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MBA 2 Semester - MARKETING MANAGEMENT (Subject Code:201)

UNIT –I
Introduction to Marketing: Needs, Wants, Demands, Marketing Mix, Marketing
Management - Concept of Marketing - Marketing Environment.

UNIT –II
Marketing Segmentations, Targeting and Positioning: Identification of Market Segments–
Segmenting Consumer Marketing–Selecting Target Markets – Segmentation and Targeting as a
basis for Strategy Formulation- Developing and Communicating a Positioning Strategy.

UNIT –III
Product Management: Constituents of a Product – Product Line - Product Mix -
Classification of New Product - New Product Development - Product Life Cycle, PLC as a
Tool for Marketing Strategy.

UNIT –IV
Pricing and Distribution Management: Objectives of Pricing – Setting Pricing Policy-,
Methods of Pricing, Adapting Price, Initiating and Responding to Price Changes.

UNIT –V
Marketing Promotion: Role of Marketing Promotion – Marketing Promotion Mix – Sales
Force Management - Online Marketing.

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INTRODUCTION
Marketing is the study and management of exchange relationships. The term developed
from the original meaning which referred literally to going to a market to buy or sell goods or
services. Marketing is used to create, keep and satisfy the customer. With the customer as the
focus of its activities, it can be concluded that Marketing is one of the premier components of
Business Management - the other being Innovation. Other services and management activities
such as Operations, Human Resources, Accounting, Law and Legal aspects can be "bought in"
or "contracted out".
Definition
"Marketing as the activity set of institutions and processes for creating, communicating,
delivering, and exchanging offerings that have value for customers, clients, partners, and
society at large."
--American Marketing Association
Meaning and definition of Marketing:
"Marketing Management is the analysis, planning, implementation and control of
programmes designed to bring about desired exchanges with target audiences for the purpose of
personal and of mutual gain. It relies heavily on the adoption and coordination of product,
price, promotion and place for achieving responses."
--Philip Kotler
Marketing management is the organizational discipline which focuses on the practical
application of marketing orientation, techniques and methods inside enterprises and
organizations and on the management of a firm's marketing resources and activities.
NEEDS, WANTS AND DEMANDS
Marketing is all about identifying and fulfilling the needs of the customer. The needs
are basic human requirements. There are three important concepts in marketing: needs, wants,
and demands. Understanding your target market’s needs, wants, and demands will help you
better market your products. Needs are things that satisfy the basic requirements. And what
distinguishes a want from demand is whether the customer wants something specific but is
willing to pay for it. Consider consumer electronics, an item the customer wants to use but may
not be able to afford.
Needs
“Needs” are the basic human requirements that are needed to survive. These necessities
include shelter, clothes, food and water. One can say that products in need categories don’t
require any push. Instead, the customer buys it themselves. But it’s actually not true. In today’s
world, the market is becoming increasingly competitive, and so brands are fighting for
attention—Examples of needs category products/sectors – Agriculture sector, Real Estate,
Healthcare etc.
We all know about Maslow’s hierarchy of needs, which categorizes needs into 5 levels
starting from physiological needs at the bottom and going up to self-actualization needs. As a
marketer, it’s important to know how your brand has targeted these needs. Companies have
different products for different consumer needs. Let’s take a look at some brands targeting
different levels of needs.
1. Physiological Needs – Food companies (Nestle, Pepsi, Coca Cola)
2. Safety Needs – Insurance companies (ICICI Prudential, Tata AIG, HDFC Life)
3. Social Needs – Social networking sites (Facebook, Twitter, Instagram)

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4. Esteem Needs – Luxury brands (iPhone, Mercedes)

5. Self-actualization needs – Non-Profit organizations and NGOs (UNICEF, Teach for India)
Wants
The desire for products or services that are not necessary, but which consumer wish for.
Humans have unlimited needs, and to satisfy them, people desire different things, like products
or services and ways of doing things. Needs are something essential for your survival. Whereas
wants are intangible and volatile – something you may desire but don’t need. As time passes,
people change their wants accordingly. The desire for different things varies from culture to
social class and from personality to personality. Marketers can influence human wants by
providing a wide range of need-satisfying products. Example of wants category
products/sectors – Hospitality industry, Electronics, FMCG, Consumer Durables etc.
Demands
When a customer is willing and able to buy what they need or want, it becomes a
demand for the organization. Want becomes demand when supported by purchasing power. For
example, everybody would like to drive a Mercedes, but everybody cannot afford it; that’s why
only those wants which are backed by purchasing power will be calculated as demand. People
can make demands because they have the ability, willingness and desire to buy what’s
necessary. For a marketer, demand is very important. It plays a significant role in managerial
decision making. This helps to forecast the demand while doing strategic marketing planning.
Demands are human wants backed by ability and willingness to buy. The person wants
only those goods which provide them maximum satisfaction. Marketers can also influence
demand by offering products at different price and quality.
Primary and Secondary demand
1. Primary demand:
Primary demand refers to the demand of the products and services that can satisfy particular
type of need. A primary demand is the total demand of the goods with different names and is
manufactured by different firms which fulfil the similar needs. For example: in summer, the
demand for cold drink increases. The primary demand is important for an individual firm
because it sells its products to a part of the primary demand.
2. Secondary demand:
Secondary demand refers to the demand of goods with special brand produced by any producer.
The special demand is more specific and includes demand for a firm's product or band. The
marketers use brand differentiation features such as brand name, packaging, price and
promotion to convince the consumers that its brand is different from competitor's brand.
Creation of demand
A consumer should be motivated for creating demand. A producer should provide
information about the availability of product, use of the product, change in product or service,
etc. to the customers for creating demand. The important methods of creating demand are as
follows:
1. Personal selling:
Personal selling is the oral communication with the potential customer for the purpose of
selling goods. Personal selling takes place to place, face to face, or it may be directed to a
middleman or final consumer. It is a direct method in which seller or sales representative
negotiates directly with customers, presents information to them, and motivates them to buy
products. In this way, demand is created.

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MBA 2 Semester - MARKETING MANAGEMENT (Subject Code:201)

2. Advertisement:
Advertisement is a non-personal communication process where the customers are given
information about new goods and services to arouse curiosity in them for buying products. The
most familiar forms of ads are found in the broadcast (TV, radio, newspaper, magazine and
media).
3. Sales promotion:
Sales promotion is the demand stimulating activity besides personal selling and advertisement.
Sales promotion activities are display and decoration of products, trade fair, exhibition, free
distribution of sample, gifts program etc. This will help to increase sales volume.
4. Publicity:
Publicity is the special form of public relations that involves news stories about an organization
or its products. It reaches mass audiences through the media. An organization provides material
for the publicity in the form of news releases, press conferences, and photographs.
Satisfaction of demand
The objective of the organization cannot be achieved only through creating the demand
for goods and services. If the customers are not satisfied by the goods and services supplied,
then they can"t be permanent customers. So, the satisfaction from the goods and services
should be more than the price paid.
Customers satisfaction depends on the product's performance and customers
expectation. When the specific expected utility of consumer is reduced from the total utility
than if the result is positive then it is called satisfaction of customers and if the result is
negative then it is called dissatisfaction of customer.
CONCEPT OF MARKETING
Evaluation of Marketing Concept
The term 'marketing concept' pertains to the fundamental premise of modern marketing.
This concept proposes that in order to satisfy the organizational objectives, an organization
should anticipate the needs and wants of consumers and satisfy these more effectively than
competitors. Marketing and marketing concepts are directly related.
Marketing Orientations
An orientation, in the marketing context, relates to a perception or attitude a firm holds
towards its product or service, essentially concerning consumers and end-users. There exist
several common orientations:
1. Product orientation
A firm employing a product orientation is mainly concerned with the quality of its own
product. A firm would also assume that as long as its product was of a high standard, people
would buy and consume the product.
2. Sales orientation
A firm using a sales orientation focuses primarily on the selling/promotion of a
particular product, and not determining new consumer desires as such. Consequently, this
entails simply selling an already existing product, and using promotion techniques to attain the
highest sales possible.
3. Production orientation
A firm focusing on a production orientation specializes in producing as much as
possible of a given product or service. Thus, this signifies a firm exploiting economies of scale,
until the minimum efficient scale is reached. A production orientation may be deployed when a

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high demand for a product or service exists, coupled with a good certainty that consumer tastes
do not rapidly alter.

4. Marketing orientation
The marketing orientation is perhaps the most common orientation used in
contemporary marketing. It involves a firm essentially basing its marketing plans around the
marketing concept, and thus supplying products to suit new consumer tastes.
5. Customer orientation
A firm in the market economy can survive by producing goods that persons are willing
and able to buy. Consequently, ascertaining consumer demand is vital for a firm's future
viability and even existence as a going concern.
6. Organizational orientation
In this sense, a firm's marketing department is often seen as of prime importance within
the functional level of an organization. Information from an organization's marketing
department would be used to guide the actions of other departments within the firm.
The production department would then start to manufacture the product, while the
marketing department would focus on the promotion, distribution, pricing, etc. of the product.
Additionally, a firm's finance department would be consulted, with respect to securing
appropriate funding for the development, production and promotion of the product.
Nature of Marketing
Nature of Marketing evolves from its multidisciplinary coverage of activities which is as
follow:
1. Dynamic Process: Marketing is an ongoing activity which does not stop at any step. After
finding customer’s needs and wants it needs to develop such products or services which can
satisfy these needs and after this there is need to advertising, promotion, distribution, etc the
process goes on.
2. Customer Oriented: Marketing is customer oriented. Marketing is the process of finding
needs and wants of customers and satisfying those needs profitably.
3. All Encompassing: Marketing is all encompassing, it is not a single process it includes
production planning, research, advertising, financial management, budgeting, selling, etc.
4. Creative: Marketing is creative in nature; it looks out for new ideas, views and activities and
solves problems or en-cash opportunities in a creative way.
5. Marketing is an Economic Function: Marketing embraces all the business activities involved
in getting goods and services, from the hands of producers into the hands of final consumers.
6. Marketing is a System of Interacting Business Activities: Marketing is that process through
which a business enterprise, institution, or organisation interacts with the customers and
stakeholders with the objective to earn profit, satisfy customers, and manage relationship. It is
the performance of business activities that direct the flow of goods and services from producer
to consumer or user.
7. Marketing is a Managerial function: According to managerial or systems approach -
"Marketing is the combination of activities designed to produce profit through ascertaining,
creating, stimulating, and satisfying the needs and/or wants of a selected segment of the
market."
Scope of Marketing
Marketing has a very wide scope it covers all the activities from conception of ideas to
realization of profits. Some of them as discussed as below:

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1. Product Planning: It includes the activities of product research, marketing research, market
segmentation, product development, determination of the attributes, quantity and quality of the
products.
2. Branding: Branding of products is adopted by many reputed enterprises to make their products
popular among their customer and for many other benefits. Marketing manager has to take
decision regarding the branding policy, procedures and implementation programs.
3. Packaging: Packaging is to provide a container or wrapper to the product for safety, attraction
and ease of use and transportation of the product.
4. Channels of Distribution: Decision regarding selection of most appropriate channel of
distribution like wholesaling, distribution and retailing is taken by the marketing manager and
sales manager.
5. Sales Management: Selling is a part of marketing. Marketing is concerned about all the selling
activities like customer identification, finding customer needs, persuading customer to buy
products, customer service, etc.
6. Advertising: Advertisement decisions like scope and time of advertisement, advertisement
message, selection of media, etc comes into marketing.
7. Finance: Marketing is also concerned about the finance, as for every marketing activity be it
packaging, advertising, sales force budget is fixed and all the activities have to be completed
within the limit of that budget.
8. After Sales services: Marketing covers after sales services given to customers, maintaining
good relationships with customers, attending their queries and solving their problems.
9. Study of Consumer Wants and Needs: Goods are produced to satisfy consumer wants.
Therefore, study is done to identify consumer needs and wants. These needs and wants
motivates consumer to purchase.
10. Study of Consumer behavior: Marketers perform study of consumer behaviour. Analysis of
buyer behaviour helps marketer in market segmentation and targeting.
11. Production planning and development: Product planning and development starts with the
generation of product idea and ends with the product development and commercialization.
Product planning includes everything from branding and packaging to product line expansion
and contraction.
12. Pricing Policies: Marketer has to determine pricing policies for their products. Pricing policies
differs from product to product. It depends on the level of competition, product life cycle,
marketing goals and objectives, etc.
13. Distribution: Study of distribution channel is important in marketing. For maximum sales and
profit goods are required to be distributed to the maximum consumers at minimum cost.
14. Promotion: Promotion includes personal selling, sales promotion, and advertising. Right
promotion mix is crucial in accomplishment of marketing goals.
15. Consumer Satisfaction: The product or service offered must satisfy consumer. Consumer
satisfaction is the major objective of marketing.
MARKETING MIX
The marketing mix, also known as the four P's of marketing, refers to the four key
elements of a marketing strategy: product, price, place and promotion. By paying attention to
the following four components of the marketing mix, a business can maximize its chances of a
product being recognized and bought by customers:
4Ps of Marketing

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MBA 2 Semester - MARKETING MANAGEMENT (Subject Code:201)

The management process through which goods and services move from concept to the
customer. It includes the coordination of four elements called the 4 P's of marketing:
(1) Identification, selection and development of a product,
(2) Determination of its price,
(3) Selection of a distribution channel to reach the customer's place and
(4) Development and implementation of a promotional strategy.

