B.

Com Sem-V
Paper: CC-11
Principles of Marketing

Chapter –I: Introduction

Market

A market is a composition of systems, institutions, procedures, social relations or

infrastructures whereby parties engage in exchange. While parties may exchange goods
and services by barter, most markets rely on sellers offering their goods or services to
buyers in exchange for money

A market is a place where parties can gather to facilitate the exchange of goods and
services. The parties involved are usually buyers and sellers. The market may be physical
like a retail outlet, where people meet face-to-face, or virtual like an online market, where
there is no direct physical contact between buyers and sellers.

Key points

• A market is a place where buyers and sellers can meet to facilitate the exchange or
transaction of goods and services.
• Markets can be physical like a retail outlet, or virtual like an e-retailer.
• Other examples include the illegal markets, auction markets, and financial markets.
• Markets establish the prices of goods and services that are determined by supply and
demand.

Marketing

Marketing refers to activities a company undertakes to promote the buying or selling of a

product or service. Marketing includes advertising, selling, and delivering products to
consumers or other businesses. Some marketing is done by affiliates on behalf of a
company.

Professionals who work in a corporation's marketing and promotion departments seek to

get the attention of key potential audiences through advertising. Promotions are targeted
to certain audiences and may involve celebrity endorsements, catchy phrases or slogans,
memorable packaging or graphic designs and overall media exposure.

1|Page
Understanding Marketing

Marketing as a discipline involves all the actions a company undertakes to draw in

customers and maintain relationships with them. Networking with potential or past clients
is part of the work too, and may include writing thank you emails, playing golf with
prospective clients, returning calls and emails quickly, and meeting with clients for coffee
or a meal.

At its most basic level, marketing seeks to match a company's products and services to
customers who want access to those products. Matching products to customers ultimately
ensures profitability.

Product, price, place, and promotion are the Four Ps of marketing. The Four Ps collectively
makes up the essential mix a company needs to market a product or service. Neil Borden
popularized the idea of the marketing mix and the concept of the Four Ps in the 1950s.

Key points

• Marketing refers to all activities a company does to promote and sell products or
services to consumers.
• Marketing makes use of the "marketing mix," also known as the four Ps—product, price,
place, and promotion.
• At its core, marketing seeks to take a product or service, identify its ideal customers,
and draw the customers' attention to the product or service available.

Scopes of Marketing

Marketing being a part of social science is highly dynamic and complex in nature. The rapid
changes in various sectors have brought great changes in the concept of marketing.
Traditionally, marketing was concerned with buying and selling of goods and services only
but now its scope has widened and it encompasses a range of activities from consumer
satisfaction to consumer delight and management of customer relationship.

1. Study of Consumer wants and need

Goods are purchase to satisfy consumer wants. Therefore study is conducted to satisfy
consumer needs and wants. These needs and wants motivates customer to purchase.

2. Study of consumer behavior

A marketer performs study of consumer behavior. Analysis of buyer behavior helps

marketers in market segmentation and targeting.

2|Page
3. Product Planning

A product refers to a bundle of benefits that offers satisfaction to the consumers.

Product planning starts with the generation of the idea and continues until the product is
ready to be launched in the market. To create a successful product the company must
understand the needs of the consumer and the currently available competition in the
market.

4. Product design
Product design is the fore most important elements in marketing the communication needs
& problems of the consumer have to be considered before marketing a new product design.

5. Implementation of product
Once the decision is finalized about the design of the product more focus should be there
on communication with the production department regarding the implementation of
product features.

6. Pricing of Product
Pricing is the most important aspect of the product because it only decides the major
buying decision of the consumer. So if the product is very new to the market correct &
affordable pricing should be done.

7. Selection of Layout
The layout is the place where actually the product /services will be availed so more focus
should be done on the exact location and layout.

8. Publicity of the product

Publicity means communication about the product and services for creating awareness &
demand for the product by publicity & Advertisement.

9. Distribution channel
Distribution channel means the number of media t or like whole-sellers, Retailers,
distributors, Agent who all are involved in the marketing channel.

10. Selling of Product

Selling involves the actual challenge of marketing. The selling of products and services
involves different strategies like distribution through stores, salesmen, Advertisements,
Exhibitions, trade fairs, etc.

11. Consumer Satisfaction

The product or service offered must satisfy consumer. Consumer satisfaction is the main
objective of marketing.

3|Page
12. Collecting the Feedback
This begins after the product is marketed and sold collecting feedback
regarding satisfaction or dissatisfaction related features like price, to make availability etc
it is to make changes in the marketing mix.

Importance of Marketing

1. Marketing informs

To attract consumers in a crowded marketplace, your target audience needs to know why
they should choose your business over someone else’s. This is where marketing comes in to
educate current and potential customers about your business and how it serves a need they
have.

The content on your website that communicates your business’s mission, product
demonstration videos you post, photos you display that show exactly what your products
look like — elements like these let prospective customers know who you are and what
makes you unique.

2. Marketing engages

It’s one thing to offer a superior in-person experience or an easy online shopping journey.
But marketing keeps your business in people’s minds after a transaction is over — and
before they need you again.

To turn first-time customers into lifelong fans who will sustain your business, you have to
establish and build relationships with the people who’ve interacted with your business.
Sending post-purchase follow-up emails, replying to customers on Twitter and Facebook,
and mailing out postcards with special offers or information on new services are just a few
of the ways that marketing can help you stay in touch with your target audience.

3. Marketing builds reputations

As a business owner or aspiring entrepreneur, you likely already understand how

important your reputation is to your success. It truly can be the deciding factor in whether
or not a consumer chooses to reach out to you or one of your competitors. Because
marketing spreads the word about your business, it’s a major factor in the reputation your
business takes on. Strong, professional marketing indicates that you’re a reputable
business. The connection is undeniable.

