Management for All

Sunday, February 16, 2014

GOVT. CONTROL ON BUSINESS

In India a number of laws affecting business have become operational over the years. The important ones affecting marketing are listed below:

1) The Indian Contract Act, 1872

2) The Indian Sale of Goods Act, 1930

3) The Industries (Development and Regulation) Act, 1951

4) The Prevention of Food Adulteration Act, 1954

5) The Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954

6) The Essential Commodities Act, 1955

7) The Companies Act, 1956

8) The Trade and Merchandise Marks Act, 1958

9) The Monopolies and Restrictive Trade Practices Act,. 1969 (MRTP Act)

10) The Patents Act, 1970

11) The Standards of Weights and Measures Act, 1976

12) The Consumer Protection Act, 1986.

Some of the legislations mentioned above apply to every undertaking, irrespective of the nature of the product sold or the service provided by it like the Contract Act, the Sale of Goods Act, the Companies Act, the Trade and Merchandise Marks Act and the Standards of Weights and Measures Act, The MRTP Act, however, does not apply to public undertakings, government-managed private undertakings, financial institutions and co-operative societies.

Thursday, February 13, 2014

SALES MANAGEMENT

Selling is done by the salesforce either directly to customers, such as in case of industrial salesmen or to retailers, as in case of salesmen merely supplying shopkeepers and inducing them to stock the goods.

In both cases, the effort of the salesmen contributes to the overall sales turnover of an organisation. The advertising effort and the sales effort are to a certain extent interrelated. The main function of advertising is generally before the actual selling occurs. The customer looks at advertisements and is thus induced to go to the shop or wait for the salesman and make his purchase. The salesman's job is to hand over the merchandise against exchange of money and provide satisfaction to the customer. Besides, he also some times has to provide after-sales service. In terms of selling, the role of a salesman can be sub-divided into several stages. These are:

1) Prospecting, i.e. trying to find out likely customers who are called Prospects.

2) Pre-approach, i.e. trying to find out more about the customers, before actually meeting them.

3) The Approach, i.e. when the-salesman actually communicates with the prospect with a view to sell the product.

4) The actual selling where he Answers Objections and Closes the sale.

5) In addition to this, he may also provide services such as giving technical Assistance, arranging credit facilities and expediting deliveries.

6) Collecting Information useful for the organization.

Tuesday, February 11, 2014

CHANNELS OF DISTRIBUTION

Channels of distribution can be grouped under two major headings: (i) Direct Selling by manufacturer and (ii) Indirect Selling through middlemen.

For direct selling, the first option involves supplying the product to the customer using your own salesmen and arranging your own deliveries. The second option is using the medium of post office. You obtain orders from your customers who respond by mail or telephone to your advertisements or to letters mailed directly to their houses. You deliver your products to them through mail or through some other carrier. The next alternative is to establish your own retail stores. Bata Ltd., for example, has established its own retail stores throughout the country. This practice has also been adopted on a smaller scale by a number of textile mills who have their own retail shops like Calico Mills, Raymonds, DCM etc., has franchised a number of retailers to sell their products to the consumers.

Figure-I : Alternative Channels of Distribution

Saturday, February 8, 2014

SALES FORECASTING

WHAT IS A SALES FORECAST?

A sales forecast predicts the value of sales over a period of time. It becomes the basis of marketing mix and sales planning.

A short-term sales forecast (say for a period of one year) when linked to the sales budget helps in the preparation of an overall budget for the firm as a whole. The short-term sales forecast in effect also provides the essential financial dimension to sales in terms of expected sales revenue and expenses required. Also, it helps in assessing the cash inflow and outflow needs and their sources.

A long-term sales forecast (say for a period of 5 years or so) on the other hand, focuses on capital budgeting needs and process of the firm. It provides for changing the marketing strategy of the firm, if needed, and includes reference to emerging product market needs, new market segments to be catered, review of distribution network and promotional programmes, organisation of sales force, and marketing set up. The long-term sales forecast triggers the task of aligning the production, procurement, financial and other functional needs of the firm with the finalised sales forecast.

HOW TO PREPARE A SALES FORECAST?

The preparation of a sales forecast requires (a) the availability of historical information on the product and industry sales, (b) identification of Product Sales Determinants, (c) prediction regarding the behaviour of market forces for the period under forecast, (d) use of appropriate techniques for forecasting, (e) judgement of executives preparing the sales forecast, and (f) the firm's market share objectives. These sales forecasting requirements are discussed below.

