CHANNELS OF DISTRIBUTION
Meeting and Definition::
A major focus of channels of distribution is delivery. It is only through distribution that public and private goods and services can be made available for use or consumption. Producers of such goods and services are individually capable of generating only the form or structural utility for their products and services. They can organize their production capabilities in such a way that the products they have developed can, in fact, be seen, analyzed and sold in the market. The emergence and arrangement of a wide variety of distribution oriented institutions and agencies, typically called intermediates because they stand between production on the one hand and consumption on the other, can be explained in the following terms :
i) Intermediaries can imporove the efficiency of the process.
ii) They help in the proper arrangement of routes of transactions.
iii) They help in the searching process.
iv) They help in the sorting process.
Marketing Channels are set of Interdependent organizations involved in the process of making a product or service available for use or consumption.
According to American Marketing Association, “A Channel of distribution, or marketing channel, is the structure of intra-company organization units and extra-company agents and dealers, wholesale and retain through which is a commodity, product or service is marketed.”
According to Philip Kotler, “Every producer seeks to link together the set of marketing intermediaries that best fulfil the firm’s objectives. This set of marketing intermediaries is called the marketing channel (also trade channel or channel of distribution).”
According to William J. Stanton, “A channel of distribution for a product is the route taken by the title of the goods as they move from the producer to the ultimate consumers or industrial user.”
According to Cundiff, Still and Govani, “Marketing Channels are the distribution networks through which producers’ products flow to the market.’
Channel Levels
The producer and the final customer aree part of every channel. We will use the number of intermediary levels to designate the length of a channel.
Channel of Distribution for Consumer Goods :
As we know that a channe of distribution is the combination of middlemen that a company uses to move is products to the ultimate consumer. For the consumer productds, four channels are widely used as shown in figure below :
i) Zero Level Channel : A Zero level channel (also called a direct-marketing channel) consists of a manufacturer selling directly to the final customer. The major examples are door-to-door sales, home parties, mail order, telemarketing. TV selling, internet selling, and manufacturer owned stores. Eureka Forbes representatives sell vacuum cleaners door-to-door.
ii) One-Level Channel : A one level channel contains one selling intermediary, such as a retailer example Maruti Suzuki. Bata, Adidas.
iii) Two-Level Channel : A Two-level channel contains two intermediaries. In consumer markets, these are typically a wholesaler and a retailer.
iv) Three-Level Channel: A three-Level channel contains three intermediaries. In the this type of channel, agents, brokers sell to wholesalers who sell to small retailers. Longer marketing channels can be found. In Japan, food distribution may involve as many as six levels. From the producer’s point of view, obtaining information about and users and exercising control becomes more difficult as the number of channel levels increases.
Channel of Distribution for Industrial Products: An industrial-goods manufacturer can use its sales force to sell directly to industrial customers. It can sell to industrial distributors, who sell to the industrial customers, or it can sell through manufacturer’s representatives or its own sales branches directly to industrial customers, or indirectly to industrial customers through industrial distributors. Zero- one, and two-level marketing channels are quite common in industrial marketing channels.
Steps involved in Designing a Channel System::
1. Formulating the Channel Objective: Formulation of Channel objectives are the first step in designing a channel system. The objectives clarify what is sought to be achieved by having the channels. All firms seek to realize certain common objectives by having the channel. In addition, they may also have some specific objectives depending on their unique circumstancers.
The common objectives, firms seek from channels, are:
i) Effective coverage of the target market.
ii) Efficient and cost effective distribution.
iii) Ensuring that consumers incur minimum exertion in procuring the product.
iv) Helping the firm to carry on manufacturing uninterrupted, confident that the channels will take care of sales.
Formulating the Channel Objective
Identifying Channel Functions
Linking Channel Design to Product
Characteristics
Evaluation of the Distribution
Environment
Evaluation of Competitor’s Channel
Designs
Matching the Channel Design to
Company Resources
Evaluating the Alternatives and Selecting
the Best
2. Identifying Channel Functions: Identification of the functions to be performed by the channel is the next step in designing a channel system. We have already discussed the channel functions in detail. Suffice to add here that channel design depends on the functions expected of the channel and that channel functions must be identified in the specific context of the firm in order to get practical direction in designing the channel system.
3. Linking Channel Design to Product Characteristics: Different products require different channel systems. The firm should analyze the characteristics of the product and choose the channel system that matches the product best. Consumer and industrial goods, for examples, need different channels. And within the category of consumer goods, different sub-categories such as convenience goods, shopping goods and specially goods may need different channel systems.
4. Evaluation of the Distribution Environment: While selecting the channel design, the firm should also take into account the distribution environment obtaining in the country/territory. It should evaluate the vital features of the distribution environment and ensure that the proposed channel design is compatible with them. Distribution environment in the broader sense includes the trade related legal environment as well. The legal implications of channel design must be carefully examined before taking a final decision.
5. Evaluation of Competitor’s Channel Designs:: The firm should also study the competitor’s channel patterns before deciding its channel design. While the firm may not necessarily follow the competitors in channel design, it should analyze the plus and minus of the channel patterns adopted by each of its major competitors. Quite a number of firms do settle down for a follow the leader’ policy in channel design. They find it an easy route. But such an approach may deprive them of the chance to score an edge over competition through the channel strategy. Reliance textiles and Asian Paints are two goods examples of companies striking an entirely new Path in channel design both broke away from the existing practice and scored high success.
