Chetana BBA college, Bijapur

It is an integrated process through which companies build strong customer relationships and creates value for their customers and for themselves.

In marketing, a product is anything that can be offered to a market that might satisfy a want or need

8 - 4

Consumer products Industrial products

◦ Materials and parts◦ Capital items◦ Supplies and services

8 - 5

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Unsought ProductsUnsought Products

New innovations Products consumers don’t want to think about these products Require much advertising &personal selling i.e Life insurance, blood donation

Specialty ProductsSpecialty Products

Special purchase efforts High price Unique characteristics Brand identification Few purchase locations i.e can be anything

Shopping ProductsShopping Products

Buy less frequently Higher price Fewer purchase locations Comparison shop i.e Clothing, appliances

Convenience ProductsConvenience Products

Buy frequently & immediately Low priced Mass advertising Many purchase locations i.e Candy, newspapers

–A group of products that are closely related because they may: • function in a similar manner•be sold to the same customer groups,

•be marketed through the same types of outlets

• fall within given price rangesP&G has 100 types of toothpastes.

Fig, tentative Product Mix of HUL

A good honest scoop of daily pleasure.

Lipton has a range of vitality teas that truly encompass the goodness of tea.

India’s favorite cup of tea, the great taste of Red Label brings people closer together and strengthens relationships.

Brooke Bond Taaza lifts me people unshackles the mind, allowing them to see and realize possibilities.

Brooke Bond Taj Mahal is an exclusive selection of teas for the discerning consumer.

Partnering with the mom in nurturing her dreams, Annapurna Atta is aimed at helping her provide wholesome tasty nutrition to her family. 

Playful banter, a little mischief, serious conversation… there’s no time for young couples like the time spent sharing a cup of 3 Roses.

Ek cup Bru aur mood ban jae…

With Kissan, good food is loved not shoved!

Kissan Amaze Brainfood is speci - fically designed for the mental development of kids.

Knorr helps families make meal times special, nutritious, tasty and healthy.

Active Wheel de "Mehnat se Aazadi" Freedom from painful & tiring laundry

Cif- the best cleaner to let you shine.

The world’s largest fabric conditioner brand.

The sheer power of Domex bleach gives you the confidence you need, eradicating all known germs.

Rin provides ‘best in class whiteness’ which is demonstrable.

Sunlight is a color care brand

Giving your kids the freedom to get dirty and experience life, safe in the knowledge that Surf Excel will remove those stains

Created in 1885, the Vim brand is still innovating and using the magic of natural ingredients to create unbeatable results over a hundred years later.

Rexona gives you 24 hour protection from sweat and body odour and therefore the confidence to handle whatever the day has in store.

Dove stands for real beauty. All around the world, Dove is making complete therapy for your hair.

Pears – the purest and most gentle way to skincare!

Lux believes in passion for beauty. It continues to be a favorite with generations of users for a sensuous experience of luxury.

Awaken, and enliven your senses with a Liril bath.

Lifebuoy is available in multiple variants in soaps and specialist formats such as liquid hand wash, catering to the entire family.

Holistic skin care experiences perfected over the ages to deliver healthy, beautiful skin

Breeze, with the goodness of glycerine gives soft, fragrant and smooth skin.

New Clear with Essential Oils, guarantees Zero dandruff and leaves your hair feeling fabulous.

Clinic Plus is India’s largest selling shampoo and has won the trust the millions of families across India.

Freshness that brings you Closer Pepsodent India is committed to improve the overall Oral health of Indians.

Sunsilk encourages young women in India to live for today. Sunsilk helps you transform the beauty of your hair instantly because LIFE CAN'T WAIT!!

Dove stands for real beauty. All around the world, Dove is making complete therapy for your hair.

Your skin is amazing. It deserves to be treated as such.

Rexona gives you 24 hour protection from sweat and body odour and therefore the confidence to handle whatever the day has in store.

Get the expert to look after your skin

Lakme is an ally to the Indian Woman and inspires her to express her unique beauty and sensuality. Thus, enabling her to realize the potency of her beauty.

More than 30 years ago, a unique brand was born. Wrapped within a humble lavender tube, it went on to become the World’s No.1 Fairness cream.

Axe with Best Quality Fragrance

LEVER Ayush aims to help a new generation of Indians rediscover everyday health and vitality through customized Ayurvedic solutions.

Aviance enables women actualize their unique potential through expert customized beauty solutions.

The new expansion of fairness cream for men

Line stretching:UpwardDownwardCombinationLine filling

Line Modernization: Line pruning:

PRICE FACTORS IN PRICE SETTING VALUE BASED PRICING COST BASED PRICING OTHER INTERNAL & EXTERNAL

CONSIDERATION INTERNAL FACTORS EXTERNAL CONSIDERATION PRICING IN DIFFERENT TYPES OF MARKET

PRICE: “It is the amount of money charged for a product or service

IN A BROADER SENSE: “It is the sum of all values that customers give up in order to gain the benefits of having or using a product or service”.