PRODUCT SALES DETERMINANTS

Product sales, generally speaking, depend upon the market need, price of the product, demand-supply situation, purchasing power available with the customers and their willingness to spend that on the purchase of the product. The importance of these factors varies according to the type of product sold i.e., consumer non-durable goods, consumer durable goods, and industrial goods. Let us now identify the major determinants of product sales relating to different types of goods.

Consumer Non-durable Goods

Three_,basic factors determine the sales of relatively low priced, short shelf life and frequently purchased consumer goods. These are: disposable personal income (personal income minus direct taxes and other deductions) of the customer; demographic characteristics (age, sex, occupation, urban/rural location, etc.) of the population, and the price level including competitive structure of the market.

Tuesday, February 4, 2014

PERSONAL SELLING

In contrast to advertising and publicity, which use impersonal methods of communication, personal selling makes use of direct personal communications to influence the target customers. Personal selling is a highly distinctive method of promotion, and makes use of oral presentation in conversation with existing and potential customers, for the purpose of making a sale.

ROLE OF PERSONAL SELLING

Personal selling, as the name implies, is an individual to individual selling. It, therefore, carries the distinctive advantage of flexibility in terms of tailoring the sales presentation to the needs of the buyer. Another unique advantage comes from its two-way communication, and human interaction thereby providing instant feedback. These two unique advantages make personal selling the most result-oriented promotion method.

Generally speaking, the nature of goods marketed, as well as the distribution system adopted, determine the role of personal selling in a firm. Therefore, personal selling is used extensively in the case of industrial goods, where the salesperson performs functions such as assisting the customer in designing the product specifications, product installation, product commissioning, solving technical problems through providing service after sales and helping customer to have optimal utilization of the product. In the case of consumer goods, on the other hand, the role of personal selling gets usually restricted to the dealer level. The scope of the tasks performed include obtaining periodic orders, ensuring supplies, offering tips to dealers on product display and attaining desired levels of stock movement. Similarly, the role played by personal selling is more in a firm which uses door-to-door selling method through its sales force than in the firm which sells through large stockiest, distributors or sole-selling agents.

Sunday, February 2, 2014

PROMOTION MIX

In our daily life we all are exposed to various tools of promotion aiming at communicating one thing or the other to us. To illustrate, while at home welcome across advertisements when reading a newspaper, watching TV, listening to radio or even examining the water, electricity or telephone_,bills. On our way to the office similar communications face us on bus panels, roadside hoardings, neon sighs, posters and banners etc. And, while at a retail shop these take the shape of traffic builders, product displays, streamers, hangers, bins etc., all sharing information relating to a specific product of a company.

Listed above are just a few types of the various promotion tools available to a marketer. Before proceeding further, let us take a look at the definitions of the four major methods of promotion. These are: advertising, personal selling, sales promotion and publicity. The committee on Definitions of the American Marketing Association defined these components as under:

Advertising: Any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor. It includes the use of such media as magazines, newspapers, outdoor posters, direct mail novelties, radio, television, bus posters, catalogues, directories, programmes, circulars and very recently online ads and social media ads.

Personal selling: Oral presentation in a conversation with one or more prospective purchasers for the purpose of making sales.

Sales promotion: Those marketing activities-other than personal selling, advertising, and publicity-that stimulate consumer purchasing and dealer effectiveness such as displays, shows and exhibitions, demonstrations, coupons, contests, and other non-routine selling efforts. These are usually short-term activities.

Publicity: Non-personal stimulation of demand for a product, service or business unit by generating commercially significant news about it in published media or obtaining favourable presentation of it on radio, television or stage. Unlike advertising, this form of promotion is not paid for by the sponsor.

Saturday, February 1, 2014

MARKETING COMMUNICATIONS

HOW COMMUNICATION WORKS?

We know by now that communication, simply speaking, is sharing of information between the two parties. Such an exchange could be oral or written, personal or public using words, figures, symbols or a combination thereof. The process of communication begins when one party (called source, sender or communicator) wishes to communicate with another party (the receiver). Communication is complete when the receiver understands in the same sense what the sender wished to communicate. The various elements of a typical communication process are given in Figure I.