Whether it’s a well-designed email campaign, high-quality images in all of your marketing
materials, or engaging website copy that reflects your unique brand voice, marketing can
help you establish credibility, build trust and engender goodwill toward your company.

4|Page
4. Marketing sells

It’s simple logic — you can’t make a sale if no one knows about your products or services.
And while setting up shop in your neighborhood may bring in some walk-in business,
marketing extends your reach and draws attention to what you’re selling so that people can
buy it.

Emails showcasing new releases, social media posts alerting customers to an upcoming sale
and online business listings that help local consumers find you are a few examples of how
you can use marketing to build the kind of awareness that generates revenue.

5. Marketing grows businesses

This function of marketing is partly the culmination of the first four. Strategic marketing
often results in growth for your business. If you successfully educate customers, keep them
engaged, create a strong reputation in their minds and smartly sell to them, your business
will most likely do well. On top of that, most (if not all) businesses thrive on the acquisition
of new customers. Marketing is how you attract those customers in the first place.

Sales Vs Marketing

BASIS FOR
SALES MARKETING
COMPARISON

Meaning Sales refers to Marketing understands the requirements of the

the process of customers in such a way that whenever any new product
selling, is introduced, it sells itself.
whereby
product is
offered for
sale to the
customer at a
certain price
and at a given
period of time.

Orientation Product- Customer-oriented

oriented

Approach Fragmented Integrated approach

5|Page
 BASIS FOR
SALES MARKETING
COMPARISON

approach

Focus Company Market needs

needs

Related to Related to flow Related to all the activities which facilitates flow of goods
of goods to to customers.
customers.

Duration Short-term Long-term

Objective To instigate To identify the needs of customers and create products to

shoppers in satisfy those needs.
such a way
that they turn
out as buyers.

Relationship One-to-One One-to-Many

Target Individual or General Public

small group

Scope Selling of the Advertisement, Sales, Research, Customer satisfaction,

product. After sales services etc.

Activity Customer Media driven

driven

Strategy Push Strategy Pull Strategy

used

Process Involves Entails identifying and satisfying customer's needs.

exchange of
goods for
adequate
consideration.

6|Page
 BASIS FOR
SALES MARKETING
COMPARISON

Technique Price Customer relationship through integration of

promotion, organization with the needs of customers.
Discounts and
Special offers.

Skills Selling and Analytical skills

required Conversational
skills

Aims at Profit Profit maximization through increased consumer

maximization satisfaction and market share.
through sales
maximization.

Marketing Mix

The marketing mix refers to the set of actions, or tactics, that a company uses to promote
its brand or product in the market. The 4Ps make up a typical marketing mix-Price,
Product, Promotion and Place. However, nowadays, the marketing mix increasingly
includes several other Ps like Packaging, Positioning, People and even Politics as vital mix
elements.

Understanding Marketing Mix

The four Ps classifications for developing an effective marketing strategy was first
introduced in 1960 by marketing professor and author E. Jerome McCarthy. Depending on
the industry and the target of the marketing plan, marketing managers may take various
approaches to each of the four Ps. Each element can be examined independently, but in
practice, they often are often dependent on one another.

Product

This represents an item or service designed to satisfy customer needs and wants. To
effectively market a product or service, it's important to identify what differentiates it from
competing products or services. It's also important to determine if other products or
services can be marketed in conjunction with it.
7|Page
Price

The sale price of the product reflects what consumers are willing to pay for it. Marketing
professionals need to consider costs related to research and development, manufacturing,
marketing, and distribution—otherwise known as cost-based pricing. Pricing based
primarily on consumers' perceived quality or value is known as value-based pricing.

Place

The type of product sold is important to consider when determining areas of distribution.
Basic consumer products, such as paper goods, often are readily available in many stores.
Premium consumer products, however, typically are available only in select stores. Another
consideration is whether to place a product in a physical store, online, or both.

Promotion

Joint marketing campaigns also are called a promotional mix. Activities might include
advertising, sales promotion, personal selling, and public relations. A key consideration
should be for the budget assigned to the marketing mix. Marketing professionals carefully
construct a message that often incorporates details from the other three Ps when trying to
reach their target audience. Determination of the best mediums to communicate the
message and decisions about the frequency of the communication also are important.

All the elements of the marketing mix influence each other. They make up the business plan
for a company and handled right, can give it great success. But handled wrong and the
business could take years to recover. The marketing mix needs a lot of understanding,
market research and consultation with several people, from users to trade to
manufacturing and several others.

Marketing Environment?

Marketing Environment is the combination of external and internal factors and forces
which affect the company's ability to establish a relationship and serve its customers.
The marketing environment of a business consists of an internal and an
external environment.

Marketing Environment is the combination of external and internal factors and forces
which affect the company’s ability to establish a relationship and serve its customers.

8|Page
The marketing environment of a business consists of an internal and an external
environment. The internal environment is company-specific and includes owners, workers,
machines, materials etc. The external environment is further divided into two components:
micro & macro. The micro or the task environment is also specific to the business but
external. It consists of factors engaged in producing, distributing, and promoting the
offering. The macro or the broad environment includes larger societal forces which affect
society as a whole. The broad environment is made up of six components: demographic,
economic, physical, technological, political-legal, and social-cultural environment.

“A company’s marketing environment consists of the factors and forces outside of marketing
that affect marketing management ability to build and maintain successful relationships with
target customers”. – Philip Kotler

Components of Marketing Environment

The marketing environment is made up of the internal and external environment of the
business. While the internal environment can be controlled, the business has very less or
no control over the external environment.