The Marketing mix contains there are 4 elements: product, price, place and promotion.
1. Product
The product aspects of marketing deal with the specifications of the actual goods or
services, and how it relates to the end-user's needs and wants. The scope of a product generally
includes supporting elements such as warranties, guarantees, and support.
2. Price
This refers to the process of setting a price for a product, including discounts. The price
need not be monetary; it can simply be what is exchanged for the product or services, e.g. time,
energy, or attention. Methods of setting prices optimally are in the domain of pricing science.
3. Place (or distribution)
This refers to how the product gets to the customer; for example, point-of-sale
placement or retailing. This third P has also sometimes been called Place, referring to the
channel by which a product or service is sold (e.g. online vs. retail), which geographic region or
industry, to which segment also referring to how the environment in which the product is sold
in can affect sales.
4. Promotion
This includes advertising, sales promotion, including promotional education, publicity,
and personal selling. Branding refers to the various methods of promoting the product, brand,
or company
MARKETING ENVIRONMENT
Some of these factors are controllable while some are uncontrollable and require
business operations to change accordingly. Firms must be well aware of its marketing

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MBA 2 Semester - MARKETING MANAGEMENT (Subject Code:201)

environment in which it is operating to overcome the negative impact the environment factors
are imposing on firm’s marketing activities. The marketing environment can be broadly
classified into three parts:

1. Internal Environment: The Internal Marketing Environment includes all the factors that are
within the organization and affects the overall business operations. These factors include labor,
inventory, company policy, logistics, budget, capital assets, etc. which are a part of the
organization and affects the marketing decision and its relationship with the customers. These
factors can be controlled by the firm.
2. Microenvironment: The Micro Marketing Environment includes all those factors that are
closely associated with the operations of the business and influences its functioning. The
microenvironment factors include customers, employees, suppliers, retailers & distributors,
shareholders, Competitors, Government and General Public. These factors are controllable to
some extent.

These factors are further elaborated:

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a) Customers: Every business revolves around fulfilling the customer’s needs and wants. Thus,
each marketing strategy is customer oriented that focuses on understanding the need of the
customers and offering the best product that fulfills their needs.
b) Employees: Employees are the main component of a business who contributes significantly to
its success. The quality of employees depends on the training and motivation sessions given to
them. Thus, Training & Development is crucial to impart marketing skills in an individual.
c) Suppliers: Suppliers are the persons from whom the material is purchased to make a finished
good and hence are very important for the organization. It is crucial to identify the suppliers
existing in the market and choose the best that fulfills the firm’s requirement.
d) Retailers & Distributors: The channel partners play an imperative role in determining the
success of marketing operations. Being in direct touch with customers they can give
suggestions about customer’s desires regarding a product and its services.
e) Competitors: Keeping a close watch on competitors enables a company to design its marketing
strategy according to the trend prevailing in the market.
f) Shareholders: Shareholders are the owners of the company, and every firm has an objective of
maximizing its shareholder’s wealth. Thus, marketing activities should be undertaken keeping
in mind the returns to shareholders.
g) Government: The Government departments make several policies viz. Pricing policy, credit
policy, education policy, housing policy, etc. that do have an influence on the marketing
strategies. A company has to keep track on these policies and make the marketing programs
accordingly.
h) General public: The business has some social responsibility towards the society in which it is
operating. Thus, all the marketing activities should be designed that result in increased welfare
of the society as a whole.
3. Macro Environment: The Macro Marketing Environment includes all those factors that exist
outside the organization and can not be controlled. These factors majorly include Social,
Economic, Technological Forces, Political and Legal Influences.

The detailed description of Macro factors is given below:

a) Political & Legal Factors: With the change in political parties, several changes are seen in the
market in terms of trade, taxes, and duties, codes and practices, market regulations, etc. So the
firm has to comply with all these changes and the violation of which could penalize its business
operations.
b) Economic Factors: Every business operates in the economy and is affected by the different
phases it is undergoing. In the case of recession, the marketing practices should be different as
what are followed during the inflation period.
c) Social Factors: since business operates in a society and has some responsibility towards it must
follow the marketing practices that do not harm the sentiments of people. Also, the companies

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are required to invest in the welfare of general people by constructing public conveniences,
parks, sponsoring education, etc.
d) Technological Factors: As technology is advancing day by day, the firms have to keep
themselves updated so that customers needs can be met with more precision. Therefore,
marketing environment plays a crucial role in the operations of a business and must be
reviewed on a regular basis to avoid any difficulty.
UNIT - II
MARKETING SEGMENTATIONS AND TARGETING
Market segmentation is the practice of dividing your target market into
approachable groups. Market segmentation creates subsets of a market based on
demographics, needs, priorities, common interests, and other psychographic or behavioural
criteria used to better understand the target audience.
By understanding your market segments, you can leverage this targeting in product,
sales, and marketing strategies. Market segments can power your product development
cycles by informing how you create product offerings for different segments like men vs.
women or high income vs. low income.
Read on to understand why segmentation is important for growth and the types of market
segmentation to use to maximize the benefits for your business.
Benefits of market segmentation
Companies who properly segment their market enjoy significant advantages. According
to a study by Bain & Company, 81% of executives found that segmentation was crucial for
growing profits. Bain also found that organizations with great market segmentation strategies
enjoyed a 10% higher profit than companies whose segmentation wasn’t as effective over a 5 -
year period.
Other benefits include:
1. Stronger marketing messages: You no longer have to be generic and vague – you can speak
directly to a specific group of people in ways they can relate to, because you understand their
characteristics, wants, and needs.
2. Targeted digital advertising: Market segmentation helps you understand and define your
audience’s characteristics, so you can direct your online marketing efforts to specific ages,
locations, buying habits, interests etc.
3. Developing effective marketing strategies: Knowing your target audience gives you a head
start about what methods, tactics and solutions they will be most responsive to.
4. Better response rates and lower acquisition costs: will result from creating your marketing
communications both in ad messaging and advanced targeting on digital platforms like
Facebook and Google using your segmentation.
5. Attracting the right customers: targeted, clear, and direct messaging attracts the people you
want to buy from you.
6. Increasing brand loyalty: when customers feel understood, uniquely well served, and trusting,
they are more likely to stick with your brand.
7. Differentiating your brand from the competition: More specific, personal messaging makes
your brand stand out.
8. Identifying niche markets: segmentation can uncover not only underserved markets, but also
new ways of serving existing markets – opportunities which can be used to grow your brand.
9. Staying on message: As segmentation is so linear, it’s easy to stay on track with your
marketing strategies, and not get distracted into less effective areas.

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10. Driving growth: You can encourage customers to buy from you again, or trade up from a
lower-priced product or service.
11. Enhanced profits: Different customers have different disposable incomes; prices can be
set according to how much they are willing to spend. Knowing this can ensure you don’t
oversell (or undersell) yourself.
12. Product development: You’ll be able to design new products and services with the needs of
your customers top of mind, and develop different products that cater to your different
customer base areas.
Companies like American Express, Mercedes Benz, and Best Buy have all used segmentation
strategies to increase sales, build better products, and engage better with their prospects and
customers.
The basics of segmentation in marketing
Understanding segmentation starts with learning about the various ways you can
segment your market as well as different types of market segmentation. There are four primary
categories of segmentation, illustrated below.
Psychographic Behavioral
Demographic (B2C) Firmographic (B2B)
(B2B/B2C) (B2B/B2C)
Classification based on
Classification based Classification based
behaviors like product
Definition on individual on company or
usage, technology
attributes organization attributes
laggards, etc.
Geography Gender Industry Location
Lifestyle Personality
Examples Education Level Number of
Traits Values Opinions
Income Level Employees Revenue
You are a smaller You are a smaller You want to target
You want to target
Decision business or you are business or you are customers based
customers based on
Criteria running your first running your first on purchase
values or lifestyle<
project project< behaviours
Difficulty Simpler Simpler More advanced More advanced
Types of market segmentation
With segmentation and targeting, you want to understand how your market will respond
in a given situation, like what causes people to purchase your products. In many cases, a
predictive model may be incorporated into the study so that you can group individuals within
identified segments based on specific answers to survey questions.
Demographic segmentation
Demographic segmentation sorts a market by elements such as age, education,
household income, marital status, family size, race, gender, occupation, and nationality. The
demographic approach is one of the simplest and most commonly used types of market
segmentation because the products and services we buy, how we use those products, and how
much we are willing to spend on them is most often based on demographic factors. It’s also
seen as a simple method of predicting future behavior, because target audiences with similar
characteristics often behave in similar ways.
To start demographic segmentation
Demographic segmentation is often the easiest because the information is the most
readily available. You can send surveys directly to customers to determine their demographic

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data, or use readily available third-party data such as government census data to gather further
information.
Geographic segmentation
Geographic segmentation can be a subset of demographic segmentation, although it can
also be a unique type of market segmentation in its own right. As its name suggests, it creates
different target customer groups based on geographical boundaries. Because potential
customers have needs, preferences, and interests that differ according to their geographies,
understanding the climates and geographic regions of customer groups can help determine
where to sell and advertise, as well as where to expand your business.
To start geographic segmentation
Geographic segmentation data again can be solicited from customers through surveys or
available third-party market research data, or can be sourced from operational data such as IP
addresses for website visitors.
Firmographic segmentation
Firmographic segmentation is similar to demographic segmentation, except that
demographics look at individuals while firmographics look at organisations. Firmographic
segmentation would consider things like company size, number of employees and would
illustrate how addressing a small business would differ from addressing an enterprise
corporation.
To start firmographic segmentation
Firmographic segmentation data can be found in public listings for companies and
information that the business makes available, as well as trade publications. Again, surveying
existing and potential customers can help to build out this data.
Behavioural segmentation
Behavioural Segmentation divides markets by behaviours and decision-making patterns
such as purchase, consumption, lifestyle, and usage. For instance, younger buyers may tend to
purchase bottled body wash, while older consumer groups may lean towards soap bars.
Segmenting markets based on purchase behaviours enables marketers to develop a more
targeted approach, because you can focus on what you know they are looking for, and are
therefore more likely to buy.
To start behavioural segmentation
Of all the types of market segmentation, behavioural segmentation is likely best started
with the information you have on an existing customer base. Though it can be bolstered by
third party market research data, the information you already have on customer purchase and
usage behaviour will be the best predictor of future behaviour.
Psychographic segmentation
Psychographic segmentation considers the psychological aspects of consumer behaviour
by dividing markets according to lifestyle, personality traits, values, opinions, and interests of
consumers. Large markets like the fitness market use psychographic segmentation when they
sort their customers into categories of people who care about healthy living and exercise.
To start psychographic segmentation
Psychographic segmentation relies on data provided by the consumers themselves.
Though market research might provide insights on what particular segments are most likely to
believe or prefer, psychographic segmentation is best completed with information direct from
the source. You can use survey questions with a qualitative focus to help draw out insights in

