develop in the
market about your company, products or services.
¾ Advertising is a way to address them directly. In other cases, negative
publicity re sults because your company is involved in a business
scandal or unsettling activities.
3. To Influence Purchase Intent
¾ A key communication objective is to motivate customers to buy. This
is normally done through persuasive advertising, which involves
emphasis of your superior benefits to the user, usually relative to
competitors. It is critical to strike a chord with the underlying need or
want that triggers a customer to act.
¾ Sports drink commercials showing athletes competing, getting hot and
sweaty and then taking a drink afterward are a common approach to
drive purchase intent. The ads normally include benefits of the drink
related to taste or nutrients.
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4. To stimulate Trial Purchase
¾ Two separate but closely related communication objectives are to
stimulate trial use and drive repeat purchases. Free trials or product
samples are common techniques to persuade customers to try your
product for the first time. The goal is to take away the risk and get the
customer to experience your brand.
¾ Once you get them on the first purchase, you have to figure out how to
convert that into a follow -up purchase. Discounts on the next p urchase
or frequency programs are ways to turn one -time users into repeat
buyers and, ultimately, loyal customers.
5. To Drive Brand Switching
¾ Another objective closely tied to stimulating trial use is driving brand
switching. This is a specific objective of getting customers who buy
competing products to switch to your brand. Tide detergent is normally
pitted against “other leading brands” in comparative ads intended to
motivate brand switching.
¾ The advantage with this goal is that customers already buy within your
product category. This means need is established. You just need to
persuade them that your product or service is superior and induce them
to try it out.
Test your knowledge
1. What is promotion? Explain elements of promotion mix.
2. What are the different objectives of promotion and marketing communication?
2.6 Factors Affecting Promotion Mix Decisions
There are many factors which influence promotion mix. These factors are called
product -market factors. Main factors influencing promotion mix has been briefly
discussed as under:
1. Type of Product
Type of product plays an important role in deciding on promo tion mix.
Product can be categorized in terms of branded products, non -branded
products, necessity products, luxury products, new products, etc. All these
types of products need different promotional tools. For example, advertising
is suitable for the bran ded and popular products. Personal selling may be fit
for non -branded products. Advertising, personal selling, sales promotion and
publicity – all four tools – are used for a newly launched product to get a
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2. Use of Product
Produc t may be industrial product, consumable and necessity product, or may
be luxurious product that affects selection of promotion tools and media. For
example, advertising and sales promotion techniques are widely used for
consumer goods while personal sellin g is used for industrial goods.
3. Complexity of Product
Product complexity affects selection of promotional tools. Personal selling is
more effective for complex, technical, risky, and newly developed products
as they need personal explanation and observati on. On the other end,
advertising is more suitable for simple and easy -handled products.
4. Purchase Quantity and Frequency
Company should also consider purchase frequency and purchase quantity
while deciding on promotion mix. Generally, for frequently purchase product, advertising is used, and for infrequently purchase product, personal
selling and sales promotion are preferred. Personal selling and advertising are
used for heavy users and light users respectively.
5. Fund Available for Market Promotion
Financial capacity of company is a vital factor affecting promotion mix.
Advertising through television, radio, newspapers and magazines is too
costly to bear by financially poor companies while personal selling and sales
promotion are comparativ ely cheaper tools. Even, the company may opt for
publicity by highlighting certain commercially significant events.
6. Type of Market
Types of market or consumer characteristics are determining the form of
promotion mix. Education, location, income, persona lity characteristics,
knowledge, bargaining capacity, profession, age, sex, etc., are the important
factors that affect company’s promotion strategy.
7. Size of Market
Naturally, in case of a limited market, personal selling is more effective.
When market is wide with a large number of buyers, advertising is preferable.
Place is also an important issue. Type of message, language of message, type
of sales promotion tools, etc., depend on geographical areas.
8. Stage of Product Life Cycle
Product passes through four stages of its life cycle. Each stage poses different
threats and opportunities. Each stage needs separate marketing strategies. munotes.in
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Each of the promotional tools has got different degree of suitability with
stages of product life cycle. It can be concluded that, in normal situations:
a. Advertising, personal selling, and, even, sales promotion are used
during the introduction stage. However, advertising is given more
priority,
b. More intensive advertising and sales promotional techniques are used
during the second stage,
c. More rigorous advertising along with personal selling are followed in
the third stage, and
d. Company prefers to curb the expenses in fourth stage, and promotional
efforts are reduced.
9. Level of Competition
Promotional efforts are designed according to type and intensity of competition. All promotional tools are aimed at protecting company’s interest against competition. Level of promotional efforts and selection of
promotional tools depend on level of competition.
10. Promotional Objec tives
It is the prime factor affecting promotional mix. Different objectives can be
achieved by using different tools of promotional mix. If company’s objective
is to inform a large number of buyers, advertising is advisable. If company
wants to convince l imited consumers, it may go for personal selling. Even,
when company wants to influence buyers during specific season or occasion,
the sales promotion can be used. Some companies use publicity to create or
improve brand image and goodwill in the market.
11. Other Factors
Over and above these factors, there are certain minor factors that affect
promotion mix.
These factors may include:
a. Price of Product
b. Type of Marketing Channel
c. Degree of Product Differentiation
d. Desire for Market Penetration, etc
The list of factors stated above is not complete. There may be more factors.
Promotional strategy should be formulated only after considering the relevant
factors. Marketing manager must be aware of these variables. Note that these
factors affect different firms in varying degree depending upon its internal
and external marketing environment. munotes.in
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2.7 Steps In Designing A Marketing Communication Program
We have observed radical changes in the way communication has evolved over the
past decade. From merely passing on a message to catchy jingles, using humour,
and subtle ironies to online communication over various social media and other
channels, marketing has changed. Brands are looking out for ways to connect with
their audien ces across the globe.
The solution, integrated marketing , combines traditional and modern marketing
strategies. It provides us with the best of both the worlds to reach the appropriate
stakeholders in the process.
Integrated Marketing Communication (IMC) basically combines various marketing strategies that boost one another. The aim is to have all the channels
work in aggregation rather than seclusion.
For instance, a company might be promoting a new product through various media
such a s print, social media, web along with others. Each media will promote the
product in its own way, depending on its capabilities and limitations. But the
message that is conveyed and to whom it is conveyed remains the same. After all,
it directs the audienc e in the same direction. Integrated marketing communication
ensures that all the correspondence received by a customer or a prospect is relevant.
This communication remains consistent over all the communication media. It gives
your customers or prospects a seamless experience over all the channels while
interacting with your brand.
There are a few primary things to note about IMC
¾ It is a continuous improvement process. The process includes creating the
strategy, implementing it, measuring the results, and improving the process
based on the results.
¾ The aim is to speed up the results, more often than not. This means to improve
revenue.
¾ The process has the customer at the centre and the processes aligned around
the customer’s needs.
¾ It can be see n as a modern replacement for the older marketing model.
You might be surprised at just how many businesses and organizations I talk
with that do not have an integrated marketing communications (IMC)
strategy in place. From B2B to B2C, large to small, an IMC strategy is as
essential as a business plan.
There are typically six steps in the IMC planning process. Each one is important in
their own right and can be applied to practically any business or organization, no
matter the size or industry. While your plan might utilize each marketing communications function differently, the overall idea remains the same.
Below are the major steps to keep in mind when developing your IMC strategy. munotes.in
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Step 1: Know your target audience
As a general rule, there is no “general audience”. You always want to communicate
with a specific audience to make the most e ffective use of your resources.