A price that the company charges falls some where between one that is too high & one that is too low to produce a profit

Customers perception of the product value sets the ceiling for the prices, if the customer perceive that the price is greater than the product value. They will not buy the product.

“It is the setting of prices based on buyer’s perceptions of value rather than on the seller’s cost”.

THERE ARE TWO TYPES OF VALUE BASED PRICING

1.GOOD VALUE PRICING2.VALUE ADDED PRICING

“It is offering just the right combination of quality & good services at a fair price”.

During the past decade, there has been a shift in consumer attitudes towards price & quality.

Many companies have noticed these changes & modified their prices to bring them in line with changing conditions of the consumers.

There are two types good value pricing1.EDLP[Every Day Low Pricing]2.High low pricing

“It is attaching value added features & services to differentiate a company offer & to support charging higher prices”.

To increase their pricing power, many company adopt value added pricing , they attach value added features & service to differentiate their offers & thus support higher prices.

To retain pricing power, a firm must retain or build the value of its marketing offering.

“Cost based pricing is the setting of the prices based on the cost for producing, distributing & selling the product plus a fair rate of return for effort & risk”.

Many companies work to lower their cost of production so that they could sell in large number & earn more profits.

There are two types of costs i.e. FIXED COSTS & VARIABLE COSTS

FIXED COSTS: are those costs that do not vary with production or sales level.

VARIABLE COSTS: are those costs that vary directly with the level of production.

TOTAL COSTS: are the sum of the fixed & variable costs for any given level of production.

If the production capacity is fixed & less the cost of production will be high as the units produced are only few. The fixed cost are spread over these units with each unit bearing a large share of fixed cost .

If the production capacity is large or if a company builds a larger plant, the number of units produced will be more .The fixed cost gets spread over all these units thereby reducing the cost of production the long run average cost is low.

The drop in the average cost of production with accumulated production experience is called as the EXPERIENCE CURVE or LEARNING CURVE

“It is the method of pricing where we add a standard mark up to the cost of product”.

“It is the setting of prices to break even on the costs of making an marketing a product , or setting prices to make a target profit”.

Formula:

Internal factors are the companies over all marketing strategy, objectives & marketing mix.

External factors are the 1.Nature of market2.Nature of demand 3.Companies competitors strategies 4.Environmental factors

If the company has selected its target market & positioning carefully, then its marketing strategy will be straight forward.

a) PURE COMPETITION

b) MONOPOLISTIC COMPETITION

c) OLIGOPOLISTIC COMPETITION

d) PURE MONOPOLY

No single buyer & seller has much effort on the on going market price. he cannot charge more than the on going price. Nor can he charge less as he can sell all they want at that price.

In a pure competitive market product development, pricing , advertising & sales promotion has no rule.

A range of prices occurs because sellers can differentiate there offers to their buyers .

Buyers see the differences & pay different prices .

The prices vary on account of product features ,style,design,or the services rendered..

The product could be uniform .ex; steel, cars & computers.

There are few sellers because it is difficult for others to enter the market.

Here, the market consist of one company or seller .

The seller may be a Govt monopoly ex. Postal service or regulated monopoly like power company a HESCOM, Railway.

Each price a company might charge will lead to a different level of demand

In a normal case, price & demand are inversely related i.e. higher the price, lower the demand.

The company sells less if the price is more & sells more if the price is less.

“It the major of the sensitivity of demand to changes in price”.

If the demand for the product changes to a relative increase in price of the product this is called ELASTIC.

If the demand hardly changes with a small change in price we call it as IN-ELASTIC.

In setting its prices, the company must also consider competitors costs, prices & marketing offerings.

The company needs to ask many questions as to how the consumers perceive its product vice-versa other products if they perceive it as of higher value then it can charge high prices.

No matter what price you charge high low or medium we should give customers superior value for that price.

While setting prices, other factors too needed to be considered like economic condition like weather there is a boom or recession.

It should also look in to Govt regulations & special concerns.

NEW PRODUCT

PRODUCT

MIX

PRICE ADJUSTMENT

SKIMMING

PRICING

Product line Discount &

allowance

PENETRATING

PRICING

Optional

pricing

Segmented

pricing

Captive

pricing

Psychological

pricing

By- products Reference pricing

Bundled

pricing

Promotional

pricing

Geographical

pricing

Dynamic pricing

International

pricing

As we have observed the pricing changes as the product passes through its Life Cycle .

Firms bringing out new products face the challenge of setting the prices for the 1st time.

They need to decide whether to set a very high price or a low price.

It depends on the company strategy as to what it intends achieving a quick return on its investment or a large customer base.