6. Matching the Channel Design to Company Resources: The resources available with the organization also govern choice of channel.
i). Firms with limited resources settle for conventional channels: Firms with limited resources and small volume of business will normally find it difficult and uneconomical to opt for own channels. For such firms, establishing branch showrooms/depots/retail outlets of their own will result in a high unit cost of distribution, which they cannot afford. They are better off by depending on conventional channels.
ii. Firms with larger resources have more options: Firms with larger resources and larger marketing operations can go in for varied distirubiton channels. In fact, in India, in several businesses, firms, which are strong in resources, usually operate two parallel channels, one reaching out to the customer through company depots and showrooms, and the other through conventional intermediaries. Firms like Reliance Industries, Bombay Dyeing, DCM and Mafatials, have all gone in for such a two pronged channel design.
7. Evaluating the alternatives and selecting the best: With the completion of the foregoing steps, the number of alternatives would have narrowed down considerably. The firm must evaluate these alternative designs and choose the best among them. Actually, two distinct evaluations – an economic evaluation and a conceptual evaluation – may be necessary.
Intensity of Distribution (Market Coverage)
RETAILING
Meaning and Definition:
The distribution of consumer products begins with the producer and ends at the ultimate consumer. Between the producer and the consumer theree is a middleman the retailer, “Who links the producers and the ultimate consumers. Retailing is defined as a conclusive set of activities or steps used to sell a product or a service to consumers for their personal or family use. It is responsible for matching individual demands of the consumer with supplies of all the manufacturers. The word ‘retail is derived from the French word retailer, meaning to cut a piece off or to break bulk.
According to William J. Stanton, “A retailer or a retail store is a business enterprise which sells primarily to the ultimate consumers for non business use.”
According to Cundiff and Still, “Retailing consists of these activities involved in selling directly to ultiumate consumers.”
Thus, Retailing includes all the activites involved in selling goods or services directly to final consumers for personal, non business use. A retailer or retail store is any business enterprise whose sales volume primarily from retailing.
Function of Retailing:
01. Assembling of goods from various wholesalers.
02. The physical movement and storage of goods for the supply to the final consumers to meet their needs and requirements.
03. Providing of information concerning the nature and use of goods to the wholesalers and producers. It also informs about the market trend to them.
04. The standardizatiokn, grading and final processing of goods which have been left ingraded or unstandardized by wholesalers.
05. The provision of ready availability of goods of various qualities and of various manufacturers.
06. the assumption of risk concerning the price, nature and extent of demand of goods as long as they remain unsold.
07. The financing inventory and the extension of credit to consumers for a short period.
Types of Retailers:
01. Speciality Store:: Specially stores, as the name implies, are ones that carry a narrow product line with a deep assortment within that line, such as apparel stores, sporting goods stores, furniture stores,florists, and bookstores. A clothing store would be a single-line store; a men’s clothing store would be a limited line store; and a men’s custom-shirt store would be a super specially store.
Consider the example of garments. A store like Shopper’s Stop that retails ready-made garments for the family is called single-line store. Raymond’s showshops that retail only men’s clothing and accessories is known as limited line store and stores that retail desiger clothes for men like Chirag Din, Lousis Phillip and Van Heusen are known as super speciality stores.
02. Department Stores: A department store carries several product lines, invariable all that is required by a typical household. These lines include food, clothing, appliances and other household goods, home furnishings, gifts and curions. In a typical department store each product line is managed independentlyn by specialist buyers or merchandisers. In India these stores are still at the introduction phase and they are mainly located in metros like Mumbai, Delhi and Channai and other cities like Bangalore and Hyderabad. The closest to the concept of department store is akbarally’s which has three stores in Mumbai.
03. Supermarket: This is a large, low cost, low margin, high volume, self service operation designed to serve the customer’s need for food, laundry and household maintenance products. Once again one does not see these supermarkets in the true sense of the term in India.
For Example: Foodland and Garware are in Mumbai and similar stores in New Delhi and other major cities.
04. Convenience Stores: These are generally food stores that are much smaller in size than supermarkets. They are conveniently located near residential areaas and have long hours of supermarekets. They are conveniently located near residential areas and have long hours of operations, seven days a week, and carry a limited line of high turnover convenience products. In the Indian context, the old and faithful street corner grocery store or cold storage or the food store are the ones that can be called convenience stores. These stores serve a very useful purpose.
05. Discount Stores: As the name implies, discount stores are the one that sell standard merchandize at lower prices than conventional merchants or stores by accepting lower margins but pushing for higher sales volume. A true discount store has four characteristics :
o It regularly sells its goods at discounted price.
o It carries national or reputed brands to enhance its image.
o It keeps its operational costs to the minimum by emphasizing on self services and no frill interiors.
o It location tends to be in low rent areas, and its draws customers from even distant locations.
The best known and the biggest discount store in the US is Wal-Mart. The nearest to this concept are textile stores like Babubhai Bhawani (BB) and Babubhai Jagivanram (BJ) in Mumbai.