Segmenting specific audiences into groups based on characteristics will help you
identify who are most likely to purchase or utilize your products and services.
Step 2: Develop a situation analysis
Commonly referred to as a SWOT Analysis, this is basically a structured method
of evaluating the internal strengths and weaknesses, and external opportunities and
threats that can impact your bran d. A situation analysis can provide much insight
into both internal and external conditions that can lead to a more effective
marketing communications strategy.
Step 3: Determining marketing communication objectives
In this step, you basically want to document what you want to accomplish with
your IMC strategy. Objectives should be measurable if you truly want to map your
campaign’s effectiveness at the end of your plan’s term.
Step 4: Determining your budget
Having a realistic idea on what you have to work with is important as it will shape
the tactics you develop in the next step. Once you determine your overall budget,
you will want to come back to this after completing step five to further refine your
budget allocations.
Step 5: Strategies and tactic s
Looking back at the objectives you created in step three, you will want to develop
strategies which are ideas on how you will accomplish those objectives. Tactics are
specific actions on how you plan to execute a strategy.
Step 6: Evaluation and measurement
Almost as important as the plan as a whole, you want to outline a method of how
you will evaluate the effectiveness of your IMC strategy. Sometimes elements of
your plan will not work. It’s important to know what did or didn’t, try to understan d
why, and make note for future planning.
The more focused on how you will utilize your resources for promoting your
business, the more you will understand where your money is going and how it’s
performing. An IMC strategy is important for any business or organization.
Test your knowledge
1. What are various factor s affecting promotion mix decision?
2. What are the various steps in development of Integrated Marketing Communication? munotes.in
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2.8 Role of Social Media In Marketing Communication
These days, everyone from small business owners to some of the biggest companies in the world is using social media to spread the word about their brands,
products, and services.
Whether it's Twi tter, Instagram, or Facebook, companies use these low -cost tools
to combine technology and social interaction with the use of words, images, and
video. Social media gives marketers a voice and a way to communicate with peers,
customers, and potential consumers. It personalizes your brand and helps you
to spread your message in a relaxed and conversational way. The downfall of social
media, if you could call it that, is that it must be a part of your everyd ay life to keep
the momentum and attention you need for it to be successful.
Social media has been a phenomenon, right from when it was born. With billions
of people connected, social media is a potential place for brands and businesses to
market their pro ducts and/or services. Social media gives business marketers a way
to communicate with customers, and to find specific potential consumers. It
personalizes the "brand" and helps a business to spread your message in a relaxed
and conversational way.
Marketi ng is a tool you use to inform customers about your products and/or service,
who you are and what you offer.
¾ You can use social media to provide an identity to who you are and the
products or services that you offer.
¾ You can create relationships using soci al media with people who might not
otherwise know about your products or service or what your companies
represent.
¾ You can be more "human" to costumers. If you want people to follow you
don't just talk about the latest product news, but share your personal ity with
them.
¾ You can use social media to communicate and provide the interaction that
consumers look for.
¾ You can use social media to associate yourselves with your customers that
may be serving the same target market.
There are a lot of ways social medi a can affect your business:
¾ Social media is just one way out of the many ways to promote your business.
You cannot just depend on social media; you must integrate it with other
vehicles of marketing.
¾ Be yourself, reflect personality. There are no rules written when it comes to
social media, only you can determine what will work for you.
¾ Be consistent, if you do not plan on being consistent don't do it at all. munotes.in
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The role of social media in your marketing is to use it as a communication tool that
makes you accessible to those interested in your product and makes you visible to
those that don't know your product. Use it as a tool that creates a personality behind
your brand and creates relationships that you otherwise may never gain.
This creates not onl y repeat -buyers but customer loyalty. Fact is social media is so
diversified that it can be used in whatever way best suits the interest and the needs
of your business.
With its ability to go viral, traditional advertising techniques that are include print
and television advertising, has been slowly overtaken by the internet as the largest
advertising market. Websites often include banner or pop -up ads. Social networking sites don’t always have ads. In exchange, products have entire pages
and are able to in teract with users. Television commercials often end with a spokesperson asking viewers to check out the product website for more information. Print ads are also starting to include QR Codes on them. These QR
Codes can be scanned by mobile devices and compu ters, sending viewers to the
product's website. Advertising is starting to move viewers from the traditional
outlets to the electronic ones.
Social media has created a new way of word -of-mouth marketing. It has taken
human nature to share. When someone lik es something, he/she can share his/her
experience with his/her friends, family, colleagues, and everyone connected in
his/her 'shares', 'circle', 'friends', 'fans' and 'followers'. For brands and businesses,
social media can be used to target specific cust omers and create a relationship as
"humans".
The role of social media in marketing is to use it as a communication tool that
makes you accessible to those interested in your product and/or service and makes
you visible to those that don't know your product .
Use it as a tool that creates a personality behind your brand and creates relationships
that you otherwise may never gain. This creates not only repeat -buyers but
customer loyalty. Fact is social media is so diversified that it can be used in
whatever wa y best suits the interest and the needs of your business.
2.9 Summary
Advertisement and promotion are vital components of the marketing mix. Some of
the roles that they play include increasing of awareness among target customers
about a company’s products and attracting new customers. This chapter has
addressed different issues that relate to this component of marketing. Under the scope of marketing communications, the chapter has explained how the communication works process in promotion. For comp anies that intend to maintain
their competitiveness in the market and attract a wide range of customers, it’s vital
for them to ensure that their promotional strategies are relevant to their target
audiences. This chapter has provided an in -depth understan ding on the concepts of
promotion. munotes.in
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2.10 Exercise
A. Fill in the blanks with the correct alternative given:
1. _________ is a marketing tool, used as a strategy to communicate between
the sellers and buyers.
a. Product
b. Pace
c. Promotion
d. Price
2. Four P’s of Marketing Mix Are Product, ________, Place and Promotion.
a. Price
b. Pace
c. People
d. Packaging
3. ___________is any paid form of non -personal presentation and promotion of
goods and services.
a. Advertising
b. Personal Selling
c. Publicity
d. Direct Marketing
4. Discounts, Coupons, Payback offers, Freebies, etc. are some of ________schemes.
a. Sales Promotion
b. Publicity
c. Personal Selling
d. Public relations
5. The Company prefers to curb the expenses in ______stage of the product life
cycle.
a. Introduction
b. Growth
c. Maturity
d. Decline
[Answer: 1 - (c) Promotion 2 - (a) Price 3 -(a) Advertising 4 - (a) Sales Promotion 5 -
(d) Decline
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B. State whether the following statements are True or False:
1. Promotion is an important element of marketing mix.
2. Personal Selling is one of the traditi onal forms of promotional tool.
3. The e -mails, text messages, Fax, are some of the tools of Public
Relations.
4. Twitter, Instagram, or Facebook are tools of Social Media .
5. The term ‘product mix’ is used to refer to the combination of differ ent
kinds of promotional tools.