The company can choose between two broad strategies

1)MARKET SKIMMING PRICING 2)PENETRATING PRICING

1. MARKET SKIMMING PRICING

2. PENETRATION PRICING

It is a setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay high price Here, the company makes fewer but more profitable sales.

“It is setting a low price for a new product in order to attract a large number of buyers and a large market share”

a) Product Line Pricing

b) Optional Product Pricing

c) Captive Product Pricing

d) By-Product pricing

e) Product Bundling Pricing

“ It is the setting the price steps between various products in a product line based on cost difference between the products, customers evaluation of different features & competitive prices”.

◦ “It is the pricing of optimal or accessory products along with the main product”.

“IT is setting the price for product that must be used along with main product”.

“It is setting a price for by – product in order to make the main products price more competitive”.

“It is combining several products & offering the bundle at a reduced price”.

Companies usually adjust the basic prices to account for various customer differences & changing conditions.

There eight price adjustment strategies1.Discount & Allowance Pricing2. Segmented Pricing3. Psychological Pricing4. Reference pricing5. promotional Pricing6. Geographical pricing7. Dynamic Pricing8. International pricing

“It is a straight reduction in price on purchase during a stated period of time”.

Most companies adjust their basic price to reward customers for certain responses such as early payment or bills, volume purchases, off season buying etc…

ALLOWANCE :are another type of reduction from the list price. There are basically promotional money paid by manufactures to retailer’s for an agreement. to feature the manufacture product in some way.

“It is selling a product or service at two or more prices, where the difference in prices is not based on difference in costs”.

Companies often adjust their basic prices to allow for differences in customers , products & locations segmented pricing takes various forms…

1. Customer segment pricing2. Product form pricing

3. Location pricing4. Time pricing

“It is a pricing approach that considers the psychological of prices & not simply the economics the price is used to say something about the product”.

Customer usually perceive the quality of a product is linked to high price, it means higher the price, the higher quality of the product.

“It another aspect of psychological pricing. it is the prices that buyers carry in their minds & refer it when looking at a given product. the reference price might be formed by noting current prices, remembering past prices or assessing the buying situations”.

“It is a pricing of the product temporarily below the list price & some times even below its cost of production to increase short run sales”.

Super markets Dept stores resort to such pricing & price a few products as loss leaders to attract customers to the stores with a hope that they will buy other items at normal markup’s.

Sellers at time give cash debts if product is brought from the dealers within a specified time or use special event pricing in certain seasons to draw more customers.

“It is the setting of prices for customers located in different parts of the country or world”.

THERE ARE FIVE(5) STRATEGIES1.FOB-ORIGIN PRICING2.UNIFORM-DELIVERD PRICING 3.ZONE PRICING4.BASING PRICING5.FREIGHT ABSORPTION PRICING

FOB-ORIGIN PRICING: “A geographical pricing strategy in which goods are placed free on board carrier, the customer pays the freight from the factory to the destination”.

UNIFORM-DELIVERD PRICING: “A geographical pricing strategy in which the company charges the same price plus freight to all customers, regardless of their location.

ZONE PRICING: “A geographical pricing strategy in which the company sets up two or more zone. All the customers within the zone pay the same total price , the more distant the zone , the higher is the price.

BASING POINT PRICING: “ A geographical pricing strategy in which the seller designates some city as a basing point & charges all customers freight cost from that city to the customer”.

FREIGHT ABSORPTION PRICE : “ A geographical pricing strategy in which the seller absorbs all or part of the freight charges in order to get the desired business”

“It is adjusting prices continually to meet the characteristics and needs individual customers & situation”

E.X: internet sellers such as amazon.com can mine their data base to gauge a shoppers desires, major his/her means instantaneously tailor products to fit the shoppers behavior & price products accordingly.

Companies that market their products internationally must decide what price to charge in the different countries in which they operates.

A name, term, sign, symbol or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.

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Step 1: Problem and Opportunity Recognition Step 2: Information Search Step 3: Evaluation of Choices Step 4: Behavior and Action Step 5: Review of Buying Decision

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Promotion is a form of corporate communication that uses various methods to reach a targeted audience with a certain message in order to achieve specific organizational objectives

Personal Selling

Advertising

Sales Promotion

Public Relations

Direct Marketing

Consistent clear and compelling

company & brand message

Promotion mix

Public relation

Personnel selling

Sales promotion

Direct marketing

advertising

Identify the target audience Determine the communication objectives

◦ Persuasive , Informative, reminder Design a message

◦ Rational, moral, emotional Choose the media

◦ Personal , non-personal Select the message source

◦ Credible, experts Collect feedback

sender decodingmessageEncoding

feedback

receiver

Noise

Promotion ObjectivesPromotion Objectives

Target Market CharacteristicsTarget Market Characteristics

Funds AvailableFunds Available

Nature of the MediaNature of the Media

MediaMedia2008

spend.(billions)

2008 spend.