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the customers’ own voice. On-demand webinar: How to drive product design and profits with
customer segmentation
To get started with segmentation
There are five primary steps to all marketing segmentation strategies:
1. Define your target market: Is there a need for your products and services? Is the market large
or small? Where does your brand sit in the current marketplace compared to your competitors?
2. Segment your market: Decide which of the five criteria you want to use to segment your
market: demographic, firmographic, psychographic, geographic, or behavioural. You don’t
need to stick to just one – in fact, most brands use a combination – so experiment with each one
to figure out which combination works best for your needs.
3. Understand your market: You do this by conducting preliminary research surveys, focus
groups, polls, etc. Ask questions that relate to the segments you have chosen, and use a
combination of quantitative (tickable/selectable boxes) and qualitative (open-ended for open
text responses) questions.
4. Create your customer segments: Analyse the responses from your research to highlight which
customer segments are most relevant to your brand.
5. Test your marketing strategy: Once you have interpreted your responses, test your findings
by creating targeted marketing, advertising campaigns and more for your target market, using
conversion tracking to see how effective it is. And keep testing. If uptake is disappointing,
relook at your segments or your research methods and make appropriate changes.
Market segmentation strategy
Why should market segmentation be considered a strategy? A strategy is a considered
plan that takes you from point A to point B in an effective and useful way. The market
segmentation process is similar, as there will be times you need to revisit your market
segments, such as:
In times of rapid change: A great example is how the Covid-19 pandemic forced a lot of
businesses to rethink how they sell to customers. Businesses with physical stores looked at
online ordering, while restaurant owners considered using food delivery services.
If your customers change, your market segmentation should as well, so you can understand
clearly what your new customers need and want from you.
On a yearly basis: Market segments can change year over year as customers are affected by
external factors that could alter their behaviour and responses.
For example, natural disasters caused by global warming may impact whether a family chooses
to stay living in an area prone to more of these events. On a larger scale, if your target customer
segment moves away from one of your sales regions, you may want to consider re-focussing
your sales activities in more populated areas.
At periodic times during the year: If you’ve explored your market and created market
segments at one time of the year, the same market segments may have different characteristics
in a different season. Seasonal segmentation may be necessary for better targeting.
For example, winter has several holidays, with Christmas being a huge influence on families.
This holiday impacts your market segments’ buying habits, how they’ll behave (spending more
than normal at this time than any other) and where they will travel (back home for the
holidays). Knowing this information can help you predict and prepare for this period.
When considering updating your market segmentation strategy, consider these three areas:
1. Acknowledge what has changed: Find out what has happened between one time period and
another, and what have been the driving forces for that change. By understanding the reasons

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why your market is different, you can make key decisions on whether you want to change your
approach or stay the course.
2. Don’t wait to start planning: Businesses are always adapting to long-term trends, so
refreshing market segmentation research puts you in a proactive place to tackle these changes
head-on. Once you have your market segments, a good idea is to consider the long-term
complications or risks associated with each segment, and forward-plan some time to discuss
problem-solving if those issues arise.
3. Go from “what” to “why”: Why did those driving forces come about? Why are there risks
with your target market? At Qualtrics, we partner with companies to understand the different
aspects of target markets that drive or slow success. You’ll have the internal data to understand
what’s happening; we help unleash insight into why with advanced modelling techniques. This
helps you get smart market segmentation that is predictive and actionable, making it easier for
future research and long-term segment reporting.
Segmentation and targeting
If you have your entire market separated into different customer segments, then you
have defined them by set criteria, like demographics, needs, priorities, common interests,
or behavioural preferences.
With this information, you can target your products and services toward these market
segments, making marketing messages and collateral that will resonate with that particular
segment’s criteria.
Customer needs research
When you know a lot about your customers, you can understand where your business is
connecting well with them and where there can be improvements.
Market segmentation can help with customer needs research (also known as habits and
practices research) to deliver information about customer needs, preferences, and product or
service usage. This helps you identify and understand gaps in your offerings that can be
scheduled for development or follow-up.
Product development
If the product or service you’ve developed doesn’t solve a stated problem of your target
audience or isn’t useful, then that product will have difficulty selling. When you know what
each of your market segments cares about an/d how they live their lives, it’s easier to know
what products will enrich or enhance their day-to-day activities.
Use market segmentation to understand your customers clearly, so that you can save time and
money developing products and services that your customers will want to purchase.
Campaign optimization
Marketing and content teams will value having detailed information for each customer
segment, as this allows them to personalize their campaigns and strategies at scale. This may
lead to variations in messaging that they know will connect better with specific audiences,
making their campaign results more effective.
When their marketing campaigns are combined with strong calls to action targeted to the
specific segment, they will be a powerful tool that drives your target market segments towards
your sales channels.
Ensuring effective segments
After you determine your segments, you want to ensure they’ll be useful. A good
segmentation analysis should pass the following tests:

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 Measurable: Measurable means that your segmentation variables are directly related to
purchasing a product. You should be able to calculate or estimate how much your segment will
spend on your product. For example, one of your segments may be made up of people who are
more likely to shop during a promotion or sale.
 Accessible: Understanding your customers and being able to reach them are two different
things. Your segments’ characteristics and behaviours should help you identify the best way to
meet them. For example, you may find that a key segment is resistant to technology and relies
on newspaper or radio ads to hear about store promotions, while another segment is best
reached on your mobile app. One of your segments might be a male retiree who is less likely to
use a mobile app or read email, but responds well to printed ads.
 Substantial: The market segment must have the ability to purchase. For example, if you are a
high-end retailer, your store visitors may want to purchase your goods but realistically can’t
afford them. Make sure an identified segment is not just interested in you, but can be expected
to purchase from you. In this instance, your market might include environmental enthusiasts
who are willing to pay a premium for eco-friendly products, leisurely retirees who can afford
your goods, and successful entrepreneurs who want to show off their wealth.
 Actionable: The market segment must produce the differential response when exposed to the
market offering. This means that each of your segments must be different and unique from each
other. Let’s say that your segmentation reveals that people who love their pets and people who
care about the environment have the same purchasing habits. Rather than having two separate
segments, you should consider grouping both together in a single segment. 
Market segmentation is not an exact science. As you go through the process, you may realise
that segmenting based on behaviours doesn’t give you actionable segments, but behavioural
segmentation does. You’ll want to iterate on your findings to ensure you’ve found the best fit
for the needs of your marketing, sales and product organisations.
MARKETING POSITIONING
Market positioning, also called brand positioning or product positioning, is a marketing
strategy focused on building a unique identity that differentiates a company from its
competitors in consumers' minds. The goal of a market positioning strategy is to make the
target market view the brand in a distinct way and to clearly communicate how the brand has a
competitive advantage in the market.
For example, a car company might want their customers to perceive their cars as a high-
end luxury status symbol. This new positioning might allow them to charge higher prices than
their competitors. Alternatively, a fast-food restaurant may want to be perceived as cheap so
that customers will choose them for their low cost.
Determining Market Positioning
Companies can use algorithms or models to try to evaluate their current position in the
current market and determine how they can reposition to capture new markets. For example,
perceptual mapping is a type of positioning map that displays consumer’s perceptions of brands
and products in relation to others based on the results of data gathered from focus groups. This
data can help inform a company’s positioning statement or brand positioning strategy for
finding their unique features that define them as a company.
Marketing Positioning Important
Market positioning has many benefits to companies that want to reach their target audience
and have an advantage over their competitors. The following are just a few of the advantages of
using a competitive positioning strategy in your marketing plan:

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 It creates market differentiation. A great market position promotes why your brand is
unique, helping you to capture a larger market share from your competitors. By successfully
conveying that your product has more desirable features or better addresses a customers’ needs,
you are creating buzz around your brand.
 It drives marketing efforts. Without a clear and convincing market position, you cannot
effectively market your product. You won’t be able to show customers what makes your brand
stand out, and this is especially troublesome if you are in a crowded industry. However, once
you nail down your place in the market, you can tailor your message to your target
demographic. 
 It increases customer loyalty. Once consumers trust your brand name and your products,
they're likely to become repeat customers. In addition, strong market positioning incentivizes
customers to skip the product research process and go directly to your brand to fulfill their
needs.
 It prioritizes value over price. Price becomes less of an obstacle when brands can show why
they have a higher value than their competitors. Consumers willingly pay more for items they
know provide a better value than a cheaper alternative. 
Types of Market Positioning Strategies
There many types of market positioning strategies a company can use to find their unique
position in the marketplace compared to their competitors. Consider the following strategic
marketing tactics that can give your company a strong value proposition and an effective
market positioning strategy.
1. 1. Availability: Sometimes the most important product characteristic is sheer availability. A
product or service will have an inherent advantage when it is available in a specific
geographical area, on specific days of the week, or at specific times of day that competitor
products are not. By simply being available when a customer needs it, a product can leapfrog
over the hurdles of marketing and price competitions.
2. 2. Durability: While consumers might gravitate toward the lowest-priced items, you can use
durability as a selling point. For example, if someone can own your product for a longer time
without having to replace it, your company can make the case that your product is more cost -
effective in the long run because of its durability. Essentially, you are offering them years of
hassle-free ownership.
3. 3. Messaging: To stand out among nearly identical products, aim for clever messaging and
product positioning based on careful market research. A funny or sentimental ad can connect
your audience to your product and help them choose you over competitors that offer items that
are functionally the same.
4. 4. Novelty: Some customers see value in new products that represent something different or
innovative. A product that is functionally the same as many others but designed in a fresh,
innovative way may also attract new customers.
5. 5. Price point: Low prices can help win a wider market share as the product falls into more
potential customers' price range. Some consumers might automatically think that a higher price
means higher quality, so if you can also promote the convenience and accessibility of your
product, it can allow you to gain a competitive market share.
IDENTIFICATION OF MARKET SEGMENTS
Market for product is big and diverse making it difficult for companies to be able to
satisfy every customer. Companies need to identify a certain set of customer within a market

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and work towards satisfying them. This set of identification is market segment. Companies
further need to understand the intricacy of how this segment behaves and operates.
An approach known as target marketing is gaining prominence where companies
identify the market segment on similar needs and wants, select one of the market segments and
then focus in developing products and marketing program.
Earlier business operation was in the form of mass marketing. In mass marketing
companies produce a product in large quantities and serve this product to as many consumers
as possible. This made sense as markets were developing and not much variety was on offering.
Now product offerings have under gone radical change thanks to advertising and
communication reach. Therefore, companies look forward to marketing at segment, niches,
local and individual level.
In segment marketing companies identify consumer with similar needs and wants. For
example, an airline is looking forward to providing no frills’ connectivity between metro cities
on US east coast compare. This segment is within airline industry but needs of customer is
different. T target audience is low budget travellers. However, customers within the segment
look for different attributes, for example, lunch or beverages as part of travel. Here companies
can offer this by charging the customer.
In niche marketing, companies target limited customer set. A niche market is worth
exploring where customers are willing to pay a premium for product, entry barriers are high
and market has growth potential. In local marketing, customers are local neighborhood, trading
stores, etc.
For example, many banks prefer local marketing for better understanding of client and
provide them right type of service. In individual marketing, companies look forward to
satisfying needs and wants of individual customer. Internet is facilitating the process of
individual marketing, where in customer log on to the site and creates products from available
options. This process is not feasible for high technology products like automobiles.
The market segmentation task has to follow a scientific process.
1. The first task is to group customer according to product and service they want.
2. The second task is to analyze customer by summarizing demographic, lifestyle and usage
pattern, which helps in the definition of market segment.
3. The third task is due diligence of the market for growth potential, competition and other
factors.
4. The fourth task is to profitability of market segment.
5. The fifth task is to undertake positioning activity for pricing and marketing programs.
6. The sixth task is to explore different positioning and marketing strategies to explore the market
to its full potential.
There are various factors, which affect segmentation in a consumer market. Geographic
is one such factor, where a country is segmented on basis region, city, urban, rural and climate.
Demographically market is segmented on the basis of age, family size, gender, household
income, life stage, occupation, education, religion, race, generation and social class.
Further, segmentation can be done on the basis of lifestyle and personality traits. On an
individual level market can be segmented on the basis of attitude, belief and perception of
products, product awareness and usage pattern.
There are various factors, which affect segmentation in the business market.
Demographic is one such factor, which consists of type of industry, size of company and