(True: 1, 2, 4 False: 3 , 5)
C. Match the Following: Group A Group B 1. Second Stage of PLC a. Relations with the general Public 2. Element of Promotion Mix b. Facebook 3. Social Media c. Growth 4. IMC d. Advertising 5.Public Relations e. Integrated Marketing Communication (Ans. 1 -c, 2-d, 3-b, 4-e, 5-a)
D. Answer the following.
1. Write a note on promotion as marketing mix .
2. Write a note on Integrated Marketing Communication.
3. Elaborate Role of Social Media in marketing communication.
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31Chapter 3: Understanding Buyer Behaviour
Module -3
3 UNDERSTANDING BUYER BEHAVIOUR
Unit Structure
3.1 Objective
3.2 Introduction
3.3 Comparing consumer markets with organizational buyers
3.4 Factors affecting consumer behavior
3.5 Steps in consumer purchase decision process
3.6 Factors affecting organizational buyer behavior
3.7 Steps in the organizational purchase decision process
3.8 Summary
3.9 Exercise
3.1 Objective
After studying this unit the student will be able to
• Understand concept of consumer markets and organizational buyers
• Describe factors affecting consumer behavior and organizational buyer behavior .
• Know steps in consumer purchase decision process
• Discuss steps in the organizational purchase decision process
3.2 Introduction
Understanding buyer behavior is the crucial to successful business. This chapter
attempts to describe the complex buying behavior with respect to individual
consumers and industrial buyers with simple examples. The aim of any business is
to generate and retain customers, where unders tanding buyer behavior is an
important aspect. Many organization assume that their job is only limited to sell
goods and services. Consumer buying behavior is perhaps the area if focused
properly, greatest gain can be made.
A consumer market is the set -up that allows customers to pick up products, goods,
and services. In a consumer market, the consumer makes choice about what
products to buy and in what quantities. Consumer market depends on various
factors like level of customer involvement, importance of intensity in a product in a particular situation. Below is a comparison of consumer markets with organizational buyers. munotes.in
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3.3 Comparing Consumer Markets With Organizational Buyers Consumer Buying (individuals and households) Organizational Buying (Industrial / Business houses) 1. Consumers purchase the goods and services for their personal use. 1. Industrial buyers buy goods and services for operations to exchange, alter its properties or use as input for
further processing. 2. Individual consumers don’t have the means or knowledge to convert those raw materials to use for consumption purpose. Hence individual consumers are buyers of final goods and services. 2. Organizations purchase more raw materials – such as oil, steel and other
items used in manufacturing 3. Consumers make buying decisions based on their awareness, prior experience of products, families,
peers and personal preferences. 3. Organizational buying decision based on nature of product, availability of suppliers, management
objectives demand forecasting etc. 4. Consumers buying decisions are driven both by need and by want. It is
possible to lure a consumer to buy a product or service he does not need through effective marketing or peer pressure. Individuals are accountable for their own spending. 4. Organization buy product as per requirements. Purchasing department is accountable for what it organizational purchases. Organizations generally purchase goods in bulk quantities as compared
to individual consumers. 5. Consumers have variety of options in choosing the products they
want.
For example A consumer may want to buy a chair so people can sit comfortably in his home. He will be able to choose any chair within his budget which he likes. 5. Organizations do not have many choices while making the purchase they have to stick to budget along with
various other constraints For example the organization may want to buy office chair for its employees have to consider the budget along with guidelines set by the Occupational Health and Safety Administration availability of suppliers etc. 6. Companies can reach their target customers through demonstrating how their products add to a consumer's life 6. Approaching organizational buyers requires making them understand how your products and services will help munotes.in
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33Chapter 3: Understanding Buyer Behaviourin some way. Whether it makes life easier or more congenial, or both. their organization benefit them. It is a help them help others approach. 7. Companies marketing to individual consumers do not focus on
building personal relationships with each of them. Rather they focus on wholesalers and retailers, providing product training and incentive programs to make sure their distribution partners have the product knowledge and loyalty to provide consumers with class customer service. 7. Organizational buyers, companies assign sales resources or account managers to manage key accounts of purchaser and also convert prospect into organizational buyers. They focus on each customer, understand their requirements and offer a customi zed
solution
3.4 Factors Affecting Consumer Behaviour
Definition: The Consumer Behavior is the interpretation of how an individual
makes decision with regards to purchase a particular product over the other and
what the factors that influence such behavior are.
Factors Influencing Consumer Behavior
Factors Influencing Consumer BehaviorPsychological Factors
Social Factors
Cultural Factors
Personal Factors
Economic Factorsmunotes.in
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Companies aim to be cognizant of the acts of the consumers in the marketplace and
the underlying reasons for such actions. These reasons are the factors that influence
the consumer behavior. These are:
Psychological Factors :
The human intellect acts an important determinant in deciding the consumer’s
preferences and likes or dislikes for a particular product and services. Some of the
important psychological factors are: stimulus , perception , attitu des and Beliefs
Social Factors:
We reside in a complex social environment where each one has different buying
behaviors however these buying behaviors are with the framework of acceptable
norms of the society. Therefore, the social factors impact the buying pattern of an
individual largely. Some of the social factors like family, Reference Groups, status
etc. determine the buying preferences of the indi viduals.
Cultural Factors :
It is believed that an individual gain an understanding of the set of values, insight,
conduct, and preferences at a very early stage of his life from immediate family,
school and the other key institutions which were around duri ng his developmental
phase. Thus, the behavioral patterns are developed from the culture where he or she
is brought up.
Demographic Factors
There are several demographic factors personal to the individuals that impact their
buying decisions. Some of them are: Age, Income, Occupation, Lifestyle etc.
Economic F actors
The last but not the least is the economic factors which have a significant impact
on the purchasing decision of an individual. These are: individual Income, Family
Income, Consumer Credit, Cash and other liquid assets of the Consumer, Savings.
Thes e are some of the factors that impact the consumer behavior, and the
companies must keep these in mind, to formulate suitable strategic marketing
decision.
Test your knowledge
1. What is difference between consumer buying and organization buying?
2. What are the various factors affecting consumer buying behavior?
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3.5 Steps in Consumer Purchase Decision Process (With Respect
to High Involvement and Low Involvement Products) Consumer involvement is defined as a state of mind that motivates consumers to identify with product/service offerings, their consumption patterns and consumption behavior. Involvement creates within consumers an urge to look for
and think about the product/service category and the varying options before making
decisions on brand preferences and the final act of purchase. It is the amount of
physical and mental effo rt that a consumer puts into a purchase decision. It creates
within a person a level of relevance or personal importance to the product/service
offering and this leads to an urge within the former to collect and interpret
information for present/future dec ision making and use. Involvement affects the consumer decision process and the sub processes of information search, information processing, and information transmission.
Involvement of consumers while makes purchase decisions varies across persons,
acros s product/service offerings in question as well as purchase situations and time
at hand. Some consumers are more involved in purchase processes than others. For
example, a person who has a high level of interest in a product category would
expend a lot of time making a decision with regard to the product and the brand.
He would compare brands across features, prices etc. Another example is a person
who is risk aversive; he would also take a longer time making a decision.
Involvement also varies across produ ct/service offerings. Some products are high
involvement products; these are products that are high in value and expensive,
possess sufficient amount of risk, are purchased infrequently, and once purchased,
the action is irrevocable, i.e. they cannot be re turned and/or exchanged. On the
other hand, there are low involvement products, which are moderately expensive
or generally inexpensive, possess little risk and are purchased regularly on a routine
basis. Further, such consumer involvement based on their p ersonal traits or on the
nature of product/service offering is also impacted by the buying situation and time
in hand for making purchase decisions. Very often, due to time constraints or
emergency situations, a consumer may expend very little time on the purchase
decision and buying activity in spite of the fact that the consumer is highly involved
or risk aversive or the product is a high involvement one.
Consumer involvement affects the ways in which consumers seek, process, and
transmit information, mak e purchase decisions and make post purchase evaluation.