(billions)

% growth2007 to

2008

% growth2007 to

2008

AdvantagesAdvantages DisadvantagesDisadvantages

Television & cableTelevision & cable

$70.0$70.0 5.7%5.7%Demonstrations, good attention, wide reach, cable targets

Demonstrations, good attention, wide reach, cable targets

Expensive in total, “clutter”Expensive in total, “clutter”

Direct mailDirect mail

$63.7$63.7 4.54.5Selected audience, flexible, can personalize

Selected audience, flexible, can personalize

Relatively costly per contact, “junk mail,” hard to retain attention

Relatively costly per contact, “junk mail,” hard to retain attention

News-paperNews-paper

$42.1$42.1 - 1.8- 1.8Flexible, timely, local marketFlexible, timely, local market

May be expensive, short life, no “pass along”

May be expensive, short life, no “pass along”

RadioRadio $18.6$18.6 0.20.2Wide reach, low costsegmented audienceWide reach, low costsegmented audience

Weak attention, many different rates, short exposure

Weak attention, many different rates, short exposure

MediaMedia2008

spend.(billions)

2008spend.

(billions)

% growth2007 to

2008

% growth2007 to

2008

AdvantagesAdvantages DisadvantagesDisadvantages

Yellow pagesYellow pages

$14.7$14.7 1.1%1.1%Reaches local customers seeking purchase info.

Reaches local customers seeking purchase info.

Many competitors listed in same place, hard to differentiate

Many competitors listed in same place, hard to differentiate

MagazineMagazine $14.1$14.1 3.03.0Very targeted, good detail, good “pass along”

Very targeted, good detail, good “pass along”

Inflexible, long lead timesInflexible, long lead times

InternetInternet $12.7$12.7 16.516.5

Ads link to more detailed site, some “pay for results,” easy to track results

Ads link to more detailed site, some “pay for results,” easy to track results

Hard to compare costs with other mediaHard to compare costs with other media

OutdoorOutdoor $6.6$6.6 6.16.1Flexible, repeat exposure, inexpensive

Flexible, repeat exposure, inexpensive

“Mass market,” very short exposure“Mass market,” very short exposure

Upstream Downstream Value delivery

network

Nature◦ Direct marketing◦ Pricing◦ Sales force

Information Promotion Contact Matching Negotiation Physical distribution Financing Risk taking

Customer Customer Customer Customer

producer producer producer producer

Retailer Retailer

Wholesaler Sales

branch

Business disributor

Industrial

Vertical Horizontal

Known as VMS Known as HMS

Multi channel distribution Multi channel distribution

Analyzing consumer needs Setting channel objectives Identifying major alternatives

◦ Types of intermediaries Company sales force Manufacturer’s agency Industrial distributors

Number of intermediaries◦ Intensive ◦ Exclusive◦ Selective◦ Responsibilities

Evaluating major alternatives ◦ Economic criteria◦ Control criteria◦ Adoptive criteria

Selecting channel members Managing and motivating channel members Evaluating channel members

Pull versus Push Promotional

Strategy

Vs.

Promotion Through the Channel

Hindustan  Lever  Limited  (HUL)  has  two   types  of  channel  selling  ‐ 

 i. Regular  (traditional)  retail  channel,   ii.Direct  Selling  Channel  in  the  name  of

 Hindustan  Lever  Network  (HLN).  

Redistribution stockists:-

Sales  Margin:  4.76%  which  includes  cash  discount,  unloading  expenses  from  depot,  distribution  expenses  to  retailers,  incentive  schemes  &  other  incidental  expenses.  

Modes  of  transport  used:  Rickshaw,  tempo.  

Incentive  schemes:  Before  2000  holiday  packages  and  tours  but  after  2000  no  non‐monetary  incentive  for  RS.  

Software  systems  and  Information  System:  UNIFY  8.3  (Developed  by  IBM  &  CMC).  This  software  needs  to  be  synchronized  daily  and  the  system  updates  any  information/  incentive  schemes  /  sales  figures  etc  to  and  from  the  common  shared  platform.  

Areas  of  Operations:  Marked  for  each  of  the  RS.  

Selling  Operations:  RSs  sells  the  goods  to  ‐   o Wholesaler  (gets   1.5  %  max.  discount  from  RS)   o Retailers  (gets   1.0%  max.  discount  from  RS)  

Based  on  the  QOC  various  awards  are  distributed  to  the  field   persons  at  the  end  of  every  month.  These  awards  are  also  known  as  ‘MOC  Star’  awards.

If  QOC  score  >  4.5 - The  person  is  eligible  for  7  star  award  

If  QOC  score  >  4    - The  person  is  eligible  for  5  star  award  

If  QOC  score  >  3.5  -The  person  is  eligible  for  3  star  award