6) Off Price Retailer : Merchandise but as less than regular wholesale prices and sold at less than wholesale prices and sold at less than retail. Often leftover goods, overruns, and irregulars obtained at reduced prices from manufacturers or other retailers.
Trends in Retailing:
At this point, we can summarize the main defeloopments retailers and manufacturers need to take into account as they plan their competitive strategies.
1. New retail forms and combinations continually emerge. Bank branches have opened in supermarkets Gas stations, include food stores that make more profit than the gas operation. Bookstores feature coffee shops.
2. The electronic age has significantly increasedthe grown of nonstore retailing. Consumers receive sales offers in the mail and over television computers and telephones to which they can immediately respond by calling a toll free number or via computer.
3. Retailers with unique formats and strong brand positioning aree ingreasingly moving into other countries McDonald’s. The limited, GAp, and Toys “R” US have become globally prominent as a result of their great marketing prowess. Many more U.S. retailers are actively pursuing overseas markets to boost profits.
WHOLESALING
Meaning and Definition:
Wholesaling includes all the activities involved in selling goods or services to those who buy for resale or business use. Wholesaling excludes manufacturers and farmers because they are engaged primarily in production, and it excludes retailers.
The person who is involved in wholesaling activity is called a wholesaler.
According to Philip Kotler, “Wholesaling consists of the sale and all activities in selling goods or services to those who buy for resale or business use.”
According to American Marketing Association, “Wholesalers sell to retailers or other merchants and or industrial, institutional and commercial users but they do not sell in significant amounts to ultimate consumers.”
Functions of Wholesalers
1. Selling and Promoting: Wholesalers provides a sales force that helps manufacturers reach many small business customers at a relatively low cost. Wholesalers have more contacts, and often buyers trust wholesalewrs more than they trust a distant manufacturer.
2. Buying and Assortment Building: Wholesalers are able to select items and build the assortments their customers need, saving the customers considserable work.
3. Bulk Breaking: Wholesalers achieves savings for their customers through buying in large carload lots and breaking the bulk into smaller units.
4. Warehousing: Wholesalers hold inventories, thereby reducing the inventory costs and risks to suppliers and customers.
5. Transportation: Wholesalers can often provide quicker deliveryto buyers because they aree closer to the buyers.
6. Financing: Wholesalers finance customers by granting credit, and finance supplers by ordering early and paying bills on time.
7. Risk Bearing: Wholesalers absorb some risk by taking title and bearing the cost of theft, damage spoilage and obsolescence.
8. Market information: Wholesalers supply information to suppliers and customers regarding competitor’s activities new products, price developments, and so on.
9. Management Services and counseling: Wholesalers often help retailers improve their operations by training sales clereks, helping with store layouts and displays, and setting up accounting and inventory control systems. They may help industrial customers by offering training and technical services.
Thursday, November 19, 2009
Monday, November 16, 2009
Unit - 5
Unit – 5
PROMOTION MIX
MEANING AND DEFINITION-
Promotion is a communication process, by which the producers of the products or services draw attention of the consumers or prospective consumers towards their products and services. Consumers are informed and reminded about the products and are requested and persuaded to purchase their products. Such communication may be may be made either along the product or well in advance of the introduction of the product in the market.
According to Phillip Kotler, “Promotion compasses all the tolls in the marketing mix whose major role is persuasive communications"
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According to
Thus, promotion includes every activity which inspires people to buy the goods and services of the company.
CHARACTERISTICS OF PROMOTION
i.) Customers are informed.
ii.) Customers are reminded.
iii.) Customers are requested and persuaded to purchase.
iv.) Sales promotion techniques.
v.) Performed by the manufacturer.
ELEMENTS OF PROMOTION MIX
1.) Advertising : advertising includes any informative or persuasive message carried by a non-personal medium and paid for by a sponsor whose product is in some way identified in the message. Traditional mass media, such as television and magazines, are most commonly used. However, the direct mailing of the catalogues, electronic media advertisements featuring computerized ordering, and other direct response vehicles are becoming increasingly popular.
Merits
i.) Can reach many consumers simultaneously.
ii.) Excellent for creating brand images.
iii.) High degree of flexibility and variety of media to chose from.
Demerits
i.) High visibility makes advertising a major target of marketing critics.
ii.) Advertising exposure time is usually brief.
iii.) Advertisements are often quickly and easily screened out by consumers.
2.) Personal Selling: Personal selling is a person-to-person dialogue between buyer and seller. The purpose of interaction, whether face-to-face or over the phone, is to persuade the buyer to accept a point of view, to convince the buyer to take a specific course of action, or to develop a consumer relationship.
Merits
i.) Can be the most persuasive promotion tool; sales people can directly influence the purchase behaviors.
ii.) Allows two way communications.
iii.) Often necessary for technically complex products.
Demerits
i.) High cost per contact.
ii.) Sales training and motivation can be expensive and difficult.
iii.) Poorly done sales presentations can hurt sales as well as company, product and brand images.
3.) Sales Promotion: It includes activities other than advertising, personal selling publicity and public relations which are used in promoting the sales of the product or persuading the customers for purchasing the product. distribution of samples, premium coupon, point of purchase display, off-price selling, etc. is the examples of sales promotion techniques.