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geographical location of the company. Operational segmentation is on the technology class,

customer consumption and customer requirements.
Purchasing methodology includes segmentation based on purchase policy, purchase
department structure, relation with companies and market positioning of companies. The order
Requirements lets segmentation be based on nature of requirement and size of order.
Personality trait segmentation looks at loyalty and risk profile.
Companies have to finalize target market in which it wants to operate. After which
segments have to be identified based of various factors as discussed. Once segments are
identified, in-depth evaluation analysis has to be done come for a conclusion, whether to target
one or several segments.
SEGMENTING CONSUMER MARKETING
Consumer markets can be segmented using a multitude of variables from four main
categories:
 Demographic: age, years of education, income, family size, gender, race, marital status
 Geographic: Rural/urban, climate, radius, neighborhood, nearby resources and amenities
 Psychographic: Activities, interests and opinions, personality, attitudes, values
 Behavioral: Purchasing history, usage habits, brand loyalty, purchase reasoning
Market research firms use a combination of these variables to create proprietary market
segments, which are usually only available with a subscription. While the sources throughout
this guide cover a wide range of consumer segments, the subsections on this page highlight a
sample of sources that look at consumers via the individual market segment categories
(demographic, geographic, psychographic, and behavioral).
To succeed in your business, you have to have a clear understanding of what your customers
need. However, not all of your customers are the same. They may differ in age or gender or
have vastly different values and interests. They may even use your products to satisfy
different requirements. To appeal to your customers effectively, segment your target market
so you can customize how you engage with them.
Demographic Segmentation
The most common way to identify a consumer market is by demographic segmentation,
which refers to the criteria most businesses use to understand how groups of their target
market are different from one another. According to Net MBA, the criteria for demographic
segmentation includes:
 Gender 
 Age
 Family status
 Sexual orientation
 Occupation
 Income
 Education
 Religion
 Ethnicity
 Nationality
It's essential to segment your target market by demographics because these criteria
affect their individual needs. For example, a man in his early 30s has different preferences
than a woman in her late 60s. If your business sells shoes, you cannot appeal to both
demographic segments in the same way. The young man may be interested in athletic name-

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brand shoes, while the older woman may want comfortable sandals with arch support. The
marketing you use to reach both demographic segments needs to take their requirements into
account.
In some cases, people from different demographics may have the same needs, which
is why it's critical to understand your consumer on a granular level. For example, the
customers of a bakery may differ in religion, nationality, education and occupation, but they
may all desire the same baked goods and react the same way to the marketing.
Geographic Segmentation
Another way to segment the consumer market is geographically. Sometimes, this is seen
as a subcategory of demographic segmentation. Many businesses and marketers treat this
category as major because customers’ geographic criteria can significantly affect their needs
as consumers. Geographic segmentation elements include:
 Region or area, such as country, state, province, county, town or city
 Size, such as population or population density
 Climate, such as weather patterns
Consumers from different geographic areas have varying needs. An online retailer
who sells swimwear to customers across the United States and Canada may need to vary the
marketing to those consumers who live in colder climates. Many parts of Canada and the
northern United States have a beach season that only lasts for a few months. As a result, the
retailer needs to focus promotional efforts during this time in those areas, while in the
southern United States, they can run year-round promotions.
Similarly, a corner store that operates in a rural area with a sparse population uses
different marketing and sales tactics than a corner store on a busy metropolitan street with a
high population density. In these market segments examples, businesses need to understand
how geographic segmentation criteria affect the needs of their consumers.
Psychographic Segmentation
While demographic and geographic segmentation look at many tangible criteria,
psychographic segmentation is about how consumers live their lives. Some of these qualities
are intangible and difficult to research. Conduct customer surveys to learn more about their
psychographic attributes, which include:
 Values, such as what they believe to be important to them, including family, community,
money or success
 Attitudes and opinions, such as how they feel about a political party or toward a key social
issue
 Interests, such as what kinds of movies they watch or what their hobbies are
 Activities, such as whether they play a sport or instrument or enjoy a cooking a particular kind
of cuisine
A consumer’s psychographic qualities affect which products and services they buy. For
example, consumers who strongly value environmental sustainability may look for products
that are manufactured using recycled materials. They may choose to buy only from
businesses with a formal program for reducing their carbon footprint. Some consumers only
support companies that are in line with their political or social beliefs.
For other consumers, their interests and activities determine the types of products and
services they buy. For example, an avid basketball player may want to buy basketball shoes
and jerseys, while a musician may be interested in specific instruments. By understanding a

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segment's values, attitudes, interests and activities, businesses can market the right products
to them in the right way.
Behavioral Segmentation
While demographic, geographic and psychographic traits include specific qualities
about your customers and their needs, behavioral segmentation is about how your customers
feel about your products. According to Net MBA, this is a good starting point for market
segmentation because it is directly related to your business.
Behavioral segmentation includes:
 Benefits your consumers are looking for from the product
 Whether they have previously bought the product
 How often they need the product or how often they use the product
 How ready they are to buy the product right now 
 Whether they feel loyal toward your brand
 When they buy the product, such as on holidays or for specific milestones
The way you market to a loyal customer is different from how you market to someone
who knows nothing about your business. Use behavioral segmentation to understand what
your consumers need and what they think of your business. If you approach loyal customers
with basic information about your products, they may feel insulted you think they don’t know
it already. Similarly, if you don't begin by talking about the benefits of your product to a new
prospect, they will not know what makes your solution better than a competitor's.
Creating Effective Consumer Market Segments
There are endless ways to segment your consumer markets, so how do you know which
segments to use? Segmenting your target market ineffectively may mean your marketing
message does not resonate with your audience. Qualtrics suggests doing a market segment
analysis to see if you have the right criteria. Consider these five elements when segmenting
your market:
 Is your segment measurable: You need to be able to determine how much your consumer
market segment will spend on your products and when they will buy. If this is something you
cannot estimate, it won't be easy to develop sales and marketing plans.
 Is your segment accessible: Segments of the consumer market you're targeting should be easy
for your business to reach. For example, if you have a potential market segment that does not
use technology but all of your company's marketing is currently done online, this may not be
the best segment for you to target.
 Is your segment substantial: Your market segment needs to be a sufficient size to be worth it
for your business to cater to them. If it is too small, you won't see the kind of return you need.
 Does your segment have unique needs: If your market segment has the same requirements as
another market segment, you don't need to separate them. They need to be diverse enough to
require tailored marketing.
 Is your segment durable: If your consumer market segment is volatile and changes frequently,
you may not be able to keep up with their needs.
SELECTING TARGET MARKETS
Target market represents a group of individuals who have similar needs, perceptions
and interests. They show inclination towards similar brands and respond equally to market
fluctuations.

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Individuals who think on the same lines and have similar preferences form the target
audience. Target market includes individuals who have almost similar expectations from the
organizations or marketers.
Obese individuals all across the globe look forward to cutting down their calorie intake.
Marketers understood their need and came up with Kellogg’s K Special which promises to
reduce weight in just two weeks. The target market for Kellogg’s K Special diet would include
obese individuals.
Individuals who sweat more would be more interested in buying perfumes and
deodorants with a strong and lasting fragrance.
To select the Target Market
The essential for the organizations or marketers to identify the set of people whom they
want to target. Marketers must understand the needs and expectations of the individuals to
create its target market.
The target audience must have similar needs, interests and expectations.
Similar products and brands should entice the individuals comprising the target market.
Same taglines and advertisements attract the attention of the target audience and prompt them
to buy.
To select a target market, it is essential for the organizations to study the following factors:
 Understand the lifestyle of the consumers
 Age group of the individuals
 Income of the consumers
 Spending capacity of the consumers
 Education and Profession of the people
 Gender
 Mentality and thought process of the consumers
 Social Status
 Kind of environment individuals are exposed to
Always remember you would never be successful if you try to impress everyone. Be
specific.
Identify individuals who show similar characteristics. Put them in one group to create target
market within a broad market.
Let us go through the below example:
Some would use it against body odour
Some would use it to fight germs and infections
Some for a fair and spotless skin
In the above case the product is same but the needs of the individuals are different. Consumers
have different reasons as to why they use soaps.
Target Audience 1
Against body odour - Soaps with a strong and lasting fragrance.
 Marketing professionals
 Sales Representatives
 People exposed to sun for a longer duration
 Individuals travelling by public transport
Target Audience 2
To fight germs and infections - Soaps with medicinal properties
 Individuals working in hospitals, nursing homes and research centres

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 Individuals working in unhygienic conditions

Target Audience 3
For a whiter skin - Soaps which improve the skin tone of individuals.
 Teenagers
 College students
Target Audience 4
For a younger looking skin - Soaps which help get rid of wrinkles and fine lines of ageing
 Individuals between age group 30 – 50 years or above
Individuals with identical requirements form the target audience. A 20 year old girl can’t be
targeted along with someone who is 50 years old.
Online matrimony sites target young individuals aspiring to get married. The organizations
strive hard to fulfil their expectations by providing suitable matches.
Other important factors like climatic conditions and geographical locations also play an
important role in deciding the target market.
Deodorants and perfumes sell like hot cakes in humid and warm places.
Target Market for Beverages
Bournvita, Complan, Maltova, Boost - Growing kids
Soft drinks (Pepsi, Coke) – Teenagers
Fruit Juice (Real, Tropicana) - Health conscious individuals
Energy Drinks (Red bull) - Professionals, Office goers
SEGMENTATION AND TARGETING AS A BASIS FOR STRATEGY
FORMULATION
Difference Between Segmentation and Targeting

In segmentation, the entire market of consumers is broken down into a number of

groups. These groups are segments that comprise consumers with similar characteristics. Of all
these segments the company chooses one segment to focus on, to offer their products. This is
the process of targeting.
We all know that, when all the consumers of the product are taken together, it makes up the
market for that product. But this is also true all the consumers are not the same. Therefore, the
consumers may differ in:
 Needs

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 Motives
 Characteristics
 Buying habits.
With this, we can conclude that the market for the product is heterogeneous in nature. So,
the marketers can divide the entire market into submarkets. These sub-markets are
homogeneous.
In this write-up, we will discuss the difference between segmentation and targeting.
Content: Segmentation Vs Targeting
1. Comparison Chart
2. Definition
3. Key Differences
4. Bases of Segmentation
5. Conclusion
Comparison Chart
BASIS FOR
SEGMENTATION TARGETING
COMPARISON
Meaning Segmentation is the process of Targeting is the process of concentrating
classifying the market into several on a particular segment of the market to
approachable groups. offer products, of all the segments of the
market.
Concerned with Dividing up the market, by grouping Choosing the right segment considering
the customers with similar needs. different factors.
Bases Need, Interest, Marital Status, Sex, Attractiveness of the segment
Buying Behavior, etc.
Stage of Target First Second
marketing
Definition of Segmentation
Segmentation implies splitting the heterogeneous market into relatively distinct
homogeneous sub-market. To divide the market, specific criteria form the base.
These groups possess consumers, having common characteristics. The characteristics include
age, income, sex, personality traits, or behavior. It aims at determining the consumer groups
whose needs can be fulfilled with one common product. Above all, it ensures the concentration
of the efforts of the firm in an effective and economical manner.