Internal Environment

The internal environment of the business includes all the forces and factors inside the
organization which affect its marketing operations. These components can be grouped
under the Five Ms of the business, which are:

▪ Men
▪ Money
▪ Machinery
▪ Materials
▪ Markets
The internal environment is under the control of the marketer and can be changed with the
changing external environment. Nevertheless, the internal marketing environment is as

9|Page
important for the business as the external marketing environment. This environment
includes the sales department, marketing department, the manufacturing unit, the human
resource department, etc.

External Environment

The external environment constitutes factors and forces which are external to the business
and on which the marketer has little or no control. The external environment is of two
types:

Micro Environment

The micro-component of the external environment is also known as the task environment.
It comprises of external forces and factors that are directly related to the business. These
include suppliers, market intermediaries, customers, partners, competitors and the public

▪ Suppliers include all the parties which provide resources needed by the organization.
▪ Market intermediaries include parties involved in distributing the product or service
of the organization.
▪ Partners are all the separate entities like advertising agencies, market research
organizations, banking and insurance companies, transportation companies, brokers,
etc. which conduct business with the organization.
▪ Customers comprise of the target group of the organization.
▪ Competitors are the players in the same market who targets similar customers as that
of the organization.
▪ Public is made up of any other group that has an actual or potential interest or affects
the company’s ability to serve its customers.

Macro Environment

The macro component of the marketing environment is also known as the broad
environment. It constitutes the external factors and forces which affect the industry as a

10 | P a g e
whole but don’t have a direct effect on the business. The macro-environment can be
divided into 6 parts.

Demographic Environment

The demographic environment is made up of the people who constitute the market. It is
characterized as the factual investigation and segregation of the population according to
their size, density, location, age, gender and occupation.

Economic Environment

The economic environment constitutes factors which influence customers’ purchasing

power and spending patterns. These factors include the GDP, GNP, interest rates, inflation,
income distribution, government funding and subsidies, and other major economic
variables.

Physical Environment

The physical environment includes the natural environment in which the business
operates. This includes the climatic conditions, environmental change, accessibility to
water and raw materials, natural disasters, pollution etc.

Technological Environment

The technological environment constitutes innovation, research and development in

technology, technological alternatives, innovation inducements also technological barriers
to smooth operation. Technology is one of the biggest sources of threats and opportunities
for the organization and it is very dynamic.

Political-Legal Environment

11 | P a g e
The political &legal environment includes laws and government’s policies prevailing in the
country. It also includes other pressure groups and agencies which influence or limit the
working of the industry and/or the business in the society.

Social-Cultural Environment

The social-cultural aspect of the macro-environment is made up of the lifestyle, values,

culture, narrow-mindedness and beliefs of the people. This differs in different regions.

Importance of Marketing Environment

Every business, no matter how big or small, operates within the marketing
environment. Its present and future existence, profits, image, and positioning depend on its
internal and external environment. The business environment is one of the most dynamic
aspects of the business. In order to operate and stay in the market for long, one has to
understand and analyze the marketing environment and its components properly.

Essential for planning

An understanding of the external and internal environment is essential for planning for the
future. A marketer needs to be fully aware of the current scenario, dynamism, and future
predictions of the marketing environment if he wants his plans to succeed.

Understanding Customers

Thorough knowledge of the marketing environment helps marketers acknowledge and

predict what the customer actually wants. In-depth analysis of the marketing environment
reduces (and even removes) the noise between the marketer and customers and helps the
marketer to understand consumer behaviour better.

Tapping Trends

12 | P a g e
Breaking into new markets and capitalizing on new trends requires a lot of insight about
the marketing environment. The marketer needs to research about every aspect of the
environment to create a foolproof plan.

Threats and Opportunities

Sound knowledge of the market environment often gives a first-mover advantage to the
marketer as he makes sure that his business is safe from future threats and taps the future
opportunities.

Understanding the Competitors

Every place has different players fighting for the same spot. A better understanding of the
marketing environment allows the marketer to understand more about the competitions
and about what advantages do the competitors have over his business and vice versa.

13 | P a g e
 Unit 2: Consumer Behaviour

Consumer Behaviour

Consumer behaviour can be defined as the decision making process and physical activity
involved acquiring, evaluating, using and disposing of goods and services. Consumer
behaviour refers to the behaviour that consumer display in searching, purchasing, using,
evaluating and disposing of products and services that they expect will satisfy their needs.

According to Walter – “Consumer behaviour is the process where by individual decides

what, where, when, how, from whom to purchase the goods and services.”According

According to Webster – “Consumer behaviour is the psychological, social & physical

behavior or potential customer as they become aware of evaluation, purchase, consume
and tell others about product and services.

Consumer behaviour focuses on how individuals make decisions to spend their available
resources to satisfy their consumption needs. This includes questions like what to buy?
When to buy? Where to buy? How often to buy? How much to buy?

Consumer – A consumer is a person who evaluates, uses and disposes a good or service to
satisfy a need.
Customer – Customer is the person, who actually purchases the product.

Consumers can be divided into two types –

Household consumers – Who buy products for their own consumption

Industrial consumers – Who buy products for further value addition, as inputs for
manufacturing or for retailing

14 | P a g e
Nature of Consumer Behaviour

1. It is complex as each customer has a unique set of needs

2. It is dynamic in nature, human behaviour is constantly altered by its environment
3. It varies from consumer to consumer, product to product and from country to country
4. It is influenced by various cultural, social, personal and psychological factors
5. The buying behaviour and pattern of an individual reflects his/her status in the society

Importance of Consumer Behaviour

1. It helps to understand human behavior and various internal and external motives that
influence human behavior.
2. It helps marketers to determine customer needs, expectations, problems, preferences
etc. which help them to estimate demand for a product or service.
3. It helps marketers to understand what a customer buys, why he buys it, when and from
who he buys which helps them to formulate an effective marketing mix (4P`s).
4. It helps advertisers to understand how consumers react to different advertising
appeals, thereby helping them to select the appropriate media and advertising message
for a particular target audience.
5. It helps organizations to analyze market opportunities and develop competitive
strategies accordingly. It helps in rapid introduction of new products.
6. It helps the government to understand the social and economic trends in the country
and formulate policies regarding price controls, subsidization, consumer protection etc.