Merits
i.) Excellent approach for short term price reductions for stimulating demand.
ii.) Can be effective for changing a variety of consumer behaviors.
iii.) Can be easily tied with other promotional tools.
Demerits
i.) May have only short term impact.
ii.) Over use of price related sales promotion tools may hurt brand image and profits.
iii.) Effective sales promotions are easily copied by competitors.
4.) Publicity: Publicity is a non-personal not paid stimulation of demand of the products or services or business units by planting commercially significant news or editorial comment in the print media or by obtaining a favorable presentation of it upon radio, television or stage.
Merits
i.) As "free advertising", publicity can be positive and stimulating demand at no cost.
ii.) May be perceived by consumers as more credible, because it is not paid for by the seller.
iii.) Consumers may pay more attention to these massages, because they are not quickly screened out as are many advertisements.
Demerits
i.) Publicity is not always possible because it is not in the hand of the seller.
ii.) Publicity can be negative and hurt sales as well as company product, & brand images.
iii.) Company cannot completely control the content of publicity messages.
5.) Public Relations: Most firms in today's environment are not only concerned to customers, suppliers and dealers but are also concerned about the effect of their action on the people outside their target markets. It is a planned effort by the organization to influence the attitudes and opinions of a specific group by developing a long term relationship. There target may include a large number of interested public (customers, stock holders, government agencies, special interest groups).
ADVERTISING
Meaning and Definition
The term 'advertising' is derived from the original Latin word 'advertere' which means 'to run' the attention. Every piece of advertising turns the attention of the readers or the listeners or the viewers or the onlookers towards a product or a service or an idea. Therefore, it can be said that anything that turns the attention to an article or a service or an idea might be well called as advertising.
According to American Marketing Association, it is “any paid form of non-personal presentation of ideas, goods or services by an identified sponsor."
According to the New Encyclopedia Britannica, “advertising is a form of communication intended to promote the sale of the product or service to influence public opinion, to gain political support or to advance a particular cause."
According to Weeler, “advertising is any form of paid non-personal presentation of ideas, goods or services for the purpose of including the people to buy."
Advantages of Advertising
A) Advantages to Manufacturers
1) It increases the sales volume: Advertising increasing the sales volume of the product. Hence mass production is possible. This leads, to reduction in the cost of production.
2) It increases the net profit: It increases the net profit by a higher turnover of sales. It leads to higher volume of production. Hence average cost of production is less, and the profit will increase its example is HUL who spend very huge amount in advertisement.
3) It controls product price: Control of wholesale and retail price is possible by means of advertisement. We can assure about the price of any product in its advertisement. Example – In advertisement we see Lux bath soap is available in Rs 10 now from any shop u can buy it and shopkeeper wont take more than Rs 10 for a single piece of Lux.
4) It helps in opening new market: Advertising is helpful in opening or creating new markets. It helps to get leadership in the market. It helps the manufacturers to take decision whether top expand the market share or not. Example – Aircel who is leader in South Indian telecom market is now expanding their market in north India.
5) It maintains the existing market: Maintenance of existing market is essential for success of a concern. Hence manufacturers, who look ahead, always have an eye on the future business.
6) It creates reputation: Advertising increases the reputation of the manufacturers in the public. It builds the image of the product and goodwill of the manufacturers.
7) It is less expensive: Advertising is considered to be less expensive. With a smaller amount of money, advertising reaches many people and more people will buy the product.
8) Wide Information: Wider information of product is possible through advertisement. Any change in the quality or price can be made known by the manufacturers to the customers as and when necessary in a quick manner. Example – In 2006 Coke and PepsiCo, Cadbury advertisement regarding quality assurance.
B) Advantages to Salesman
1) Creates a background: Salesman's mastery and skill satisfy the customers. A well-trained active tactful salesman's job makes easy distribution. The advertisement, which is the background, will help the salesman very much. Customers know about the product through advertisement. When the salesman contacts them with the product, customers buy the product without any hesitation.
2) Curtails the burden of the Salesman's job: If the advertising is done by the manufacture, the work of the salesman is reduced. Otherwise he has to advertise about the product end then try to sell the product. Salesman's function is supported and supplemented by advertisement.
3) Least effort: Advertised product can be sold very easily. Salesman's time is saved and he can contact more customers in a short period. He can meet many customers with least effort.
4) Consumer's needs can be studied: A salesman's confidence is increased through advertising by educating and stimulating the customers. Customer's demand and needs are studied by him correctly.
5) Creates enthusiasm: Advertising reduces salesman's job. He can do his job in a better way to sell the product, crossing the fixed quota. Hence it creates enthusiasm and confidence in him.
C) Advantages to wholesalers and retailers
1) Creates easy sale: Advertisement informs consumers about the quality of the product. Hence they know about the product. Sale of thet product is easy for the wholesalers and retailers.
2) Increase the turnover: Advertisement helps quick sale of product which in turn increases the rate of turnover of the product. Thus, there is no question of old stocks. It reduces the expenses on overhead charges.
3) Attracts more customers: Advertising gives the detailed information about the product and the availability of the product in a particular shop. As such, it attract more customers in that particular shop.