Figure I: Elements of the Communication Process

Sunday, January 19, 2014

PRICING OVER PRODUCT LIFE-CYCLE

PRICING OVER THE LIFE-CYCLE OF A PRODUCT

Many products generally have a characteristic known as ‘perishable distinctiveness'. This means that a product which is distinct when new, degenerates over the years into a common commodity. The process by which the distinctiveness gradually disappears as the product merges with other competitive products has been rightly termed by Joel Dean as "the cycle of competitive degeneration". The cycle begins with the invention of a new product, and is often followed by patent protection, and further development to make it saleable. This is usually followed by a rapid expansion in its sales as the product gains market acceptance. Then competitors enter the field with imitation and rival products and the distinctiveness of the new product starts diminishing. The speed of degeneration differs from product to product. The innovation of a new product and its degeneration into a common product is termed as the life-cycle of a product.

There are five distinct stages in the life-cycle of a product as shown in Figure I.

Figure I: Life-cycle of a Product

Thursday, January 16, 2014

PRICING METHODS

Pricing is an important element of the marketing mix. Pricing is affected not only by the cost of manufacturing the product, but also by (i) the company's objectives in relation to market share and sales; (ii) the nature and intensity of competition; (iii) stage of the product life-cycle at which the product is currently positioned; (iv) nature of product whether as consumer or industrial product and if the former whether it is a luxury or necessity. Before making any pricing decision it is important to understand all these factors.

Although there are several factors affecting the pricing decisions, it would be useful to discuss the pricing methods most commonly used. These methods are:

1. Cost-plus or Full-cost pricing

2. Pricing for a rate of return, also called target pricing

3. Marginal cost pricing

4. Going rate pricing, and

5. Customary prices.

The first three methods are cost-oriented as the prices are determined on the basis of costs. The last two methods are competition-oriented as the prices here are set on the basis of what competitors are charging.

1. Cost-plus or Full-cost Pricing

Monday, January 13, 2014

PRICING DECISION

Price is an important element of the marketing mix. It can be used as a strategic marketing variable to meet competition. It is also a direct source of revenue for the firm. It must not only cover the costs but leave some margin to generate profit for the firm. However, price should not be so high as to frighten the customers. Price is also an element which is highly perceptible to customers and significantly affects their decisions to buy a product. In general, price directly determines the quantity to be sold.

DETERMINANTS OF PRICING

Pricing decisions are usually determined by demand, competition and cost. We shall discuss each of these_,factors separately. We take demand first.

Demand

The popular ‘Law of Demand' states that "higher the price; lower the demand, and vice versa, other things remaining the same’’. In season, due to plentiful supplies of certain, agricultural products, the prices are low and because of low prices, the demand for them increases substantially. You can test the validity of this law yourself in your daily life. There is an inverse relationship between price and quantity demanded. If price rises, demand falls and if the price falls, the demand goes up. Of course, the law of demand assumes that there should be no change in the other factors influencing demand except price. If any one or more of the other factors, for instance, income, the price of the substitutes, tastes and preferences of the consumers, advertising, expenditures, etc. vary, the demand may rise in spite of a rise in price, or alternatively, the demand may fall in spite of a fall in price. However, there are important exceptions to the law of demand.

Friday, January 10, 2014

PACKAGING

Packaging has been variously defined in both technical and marketing literature. One of the most quoted definition is ‘Packaging is the art, science and technology of preparing goods for transport and sale'. This definition brings out two salient aspects of packaging. These are:

a) It has to help in the physical transportation and sale of the products packaged.

b) Packaging as a function consists of two distinct elements, (i) the positive aspects,viz., the science and technology related to package design, selection of packaging materials etc. and (ii) the behavioural aspects, viz., the art of product design which is associated with consumer motivation research, buying research, etc.

The last aspect has been highlighted in another definition of packaging. ‘Properly designed, the package should enhance the value of its contained product, and impart that impression, either directly or subtly, to the customer'. The role of packaging in value enhancement is increasingly becoming important in consumer marketing today.

Thursday, January 9, 2014

BRANDING

A crucial step in the branding strategy is deciding on a specific brand name for the product that is being introduced. In the earlier times when the concept and practice of branding was much less developed, very often the family name/surname was used. Some of those are still very much alive, for example, Siemens or Ford. The other common method of branding was by way of addressing the product range of the company. Two famous examples are General Motors and General Electric. It seems the function that brand was supposed to perform was either to indicate the source or the origin of the product (family name) or indicate the product range. However, a brand name has emerged as one of the most important elements of the merchandising function in the recent times and will become more and more crucial as the competition becomes more severe in India. Let us understand what the conceptual meaning of the terms brand and brand name is.