Consumer Buying Decision

The buyer decision process (or customer buying process) helps markets to identify how
consumers complete the journey from knowing about a product to making the purchase
decision. Understanding the customer’s buying process is essential for marketing and sales.

15 | P a g e
The buyer decision process will enable them to set a marketing plan that convinces them to
purchase the product or service for fulfilling the buyer’s or consumer’s problem.
Consumers go through 5 stages in taking the decision to purchase any goods or services.

When making a purchase, the buyer goes through a decision process consisting of 5 stages.

Clearly, the buying process starts long before the actual purchase and continues long after.

The marketer’s job is to understand the buyer’s behavior at each stage and the influences
that are operating. The figure implies that consumers pass through all five Stages with
every purchase.

Let’s explain all 5 stages of the buyer decision process.

16 | P a g e
 1. Need or Problem Recognition

During need or problem recognition, the consumer recognizes a problem or need that
could be satisfied by a product or service in the market. Problem Recognition is the first
stage of the buyer decision process. At this stage, the consumer recognizes a need or
problem. The buyer feels a difference between his or her actual state and some desired
state.

This could be a simple as “I’m hungry, I need food.”

The need may have been triggered by internal stimuli (such as hunger or thirst) or external
stimuli (such as advertising or word of mouth).

2. Information Search

Once the need is recognized, the consumer is aroused to seek more information and moves
into the information search stage. The second stage of the purchasing process is searching
for information. After the recognition of needs, the consumers try to find goods for
satisfying such needs. They search for information about the goods they want. Consumers
can get information about goods from different sources.

▪ Personal sources: This includes family, friends, neighbors, colleague, etc.

▪ Commercial source: This includes advertising, salespeople, dealers, packaging, display,

etc.

▪ Public sources: This includes mass media, consumer rating organizations, etc. they also
become confidential to provide information.

▪ Experimental sources: This includes handling, examining, using, etc. Such information
becomes decisive and confidential.

3. Evaluation of Alternatives

With the information in hand, the consumer proceeds to alternative evaluation, during
which the information is used to evaluate” brands in the choice set.

17 | P a g e
Evaluation of alternatives is the third stage of the buying process. Various points of
information collected from different sources are used in evaluating different alternatives
and their attractiveness.

While evaluating goods and services, different consumers use different bases.

Generally, the consumers evaluate the alternatives on the basis of attributes of the product,
the degree of importance, belief in the brand, satisfaction, etc. to choose correctly.

4. Purchase Decision

After the alternatives have been evaluated, consumers decide to purchase products and
services. They decide to buy the best brand.

But their decision is influenced by others’ attitudes and situational factors.

5. Post-Purchase Evaluation

In the final stage of the buyer decision process, post purchase behavior, the consumer takes
action based on satisfaction or dissatisfaction.

In this stage, the consumer determines if they are satisfied or dissatisfied with the
purchasing outcome. Here is where cognitive dissonance occurs, “Did I make the right
decision.”

Consumers go through the 5 stages of the buyer decision process in deciding to purchase
any goods or services.

Factor influencing consumer buying behaviour

1. Psychological Factors
2. Social Factors
3. Cultural Factors
4. Personal Factors
5. Economic Factors

18 | P a g e
Consumer behavior is influenced by many different factors. A marketer should try to
understand the factors that influence consumer behavior. Here are 5 major factors that
influence consumer behavior:

1. Psychological Factors
Human psychology is a major determinant of consumer behavior. These factors are difficult
to measure but are powerful enough to influence a buying decision.
Some of the important psychological factors are:

i. Motivation
When a person is motivated enough, it influences the buying behaviour of the person. A
person has many needs such as the social needs, basic needs, security needs, esteem needs
and self-actualization needs. Out of all these needs, the basic needs and security needs take
a position above all other needs. Hence basic needs and security needs have the power to
motivate a consumer to buy products and services.
ii. Perception

19 | P a g e
Consumer perception is a major factor that influences consumer behavior. Customer
perception is a process where a customer collects information about a product and
interprets the information to make a meaningful image about a particular product. When a
customer sees advertisements, promotions, customer reviews social media feedback, etc.
relating to a product, they develop an impression about the product. Hence consumer
perception becomes a great influence buying decision of consumers. Learning can be either
conditional or cognitive.
iii. Learning
When a person buys a product, he/she gets to learn something more about the product.
Learning comes over a period of time through experience. A consumer’s learning depends
on skills and knowledge. While a skill can be gained through practice, knowledge can be
acquired only through experience. In conditional learning the consumer is exposed to a
situation repeatedly, thereby making a consumer to develop a response towards it.
Whereas in cognitive learning, the consumer will apply his knowledge and skills to find
satisfaction and a solution from the product that he buys.
iv. Attitudes and Beliefs
Consumers have certain attitude and beliefs which influence the buying decisions of a
consumer. Based on this attitude, the consumer behaves in a particular way towards a
product. This attitude plays a significant role in defining the brand image of a product.
Hence, the marketers try hard to understand the attitude of a consumer to design their
marketing campaigns.
2. Social Factors

Humans are social beings and they live around many people who influence their buying
behavior. Human try to imitate other humans and also wish to be socially accepted in the
society. Hence their buying behavior is influenced by other people around them. These
factors are considered as social factors. Some of the social factors are:

20 | P a g e
i. Family
Family plays a significant role in shaping the buying behavior of a person. A person
develops preferences from his childhood by watching family buy products and continues to
buy the same products even when they grow up.

ii. Reference Groups

Reference group is a group of people with whom a person associates himself. Generally, all
the people in the reference group have common buying behavior and influence each other.

iii. Roles and status

A person is influenced by the role that he holds in the society. If a person is in a high
position, his buying behavior will be influenced largely by his status. A person who is a
Chief Executive Officer in a company will buy according to his status while a staff or an
employee of the same company will have different buying pattern.