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This helps in tapping the market in a better manner. Besides, it also helps in optimizing
products and advertising them to consumer groups.
Market Segment
Market Segment is that part of the entire market, wherein the consumers have one or
more things in common. And due to this reason, their product needs are the same.
It is a strategic marketing tool. This is used to determine the market and also to allocate
resources.
Important: The concept of segmentation was coined by Smith in the year 1957.
Assumptions of Market Segmentation
1. All the buyers are not the same.
2. Identification of consumers with similar characteristics. These can be background, need,
values, behaviors, and so forth.
3. There will be small sub-groups and often homogeneous in nature, as compared to the market.
4. It is easier for the marketer to satisfy a small group with similar customers than a large group
with diverse customers.
Requirements of Effective Segmentation

 Measurability: The segments have to be measurable. In other words, the quantification of the
segment should be possible so that the size can be estimated.
 Accessibility: Segmentation should be done in a manner that the marketer may get through and
serve the segments. 
 Viability: Segments should be cost-effective as well as profitable to the marketer.
 Intensity: Attractiveness of segment is also ascertained by its intensity with regard to inter-firm
rivalry. A higher intensity indicates more competition between firms. Therefore, it makes the
segment unattractive for the marketer.
Definition of Targeting
After the creation of different segments, managers decide which segment is best to
target. For the purpose of targeting the company takes into account its ultimate objectives. In
practice, managers go for that segment that is highly profitable. But the firm can also aim for
that segment that is less likely to attract competitors.

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In other words, targeting is the process of choosing one segment, of all the segments, to aim
for. There are three strategic options are available to the marketers which are:
1. Concentrated Marketing: In this, the company focuses on a single segment at a time.
Another term used for this is niche marketing. In this, the marketer attempts to become
the blue-chip within that segment.
2. Differentiated Marketing: In this strategy, the marketer concentrates on more than one
segment at a time. Also, the company offers a differentiated marketing mix for each segment.
The alternative name of this is multi-segmented marketing.
3. Undifferentiated Marketing: In this, the marketer uses a ‘scattergun’ approach. Therefore, the
marketers offer one basic product that would serve the needs of people belonging to different
age groups and lifestyles.
The marketer’s decision about the adoption of strategy depends on these factors:
 Company’s Resources
 Product features and benefits
 Characteristics of the segment 
Targeting Strategies

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Standardization:
Here, the firm offers a similar product to different segments. For this, the same communication,
distribution, and pricing strategy are used.
Differentiation:
In this, the company differentiates its products to match the needs and expectations of different
segments of the market.
Focus:
It is a hybrid strategy. That is to say, it combines both standardization and differentiation
strategies. Also, the ‘core strategy’ remains unchanged, but differentiation is implemented to
fulfill the requirements of specific consumers.
Key Differences Between Segmentation and Targeting
The points listed below explain the difference between segmentation and targeting:
1. Segmentation is the practice of classifying the broad customer base into several sub-groups. It
may comprise both existing customers and prospective ones. In contrast, targeting is the
practice of evaluating the attractiveness of different segments and choosing a segment to enter.
2. Segmentation is concerned with breaking down the heterogeneous market into sub-units. These
sub-units have consumers with homogeneous needs. However, in targeting, the firm targets a
particular segment considering various factors.
3. To divide the target audience into segments the marketers create groups. These groups rest on
shared characteristics like common needs, interests, lifestyles, or profiles. As against, the
attractiveness of the segment is the basis of targeting.
4. Segmentation is the first stage of target marketing. Whereas targeting is the second stage.
Bases for Market Segmentation
There are two approaches for segmentation of the market:
People-Oriented Approach
Here the segmentation relies on consumer characteristics. The bases can be:

 Geographic Segmentation: In this, the segmentation of the consumer is location-wise. The

division is as per Country, State, Region (Urban or rural), Cities (Tier-I, Tier-II, and Tier-III).

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This is because the climate, needs, preferences, and wants of people living in different places
vary. With that in mind, the company divides its market into these segments geographically:
o Local Market
o Urban Market
o Rural Market
o Regional Market
o Global Market
 Demographic Segmentation: Demography is concerned with the population of the country.
Here, many factors influence the needs, preferences, and usage rate of the consumers. The
demographic classification of the consumer can be done on the basis of: 
o Age
o Sex
o Family Size
o Family Life Cycle
o Income
o Education
o Castes and Social Classes
o Occupation
o Nationality
o Religion
 Psychographic Segmentation: Psychographic mean intrinsic virtues of an individual. These
characteristics form the basis of market segmentation. It may cover the following bases:
o Social Class
o Lifestyle
o Personality
o Buying Motives
Product-Oriented Approach
Here, market segmentation depends on product characteristics. Also known as consumer
response segmentation or behavioral segmentation. The bases are:
 Occasions: There are certain products that consumers buy on specific occasions. Even, the
company advertises its products by associating its use with that occasion. These occasions
increase demand for that product. The products can be clothing, jewelry, firecrackers, greeting
cards, and so forth
 Benefits: Benefits derived by consumers from products are also a basis of segmentation. It can
be quality, services, economy, ease of use, safety, durability, warranty, and so forth.
 User Status: User status also acts as a basis for dividing the market. They are:
o Non-users
o Ex-users
o Prospective users
o First-time buyers
o Occasional users
o Regular users.
Here, the company aims at converting all the users into regular users. And to do so companies
make use of different marketing techniques.
 Usage Rate: The usage rate of different consumers varies. They include: 
o Light users: Users are more in number but they buy a very little quantity.

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o Medium users: Users are more in number and consume more quantity as compared to the light
users.
o Heavy users: Users are few in number but consume a very high quantity of that product.
 Loyalty Pattern: All the consumers are not the same in terms of loyalty. This means, there is a
varying degree of loyalty of consumers towards the brand. It is reflected through their buying
patterns. They are:
o Hard-core loyal
o Soft loyal
o Shifting loyal
o Brand switchers.
The company’s marketing efforts aim for increasing the number of hard-core consumers.
 Buyer Readiness Stage: The stages of readiness of consumers are different. They are:
o Unaware
o Aware
o Informed
o Interested
o Desirous
o Intended
 Attitude towards products: The attitude of the buyers may differ greatly. This acts as a basis
for segmenting the market. The buyers include: 
o Enthusiastic
o Positive
o Indifferent
o Negative
o Hostile.
Conclusion
Above all, market segmentation deals with fragmenting consumers based on their needs. But,
targeting is all about selecting a segment of all the segments, to aim for.

DEVELOPING AND COMMUNICATING A POSITIONING STRATEGY.

A good positioning strategy is compellingly tied to an idea your key audiences already
hold. It takes what they already know to be true in the world, and turns that truth to your
advantage. This not only creates a competitive advantage, but it gives your company a clear
direction on who you are, what you do, and why you are valuable. It increases internal morale.
It provides a platform for all external marketing and communications It guides all that the
company says and does.
Think about Volvo, they took it upon themselves to be the leaders in safety – a concept
that established them as a major global automotive brand with a real clear reason for being. Or
Avis, who celebrated their #2 ranking in the marketplace as a badge of honor, because it meant
“we try harder.”
Origins of Positioning
It’s impossible to talk about positioning without giving major credit to Jack Trout and
Al Ries, who developed and introduced the concept of positioning in the early 1970’s. Their
highly celebrated first book was called, Positioning: The Battle for your mind. The book has
been re-released in multiple editions over the years.

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Develop a Positioning Strategy in 4 Steps

Step 1: Differentiation.
Differentiation is clearly an important marketing and communication concept. If your
company or product is not differentiated, there is no reason to choose it. You are just a
commodity stuck with competing on price. You must stand apart from your competitors to get
noticed at all. you can differentiate in two main ways – to create a preference, or command a
premium. Think of the airlines – they are all essentially selling the same service, which is
transported from one place to another. Southwest and Emirates both fly Boeing aircraft from
one destination to the other, yet each is highly differentiated. Southwest has decided to create a
preference by offering low cost, convenient flights and eliminating a lot of the perks (even
peanuts!). Emirates, on the other hand, commands a premium price by offering a five-star hotel
experience in the sky.
Step 2: Relevance.
Differentiation alone is not enough. You must be differentiated in a way that is
compelling to your audience. For example, you could put your fine wine in yellow plastic
squeeze bottles. That would be differentiating, but not relevant or compelling to wine
connoisseurs. This is where positioning comes in. It begins with finding unfulfilled desires and
focusing on them. For example, Miller Beer found that big beer drinkers felt too full too early
in their drinking, so it positioned Miller Lite as “everything you’ve always wanted in a great
beer, and less”. It quickly became the 2nd largest selling beer in the U.S.
Step 3: Coherence.
Your positioning strategy is not just a slogan. It’s how you create and deliver your
product or service. It’s how you address and engage your audiences. Once you’ve made a
decision on how you will differentiate in meaningful ways, you need to articulate and plan how
that unique value will be delivered to all. BMW’s position as the “ultimate driving machine” is
essentially a claim to superior engineering, resulting in a superior experience. To succeed in
defending this position, they needed to do more than create great cars. They had to show up in
places where extra driving is celebrated and appeal to people for whom a car is more than a
way to get around – it’s a symbol of values and status.
Step 4: Reputation.
Successful positioning strategy takes commitment, investment and repetition. You need
to set and fulfill expectations over and over again to earn the reputation that your strategy
suggests. Starbucks didn’t immediately become the “third space” that people frequent for
personal and professional respite. They worked hard and invested heavily to become the
world’s largest and favorite coffeehouse. Similarly, one of the world’s best-known brands,
Nike, invested many decades of heavy advertising and product innovation to become known as
the title holders to athletic performance and victory, especially considering they had
competitors like Adidas who were trying to own a very similar position. In the end, both owned
athleticisms, but Nike owned the winner’s attitude.

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UNIT –III
PRODUCT MANAGEMENT
Product management is an organizational function that guides every step of a product’s
lifecycle - from development to positioning and pricing - by focusing on the product and its
customers first and foremost. To build the best possible product, product managers advocate for
customers within the organization and make sure the voice of the market is heard and heeded.
Thanks to this focus on the customer, product teams routinely ship better-designed and
higher-performing products. In tech, where entrenched products are quickly uprooted by newer
and better solutions, there is more need than ever for an intimate understanding of customers
and the ability to create tailored solutions for them. That’s where product management comes
in.
As a member of a product team myself, I work daily with product managers and interviewed
dozens more about their roles and responsibilities. Despite the advice here, I’ve learned that
there is no one way to apply principles of product management. Every product has its own
goals and challenges which require a unique and customized approach to product management.
Martin Eriksson famously described product management as the intersection of business, user
experience, and technology.

 Business - Product management helps teams achieve their business objectives by bridging the
communication gap between dev, design, the customer, and the business. 
 UX - Product management focuses on the user experience, and represents the customer inside
the organization. Great UX is how this focus manifests itself.
 Technology - Product management happens, day to day, in the engineering department. A
thorough understanding of computer science is paramount.
Three additional skills that every PM needs are storytelling, marketing, and empathy.
Storytelling
A product leader should be as inspirational as they are tactical, and storytelling is their
tool of choice. Through customer interviews and market research, product managers learn more
about the customer than even the salespeople. They then use their storytelling skills to share
that perspective with the rest of the company.

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Marketing
Product Management’s customer focus also informs marketing efforts. Instead of
sticking to the brand and using established techniques, product management teams (often
including Product Marketing Managers) integrate the language of their customers into the
messaging of their product. Furthermore, knowledge of the competitive landscape and the
ability to stand out and differentiate pays dividends in the long run. Understanding basic
marketing and positioning concepts will help product managers ship products that people can
find and relate to.
Empathy
Finally, product management is about empathy - empathy for the developers and how
they work, empathy for the customer and their pain points, and even empathy for upper
management, who juggle aggressive goals and impossible schedules. This skill in empathy, one
developed through immersion within and intimate understanding of each group and
stakeholder, separates the product teams that can rally the organization around common goals
from those who are incapable of doing so.
CONSTITUENTS OF A PRODUCT
A product is simply a marketing offering, whether tangible or intangible, that someone
wants to purchase and consume. In reality while decisions related to the consumable parts of
the product are extremely important, the TOTAL product consists of more than what is
consumed.
A product is said to have three components:

Core Benefits
The core product itself is the benefit the customer receives from using the product.
People make buying decisions to satisfy their needs.
In some cases these core benefits are offered by the product itself (e.g., floor cleaner) while in
other cases the benefit is offered by other aspects of the product (e.g., the can containing the
floor cleaner that makes it easier to spread the product).