4) Increases the prestige of the store: Customers know about the store through advertising. The goodwill or the reputation earned by the manufacturer is also shared by the selling shops. Thus the prestige of the firm increases.
5) Publicity: In advertisement, product publicity and wholesale or retail shop publicity is done simultaneously. Thus the retailers are also known to the public and thereby increase their sales.
D) Advantages to the customer
1) Easy purchasing: Advertising helps consumers in easy purchasing of products. Advertisement gives useful information about the reasonableness of the quality and the price of he product.
2) Fair: It helps the customers to get the product at fair prices.
3.) Saves time: It helps customers by giving the information about the availability of the product, i.e. where and when. The consumer can select the best product in a particular shop. Thus it reduces their shopping time.
4) Best quality product: Advertisement generally stands for a quality product. Manufacturers advertise their product only for selling. If the product is not, customers switch on to other products (brand). Manufacturers maintain their quality to retain their market.
5) Educates the customers: The aim of the advertising is to educate the customers about the introduction of the new product mentioning its different uses. It gives information to the customers about the availability of goods and services in the market.
E) Advantages to community
1) Increases employment opportunities: Advertising generates employment opportunities directly or indirectly. Direct employment opportunities in advertising are artists, painters, singers, musicians, photographers, pressmen, managing agencies, etc.
2) Uplifts the standard of living: Advertising educates the members of the community in various uses of the products. As such, people know the varieties of products and their availability in the market and uses and benefits.
3) Educative value: Advertising educates the members of the community in various uses of the products. As such, people know the varieties of products and their availability in the market and uses and benefits.
4) Helps press: Advertising gives more income to the press. we cannot buy newspapers at cheaper rate without advertisement. Commercial advertisement and broadcasting are undertaken by radios, television, newspapers, etc. These leads to the cheaper availability of the newspapers.
SALES PROMOTION
Meaning and Definition
The word promotion originates from Latin word 'Promovere' means 'to move forward' or to push forward. Sales and promotion are two different words and sales promotion is the combination of these two words.
Sales Promotion is another important component of marketing communications mix. It is essentially a direct and immediate inducement. It adds extra value to the product and hence prompts the dealer/consumer to buy the product.
Thus, sales promotion methods aim to capture the market and increase the sales volume. It is an important lubricant in marketing to lubricate the marketing efforts. Now-a-days sales promotion is a necessary to boost sales. In the broader sense, it is not expenditure; it is an investment, as it pays rich returns. It aims in creating demand. It is right to say that sales promotion moves the product. A manufacturer must take the customers to know the product and he must influence them to buy that product.
According to William J. Stanton, "Sales promotion is an exercise in information, persuasion and influence."
According to American Marketing Association, "These marketing activities, other than personal selling, advertising and publicity that stimulate consumer purchasing and dealer effectiveness such as display shows and exhibitions, demonstrations and various non-recurrent selling efforts not in ordinary routine."
According to Phillip Kotler, "Promotion encompasses all the tools in the marketing mix whose major role is persuasive communication."
Characteristics of Sales Promotion
i) Sales promotion does not include advertisement, personal selling and publicity.
ii) Sales promotion activities are not regular activities. These are purely temporary and are performed at certain times such as display, free samples, exhibitions, demonstrations, etc.
iii) It makes advertisements and personal selling more effective.
iv) Sales promotion encourages dealers distributors and consumers.
Objectives of Sales Promotion
The major objectives of sales promotion are:
i) To increase buying response at the customers level,
ii) To increase the sales effort of dealers and sales personnel,
iii) To attract new customers,
iv) To inform the public about new product and its specialties, attraction and advantages,
v) To capture the major share of the market,
vi) To create a favorable attitude towards the product,
vii) To simplify the job of the middlemen,
viii) To meet the competition of the other firms,
ix) To effect off season sales to boost the sales,
x) To create additional talking points to sales-persons.
xi) To stimulate the demand by popularizing the products,
xii) To establish and maintain communications with large market segments,
xiii) To keep the memory alive,
Methods/Devices of Sales Promotion
The various sales promotion devices can be classified in three ways given below:
1) Consumers Promotion
Sales promotion directed at customers may be done with a view to increase the products rate of using among existing consumers to attract new customers to the company product. It may also be undertaken to retaliate the competitors' sales promotion or other activities.
Consumers contests may be helpful in achievement of marketing objectives such as the following:
i) Introducing a new product,
ii) Opening up of new territories or markets,
iii) Getting consumers to increase the frequency if the purchases,
iv) Increasing brand awareness and maintaining brand loyalty,
v) Offsetting price competition,
vi) Activating slow-moving products,
vi) Obtaining information such as names, addresses and opinions of users of the product for the purpose of research.