3. Cultural factors

A group of people are associated with a set of values and ideologies that belong to a
particular community. When a person comes from a particular community, his/her
behavior is highly influenced by the culture relating to that particular community. Some of
the cultural factors are:

i. Culture

Cultural Factors have strong influence on consumer buyer behavior. Cultural Factors
include the basic values, needs, wants, preferences, perceptions, and behaviors that are
observed and learned by a consumer from their near family members and other important
people around them.

21 | P a g e
ii. Subculture

Within a cultural group, there exists many subcultures. These sub-cultural groups share the
same set of beliefs and values. Subcultures can consist of people from different religion,
caste, geographies and nationalities. These subcultures by itself form a customer segment.

iii. Social Class

Each and every society across the globe has form of social class. The social class is not just
determined by the income, but also other factors such as the occupation, family
background, education and residence location. Social class is important to predict the
consumer behavior.

4. Personal Factors

Factors that are personal to the consumers influence their buying behavior. These personal
factors differ from person to person, thereby producing different perceptions and
consumer behavior.
Some of the personal factors are:

i. Age

Age is a major factor that influences buying behavior. The buying choices of youth differ
from that of middle-aged people. Elderly people have a totally different buying behavior.
Teenagers will be more interested in buying colorful clothes and beauty products. Middle-
aged are focused on house, property and vehicle for the family.
ii. Income
Income has the ability to influence the buying behavior of a person. Higher income gives
higher purchasing power to consumers. When a consumer has higher disposable income, it
gives more opportunity for the consumer to spend on luxurious products. Whereas low-

22 | P a g e
income or middle-income group consumers spend most of their income on basic needs
such as groceries and clothes.
iii. Occupation
Occupation of a consumer influences the buying behavior. A person tends to buy things that
are appropriate to this/her profession. For example, a doctor would buy clothes according
to this profession while a professor will have different buying pattern.
iv. Lifestyle
Lifestyle is an attitude, and a way in which an individual stay in the society. The buying
behavior is highly influenced by the lifestyle of a consumer. For example when a consumer
leads a healthy lifestyle, then the products he buys will relate to healthy alternatives to junk
food.

5. Economic Factors

The consumer buying habits and decisions greatly depend on the economic situation of a
country or a market. When a nation is prosperous, the economy is strong, which leads to
the greater money supply in the market and higher purchasing power for consumers. When
consumers experience a positive economic environment, they are more confident to spend
on buying products. Whereas, a weak economy reflects a struggling market that is
impacted by unemployment and lower purchasing power. Economic factors bear a
significant influence on the buying decision of a consumer. Some of the important economic
factors are:

i. Personal Income

When a person has a higher disposable income, the purchasing power increases
simultaneously. Disposable income refers to the money that is left after spending towards
the basic needs of a person. When there is an increase in disposable income, it leads to
higher expenditure on various items. But when the disposable income reduces, parallelly
the spending on multiple items also reduced.

23 | P a g e
ii. Family Income

Family income is the total income from all the members of a family. When more people are
earning in the family, there is more income available for shopping basic needs and luxuries.
Higher family income influences the people in the family to buy more. When there is a
surplus income available for the family, the tendency is to buy more luxury items which
otherwise a person might not have been able to buy.

iii. Consumer Credit

When a consumer is offered easy credit to purchase goods, it promotes higher spending.
Sellers are making it easy for the consumers to avail credit in the form of credit cards, easy
installments, bank loans, hire purchase, and many such other credit options. When there is
higher credit available to consumers, the purchase of comfort and luxury items increases.

iv. Liquid Assets

Consumers who have liquid assets tend to spend more on comfort and luxuries. Liquid
assets are those assets, which can be converted into cash very easily. Cash in hand, bank
savings and securities are some examples of liquid assets. When a consumer has higher
liquid assets, it gives him more confidence to buy luxury goods.

v. Savings

A consumer is highly influenced by the amount of savings he/she wishes to set aside from
his income. If a consumer decided to save more, then his expenditure on buying reduces.
Whereas if a consumer is interested in saving less, then most of his income will go towards
buying products

24 | P a g e
 b. Market segmentation
Definition
A market consists of all such people who have the willingness to buy and the capacity to
buy a product or service. The market for a product or service is generally heterogeneous
father than the homogeneous mass of customers.

Each potential buyer has individual needs and desires, and specific circumstances that
influence his/her purchasing and consumption behaviour. Its firm attempts to cater to the
local market, its limited resources might be frittered away. At the same time it would be
highly inefficient to tailor the marketing programme to each specific customer. The firm
can develop a marketing programme for each relatively homogeneous and meaningful
segment of the total market.

Concept of Market segmentation

Market segmentation is the process of dividing a market of potential customers into

groups, or segments, based on different characteristics. The segments created are
composed of consumers who will respond similarly to marketing strategies and who share
traits such as similar interests, needs, or locations.

What is market segmentation?

Market segmentation involves dividing a large homogenous market of potential customers

into clearly identifiable segments. Customers are divided based on meeting certain criteria
or having similar characteristics that lead to them having the same product needs.
Segments are made up of customers who will respond similarly to marketing strategies.
They share common interests, needs, wants and demands.

Most companies don’t have enough resources to target a mass market. That is why they
need to target the specific market segment that needs their product. They divide the
market into similar and identifiable segments through market segmentation.