Various steps in consumer decision process are as follows:
a) Information search
Highly involved consumers or consumers involved with a product category
would actively search for information about the product category and the
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While the former, would be active seekers of information, the latter would be
passive recipients. Active seekers would look out to various sources of
information and would put in deliberate efforts towards information gathering.
b) Information processing
The information processing activity would vary across high involvement
consumers viz low involvement customers. Highly involved consumers
would process product information with greater depth; they would make conclusions about brand preferences based on arguments and counterarguments; they would tend to get emotional charged either favorably
because of likeability of the brand or unfavorably because of di slike ability
of the brand. They would also evaluate more alternatives.
c) Information transmission
Highly involved consumers talk about the product/service category and the
various brands available with great ease and level of interest, as compared to
consumers who are low on involvement in the product category. Information
transmission takes place via word -of-mouth, positive when the brand seems
favorable, and negative, when it seems unfavorable.
d) The purchase decision
The purchase decision, i.e. to buy or not to buy, or to buy brand X over Y, is
complex for a high involvement consumer than for one on low involvement.
e) Post purchase behavior
Consumers who are high on involvement make post purchase evaluations
about product usage more critically th an those on low involvement. It is
noteworthy that high involvement consumers are more difficult to please and
satisfy; and the marketers need to put in a lot of effort to satisfy them. This is
because they not only have a bearing on their future purchase, but also on
purchase of others who are opinion seekers.
3.6 Factors Affecting Organizational Buyer Behaviour
Organizational buying is a complex process consisting of various factors like organizational structure, the nature of product to be purchased, human interventions etc.
Organizational buyers buy goods and services for operations to resell, modify its
properties use as in put for further processing.
Below are factors affecting organizational buying behaviour:
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A. Nature of goods or services purchased
Organizations usually purchase more inputs – example power, steel, paper wires
etc. used in manufacturing operations. Organizations generally purchase goods in
bulk as per demand forecasts of organizations .
For example a paper bag making company may buy 1000 tons of paper roll which
can be converted into paper bag by a chain of manufacturing activities. The
organizational market is concise hence they can procure their inputs from a
limited number of organizational suppl iers.
B. Customer Relationships
To deal with organizational buyers, companies appoint sales persons or account
managers who manage key accounts of customers and convert prospect into organizational buyers. Sales persons work on key account profiles of organi zational buyers’ individual needs and suggest them with a personal service.
C. Decision Making
Companies have to work with various decision makers and others who influence
the purchasing decision in context of organizational buyers. Example purchasing
manage rs may be the main points of contact for sales and marketing teams, the
decision -making team may also include key personnel like the technical manager,
finance director, production manager or even the CEO if the buying business is
making a major capital de cision. To serve all organizational decision influencers,
companies should contact through the sales team or communicate through
advertising, email or public relations activities.
D. Buying Timeline
The time between buying decision of a product or service and the actual purchase
may vary depending on the operational requirement. For routine purchases, the
time period may be relatively less. The steps involved in organizational buying
decision include making an initial decision to purchase, developing productio n
specification, sourcing potential suppliers, examining all prospective suppliers’
proposals and rates, checking samples, discussing terms and releasing final
purchase order. To keep up relationship with the potential suppliers during the
buying process, companies develop communication strategies, arranging meetings ask them for product demonstrations, samples, or emailing any relevant
information.
Test your knowledge
1. What are the various steps in consumer purchase decision process?
2. What are the various factor s affecting organization buying behavior? munotes.in
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3.7 Steps In The Organizational Purchase Decision Process
(With Respect To Different Buying Situations)
The organizational buyi ng process contains eight steps, which are listed in the
figure below. Even though these stages similar to those of the consumer buying
process, however there are significant differences between these two. These
differences have direct impact on the market ing strategy of each. An organizational
buying complete step occurs only in the case of a new purchase. For all practical
purpose, the organizational buying process is more complex than the consumer
buying process.
It is also important to understand that organizational buying decisions are information -concentrated as compared to consumer buying decisions.
1. Problem Identification
The first step is in organizational process recognition of a problem or need
which can be satisfied by purchase of good or service. Need or problem urge
an individual to purchase the product. Problem identification can be due to
internal or external stimuli. Examples of Internal include basic or normal
needs like hunger, thirst, sex, or comfort. Examples of external stimuli can
be a presentation by a salesperson, an advertisement, information picked up
at a trade show, or a new competitive development.
2. General Need Description
Once need is identified, the customers should express it in detail to make sure
that marketer u nderstands what kind of goods and services the organization
should produce. Organizations can do so by all the product -related concerns
of a typical customer. Problem RecognitionGeneral Need DescriptionProduct SpecificationSupplier SearchProposal SolicitationSupplier SelectionOrder -Routine SpecificationPerformance Review
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Marketers can do so by sales presentation, trade advertising, and web sites,
content marketing, sales support customers become acquainted with what
organizations offer will help to construct consciousness and let potential
customers acknowledge what business offer.
3. Product Specification
The next step is product specification. These specifications position with the
most important consideration items established earlier. The buyer will try to
find the best supplier. Organizational buyers may explore all possible sources
of information for example consulting trade directories, publicati ons, trade
magazines, contacting sales man, seeking guidance from opinion leaders,
peers or colleagues from other companies for recommendations.
Organizations can engage the prospective customers by maintaining well -
designed Web sites with useful particul ars, Answering all product related
queries, sharing samples whenever required, constantly communicating with
clients using content marketing strategies Personal selling plays an important
role as sales personnel represent about the organization’s goals, pr iorities,
and product specifications and provide relevant data to the buyer about the
offerings under consideration. Product specification plays a crucial role in
case of buying a core product example a paper bag making company plans to
buy machinery it will explore all minute details and terms regarding purchase. However in case of small items purchase say gum in depth
specification is not required.
4. Supplier Search
Organization will search the supplier on the basis of location suitability.
Supplier w ho is in nearby location will be given priority as it will result into
just in time delivery of material for production purpose.
5. Proposal Solicitation
The next step is Proposal Solicitation. Suppliers are asked to submit proposals. Depending on the complexity of the product, some suppliers send
only single catalog or a sales representative or even detailed proposal outlining what the supplier can offer say product specifications, timing, and
pricing credit terms.
6. Supplier Selection
At this step, the organization buyer evaluates the proposals and makes a final
choice. An important part of this selection involves evaluate the suppliers
under consideration. The supplier selection process constitutes rigorous
review of the proposals submitted, as well as consideratio n of suppliers
capabilities, reputation, customer preferences, warranties, and so on. munotes.in
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Depending on complexity and volume of purchases negotiation area may
include product quantity, specifications, pricing, timing, delivery, and other
terms of sale. Ultim ately the organizational buyers finalize their selection and
communicate it to the suppliers who submitted proposals.
7. Order -Routine Specification
The organizational buyer writes the closing order with the chosen supplier,
listing the technical specifications, the quantity required, the warranty etc. At
this stage, the supplier typically works closely with the buyer to manage
inventories and deliver on agreement terms.
8. Performance Review
In this final stage, the buyer assesses the supplier’s accomplishment and
shares feedback. This may be a very simple or a very complex process
depending on item purchased
As stated above, the eight -stage buying stage here applies to new tasks, which
typically require more complex, involved purchasing decisions. For repurchase and
frequent purchases, organizations use only few steps of the process. Some stages
may be surpassed completely example procuring from an already identified
supplier . Organizations may also take route of e -buying processes, in which an on
boarded supplier has been identified to supply a range of standard goods at pre -
negotiated rates. For example, a paper bag making organization buying paper rolls
of a particular quality at fixed intervals subject to market fluctuations the rates and
frequency of purchased follows a fixed pattern.