Forms of Consumer Promotion
i) Free Distribution of Samples: It involves free distribution of samples to unlimited customers. The samples may be distributed door to door, or may be offered in a retail store, or with the purchase of any particular product. These samples may also be given to th professionals to red comment. This helps the consumers to verify the real quality of the product. This is suitable for introducing a new product of daily use.
ii) Coupons: A coupon is a certificate that entitle the consumers to a specified saving on the purchase of the specifies product. These coupons are usually issued by the manufacturers through the retailers or in most of the cases; they are kept inside the package. The consumer may get a discount of the value stated on the coupon at the time of purchase. The retailers are imbrued the value of coupon by the manufacturers.
iii) Premiums or Bonus Offers: An offer of a certain amount of product at no cost of consumers who buy a stated amount of product or a special pack thereof is called premium offer or bonus offer. This method is very popular now-a-days in view of the acute competition. Premium may be kept inside the pack or in the form of reusable container.
iv) Money Refund Offer: This offer is generally stated in media advertising that the manufacturer will return the price if the product is not to the satisfaction of the consumer within a stated period. For example, Bull-worker Exerciser is promoted this way.
v) Price off or Temporary Price Reduction: This involves an offer to consumers of a certain amount of money off the regular price of a product. This is done to attract consumers of other brands to his product. This offer is generally done on some specific occasions or festivals such as Diwali or Id etc. or when a substitute or competing product enters the market.
vi) Contester Sweepstakes: At times contest are arranged with a view to attract new users to the company's product. An opportunity under this device is given to consumers of other brands of his product to win cash prices, free air trips or goods. It is an indirect method of introducing a new product. In such contests, consumers are asked to reply very simple questions in a form available on purchase of the company's product.
vii) Bonus Stamps: Such bonus stamps are issued to the consumers by the retailers or manufacturer in the proportion to their purchases. The consumer goes on collecting stamps untill he has sufficient quantity ti obtain a merchandise in exchange of the stamps.
viii) Draw: Under this system, every purchaser making a purchase of certain specified amount is offered a coupon during a certain period. After the expiry of the period the draw is made and the attractive prices are given to the winners.
ix) Cheap Bargain or Self liquidating Premium: Under this method, the consumer is offered another product at a cheaper rate along with the purchase of company's product. For example, a plastic bucket of 5 litre at Rs.5 only with the purchase of one Kg. pack of 'Surf'.
x) After Sale Service: Under this method, the producer gives a guarantee to the consumers to maintain the product for a certain specified period. It is called warranty. If, during this period, consumer feels any problem, he may get the defect removed at no cost. It develops faith among the consumers about the quality of the product.
2) Middleman Promotion:
Incentive programmes for dealers aim at obtaining maximum co-operation from distribution channels such as wholesalers, semi-wholesalers and retailers, who form vital links in the distribution chain. Manufacturers want preferred store locations and special displays. They want the product to be displayed in those retail outlets where it is possible to attract the maximum number of consumers. Because more manufacturers seeks this kind of merchandising help than retailers can provide, the practice of trade deals as shown increased acceptance.
There are different types of deals and the most common among them are described below:
i) Buying Allowance Discount: The buying allowance or discount is offered to the dealer to induce him buy the manufacturer’s product. Such allowance or discount may be given at a fixed percentage on each minimum quantity of product purchased during a stated period of time.
ii) Buy-back Allowance: This method of promotion is practiced to prevent a post deal sales decline. Under this method, the manufacturer offers a certain amount of money for additional new purchases based on the quantity of purchases made on the first trade deal.
iii) Display and Advertising Allowance: This allowance is offered to the dealer to display the manufacturer’s product. This allowance is given on the basis of space provided to display the manufacturer's product in the shop.
iv) Dealer-listed Promotion: Under this method dealer name and address is given on the advertisement and other publicity material as cleaners, diaries, etc.
v) Push Money or PM's: This is an incentive payment in cash or in kinds to the retailer or salesman to push the sale at a fixed rate of each article sold.
vi) Sales Contests: It is device to stimulate and motivate distributors, dealers and their sales staff. They are offered cash prizes for those who will win the sale contest, i.e., who will make the highest sales of the company's product. In view of the winning chance, sellers participate in the contest.
vii) Free Gifts: Under this method, producers give free gifts to the dealer on the basis product purchased by him.
viii) Advertising Material: The advertising materials such as calendars, New Year diaries, literature, sign boards, packaging bags, posters, etc. are supplied by the producer of the product to the dealer or middlemen for advertising.
ix) Credit Facility: The producers allow credit to their dealers, based on the quantity purchased by them. This enables them to purchase bulk quantity.
3) Sales Force Promotions:
Personal selling by far is most important method of sales promotion. To make it highly effective, sales force promotion schemes are felt necessary. The tools for the sales force promotion are:
i) Bonus to Sales Force: A quota of sale is fixed. In order to get the higher premium the salesman will try to sell more quantity of goods.
ii) Sales Promotion Contest: Sales force contests are announced to stimulate company salesman to redouble their interest and efforts over a stated period with prozes to be the top performer.
iii) Sales Meetings, Salesmen's Convention and Conferences: These are conducted by the manufacturers for the purpose of education, inspiring and rewarding the salesmen. New products and new selling techniques are discussed in such meetings.
PUBLIC RELATIONS
Meaning
Most firms in today's environment are not only concerned to customers, suppliers and dealers but also concerned about the effect of their actions on people outside their target markets. It is a planning effort by an organization to to influence the attitudes and opinions of a specified group by developing a long term relationship. There target may include a large number of interested public (customers, stock holders, govt. agency, special interest groups).
A public in any group that has an actual or potential interest or impact on a company's ability to achieve its objectives. Public relations (PR) involve a variety of programs designed to promote or protect a company's image or its individual products.