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Consequently, at the very heart of all product decisions is determining the key or core
benefits a product will provide. From this decision, the rest of the product offering can be
developed.
Actual Product
The core benefits are offered through the components that make up the actual product
the customer purchases.
For instance, when a consumer returns home from shopping at the grocery store and
takes a purchased item out of her shopping bag, the actual product is the item she holds in her
hand. Within the actual product is the consumable product, which can be viewed as the main
good, service or idea the customer is buying.
Augmented Product
Marketers often surround their actual products with goods and services that provide
additional value to the customer’s purchase.
While these factors may not be key reasons leading customers to purchase (i.e., not core
benefits), for some the inclusion of these items strengthens the purchase decision while for
others failure to include these may cause the customer not to buy.
Items considered part of the augmented product include:
 Guarantee
 Warranty
 Customer Service
 Complementary Products
 Accessibility
Three components of Products

Product Mix:
Product mix, also known as product assortment, refers to the total number of product
lines that a company offers to its customers. For example, a small company may sell multiple
lines of products. Sometimes, these product lines are fairly similar, such as dish washing liquid
and bar soap, which are used for cleaning and use similar technologies. Other times, the
product lines are vastly different, such as diapers and razors. The four dimensions to a
company's product mix include width, length, depth and consistency.
1. Width:
The width of a company's product mix pertains to the number of product lines that a
company sells. For example, if a company has two product lines, its product mix width is two.
Small and upstart businesses will usually not have a wide product mix. It is more practical to

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start with some basic products and build market share. Later on, a company's technology may
allow the company to diversify into other industries and build the width of the product mix.
2. Length
Product mix length pertains to the number of total products or items in a company's
product mix, according to Philip Kotler's, Analysis, Planning, Implementation and Control."
For example, ABC company may have two product lines, and five brands within each product
line. Thus, ABC's product mix length would be 10. Companies that have multiple product lines
will sometimes keep track of their average length per product line. In the above case, the
average length of an ABC Company's product line is five
3. Depth
Depth of a product mix pertains to the total number of variations for each product.
Variations can include size, flavor and any other distinguishing characteristic. For example, if a
company sells three sizes and two flavors of toothpaste, that particular brand of toothpaste has a
depth of six. Just like length, companies sometimes report the average depth of their product
lines; or the depth of a specific product line.
4. Consistency
Product mix consistency pertains to how closely related product lines are to one another--in
terms of use, production and distribution. A company's product mix may be consistent in
distribution but vastly different in use. For example, a small company may sell its health bars
and health magazine in retail stores. However, one product is edible and the other is not. The
production consistency of these products would vary as well.
Classification of Products
Product is anything that can be able to meet the needs and wants of target customers. A
product is anything offered for sale for the purpose of satisfying a want or need on both side of
the exchange process. A product is a set of tangible and intangible attributes including
packaging, color, price, quality and brand, plus the services and reputation of the seller.
Products are classified on two types on the basis of customer characteristics.
 Consumer product
 Industrial product

Classifications of Products

Consumer Products Industrial products

Convenienc Shopping Specialty Unsought Materials Capital Supplies and

e products Products Products products and parts item services

 Staple
products  Fashion a. Raw materials a. Accessory a.Supplies
 Impulse products b. Manufactured equipment b.Business
products  Service materials & b. Installations services
 Emergency products parts
products 33
 Home
delivery
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Consumer Products: Consumer products are products and services bought by final consumers
for personal consumption. Consumer products are mainly use in personal consumption. Various
types of consumer products are given below:
A. Convenience products: Convenience products are consumer’s products and services that
customers usually buy frequently, immediately and with minimum of comparison and buying
effort. There are various types of convenience products are:
 Staple products: Staple products are products that are bought often, routinely, and without
much thought. Such as; Rice, Sault, etc.
 Impulse products: Impulse products are products that are bought quickly as unplanned
purchases because of a strongly felt need. Such as; Ice-cream, toys, magazines, etc.
 Emergency products: Emergency products are products that are purchased immediately when
the need is great. Parts of car, medicine service for emergency patient, raincoat for rainy
season, etc.
 Home delivery products: These products are mainly delivered to customer’s home.
B. Shopping Products: The products which are purchased by customers on the basis of pre
planning is called shopping product. Shopping products are less frequently purchased consumer
products and services that customers compare carefully on suitability, quality, price and style.
Shopping products are:
 Fashion products: Fashion products are shopping goods that are purchased for their
appearance, distinctiveness or style. Such as; garments, gift etc.
 Service products: Service goods are durably shopping goods that represent relatively large
outlays to the consumer and that usually require repair or other servicing. Such as; TV, Air
conditioner etc.
C. Specialty Products: These products are charming and technology based. These are
consumer products and services with unique characteristics or brand identification for which a
significant group of buyers is willing to make a special purchase effort. Such as; Mercedes Car,
High priced watch, etc.
D. Unsought products: These are consumer products that the consumer either does not know
about or know about but does not normally think of buying.
Such as; Life insurance policy, grave stone, etc. Unsought products are:
 New unsought products
 Regular unsought products
Industrial Products: Industrial products are mainly used for further production.
According to Philip Koter “Industrial products are products bought by individuals and
organizations for further processing or for use in conducting a business”. There are various
types of industrial products are given below:
A. Materials and parts: Materials and parts are industrial products that enter the manufacturer’s
product completely. It has two types:
a). Raw materials
b). Manufactured materials and parts
B. Capital item: Capital items are industrials products that aid in the buyer’s production or
operations, including installations and accessory equipment. It has two types:
a). Accessory equipment
b). Installations
C. Supplies and services: These are industrial products that do not enter the finished product at
all. These are:

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a). Supplies
b). Business services.
NEW PRODUCT DEVELOPMENT PROCESS
In order to stay successful in the face of maturing products, companies have to obtain
new ones by a carefully executed new product development process. But they face a problem:
although they must develop new products, the odds weigh heavily against success. Of
thousands of products entering the process, only a handful reaches the market. Therefore, it is
of crucial importance to understand consumers, markets, and competitors in order to develop
products that deliver superior value to customers. In other words, there is no way around a
systematic, customer-driven new product development process for finding and growing new
products. We will go into the eight major steps in the new product development process.
1. Idea generation
2. Idea screening
3. Concept development and Testing
4. Marketing strategy development
5. Business analysis
6. Product development
7. Test marketing
8. Commercialization
New Product Development Process

1. Idea generation
The new product development process starts with idea generation. Idea generation refers to
the systematic search for new-product ideas. Typically, a company generates hundreds of ideas,
maybe even thousands, to find a handful of good ones in the end. Two sources of new ideas can
be identified:

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A. Internal idea sources: the company finds new ideas internally. That means R&D, but also
contributions from employees.
B. External idea sources: the company finds new ideas externally. This refers to all kinds of
external sources, e.g. distributors and suppliers, but also competitors. The most important
external source are customers, because the new product development process should focus on
creating customer value.
2. Idea screening
The next step in the new product development process is idea screening. Idea screening
means nothing else than filtering the ideas to pick out good ones. In other words, all ideas
generated are screened to spot good ones and drop poor ones as soon as possible. While the
purpose of idea generation was to create a large number of ideas, the purpose of the succeeding
stages is to reduce that number. The reason is that product development costs rise greatly in
later stages. Therefore, the company would like to go ahead only with those product ideas that
will turn into profitable products. Dropping the poor ideas as soon as possible is, consequently,
of crucial importance.
3. Concept development and Testing
To go on in the new product development process, attractive ideas must be developed into a
product concept. A product concept is a detailed version of the new-product idea stated in
meaningful consumer terms. You should distinguish
 A product idea à an idea for a possible product
 A product concept à a detailed version of the idea stated in meaningful consumer terms
 A product image à the way consumers perceive an actual or potential product.
4. Marketing strategy development
The next step in the new product development process is the marketing strategy
development. When a promising concept has been developed and tested, it is time to design an
initial marketing strategy for the new product based on the product concept for introducing this
new product to the market.
The marketing strategy statement consists of three parts and should be formulated carefully:
 A description of the target market, the planned value proposition, and the sales, market share
and profit goals for the first few years
 An outline of the product’s planned price, distribution and marketing budget for the first year
 The planned long-term sales, profit goals and the marketing mix strategy.
5. Business analysis
Once decided upon a product concept and marketing strategy, management can evaluate
the business attractiveness of the proposed new product. The fifth step in the new product
development process involves a review of the sales, costs and profit projections for the new
product to find out whether these factors satisfy the company’s objectives. If they do, the
product can be moved on to the product development stage.
In order to estimate sales, the company could look at the sales history of similar
products and conduct market surveys. Then, it should be able to estimate minimum and
maximum sales to assess the range of risk. When the sales forecast is prepared, the firm can
estimate the expected costs and profits for a product, including marketing, R&D, operations
etc. All the sales and costs figures together can eventually be used to analyse the new product’s
financial attractiveness.

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6. Product development
The new product development process goes on with the actual product development. Up
to this point, for many new product concepts, there may exist only a word description, a
drawing or perhaps a rough prototype. But if the product concept passes the business test, it
must be developed into a physical product to ensure that the product idea can be turned into a
workable market offering. The problem is, though, that at this stage, R&D and engineering
costs cause a huge jump in investment.
The R&D department will develop and test one or more physical versions of the product
concept. Developing a successful prototype, however, can take days, weeks, months or even
years, depending on the product and prototype methods.
7. Test marketing
The last stage before commercialisation in the new product development process is test
marketing. In this stage of the new product development process, the product and its proposed
marketing programme are tested in realistic market settings. Therefore, test marketing gives the
marketer experience with marketing the product before going to the great expense of full
introduction. In fact, it allows the company to test the product and its entire marketing
programme, including targeting and positioning strategy, advertising, distributions, packaging
etc. before the full investment is made.
The amount of test marketing necessary varies with each new product. Especially when
introducing a new product requiring a large investment, when the risks are high, or when the
firm is not sure of the product or its marketing programme, a lot of test marketing may be
carried out.
8. Commercialization Test marketing has given management the information needed to make the
final decision: launch or do not launch the new product. The final stage in the new product
development process is commercialisation. Commercialisation means nothing else than
introducing a new product into the market. At this point, the highest costs are incurred: the
company may need to build or rent a manufacturing facility. Large amounts may be spent on
advertising, sales promotion and other marketing efforts in the first year.
PRODUCT MIX AND PRODUCT LINE DECISIONS
A product mix is the set of all products and items that a particular seller offers for sale.
A company’s product mix has the certain width, length, depth and consistency.
Product mix Decisions
1. The width of a product mix refers to how many different product lines the company carries.
2. The length of a product mix refers to the total number of items in a particular product line.
3. The depth of a product mix refers to how many variants are offered of each product in the line.
4. The consistency of the product mix refers to how closely related the various product lines are in
end use, production requirements, distribution channels, or some other way.
Product Line Decisions:
Many companies start as a single product item or product line business. After getting a taste
of success and with an availability of more resources, companies decide to expand their product
line and/or introduce newer product lines in consonance with market opportunities or in
response to competitors’ moves.
1. Companies make decisions that concern either adding new items in existing product lines,
deleting products from existing product lines, or adding new product lines.
2. Another aspect relates to upgrading the existing technology either to reduce the product costs or
to improve quality, for stretching (downwards, upwards, or both ways), or line filling.