25 | P a g e
The process of market segmentation involves the following steps:

(i) Identify the total market (those who buy or may be induced to buy the product or
service under consideration).

(ii)Divide the total market into its major sub-markets or segments.

(iii) Estimate the sales potential and profit potential for each sub-market.

(iv) Determine the unique characteristics and requirements of each sub-market.

(v) Select one or more segments on which the firm will focus on serving.

Why is market segmentation important for marketers?

Market segmentation makes it easier for marketers to personalize their marketing

campaigns. By arranging their company’s target market into segmented groups, rather than
targeting each potential customer individually, marketers can be more efficient with their
time, money, and other resources than if they were targeting consumers on an individual
level. Grouping similar consumers together allows marketers to target specific audiences in
a cost effective manner.

Market segmentation also reduces the risk of an unsuccessful or ineffective marketing

campaign. When marketers divide a market based on key characteristics and personalize
their strategies based on that information, there is a much higher chance of success than if
they were to create a generic campaign and try to implement it across all segments.

Marketers can also us segmentation to prioritize their target audiences. If segmentation

shows that some consumers would be more likely to buy a product than others, marketers
can better allocate their attention and resources.

What types of market segments can a company have?

• Geographic – based on land, rural or metropolitan area.

• Demographic – based on age, gender, income, occupation, education, nationality.
• Psychographic – based on social status, lifestyle-type, personality type.

26 | P a g e
• Behavioural – based on intensity of product use, brand loyalty, user behaviours, price
sensitivity, technology adoption.

Geographic segmentation

This involves splitting up a market based on location. Even though this is a basic form of
segmentation it is highly effective. By knowing where a customer is located can help a
company better understand the needs of their customers and companies can then target
customers with location-specific ads.

You can divide a segment based on their locations, such as town, county, zip code or
country. But you can also identify customers based on the climate they live in or the
population density of their location. Dividing a segment based on the characteristics of
their location, allows marketers to be even more specific with their targeting and
messaging. When targeting different geographic segments, marketers need to take into
consideration elements such as language. Language may change depending on the region
you are targeting.

Demographic segmentation

This is the most common type of segmentation. A target audience is divided based on
qualities such as, age, gender, occupation, education, income and nationality.

Demographic segmentation is the easiest way to divide a market. Mixing demographic

segmentation with another type of market segmentation can help to narrow your market
down even further.

The information required for demographic segmentation is easy to gather and doesn’t cost
a company too much to obtain.

For example, a common product which is segmented based on demographics is body wash.
Generally, you’ll see body wash for women and body wash for men.

27 | P a g e
Behavioural segmentation

A company can segment their market based on consumer’s behaviours. By dividing your
target audience based on their behaviours allows you to create specific messaging that will
accommodate to those behaviours.

Behaviours include;

• What actions were taken on a website?

• What are their online shopping habits?
• How loyal are they to the brand/ product?
• What is their usage rate of your product?
• What need is a consumer trying to satisfy?

This information is relevant because it’s directly related to how a consumer interacts with
your products. Therefore, marketers can market more effectively to customers by knowing
their behaviours.

Psychographic segmentation

This form of segmentation is very similar to demographic segmentation however, it deals

with characteristics that are related to mental and emotional attributes. Psychographic
segmentation divides a group of customers based on their personality traits, values,
interests, attitudes and lifestyles. Demographics as we discussed earlier are much easier to
observe than psychographics, however, psychographics give marketers valuable insights
into customers motives, preferences and needs. By understanding psychographics,
marketers can develop content that is more relatable to their customer segments.

Demographic segmentation can merge very well with psychographic segmentation. If you
feel your messaging isn’t appealing to your demographic segment, you can try including

28 | P a g e
psychographic information. It is psychographic information that informs you why people
purchase or don’t purchase a product or service.

What are the benefits of market segmentation?

Market segmentation makes it easier for marketing teams to develop highly targeted and
effective marketing campaigns and plans.

Below we’ve outlined several benefits which exist with understanding and defining market
segments.

• Greater company focus

When a company has identified specific market segments, it helps them to focus on what
segments they want to target with specific products/ services/ content/ blogs and
campaigns. When a company has a focus on specific segments, they ensure they are
targeting the right segment with the right product which will see the greatest ROI.

• Better serve a customer’s needs and wants

Having defined segments enables companies to satisfy a variety of customer needs by

offering different bundles and incentives. Different forms and promotional activities will be
used for different segments based on that segments needs/ wants and characteristics.

• Market competitiveness

When a company is focusing on a specific segment, their market competitiveness increases.

Which in turn will lead to a higher ROI. The company is focused on specific segments and
learns everything they need to know about that segment, to market their products to them.

• Market expansion

29 | P a g e
With geographic segmentation as discussed earlier, market expansion is possible
immediately. When a company understands their segments and how to market to a
segment in a particular location, they can expand immediately into another nearby
location. If segmentation is based on demographics, then once the company knows their
demographic segment they can expand in that segment with similar products.

• Targeted communication

Even when product features and benefits are the same, it is important for companies to
target segments with specific communication. For example, if your segment was senior
engineers, they may respond better to technical information about a product in the form of
white papers or info graphics, but a project manager might respond better to information
regarding cost savings, efficiencies etc in the form of a blog, case study or video. Messaging
will be different for different segments. Platforms which are used to target different
segments will be different also. The key is to understand your segments and target
communication relevant to them on the relevant platforms.

30 | P a g e
 Unit 3: Product

What is a Product

In general, a product is defined as a “thing produced by labor or effort” or the “result of an

act or a process. ” The word “product” stems from the verb “produce”, from the Latin
prōdūce(re) “(to) lead or bring forth. ” Since 1575, the word “product” has referred to
anything produced.