"Public Relations is a deliberate and continuous effort to establish and maintain understanding between an organization and its public."
Functions of Public Relations
1) Press relations: Presenting news and information about the organization in the most positive light.
2) Product publicity: Sponsoring efforts to publicize specific products.
3) Corporate communication: Promoting understanding of the organization through internal and external communications.
4) Lobbying: Dealing with legislature and Govt. officials to promote or defeat the legislation and regulation.
5) Counseling: Advising management about public issues and company positions and image. This includes advising in the event of a product mishap.
Tools of PR
The following tools can be employed for maintaining good public relations with public:
1) Publications: Companies rely extensively on published materials to reach and influence these target markets. These include annual reports, brochures, articles, company news letters and magazines and audiovisual materials.
2) News: One of the major tasks of PR professionals is to find or create favorable news about the company, its products, and its people. News generation requires skills in developing a story concept, researching it, and writing a press release. But the PR person's skill must go beyond preparing news stories. Getting the media to accept release and attend press conferences calls for marketing and interpersonal skills.
3) Public Service Activities: Companies can build goodwill by contributing money and time to good causes. Large companies typically ask executives to support community affairs. In other instances, companies will donate an amount of money to a specified cause. Such cause related marketing is used by a growing number of companies to build public goodwill.
4) Identity Media: In a society market by sensory overload, companies compete for attention. They need a visual identity that the public immediately recognizes. The visual identity is carried by the company logos, stationary, brochures, signs, business forms, business cards, buildings, uniforms and dress codes.
5) Direct Mail: It is used for sending innovations to exhibitions, programmes, functions and also for sending seasons' greetings and gifts. House journals and PR literature are also sent by the medium of direct mail. The style and tone of all the company letters has great effect on the company's public image; every letter should make a good impression on the receiver.
6) Exhibition and Trade Fair: Displaying products at exhibitions and trade fairs bring the organization and the public close to each other. Having a look at a product is much better than reading about item in a catalogue. If it is a mechanical appliance, one can se it in operation. People hesitate to step into a shop and demand the demonstration of a gadget. But such demonstrations are a part of exhibition. So people watch them with interest and without any embarrassment. Thus exhibitions and trade fairs prove very educative to the public.
7) Patronizing Sports: This is among the latest methods adopted by the public relations departments to promote good public relations and to project a friendly image. They take sportsmen into the organization and sponsor the tournaments. Sports are encouraged and good sportsmen are encouraged to keep flying their nation’s flag in their individual fields. Tatas, Mafatlals, M.R.F., A.C.C., Times of India have made commendable contribution in this field.
8) Seminars and conferences: Seminars and conferences are expensive, but large organizations that can afford them to do like to host them. If adequate newspaper, radio and television coverage is arranged for them, they help to build the image of the organization. At the same time, they promote a sense of fraternity and solidarity among organizations engaged in similar pursuits. The recommendations made at such seminars and conferences command great respect among government circles.
PERSONAL SELLING
Meaning and Definition
Personal selling is unique as it is a face-to face transaction between a salesman and a prospective customer. Evidently, a well trained and competitive spirited salesman can be an effective communication medium. His knowledge about the product, the degree of his familiarity with the customer, whether he is handling a new customer or an established customer, the degree of involvement in the company he is representing, the level of his motivation and his convictions about the quality and performance standards will be the determining factor in his role as a communicator.
According to American Marketing Association, the personal selling is "the personal or impersonal process of assisting and/or persuading a prospective customer or buy a commodity or service or to act favorable upon an idea that has commercial significance to the seller."
Thus, Personal selling involves oral presentation in conversation with one or more prospective buyer for the purpose of making sales. The personal selling is to bring the right product into contact with the right customer, and to make certain that ownership transfers takes place.
Objectives of Personal Selling
Personal selling has two types of objectives--- long-term and short-term. The long term objectives, which are more or less permanent, are broader. These are also known as qualitative objectives. The objectives under this head are:
i) To do the entire job.
ii) To serve the existing customers.
iii) To search out and obtain new customers.
iv) To secure and maintain customers' co-operation in promoting the product line.
v) Top keep customers informed of changes in the product line.
vi) To assist customers in selling the product line.
vii) To provide technical assistance and to middlemen whenever needed.
viii) To handle the sales personnel of middlemen.
ix) To provide advice and assistance to middlemen whenever needed.
x) To collect and report market information on interested matters to company management.
Role of Salesperson
i) Diagnostic: This involves a salesperson probing and finding the cause of a problem. Like an expert doctor, a salesperson diagnoses the needs of his or her customers. He or she also diagnoses the competitive forces present in the territory and their impact on his or her product's share. Another area of diagnose is the strength and weakness of the competitor's sales team and distribution in the territory and their implication on his or her firm's marketing.
For example: Migration of people from one area to another, the increasing popularity of the cable TV in his or her area; or the opening of a new shopping plaza, are some of the trend which an alert salesperson is able to perceive and understand its implications for his or her organization.
ii) Analyst: Having diagnosed the market forces the salesperson needs to analyze customer needs and market trends and identify the linkages, if any. For example, he or she needs to analyze the customer situation and its implication for his or her organization.
iii) Information Provider: The salesperson is expected to play the role of an intelligence agent. In this role he or she is expected to keep the management posted on any significant developments in the territory. For instance - Has there been any shift in the competitor’s strategy or tactics? Has any competitor entered the territory? The management looks upon salespeople to provide them with these and several other such customer and competitors information.