3.8 Summary
A consumer market is the set -up that allows customers to pick up products, goods,
and services. Consumers pu rchase the goods and services for their personal use.
Industrial buyers buy goods and services for operations to exchange, alter its
properties or use as input for further processing. There are significant difference
between the organizational buying and i ndividual buying.
Consumer purchase is generally short term where they the relationship with seller
ends once the transaction is done. However organizational buying process focuses
on long term where they build long lasting relationships with suppliers. Th e factors
related to individual purchase include Psychological Factors , Social Factors: like
family, Reference Groups, status etc. Cultural Factors , Demographic Factors like
Age, Income, Occupation, and Lifestyle etc.
Consumers purchase goods from retailers where business buyers usually purchase
goods directl y from the manufacturer. Organizational buyers include eight steps for
buying 1st time however when making routine purchase organizations may exclude
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3.9 Exercise
A. Fill in the blanks with appropriate option.
1. ____________ Charact erized by high consumer involvement and significant
differences between brands.
a. Complex buying behavior
b. Dissonance -reducing buying behavior
c. Habitual buying behavior
d. Variety -seeking buying behavior
2. Consumers purchase the goods and services for their _________.
a. Personal use
b. Industrial use
c. Selling
d. Transportation
3. Groceries fall into category of ___________ buying behavior .
a. Habitual buying behavior
b. Dissonance -reducing buying behavior .
c. Complex buying behavior
d. Variety -seeking buying behavior
4. Reference Groups are part of ___________factors influencing consumer
behavior
a. Psychological Factors
b. Social Factors
c. Cultural Factors
d. Economic Factors
5. The first step in the organizational buying process is ____________.
a. Problem Recognition
b. Marketing intermediaries
c. Suppliers
d. Service representatives
[Answer: 1 - (a) Complex buying behavior 2- (a) Personal use 3-(d) Variety -
seeking buying behavior 4- (b) Social Factors . 5- (a) Problem Recognition
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B. State whether the following statement is true or false.
1. A consumer market is the set -up that allows customers to pick up products,
goods, and services.
2. Organizations also purchase more raw materials – such as oil, steel and
other items used in manufacturing.
3. Organizational buying decisions are driven both by need and by want.
4. For re purchase and frequent purchases, organizations use eight steps of the
buying process.
5. Most regularly demonstrated kind of buying behavior is Variety -seeking
buying behavior
(True: 1, 2 False: 3, 4, and 5)
C. Match the following. Table A Table B 1. Complex buying behavior a. Consumers perceive significant deviation between brands but are not particularly involved in the purchase. 2.Dissonance-reducingbuying behavior b. Occurs when item is bought regularly, does not fetch much money, perceived to
have few significant differences between brands. 3. Habitual buying behavior c. Consumers are extremely involved in the purchase, but have trouble determining the
differences between brands. 4. Variety-seeking buying behavior d. Characterized by high consumer involvement and significant differences between brands. 5. Psychological Factors e. The human intellect acts an important determinant in deciding the consumer’s preferences and likes or dislikes for a particular product and services.
(Answer: 1 - d, 2- c, 3- b, 4-a, 5-e)
Answer the following
1. Explain Steps in the organizational purchase decision process
2. Write a note on consumer buying behavior.
3. Write a note on organization buying behavior.
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43Chapter 4: Marketing of Services and Rural Marketing
Module - 4
4 MARKETING OF SERVICES AND
RURAL MARKETING
Unit Structure
4.1 Objectives
4.2 Introduction
4.3 Services
4.4 Marketing mix for services marketing
4.5 Managing service quality and productivity
4.6 Rural market scenario in India
4.7 Factors contributing to the growth of rural markets in India
4.8 Challenge of Rural Marketing
4.9 Strategies to cope with th e challenges of rural marketing
4.10 Summary
4.11 Exercise
4.1 Objectives
After completing this module students will be able to:
x Understand the meaning of services its definition and characteristics.
x Understand the Marketing mix for services marketing
x Understand the concept Managing service quality and productivity
x Understand the current scenario of rural marketing, various factors contributing to growth of rural marketing, challenges associated with rural marketing and strategies to cope with the challenges of rural marketing.
4.2 Introduction
Service marketing is marketing based on relationship and value. It may be used to
market a service or a product. With the increas ing prominence of services in the
global economy, service marketing has become a subject that needs to be studied
separately. Services are intangible, yet provide satisfaction. It is performed not
manufactured. The services may or may not be tied to tangible goods. Maintenance
and repairs are related to tangible goods, consultancy is not. No ownership passes
from seller to buyer in a service. One may have the right to use a hotel room or a
railway berth for a period of time, but the ownership of the room or berth remains
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4.3 Services : Definition And Features
Definition of Services
Philip Kotler defines services as “Any act or perform ance that one party can offer
to another that is essentially intangible and does not result in the ownership of
anything. Its production may or may not be tied a physical product.”
Valarie A Zeithaml : defines “Services are deeds, processes and performances
provided or co -produced by one entity or person for another entity or person.”
The term ‘services’ cannot be only personal services like auto servicing, hair
cutting, beauty parlour, dentist’s services, legal services, consultancy services etc.
According to marketing experts and management thinkers, the contents of services
are wider.
Features of services
1. Intangibility
In marketing services, intangibility means the inability of a consumer to
preassess the value of using a service . Unlike a physical product, a service
cannot be seen, tasted, felt, heard, or smelled prior to its purchase.
2. Perishability
Services are perishable because they cannot be stored . Because of this, it is
difficult for service pr oviders to manage anything other than steady demand.
When demand increases dramatically, service organizations face the problem
of producing enough output to meet customer needs
3. Inseparability
Inseparability (also known as simultaneity) is used in marketi ng to describe
a key quality of services that distinguishes them from goods . In other
words, services are generated and consumed within the same time frame.
Moreover, it is very difficult to separate a service from the service provider.
They are inseparabl e.
4. Heterogeneity
The term heterogeneity describes the uniqueness of service offerings (also
known as variability). In other words, services are generated, rendered , and
consumed at one time. Given that services are heterogeneous, it is essential
that each and every customer receive excellent service.
5. Ownership
Ownership is never transferred in the case of services . In products, the
product is produced first and then it is sold. However in services, the product
is bought first and then produced and con sumed
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6. Quality measurement
The SERVQUAL Instrument measures the five dimensions of Service
Quality. These five dimensions are: tangibility, reliability, responsiveness,
assurance and empathy .
7. Valuation
Services have different valuation depending upon its demand and its quality.
For example: Transport buses charges are higher during the holiday season
due to high demand.
4.4 Marketing Mix For Services Marketing
The marketing concept dictates that marketing decisions should be based upon
customer needs and wants. Buyers purchase goods and services to satisfy their
needs and wants. Thus when a buyer engages in a market transaction he perceives
a bundle of benefits and satisfactions to be derived from that transaction. However
he does not usually divide the market offering into its component parts.
The formulation process of marketing mixes in services markets is much the same
as in other types of markets typically t his involves:
(a) Separating the offering into its components or sub mixes;
(b) Coordinating the sub mixes into the marketing mix.
Seven elements used in marketing mix for service are as follows:
1. Product
The service product requires consideration of the range of services provided,
the quality of services provided and the level of services provided. Attention
will also need to be given to matters like the use of branding, warranties and
after-sale service.