Brand: Brand is a word, mark, symbol, device or a combination thereof, used to identify some product or service. The definition clearly focuses on the function of a brand, that is, to identify, irrespective of the specific means employed for the identification.

Brand Name: The American Management Association defines it thus: "Brand name is a part of a brand consisting of a word, letter, group of words or letters comprising a name which is intended to identify the goods or services of a seller or a group of sellers and to differentiate them from those of competitors."

Sunday, December 29, 2013

NEW PRODUCT DEVELOPMENT

It is very important to have a strategy for developing new products. Many products fail and in order to keep expanding company sales, we must have new products. Some products of Hindustan Lever have failed, but still they remain leading manufacturers because they have continuously added to their lines and added product lines to their product mix. Their 'Hima' peas introduced in the 60's flopped, because, in the words of the Chairman of Hindustan Lever, 'India is not yet ready for convenience foods, neatly done up in packages.' The product 'concept' requires testing before one goes into product designing and it is very necessary to have an adequate strategy for developing new products and introducing them. Several stages must be defined. Figure I gives the stages in new product development. These will now be discussed in detail.

Figure-I : Stages in New Product Development

PRODUCT LIFE CYCLE

A company which introduces a new product naturally hopes that the product will contribute to the profits and provide consumer satisfaction for a long period of time. This however, does not always happen in practice. So, progressive organisations try to remain aware of what is happening throughout the life of the product in terms of the sales and the resultant profits.

The Introduction Stage

Let us start thinking from the very beginning about what happens when a new product is introduced in the market.

Wednesday, December 18, 2013

PRODUCT DIVERSIFICATION

The meaning of the word diversification is very simple. As soon as a manufacturer offers more than one product, it is described as product diversification. Diversification implies that a company has moved from one product item to marketing more than one product. Generally, diversification is categorised into two types:

1. Related Diversification and

2. Unrelated Diversification.

Where the new products introduced in the product mix are similar to the existing product, diversification is described as 'related'. When a company accepts new products which are very different from the existing products, the diversification is said to be ‘unrelated'.

PRODUCT DECISIONS AND STRATEGIES

PRODUCT :

Product related decisions form one of the 4Ps of marketing mix. These decisions include introduction of new products, Improvement of existing products, planned elimination of obsolete products and, packaging and branding.

Most product decisions are taken in the context of the overall strategy of an organisation. This strategy may also include important areas of diversification.

Product is the bundle of benefits or satisfactions offered to a customer. Product or Goods is a composite of the characteristics and features-physical and psychological-which are offered for purchase by a customer, whether it is a consumer or an industrial purchaser. How people personally feel about, or perceive the product is just as important as the actual physical characteristics of it.

Product Differentiation: You must have understood now that a product is really a bundle of potential benefits offered to a purchaser. However, there are certain products which basically look alike. Take toothpastes, for example. These are offered by different manufacturers and were it not for the tube and the branding; the customer would not even be able to distinguish between the products of most different manufacturers. To make their product distinct from others the manufacturers identify them to the customer, that is, `differentiate', by using different packaging, colouring etc. and by emphasising different benefits or advantages in their promotion.

Product Positioning: You know that all products do not appeal to all income groups or age groups, unless they are meant to satisfy basic necessities. A manufacturer can thus use the need-oriented segmentation. For example, a toothpaste manufacturer may appeal to prevention of `tooth decay', while another might offer `sociability' in the sense of preventing bad breath. Still another may provide the need to be `attractive' by emphasising the whiteness of the teeth which his product, toothpaste, gives. This lathe concept of product positioning. In the case of soft drinks, positioning can be done in terms of pricing, calorie contents and in many other ways. Thus positioning is used for bringing about differentiation in a manufacturer's product.

Sunday, December 15, 2013

DECISION PROCESS OF BUYER

BUYER DECISION PROCESS

Even buying decision involves an element of active reasoning. The manner in which this active reasoning manifests itself is illustrated in Figure I. In making a purchase decision the consumer goes through the five stages of:

1. Problem recognition,

2. Pre-purchase information search,

3. Evaluation of alternatives,

4. Purchase decision, and

5. Post purchase behaviour.

However, in case of routine purchases, the consumer may skip the second and third stages and straight away go to the stage of purchase decision. But in case of purchase decision involving extensive problem solving, the consumer is likely to go through all the five stages in the specified sequence.

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