The customer also wants the salesperson to provide information on the product, competition, new developments in the product area, and so forth.
iv) Strategist: Another role of the salesperson is that of a strategist. He or she is being the "soldier in the field" or the "man in command", has to evolve a strategy that can help him or her to be a market leader.
v) Tactician: A salesperson is also a tactician in the sense that he or she evolves tactics to win over the customer or to enhance the dealer satisfaction. Tactics are short-term action plans following from the strategy, which is a long term action plan.
For example: Choice of words in a face to face negotiation with the customer or how much or when to give in while in negotiating a sale. Thus, in order to succeed a salesperson has to be a good tactics.
vi) Change Agent: Lastly, we see a salesperson as an agent of change in the market or territory in which he or she operates. For it is he or she who introduce new product ideas and influences the life- styles and consumption patterns by making new products and services available in the territory and influencing opinion leaders to accept them and recommends the same to others.
Personal Selling Process
The personal selling process is a logical sequence of steps that a salesperson takes in dealing with a prospective customer. The approach of selling method is different from salesman to salesman. Personal selling aims at oral presentation by talk or conversation between a salesman and a prospect. The salesman endeavors to convert the prospect in to a buyer. The steps are as follows:
1) Pre-Sale Preparation: The first step in personal selling is the preparation of the salesperson. The salesperson must be properly selected, trained and motivated for the job. They must be fully familiar with the producer, the product, the market and the selling techniques. They must be fully aware of the motivation and behavior of the people who are the prospective consumers. They should also be well informed about the nature of the competition and the nature of the competitor’s product.
2) Prospecting or Locating Prospective Buyers: It refers to locating the potential buyer for the product and satisfactory buyer for the product and satisfactory screen them to make sure that their sales efforts will not go waste. He should examine the need of buyers and their ability of capacity to buy the product.
3) Approaching: Before calling of the prospects, tha salesperson should try to get information about their number, habits, spending capacity, motives, etc. He should know what product or brand are they using. After collecting such information, he should approach the customer in a polite and dignified way and introduce himself and his product to the prospective customer. He should not be over clever or deceptive at this stage. A counter sale person should be very careful in attending he would be customer. If he is busy in attending some other person, he should assure the new customer that he would be attending very soon. he should be careful in his first impression.
4) Sales Presentation : Having found out the prospect's needs, the salesperson needs to make a sales presentation in a meaningful and convincing manner a good sales presentation is one that not only gives all the benefits that the prospect gets but also proves to the later that he or she will be better off afte the product to bought and used. The sales presentation must also satisfy the intangible need of the prospect the esteem need. An effective sales presentation demands the salesperson use skill like presentation, explanation and receptivity raising.
5) Managing Objections: The prospect's objections are request for more information on certain aspects of sale. These should be perceived as opportunities for creative thinking to nail competitions. Hence, this stage demands that the salesperson understand the true nature of the prospect's objections and answer them straightway. This stage demands probing and problem solving skills as well as brevity on the part of the salesperson.
6) Closing The Sales : It aims at taking an order for the products from the prospective buyers. The salesman also asks question as to the product- choice of color, period of delivery, quality, terms, etc. At the climax stage, the prospects place orders with the salesman.
7) Follow up the Sales : After closing the sales, follow up is a must. It refers to activities undertaken to ensure the customer that he has taken the right decision of buying the product. These activities include installation of the product. Checking and testing its smooth performance, maintenance, and after-sale services. It helps building relationship
DIRECT MARKETING
Direct marketing (DM) is the process by which a firm approaches its customers on one-to-one basis and markets its products directly to them. In conventional marketing, a firm approaches the customers on a mass basis and sells to them indirectly.
Direct Marketing Association of USA has defined direct marketing as " an interactive system of marketing which uses one or more advertising media to effect a measurable response and/or transaction at any location".
Advantages
1) Focused Approach: It is possible to identify a very specific target market using direct marketing techniques. This makes it a very useful promotion tool for Niche products because it is possible to target only those who are likely to respond to the promotion- there is les wastage.
2) Cost Effective : All those cost per thousand people reach may be high as compared to other mass marketing promotional techniques, direct marketing can be very cost effective for Niche products.
3) Immediate and Flexible: Some promotional activities can take a great deal of time to develop from first idea to final execution- TV ads. For example, direct marketing is flexible end there are short leads times associated with its use because of which it often has an immediate impact of customer responses.
5) Tailored Messages: Direct Marketing also offers greater opportunities for developing tailors- made messages for particular group of customers.
Disadvantages
1) May be seen as competing with exhausting intermediaries may offset market intermediaries as sales those direct marketing may be taking sales away from them. In effect, you may end up competing with your customers, that is, the intermediaries.
2) May be seen as intrusive by consumers specially a problem for door to door and daily market.
3) Costs. Initial customer acquisition costs are high- high cost per thousand each, and database development can be expensive.
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