In marketing, a product is anything that can be offered to a market that might satisfy a want
or need. In retail, products are called merchandise. In manufacturing, products are
purchased as raw materials and sold as finished goods. Commodities are usually raw
materials such as metals and agricultural products, but the term can also refer to anything
widely available in the open market. In project management, products are the formal
definition of the project deliverables that form the objectives of the project.

Goods, Services, or Ideas

Goods are a physical product capable of being delivered to a purchaser and involve the
transfer of ownership from seller to customer.

A service is a non-material action resulting in a measurable change of state for the

purchaser caused by the provider.

Ideas (intellectual property) are any creation of the intellect that has commercial value, but
is sold or traded only as an idea, and not as a resulting service or good. This includes
copyrighted property such as literary or artistic works, and ideational property, such as
patents, appellations of origin, business methods, and industrial processes.

Product Classification: Tangible or Intangible

A product can be classified as tangible or intangible.

31 | P a g e
A tangible product is a physical object that can be perceived by touch such as a building,
vehicle, or gadget. Most goods are tangible products. For example, a soccer ball is a tangible
product.

Soccer Ball: A soccer ball is an example of a tangible product, specifically a tangible good.

An intangible product is a product that can only be perceived indirectly such as an

insurance policy. Intangible data products can further be classified into virtual digital
goods (“VDG”), which are virtually located on a computer OS and accessible to users as
conventional file types, such as JPG and MP3 files. Virtual digital goods require further
application processing or transformational work by programmers, so their use may be
subject to license and or rights of digital transfer. On the other hand, real digital goods
(“RDG”) may exist within the presentational elements of a data program independent of a
conventional file type. Real digital goods are commonly viewed as 3-D objects or
presentational items subject to user control or virtual transfer within the same visual
media program platform. Services or ideas are intangible.

Product Classification: By Use or By Association

In its online product catalog, retailer Sears, Roebuck and Company divides its products into
“departments”, and then presents products to potential shoppers according to function or
brand. Each product has a Sears item-number and a manufacturer’s model-number. Sears

32 | P a g e
uses the departments and product groupings with the intention of helping customers
browse products by function or brand within a traditional department-store structure.

A product line is “a group of products that are closely related, either because they function
in a similar manner, are sold to the same customer groups, are marketed through the same
types of outlets, or fall within given price ranges. ” Many businesses offer a range of
product lines which may be unique to a single organization or may be common across the
company’s industry. In 2002 the US Census compiled revenue figures for the finance and
insurance industry by various product lines such as “accident, health and medical
insurance premiums” and “income from secured consumer loans.” Within the insurance
industry, product lines are indicated by the type of risk coverage, such as auto insurance,
commercial insurance, and life insurance.

Product Mix

Definition: The Product Mix also called as Product Assortment/ variety, refers to the
complete range of products that is offered for sale by the company. In other words, the
number of product lines that a company has for its customers is called as product mix.

The Product Line refers to the list of all the related products manufactured or marketed by
a single firm. The number of products within the product line are called as the items, and
these might be similar in terms of technology used, channel employed, customer’s needs
and preferences or any other aspect. For example, the product lines of ITC are FMCG,
Hotels, Paper Board and Packaging, Agribusiness.

The product mix has four dimensions: Breadth, Length, Depth, and Consistency.
The Breadth of a product mix shows the different kinds of product lines that firm carries.
Simply, it shows the number of items in the product line. This dimension of the product mix
represents the extent to which the activities of the firm are diversified. In the example
below, there are 4 product lines that show the width of the ITC.

33 | P a g e
The Length of a Product mix refers to the number of items in the product mix. In the
example below the length is 11. As in the foods line, the number of items is 3, in cigarettes
is 3 and so on.. On adding all the items, we get the length of a product.

The Depth of a product mix refers to the variants of each product in the product line. For
example, in the example below, curry, pastes, biryanis, conserves, etc. shows the depth of
the foods product line.

34 | P a g e
The Consistency of a product mix shows the extent to which the product lines are closely
related to each other in terms of their end-use, distribution requirements, production
requirements, price ranges, advertising media, etc. In the above example, it is clear that
ITC’s product lines are less consistent as these perform different functions for the buyers.

These terms in a product assortment help the firm to take a decision regarding the addition
or removal of the product items in the product lines. Generally, the firms introduce a new
product item into the existing product line as it is easy to gain the customer support for the
new product due to the customer’s familiarity with the existing product line.

Branding

Branding, by definition, is a marketing practice in which a company creates a name, symbol

or design that is easily identifiable as belonging to the company. This helps to identify a
product and distinguish it from other products and services. Branding is important because
not only is it what makes a memorable impression on consumers but it allows your
customers and clients to know what to expect from your company. It is a way of
distinguishing yourself from the competitors and clarifying what it is you offer that makes
35 | P a g e
you the better choice. Your brand is built to be a true representation of who you are as a
business, and how you wish to be perceived.

There are many areas that are used to develop a brand including advertising, customer
service, promotional merchandise, reputation, and logo. All of these elements work
together to create one unique and (hopefully) attention-grabbing professional profile.

Why Is Branding Important?

Branding is absolutely critical to a business because of the overall impact it makes on your
company. Branding can change how people perceive your brand, it can drive new business
and increase brand awareness.

Branding Gets Recognition

The most important reason branding is important to a business is because it is how a

company gets recognition and becomes known to the consumers. The logo is the most
important element of branding, especially where this factor is concerned, as it is essentially
the face of the company.

This is why a professional logo design should be powerful and easily memorable, making
an impression on a person at first glance. Printed promotional products are a way of
getting this across.

Branding Increases Business Value

Branding is important when trying to generate future business, and a strongly established
brand can increase a business’ value by giving the company more leverage in the industry.
This makes it a more appealing investment opportunity because of its firmly established
place in the marketplace.