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3. Product managers need to closely examine the sales and profits of each item in a product line
Decisions.
4. The findings will help them decide whether to build, maintain, harvest, or divest different items
in a particular product line Decisions.
Line Stretching:
Product lines tend to lengthen over the years for different reasons such as excess
manufacturing capacity, new market opportunities, demand from sales force and resellers for a
richer product line to satisfy customers with varied preferences, and competitive compulsions.
Lengthening of lines raises costs in many areas and decisions are based on a careful appraisal.
However, at some point in time somebody, often the top management intervenes and stops this.
Downward Line Stretch:
Companies sometimes introduce new products with an objective of communicating an
image of technical excellence and high quality and locate at the upper end of the market.
Subsequently, the company might stretch downwards due to competitor’s attack by introducing
a low-end product in response to a competitive attack, or a company may introduce a low-end
product to fill up a vacant slot that may seem attractive to a new competitor. Another
possibility is that market may become more attractive at low-end due to faster growth rate.
Upward Stretch: In this situation, companies operating at low-end may opt to enter high-end
because of better opportunities as a result of faster market growth, or the need to create an
image of the full line company.
There may be certain risks associated with upward line stretching. These may include
prospective customers’ perceptions that the newcomer in the high-end category may not
produce high-quality products, or competitors already well established in the high-end market
may retaliate by introducing items in the low-end of the market. For example, long established
footwear company Bata failed in its attempt when it tried the upward stretch and finally
introduced its Power line of economical sports shoes.
Both-Way Stretch: Companies operating in the medium range of the market may decide to
stretch product line(s) both ways for reasons of opportunities arising in different market
segments. The main risk is that it may prompt some customers to trade down. However,
companies often prefer to retain their customers by providing low-end alternatives rather than
losing them to competitors.
PRODUCT LIFE CYCLE STAGES

As consumers, we buy millions of products every year. And just like us, these products
have a life cycle. Older, long-established products eventually become less popular, while in

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contrast, the demand for new, more modern goods usually increases quite rapidly after they are
launched.
Because most companies understand the different product life cycle stages, and that the
products they sell all have a limited lifespan, the majority of them will invest heavily in new
product development in order to make sure that their businesses continue to grow.
The product life cycle has 4 very clearly defined stages, each with its own
characteristics that mean different things for business that are trying to manage the life cycle of
their particular products.
1. Introduction Stage – This stage of the cycle could be the most expensive for a company
launching a new product. The size of the market for the product is small, which means sales are
low, although they will be increasing. On the other hand, the cost of things like research and
development, consumer testing, and the marketing needed to launch the product can be very
high, especially if it’s a competitive sector.
2. Growth Stage – The growth stage is typically characterized by a strong growth in sales and
profits, and because the company can start to benefit from economies of scale in production,
the profit margins, as well as the overall amount of profit, will increase. This makes it possible
for businesses to invest more money in the promotional activity to maximize the potential of
this growth stage.
3. Maturity Stage – During the maturity stage, the product is established and the aim for the
manufacturer is now to maintain the market share they have built up. This is probably the most
competitive time for most products and businesses need to invest wisely in any marketing they
undertake. They also need to consider any product modifications or improvements to the
production process which might give them a competitive advantage.
4. Decline Stage – Eventually, the market for a product will start to shrink, and this is what’s
known as the decline stage. This shrinkage could be due to the market becoming saturated (i.e.
all the customers who will buy the product have already purchased it), or because the
consumers are switching to a different type of product. While this decline may be inevitable, it
may still be possible for companies to make some profit by switching to less-expensive
production methods and cheaper markets.
The concept of product life cycle (PLC)
The concept of product life cycle (PLC) concerns the life of a product in the market with
respect to business/commercial costs and sales measures. The product life cycle proceeds
through multiple phases, involves many professional disciplines, and requires many skills, tools
and processes. PLC management makes the following three assumptions.
 Products have a limited life and thus every product has a life cycle.
 Product sales pass through distinct stages, each posing different challenges, opportunities, and
problems to the seller.
 Products require different marketing, financing, manufacturing, purchasing, and human
resource strategies in each life cycle stage.
Once the product is designed and put into the market, the offering should be managed
efficiently for the buyers to get value from it. Before entering into any market complete
analysis is carried out by the industry for both external and internal factors including the laws
and regulations, environment, economics, cultural values and market needs. Product life cycle
is guanine concept and this term ‘product life cycle’ is associated with every product that
exists, however, due to a limited shelf life the product has to expire. From the business
perspective, as a good business, the product needs to be sold before it finishes its life. In terms

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of profitability, expiry may jolt the overall profitability of the business therefore there ar e few
strategies, which are practiced to ensure that the product is sold within the defined period of
maturity.
PLC AS A TOOL FOR MARKETING STRATEGY
Product passes through four stages of its life cycle. Every stage poses different
opportunities and challenges to the marketer. Each of stages demands the unique or
distinguished set of marketing strategies. A marketer should watch on its sales and market
situations to identify the stage in which the product is passing through, and accordingly, he
should design appropriate marketing strategies. Here, strategy basically involves four elements
– product, price, promotion, and distribution.
By appropriate combination of these four elements, the strategy can be formulated for
each stage of the PLC. Every stage gives varying importance to these elements of marketing
mix. Let us analyze basic strategies used in each of the stages of the PLC, as described by
Philip Kotler.
Marketing Strategies for Introduction Stage:
Introduction stage is marked with slow growth in sales and a very little or no profit.
Note that product has been newly introduced, and a sales volume is limited; product and
distribution are not given more emphasis. Basic constituents of marketing strategies for the
stage include price and promotion. Price, promotion or both may be kept high or low depending
upon market situation and management approach. Observe Figure 3.
ADVERTISEMENTS:
Following are the possible strategies during the first stage:

1. Rapid Skimming Strategy:

This strategy consists of introducing a new product at high price and high promotional
expenses. The purpose of high price is to recover profit per unit as much as possible. The high
promotional expenses are aimed at convincing the market the product merits even at a high
price. High promotion accelerates the rate of market penetration, in all; the strategy is preferred
to skim the cream (high profits) from market.
This strategy makes a sense in following assumptions:
(a) Major part of market is not aware of the product.
(b) Customers are ready to pay the asking price.
(c) There possibility of competition and the firm wants to build up the brand preference.
(d) Market is limited in size.
2. Slow Skimming Strategy:
This strategy involves launching a product at a high price and low promotion. The
purpose of high price is to recover as much as gross profit as possible. And, low promotion
keeps marketing expenses low. This combination enables to skim the maximum profit from the
market.
This strategy can be used under following assumptions:
(a) Market is limited in size.

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(b) Most of consumers are aware of product.

(c) Consumers are ready to pay high price.
(d) There is less possibility of competition.
3. Rapid Penetration:
The strategy consists of launching the product at a low price and high promotion. The
purpose is the faster market penetration to get larger market share. Marketer tries to expand
market by increasing the number of buyers.
It is based on following assumptions:
(a) Market is large.
(b) Most buyers are price-sensitive. They prefer the low-priced products.
(c) There is strong potential for competition.
(d) Market is not much aware of the product. They need to be informed and convinced.
(e) Per unit cost can be reduced due to more production, and possibly more profits at low price.
4. Slow Penetration:
The strategy consists of introducing a product with low price and low-level promotion.
Low price will encourage product acceptance, and low promotion can help realization of more
profits, even at a low price.
Assumptions of this strategy:
(a) Market is large.
(b) Market is aware of product.
(c) Possibility of competition is low.
(d) Buyers are price-sensitive or price-elastic, and not promotion-elastic.
Marketing Strategies for Growth Stage:
This is the stage of rapid market acceptance. The strategies are aimed at sustaining
market growth as long as possible. Here, the aim is not to increases awareness, but to get trial
of the product. Company tries to enter the new segments. Competitors have entered the market.
The company tries to strengthen competitive position in the market. It may forgo maximum
current profits to earn still greater profits in the future.
Several possible strategies for the stage are as under:
1. Product qualities and features improvement
2. Adding new models and improving styling
3. Entering new market segments
4. Designing, improving and widening distribution network
5. Shifting advertising and other promotional efforts from increasing product awareness to
product conviction
6. Reducing price at the right time to attract price-sensitive consumers
7. Preventing competitors to enter the market by low price and high promotional efforts
Marketing Strategies for Maturity Stage:
In this stage, competitors have entered the market. There is severe fight among them for
more market share. The company adopts offensive/aggressive marketing strategies to defeat the
competitors.
Following possible strategies are followed:
1. To Do Nothing:
To do nothing can be an effective marketing strategy in the maturity stage. New
strategies are not formulated. Company believes it is advisable to do nothing. Earlier or later,
the decline in the sales is certain. Marketer tries to conserve money, which can be later on

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invested in new profitable products. It continues only routine efforts, and starts planning for
new products.
2. Market Modification:
This strategy is aimed at increasing sales by raising the number of brand users and the
usage rate per user. Sales volume is the product (or outcome) of number of users and usage rate
per users. So, sales can be increased either by increasing the number of users or by increasing
the usage rate per user or by both. Number of users can be increased by variety of ways.
There are three ways to expand the number of users:
i. Convert non-users into users by convincing them regarding uses of products
ii. Entering new market segments
iii. Winning competitors’ consumers
Sales volume can also be increased by increasing the usage rate per user.
This is possible by following ways:
i. More frequent use of product
ii. More usage per occasion
iii. New and more varied uses of product
3. Product Modification:
Product modification involves improving product qualities and modifying product
characteristics to attract new users and/or more usage rate per user.
Product modification can take several forms:
i. Strategy for Quality Improvement:
Quality improvement includes improving safety, efficiency, reliability, durability,
speed, taste, and other qualities. Quality improvement can offer more satisfaction.
ii. Strategy for Feature Improvement:
This includes improving features, such as size, colour, weight, accessories, form, get-
up, materials, and so forth. Feature improvement leads to convenience, versatility, and
attractiveness. Many firms opt for product improvement to sustain maturity stage.
Product improvement is beneficial in several ways like:
(1) It builds company’s image as progressiveness, dynamic, and leadership,
(2) Product modification can be made at very little expense,
(3) It can win loyalty of certain segments of the market,
(4) It is also a source of free publicity, and
(5) It encourages sales force and distributors.
4. Marketing Mix Modification:
This is the last optional strategy for the maturity stage. Modification of marketing mix
involves changing the elements of marketing mix. This may stimulate sales. Company should
reasonably modify one or more elements of marketing mix (4P’s) to attract buyers and to fight
with competitors. Marketing mix modification should be made carefully as it is easily imitated.
Marketing Strategies for Decline Stage:
Company formulates various strategies to manage the decline stage. The first important
task is to detect the poor products. After detecting the poor products, a company should decide
whether poor products should be dropped. Some companies formulate a special committee for
the task known as Product Review Committee. The committee collects data from internal and
external sources and evaluates products. On the basis the report submitted by the committee,
suitable decisions are taken.

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Company may follow any of the following strategies:

1. Continue with the Original Products:
This strategy is followed with the expectations that competitors will leave the market.
Selling and promotional costs are reduced. Many times, a company continues its products only
in effective segments and from remaining segments they are dropped. Such products are
continued as long as they are profitable.
2. Continue Products with Improvements:
Qualities and features are improved to accelerate sales. Products undergo minor changes
to attract buyers.
3. Drop the Product:
When it is not possible to continue the products either in original form or with
improvement, the company finally decides to drop the products.
Product may be dropped in following ways:
i. Sell the production and sales to other companies
ii. Stop production gradually to divert resources to other products
iii. Drop product immediately.

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UNIT - IV
PRICING AND DISTRIBUTION MANAGEMENT
Pricing is a process of fixing the value that a manufacturer will receive in the exchange of
services and goods. Pricing method is exercised to adjust the cost of the producer’s offerings
suitable to both the manufacturer and the customer. The pricing depends on the company’s
average prices, and the buyer’s perceived value of an item, as compared to the perceived value
of competitors product.
Every businessperson starts a business with a motive and intention of earning profits. This
ambition can be acquired by the pricing method of a firm. While fixing the cost of a product
and services the following point should be considered:
 The identity of the goods and services
 The cost of similar goods and services in the market
 The target audience for whom the goods and services are produces
 The total cost of production (raw material, labour cost, machinery cost, transit, inventory cost
etc).
 External elements like government rules and regulations, policies, economy, etc.,
Distribution management is the process used to oversee the movement of goods from
supplier to manufacturer to wholesaler or retailer and finally to the end consumer. Numerous
activities and processes are involved, including raw good vendor management, packaging,
warehousing, inventory, supply chain, logistics and sometimes even blockchain.
OBJECTIVES OF PRICING
Pricing can be defined as the process of determining an appropriate price for the
product, or it is an act of setting price for the product. Pricing involves a number of decisions
related to setting price of product. Pricing policies are aimed at achieving various objectives.
Company has several objectives to be achieved by the sound pricing policies and strategies.
Pricing decisions are based on the objectives to be achieved. Objectives are related to sales
volume, profitability, market shares, or competition.
1. Profits-related Objectives:
Profit has remained a dominant objective of business activities.
Company’s pricing policies and strategies are aimed at following profits-related
objectives:
i. Maximum Current Profit:
One of the objectives of pricing is to maximize current profits. This objective is aimed
at making as much money as possible. Company tries to set its price in a way that more current
profits can be earned. However, company cannot set its price beyond the limit. But, it
concentrates on maximum profits.