2. Price
Price considerations include levels of prices, discounts allowances and
commissions, terms of payment and credit. Price may also pay a part in differentiating one service from another and therefore the customers perceptions of value obtained from a service and the interaction of price and
quality are important considerations in many service price sub mixes.
3. Place
The location of the service providers and their accessibility are important
factors in services marketing. Accessibility relates not just to physical
accessibility but to other means of communication and contact. Thus the
types of distribution channels used (e.g. travel agents) and their coverage is
linked to the crucial issue of service accessibility.
4. Promotion
Promotion includes the various methods of communicat ing with markets
whether through advertising, personal selling activities, sales promotion munotes.in
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46MARKETING MANAGEMENTactivities and other direct forms of publicity, and indirect forms of communication like public relations.
5. People
All human actors who play a part in service delivery and thus influence the
buyer’s perceptions: namely, the firm’s personnel, the customer, and other
customers in the service environment. All of the human actors participating
in the delivery of a service provide clues to the customer regarding the nature
of the service itself.
6. Physical evidence
An environment in which the service s are delivered , and where the firm and
customer s are interact s and any tangible component that facilitate performance or communication of the service.
7. Process.
The actual procedures, mechanism and flow of activities by which, the
service is delivered the service delivery and operating systems. The actual
delivery steps the customer experiences, or the operational flow of the
service, will also provide customers with evidence on which to judge the
service.
Test your knowledge
1. What are the features of services?
2. Explain the various marketing mix for services.
4.5 Managing Service Quality And Productivity
The term Service Quality is an association of two different words; “service” and
quality. Service means “any activity or benefit that one party can offer to another
that is essentially intangible and does not resul t in the ownership of anything”.
Quality has come to be recognized as a strategic tool for attaining operational
efficiency and better performance of business.
Service quality means the ability of a service provider to satisfy customer in an
efficient man ner through which he can better the performance of business. In the
service sector too quality is an important element for the success of business. It is
because of the realization of its positive link with profits, increased market share,
customer satisfa ction. Several earlier studies and authors pointed out that quality
concept in service is different from the concept prevalent in the goods sector. The
reasons for such a treatment are inherent features of services like intangibility,
inseparability from t he provider, heterogeneous etc. Hence there is a distinct frame
work for quality explication and measurement.
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MEASUREMENT OF SERVICE QUALITY
In the case of tangible goods, quality can be assessed by examining the goods.
Quality control can be used to check specifications and reject defective goods. But
service quality cannot be assessed in the same way as a tangible product due to
particular fe ature of service such as, intangibility, in separability etc.
As in the case of goods, the service provider cannot undertake quality check before
the service is finally delivered to the customer. In order to assess the service quality
the customer judges the expected service quality against the perceived quality when
they receive it. There are mainly two methods for measuring service quality viz .
x Gap analysis Service
x Performance measures
Gap analysis
Gap analysis model of service quality was develope d by Parasuraman, A. et al. in
the year 1985. The model indicated that customer perception of quality was
influenced by a series of five distinct gaps. They are mentioned below.
Gap Analysis Model of Service Quality
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Gap - 1 - Gap between customer expect ation and Management perception. The
reasons for this gap are lack of adequate market research and lack of upward
communication. This gap can be narrowed by adopting adequate research programs
to know customer needs and to improve the communication system. It can be
measured by using the SERVQUAL scale and comparing the scores obtained from
the management and customers.
Gap - 2 - Gap between Management perception and service quality specification.
This gap exists in service firms because of the lack of who le hearted commitment
of management to service quality, inadequate service leadership etc. It can be
closed by standardizing service delivery process and setting proper organizational
goals.
Gap - 3 - Gap between Service quality specification and service delivery. The third
gap originates from the discrepancies in the actual service delivery, that is, the
service providers or employees do not perform at the level expected by the
management. It is because of the ineffective recruitment, lack of proper incen tives
and motivations etc. This gap can be eliminated by providing the employees with
adequate support system, better human resource management system etc.
Gap - 4 - Gap between Service delivery and external communication. The gap
between service delivery and external communication occurs due to exaggerated
promise or ineffective communication to the customer, which raise customer
expectations. This can be narrowed by efficient and effective communication
system.
Gap - 5 - Gap between expected quality and perceived quality. This gap exists
because of the inequality in the service expectation of customer and his service
perception. This can be overcome by identifying , quantifying and monitoring
customer expectations and perceptions through the effective use of marketing and
marketing research tools.
Service performance measures An alternative to using gap theory methodology
for measuring service quality is the servic e performance measures. The two types
of performance measures can be used under this method.
Soft measures of service quality
Soft measures are those that cannot easily be observed and must be collected by
talking to customers, employees or others.
1. Customer satisfaction surveys: Under this method individual customers or
corporate customer may be asked to rate their specific and overall impression
of service delivery. For this a questionnaire or interview schedule can be
used. Besides this, focus group interviews and other market research
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2. Internal performance analysis: In this method employee surveys are conducted to determine perception of the quality of service delivered to
customers on specific dimens ions. Also, feedback from quality circles,
performance evaluation reports, customer retention levels etc., provide s
information to monitor quality of services. Hard measures of service quality
this method includes those characteristics and activities that can be counted
timed or measured through audits.
For Example - Such measures may include waiting time for the pass book to be
updated by a bank, time taken to issue a demand draft, delay in clearing and
crediting a cheque deposited by the customer etc.
Dimensions of Service Quality
Measuring of service quality relies on the customer’s perception and this could be different from the expected service. To determine the gap between services expected and perceived service, several models are used like the SER VQUAL
model, RATER model, e -SERVICE QUALITY etc. The main dimensions of
service quality determination are as follows:
Dimensions of Service Quality
1. Reliability
Reliability is defined as the ability to perform the promised service dependably and accurat ely. In broad sense reliability means, service firms'
promises about delivery, service provisions, problem resolutions and pricing.
Customers like to do business with those firms, who keep their promises. So
it is an important element in the service qualit y perception by the customer
and his loyalty. Hence the service firms need to be aware of customer
expectation of reliability. In the case of banking services, the reliability
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dimension includes - regularity, attitude towards complaints, keep customers
informed, consistency, procedures etc.
2. Responsiveness
Responsiveness is the willingness to help customers and to provide prompt
service. This dimension focuses in the attitude and promptness in dealing
with customer requests, questions, complaints and prob lems. It also focuses
on punctuality, presence, and professional commitment etc., of the employees
or staff. It can be calculated on the length of time customers wait for
assistance, answers to questions etc. The conditions of responsiveness can be
improved by continuously view the process of service delivery and employee’s attitude towards requests of customers.
3. Assurance
The third dimension of service quality is the Assurance dimension. It can be
defined as employee's knowledge, courtesy and the abilit y of the firm and its
employees to inspire trust and confidence in their customers. This dimension
is important in banking, insurance services because customers feel uncertain
about their ability to evaluate outcome. In some situations like insurance,
stock broking services firms try to build trust and loyalty between key contact
persons like insurance agents, brokers etc and individual customers. In
banking services "personal banker" plays the role of key contact person. This
dimension focuses on job knowl edge and skill, accuracy, courtesy etc of
employees and security ensured by the firm.
4. Empathy
Another dimension of service quality is the Empathy dimension. It is defined
as the caring, individualized attention provides to the customers by their
banks or service firms. This dimension try to convey the meaning through
personalized or individualized services that customers are unique and special
to the firm. The focus of this dimension is on variety of services that satisfies
different needs of customers, individualized or personalized services etc. In
this case the service providers need to know cust omers personal needs or
wants and preferences.