Branding Generates New Customers

36 | P a g e
A good brand will have no trouble drumming up referral business. Strong branding
generally means there is a positive impression of the company amongst consumers, and
they are likely to do business with you because of the familiarity and assumed
dependability of using a name they can trust. Once a brand has been well-established, word
of mouth will be the company’s best and most effective advertising technique.

Improves Employee Pride and Satisfaction

When an employee works for a strongly branded company and truly stands behind the
brand, they will be more satisfied with their job and have a higher degree of pride in the
work that they do. Working for a brand that is reputable and help in high regard amongst
the public makes working for that company more enjoyable and fulfilling. Having a branded
office, which can often help employees feel more satisfied and have a sense of belonging to
the company, can be achieved through using promotional merchandise for your desktop.

Creates Trust Within The Marketplace

A professional appearance and well-strategised branding will help the company build trust
with consumers, potential clients and customers. People are more likely to do business
with a company that has a polished and professional portrayal.

Being properly branded gives the impression of being industry experts and makes the
public feel as though they can trust your company, the products and services it offers and
the way it handles its business.

Branding Supports Advertising

Advertising is another component to branding, and advertising strategies will directly

reflect the brand and its desired portrayal. Advertising techniques such as the use of
promotional products from trusted companies such as Outstanding Branding make it easy
to create a cohesive and appealing advertising strategy that plays well into your branding
goals.

37 | P a g e
Packaging

Packaging is the science, art, and technology of enclosing or protecting products for
distribution, storage, sale, and use. Packaging also refers to the process of design,
evaluation, and production of packages. Packaging can be described as a coordinated
system of preparing goods for transport, warehousing, logistics, sale, and end use.
Packaging contains, protects, preserves, transports, informs, and sells. In many countries it
is fully integrated into government, business, institutional, industrial, and personal use.
Package labeling (American English) or labeling (British English) is any written, electronic,
or graphic communications on the packaging or on a separate but associated label.

The purposes of packaging and package labels

Packaging and package labeling have several objectives

Physical protection – The objects enclosed in the package may require protection from,
among other things, mechanical shock, vibration, electrostatic discharge, compression,
temperature,etc.

Barrier protection – A barrier from oxygen, water vapor, dust, etc., is often required.
Permeation is a critical factor in design. Some packages contain desiccants or Oxygen
absorbers to help extend shelf life. Modified atmospheres or controlled atmospheres are
also maintained in some food packages. Keeping the contents clean, fresh, sterile and safe
for the intended shelf life is a primary function.

Containment or agglomeration – Small objects are typically grouped together in one

package for reasons of efficiency. For example, a single box of 1000 pencils requires less
physical handling than 1000 single pencils. Liquids, powders, and granular materials need
containment.

38 | P a g e
Information transmission – Packages and labels communicate how to use, transport,
recycle, or dispose of the package or product. With pharmaceuticals, food, medical, and
chemical products, some types of information are required by governments. Some
packages and labels also are used for track and trace purposes.

Marketing – The packaging and labels can be used by marketers to encourage potential
buyers to purchase the product. Package graphic design and physical design have been
important and constantly evolving phenomenon for several decades. Marketing
communications and graphic design are applied to the surface of the package and (in many
cases) point of sale display.

Security – Packaging can play an important role in reducing the security risks of shipment.
Packages can be made with improved tamper resistance to deter tampering and also can
have tamper-evident features to help indicate tampering. Packages can be engineered to
help reduce the risks of package pilferage: Some package constructions are more resistant
to pilferage and some have pilfer indicating seals. Packages may include authentication
seals and use security printing to help indicate that the package and contents are not
counterfeit. Packages also can include anti-theft devices, such as dye-packs, RFID tags, or
electronic article surveillance tags that can be activated or detected by devices at exit
points and require specialized tools to deactivate. Using packaging in this way is a means of
loss prevention.

Convenience – Packages can have features that add convenience in distribution, handling,
stacking, display, sale, opening, re-closing, use, dispensing, reuse, recycling, and ease of
disposal

Portion control – Single serving or single dosage packaging has a precise amount of
contents to control usage. Bulk commodities (such as salt) can be divided into packages
that are a more suitable size for individual households. It is also aids the control of
39 | P a g e
inventory: selling sealed one-liter-bottles of milk, rather than having people bring their
own bottles to fill themselves

Packaging types

Packaging may be looked at as being of several different types. For example a transport
package or distribution package can be the shipping container used to ship, store, and
handle the product or inner packages. Some identify a consumer package as one which is
directed towards a consumer or household.

Packaging may be described in relation to the type of product being packaged: medical
device packaging, bulk chemical packaging, over-the-counter drug packaging, retail food
packaging, military materiel packaging, pharmaceutical packaging, etc.
It is sometimes convenient to categorize packages by layer or function: "primary",
Secondary etc.

1. Primary packaging is the material that first envelops the product and holds it. This
usually is the smallest unit of distribution or use and is the package which is in direct
contact with the contents.
2. Secondary packaging is outside the primary packaging, perhaps used to group
primary packages together.
3. Tertiary packaging is used for bulk handling, warehouse storage and transport
shipping. The most common form is a palletized unit load that packs tightly into
containers.

Labeling
Labeling is any written, electronic, or graphic communications on the packaging or on a
separate but associated label. Display of information about a product on its container,
Packaging or the product itself.

40 | P a g e
1. Brand Identification - Labeling helps in the identification and principal place of
business of the person by or for whom the prepackaged product was manufactured,
processed or packaged for resale.

2. Description - Labels provide the information regarding the food product. It describes
the contents, nutritional values, cost, product usage methods, shelf life etc.

3. Promotion - Finally labels helps in promoting the product through attractive and
bright graphics replacing paper labels glued on cans and bottles.

41 | P a g e