5. Tangibility
The fifth dimension of service quality is the Tangibility which is defined as
the appearance of physical facilities, equipment's , communication materials
and technology. All these provide enough hints to customers about the quality
of service of the firm. Also, this dimension enhances the image of the firm.
Hence tangibility dimension is very important to firms and they need to invest
heavily in arranging physical facilities.
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Productivity
First thing to be understand that productivity and production is not the same
concept. Production is denoted in number or quantity, whereas productivity is
relative concept, generally expressed in terms of ratio or output. Productivity means
maximum or greatest output with smallest or minimum efforts. Productivity is ratio
of Output to Input. Productivity can be increased if use manage the resource very
efficiently or minimum waste of available resources, but production can be increase
only if increase in number of input units.
Measures To Increase The Productivity
Following are the various measures to increase the productivity.
1. Incentive plan to employees:
Every organization should design incentives plan for their employees to
motivate them to work in better way. The plans should consider monetary as
well as non - monetary benefit to the employees. Monetary benefit includes
wages and salaries, bonus etc. Non - monetary benefits incudes various
faculties at work place, good work ing condition, participation of worker in
decision making policies of management etc.
2. Training:
Training is essential for new employees to familiar with work and giving
them skill and knowledge about the job. Training helps them to understand
the work in b etter way. Training improves the attitude of employees towards
work.
3. Network analysis techniques:
Network analysis techniques help the company to plan about the time
duration required for completion of project. The generally make a use of
CPM or PERT techn ique. Critical Path Method (CPM) and Project Evaluation Review Technique (PERT) helps the company to focus on important activities which require maximum time for its completion and
thereby plan the activities in such a way to reduce the time for completion of
project and improve overall productivity.
4. Value Engineering:
Value Engineering helps to improve the quality product and reduce the cost
,by designing appropriate process at various department and various stages
of product life cycle. Various states inc ludes in value engineering such as selecting product for improvement, collect relevant data required for improvement, analysis the existing process of work, develop new design or
process, implement the new process, review of process etc.
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5. Job modification:
This is done to make the job more meaningful and interesting to the
employees. In this more challenging jobs and responsibilities are offered to
the employees to improve their efficiency . For example, an employee who is
doing reporting work will be given the work to frame the policies for the
organization. a
6. Quality circle
Concept of Quality circle was first popularized by Dr. Kaoru in 1960. Quality
circle is group of people from different department of organization, who m eet
together and identity, analyses the various problem of organization . This
quality circle group comes up with solution to solve the problem and
recommend the same to management. Management will review the solution
and implement the same, this will lead to increase in productivity.
7. Resources Management:
Optimum utilization of available resources is necessary to increase productivity. Various resources of organization such as physical, capital,
manpower resources should be utilize efficiently to increase t he productivity.
8. Material Management:
Material management deals with management of material used in production
or manufacturing process. There should be proper inventory management,
systematic storing of this materials. Some objectives of material manage ment
includes purchase quality material at right price, maintain good relation with
supplier, maintain proper level of inventory etc.
9. Performance evaluation:
Every company should do performance evaluation of their employees every
year. Company should inform the worker about their strengths and weaknesses. This performance evaluation help the worker to identify their weaknesses improve the same, which in turn will help to improve productivity.
10. Quality control:
Quality control is essential to increase the productivity . The main objective
of quality control is to produce quality goods at reasonable price , find out the
various deviations in quality and take necessary measures to improve the
same. This quality control helps to improve productivity.
4.6 Rural Market Scenario In India
Rural marketing in Indian economy can be class ified mostly under the following
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The markets for consumer durables consist of both durable and non -durable goods .
The markets for agricultural products which are include fertilizers, pesticides,
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Rural marketing in India i s sometimes mistaken by people who think rural
marketing is all only about agricultural marketing. Rural marketing determines the
carrier of business activities from urban sectors to the rural regions as well as the
marketing of various products manufactur ed by the non -agricultural workers from
rural to urban areas.
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¾ Here agriculture is first and also the main source of income.
¾ This income is seasonal in nature and fluctuates as it depends on crop
production.
¾ Though it is large, the rural market is geographically scattered.
¾ It shows religious, cultural and economic disparities.
¾ The market is not much developed, because the people here exercise adequate
purchasing power.
¾ These markets have their orientat ion in agriculture, with poor standard of
living, low per capital income and backwardness.
¾ It shows sharper and different regional preferences with distinct predictions,
habit patterns and behavioral aspects.
¾ Rural marketing process is an outcome of the ge neral rural development
process initiation and management of social and economic change in the rural
sector is the core of the rural marketing process.
4.7 Factors Contributing to the Growth of Rural Markets in
India
1. Increase in literacy level
Level of education in rural area is increasing over a period of time. More than
50% of rural population is literate. Due to increase in literacy level the
demand for various consumer product started increasing in rural area.
2. Development of infrastructure facilities
Government has taken initiative to connect each and every village with
proper transportation facilities, as a result of this various infrastructure
project started in rural area. Due to proper connectivity of urban area with
rural area, demand for goods and services started increasing in rural area.
3. Increasing mass media penetration
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4. Employment generation
Government has taken initiative and started various projects in rural areas,
result into development of rural areas. With the development of rural area
new employment opportunities started in rural area.
5. Research and development in agriculture
Agriculture is primary business in rural areas. With the new research in
agriculture, various scientific methods are used by farmers to improve the
crop yield. With this there is increase in opportunity for rural marketing.
6. Influence from urban people
Rural people started influenced from urban people. Lifestyle of rural people
is also to some extent influence by urban people. People in rural area started
following the buying behavior of urban people. This leads to increase in
demand for rural marketing.
7. Co-operative marketing
New MNC has entered into rural marketing. This MNC started making
efforts, awareness and new innovative technique for development of rural
marketing. MNC such as HUL, Godrej etc. have made various efforts for
development of rural marketing in India.
4.8 Challenge Of Rural Marketing
Twelve problems faced in rural marketing are as follows:
1. Depri ved people and deprived markets
The number of people below the poverty line has not decreased in any
appreciable manner. Thus, poor people and consequently underdevel oped
markets characterize rural markets. A vast majority of rural people is tradition
bound, and they also face problems such as inconsistent electrical power,
scarce infrastructure and unreliable telephone system, and politico -business
associations that hinder development efforts.
2. Lack of communication facilities
Even today, most villages in the country are inaccessible during the monsoons. A large number of villages in the country have no access to
telephones. Other communication infrastructure is also highly underdeveloped.
3. Transport
Many rural areas are not connect ed by rail transport. Many roads have been
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bullock carts is inevitable even today. Camel carts are used in Rajasthan and
Gujarat in both rural and urban sectors.
4. Many languages and dialec ts
The languages and dialects vary from state to state, region to region and
probably from district to district. Since messages have to be delivered in the
local language, it is difficult for the marketers to design promotional
strategies for each of these areas. Facilities such as phone, telegram and fax
are less developed in villages adding to the communica tion problems faced
by the marketers.
5. Dispersed markets
Rural population is scattered over a large land area. And it is almost impos -
sible to en sure the availability of a brand all over the country. District fairs
are periodic and occa sional in nature. Manufacturers and retailers prefer such
occasions, as they allow greater visibility and capture the attention of the
target audience for larger sp ans of time. Advertising in such a highly
heterogeneous market is also very expensive.
6. Low per capita Income
The per capita income of rural people is low as compared to the urban people.
Moreover, demand in rural markets depends on the agricultural situat ion,
which in turn depends on the monsoons. Therefore, the demand is not stable
or regular. Hence, the per -capita income is low in villages compared with
urban areas.
7. Low levels of literacy
The level of literacy is lower compared with urban areas. This ag ain leads to
a problem of communication in these rural areas. Print medium becomes
ineffective and to an extent irrelevant, since its reach is poor.
8. Prevalence of spurious brands and seasonal demand
For any branded product, there are a multitude of local variants, which are
cheaper and hence more desirable. Also, due to illiteracy, the consumer can
hardly make out a spurious brand from an original one. Rural consumers are
cautious in buying and their decisions are slow, they generally gi ve a product
a trial and only after complete satisfaction they buy it again.
9. Different way of thinking
There is a vast difference in the lifestyles of the people. The choice of brands
that an urban customer enjoys is not available to the rural customer, w ho
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simple thinking and their decisions are still governed by customs and
traditions. It is difficult to make them adopt new practices.
10. Warehousing problem
Warehousing facilities in the form of storehouse are not available in rural
India. The available storehouse is not properly maintained to keep goods in
proper conditions. This is a major problem because of which the warehousing
cost increases in rural India.
11. Problems in sales forc e management
Sales force is generally reluctant to work in rural areas. The languages and
dialects vary from state to state, region to region, and probably from district
to district. Since messages have to be delivered in the local language, it is
difficu lt for sales force to communicate with the rural consumers. Sales force
finds it difficult to adjust to the rural environ ment and inadequate facilities
available in rural areas.
12. Distribution problem
Effective distribution requires village -level shopkeepe r, taluka-level
wholesaler/dealer, district -level stockist/distributor, and company -owned
depot at state level. These many tiers increase the cost of distribution. Rural
markets typically signify complex logistical challenges that directly translate
into h igh distribution costs. Bad roads, inadequate warehousing and lack of
good distributors pose as major problems to the marketers.
Test your knowledge
1. What are the various factors for growth of rural marketing in India?
2. Explain the dimension of service quality.
4.9 Strategies To Cope With The Challenges Of Rural
Marketing
The following are some of the strategies adopted by Companies for Rural Markets
for their Products and Services:
1. Easy -Way communication
The companies have realized the importance of proper communication in
local language for promoting their products especially in rural market. They
have started selling the concept of quality with proper communication and
easily understandable way of communications.
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2. Chang ing Pattern of Rural Customers
Now a days villagers are constantly looking forward for new branded
products and good services. Indian customer in rural market was never price
sensitive, but they want value for money. They are ready to pay premium for
the product if the product is offering some ex tra utility for the premium.
3. Best Promotion and Quality Perception
Companies with new technology are properly capable to communicating its
products and services to their customer. There is a trade -off between quality
a customer perceives and a company wants to communicate. Thus, this
positioning of technology is very crucial. The perception of the Indian about
the desired product is changing. Now they know the difference between the
products and the utilities derived out of it.
4. Promoting Indian Spo rts Team
Companies are promoting Indian sports team so that they can associate
themselves with India. With this, they can influence Indian mindset like
during cricket world cup. For example Hero Honda has launched a campaign
“Dhak Dhak Go” similarly; other companies have also launched campaigns
during world cup.
Product/Services Campaign like “Be Indian”
Companies are now talking about Be Indian. It is a normal tendency of an
Indian to try to associate him/her with the product. If he/she can visualize
himself/herself with the product, he/she becomes loyal to it.
5. Developing Specific Products
Many companies are developing rural -specific products. Keeping into consideration the requirements, a firm develops these products. Electrolux is
working on a ma de- for India fridge designed to serve basic purposes: chill
drinking water, keep cooked food fresh, and to withstand long power cuts. In
Service sector like Insurance they are focusing on micro insurance products
for rural segments.
6. Effective Media modes of communication
Traditional media or the modern, media used for rural marketing is being
used by companies. The traditional media include melas, puppetry, folk
theatre etc. while the modern media includes T.V, Radio and E -Chaupal. L IC
uses puppets to educate rural masses about its insurance policies. Govt. of
India uses puppetry in its campaigns to press ahead social issues.
7. Patriotism with Products and Services
Companies are associating themselves with India by talking about In dia, by
saying that they are Indian and they are more patriotic. Using Indian Tricolor
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Nokia has designed a new cellular phone 5110, with the India tricolor and a
ringing tone of “Sare Jahan se achcha”.
8. Focus on Customer Requirement
All customers want value for their money. They do not see any value
associated with the products. They aim for the basic functionality. However,
if the sellers provide frills free of cost they are happy with that. They are
happy with such a high technology that can fulfil their needs. For example
Nokia and Reliance have launched a simple product, which has captured the
market.
9. Adopting Best localized way of distributing channels
Proper distribution channels are recognized by companies. The distribution
channel could be big scale like super markets. They thought that a similar
system can be grown in India. However, they were wrong; soon they realized
that to succeed in India they have to reach the noo k and the corner of the
country. They have to reach the “local
Paanwala, Local Baniya or Kirana Shop Owners” only they can succeed. Big
multinational companies in India capture the rural market share in India if they have
to go the local market shoe seller s and with the low priced products.
4.10 Summary
Service sector is supporting to today’s primary sector. In the absence of services it s
difficult to do carry on any business. Over a period of time growth of service sector
has increase and its contribution to country’s GDP is also increased. Initiative of
government to implementation of GST further given boost to this sector.
In India rur al marketing is suffering from various challenges for its growth. Most
of the population of India stays in rural area so development of proper market of
this area is need of the day. Rural market is one of the biggest opportunities which
should be tap with the help of various strategies to cope up with its challenges.
4.11 Exercise
A. Fill In the blanks with appropriate option.
1. According to the ________ “Any act or performance that one party can offer
to another that is essentially intangible and does not resu lt in the ownership
of anything. Its production may or may not be tied a physical product ”
a. AMA
b. Philip Kotler
c. Mark Burgess
d. Armstrong munotes.in
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2. Services are__________ b ecause of this, it is difficult for service providers
to manage anything other than steady demand.
a. Perishable
b. Intangible
c. Inseparable
d. Heterogeneous
3. The SERVQUAL Instrument measures the _______ dimensions of Service
Quality.
a. Three
b. Four
c. Five
d. Six
4. Services sector provides revenue to the government in the form of _______ .
a) Excise duty
b) Custom duty
c) Income tax
d) GST
5. Financial services include _______ and ________ services.
a) Banking and insurance
b) Retailing and health care
c) Education and recreation
d) Physical and mental
[Answer: 1 - (b) Philip Kotlar 2 - (a) Perishable 3 -(c) Five 4 - (d) GST 5 - (a) Banking
and insurance]
B. State whether the following statement is true or false.
1. Demand determines price of services.
2. A service can be separated from the person or firm providing it.
3. Demand of services is difficult to predict.
4. Service is an act or performance offered by one party to another.
5. Hospitality industry is a part of manufacturing sector.
(True: 1, 3 , 4 False:2 , 5)
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C. Match the following . Table A Table B 1. Lack of communication facilities a. Feature of Services 2. Intangibility 1. Service industry 3. Insurance Sector 2. Mining industry 4. Physical evidence 3. Challenge to rural marketing 5. Extracting of coal 4. Marketing mix for service
marketing
(Answer: 1 - d, 2- a, 3- b, 4-e, 5-c)
D. Answer the following
1. Write a note on Service Quality and Productivity.
2. What are the challenges in rural marketing?
3. What are the strategies to cope with the challenges of rural marketing ?
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