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ii. Target Return on Investment:

Most companies want to earn reasonable rate of return on investment.
Target return may be:
(1) Fixed percentage of sales,
(2) Return on investment, or
(3) A fixed rupee amount.
Company sets its pricing policies and strategies in a way that sales revenue ultimately
yields average return on total investment. For example, company decides to earn 20% return on
total investment of 3 crore rupees. It must set price of product in a way that it can earn 60 lakh
rupees.
2. Sales-related Objectives:
The main sales-related objectives of pricing may include:
i. Sales Growth:
Company’s objective is to increase sales volume. It sets its price in such a way that
more and more sales can be achieved. It is assumed that sales growth has direct positive impact
on the profits. So, pricing decisions are taken in way that sales volume can be raised. Setting
price, altering in price, and modifying pricing policies are targeted to improve sales.
ii. Target Market Share:
A company aims its pricing policies at achieving or maintaining the target market share.
Pricing decisions are taken in such a manner that enables the company to achieve targeted
market share. Market share is a specific volume of sales determined in light of total sales in an
industry. For example, company may try to achieve 25% market shares in the relevant industry.
iii. Increase in Market Share: Sometimes, price and pricing are taken as the tool to increase
its market share. When company assumes that its market share is below than expected, it can
raise it by appropriate pricing; pricing is aimed at improving market share.

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3. Competition-related Objectives:
Competition is a powerful factor affecting marketing performance. Every company tries
to react to the competitors by appropriate business strategies.
With reference to price, following competition-related objectives may be priorized:
i. To Face Competition:
Pricing is primarily concerns with facing competition. Today’s market is characterized
by the severe competition. Company sets and modifies its pricing policies so as to respond the
competitors strongly. Many companies use price as a powerful means to react to level and
intensity of competition.
ii. To Keep Competitors Away:
To prevent the entry of competitors can be one of the main objectives of pricing. The
phase ‘prevention is better than cure’ is equally applicable here. If competitors are kept away,
no need to fight with them. To achieve the objective, a company keeps its price as low as
possible to minimize profit attractiveness of products. In some cases, a company reacts
offensively to prevent entry of competitors by selling product even at a loss.
iii. To Achieve Quality Leadership by Pricing:
Pricing is also aimed at achieving the quality leadership. The quality leadership is the
image in mind of buyers that high price is related to high quality product. In order to create a
positive image that company’s product is standard or superior than offered by the close
competitors; the company designs its pricing policies accordingly.
iv. To Remove Competitors from the Market:
The pricing policies and practices are directed to remove the competitors away from the
market. This can be done by forgoing the current profits – by keeping price as low as possible –
in order to maximize the future profits by charging a high price after removing competitors
from the market. Price competition can remove weak competitors.
4. Customer-related Objectives:
Customers are in center of every marketing decision.
Company wants to achieve following objectives by the suitable pricing policies and
practices:
i. To Win Confidence of Customers:
Customers are the target to serve. Company sets and practices its pricing policies to win
the confidence of the target market. Company, by appropriate pricing policies, can establish,
maintain or even strengthen the confidence of customers that price charged for the product is
reasonable one. Customers are made feel that they are not being cheated.
ii. To Satisfy Customers:
To satisfy customers is the prime objective of the entire range of marketing efforts.
And, pricing is no exception. Company sets, adjusts, and readjusts its pricing to satisfy its
target customers. In short, a company should design pricing in such a way that results into
maximum consumer satisfaction.
5. Other Objectives:
Over and above the objectives discussed so far, there are certain objectives that
company wants to achieve by pricing.
They are as under:
i. Market Penetration: This objective concerns with entering the deep into the market to
attract maximum number of customers. This objective calls for charging the lowest possible
price to win price-sensitive buyers.

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ii. Promoting a New Product:

To promote a new product successfully, the company sets low price for its products in
the initial stage to encourage for trial and repeat buying. The sound pricing can help the
company introduce a new product successfully.
iii. Maintaining Image and Reputation in the Market:
Company’s effective pricing policies have positive impact on its image and reputation
in the market. Company, by charging reasonable price, stabilizing price, or keeping fixed price
can create a good image and reputation in the mind of the target customers.
iv. To Skim the Cream from the Market:
This objective concerns with skimming maximum profit in initial stage of product life
cycle. Because a product is new, offering new and superior advantages, the company can
charge relatively high price. Some segments will buy product even at a premium price.
v. Price Stability:
Company with stable price is ranked high in the market. Company formulates pricing
policies and strategies to eliminate seasonal and cyclical fluctuations. Stability in price has a
good impression on the buyers. Frequent changes in pricing affect adversely the prestige of
company.
vi. Survival and Growth:
Finally, pricing is aimed at survival and growth of company’s business activities and
operations. It is a fundamental pricing objective. Pricing policies are set in a way that
company’s existence is not threatened.
Factors Affecting Pricing Product:
Internal Factors and External Factors
The pricing decisions for a product are affected by internal and external factors.
A. Internal Factors:
1. Cost:
While fixing the prices of a product, the firm should consider the cost involved in
producing the product. This cost includes both the variable and fixed costs. Thus, while fixing
the prices, the firm must be able to recover both the variable and fixed costs.
2. The predetermined objectives:
While fixing the prices of the product, the marketer should consider the objectives of
the firm. For instance, if the objective of a firm is to increase return on investment, then it may
charge a higher price, and if the objective is to capture a large market share, then it may charge
a lower price.
3. Image of the firm:
The price of the product may also be determined on the basis of the image of the firm in
the market. For instance, HUL and Procter & Gamble can demand a higher price for their
brands, as they enjoy goodwill in the market.
4. Product life cycle:
The stage at which the product is in its product life cycle also affects its price. For
instance, during the introductory stage the firm may charge lower price to attract the customers,
and during the growth stage, a firm may increase the price.
5. Credit period offered:
The pricing of the product is also affected by the credit period offered by the company.
Longer the credit period, higher may be the price, and shorter the credit period, lower may be
the price of the product.

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6. Promotional activity:
The promotional activity undertaken by the firm also determines the price. If the firm
incurs heavy advertising and sales promotion costs, then the pricing of the product shall be kept
high in order to recover the cost.
B. External Factors:
1. Competition:
While fixing the price of the product, the firm needs to study the degree of competition
in the market. If there is high competition, the prices may be kept low to effectively face the
competition, and if competition is low, the prices may be kept high.
2. Consumers:
The marketer should consider various consumer factors while fixing the prices. The
consumer factors that must be considered includes the price sensitivity of the buyer, purchasing
power, and so on.
3. Government control:
Government rules and regulation must be considered while fixing the prices. In certain
products, government may announce administered prices, and therefore the marketer has to
consider such regulation while fixing the prices.
4. Economic conditions:
The marketer may also have to consider the economic condition prevailing in the
market while fixing the prices. At the time of recession, the consumer may have less money to
spend, so the marketer may reduce the prices in order to influence the buying decision of the
consumers.
5. Channel intermediaries:
The marketer must consider a number of channel intermediaries and their expectations.
The longer the chain of intermediaries, the higher would be the prices of the goods.
PRICING POLICIES
A systematic approach to pricing requires the decision that an individual pricing
situation be generalised and codified into policy coverage of all the principal pricing problems.
Policies can and should be tailored to various competitive situations. A policy approach which
is becoming normal for sales activities is comparatively rare in pricing. Most well managed
manufacturing enterprises have a clear cut advertising policy, product customer policy and
distribution-channel policy. But pricing decision remains a patchwork of ad hoc decisions. In
many, otherwise well managed firms, price policy have been dealt with on a crisis basis.
The following considerations involve in formulating the pricing policy:
1. Competitive Situation:
Pricing policy is to be set in the light of competitive situation in the market. Marketers have
to know whether the firm is facing perfect competition or imperfect competition. In perfect
competition, the producers have no control over the price. Pricing policy has special signifi-
cance only under imperfect competition.
2. Goal of Profit and Sales:
The businessmen use the pricing device for the purpose of maximizing profits. They should
also stimulate profitable combination sales. In any case, the sales should bring more profit to
the firm.
3. Long Range Welfare of the Firm: Generally, businessmen are reluctant to charge a
high price for the product because this might result in bringing more producers into the

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industry. In real life, firms want to prevent the entry of rivals. Pricing should take care of the
long run welfare of the company.
4. Flexibility:
Pricing policies should be flexible enough to meet changes in economic conditions of
various customer industries. If a firm is selling its product in a highly competitive market, it
will have little scope for pricing discretion. Prices should also be flexible to take care of
cyclical variations.
5. Government Policy:
The government may prevent the firms in forming combinations to set a high price. Often
the government prefers to control the prices of essential commodities with a view to prevent the
exploitation of the consumers. The entry of the government into the pricing process tends to
inject politics into price fixation.
6. Overall Goals of Business:
Pricing is not an end in itself but a means to an end. The fundamental guides to pricing,
therefore, are the firms overall goals. The broadest of them is survival. On a more specific
level, objectives relate to rate of growth, market share, maintenance of control and finally
profit. The various objectives may not always be compatible. A pricing policy should never be
established without consideration as to its impact on the other policies and practices.
7. Price Sensitivity:
The various factors which may generate insensitivity to price changes are variability in
consumer behaviour, variation in the effectiveness of marketing effort, nature of the product.
Businessmen often tend to exaggerate the importance of price sensitivity and ignore many
identifiable factors which tend to minimise it.
8. Reutilization of Pricing:
A firm may have to take many pricing decisions. If the data on demand and cost are highly
conjectural, the firm has to rely on some mechanical formula. If a firm is selling its product in a
highly competitive market, it will have little scope for price discretion. This will have the way
for routinised pricing.
METHODS OF PRICING
An organization has various options for selecting a pricing method. Prices are based
on three dimensions that are cost, demand, and competition.
The organization can use any of the dimensions or combination of dimensions to set the
price of a product.
Figure-4 shows different pricing methods:

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The different pricing methods (Figure-4) are discussed below;

Cost-based Pricing:
Cost-based pricing refers to a pricing method in which some percentage of desired
profit margins is added to the cost of the product to obtain the final price. In other words, cost-
based pricing can be defined as a pricing method in which a certain percentage of the total cost
of production is added to the cost of the product to determine its selling price. Cost-based
pricing can be of two types, namely, cost-plus pricing and markup pricing.
These two types of cost-based pricing are as follows:
i. Cost-plus Pricing:
Refers to the simplest method of determining the price of a product. In cost-plus
pricing method, a fixed percentage, also called mark-up percentage, of the total cost (as a
profit) is added to the total cost to set the price. For example, XYZ organization bears the
total cost of Rs. 100 per unit for producing a product. It adds Rs. 50 per unit to the price of
product as’ profit. In such a case, the final price of a product of the organization would be
Rs. 150.
Cost-plus pricing is also known as average cost pricing. This is the most commonly
used method in manufacturing organizations.
In economics, the general formula given for setting price in case of cost-plus pricing is
as follows:
P = AVC + AVC (M)
AVC= Average Variable Cost
M = Mark-up percentage
AVC (m) = Gross profit margin
Mark-up percentage (M) is fixed in which AFC and net profit margin (NPM) are covered.
AVC (m) = AFC+ NPM
ii. For determining average variable cost, the first step is to fix prices. This is done by
estimating the volume of the output for a given period of time. The planned output or
normal level of production is taken into account to estimate the output.
The second step is to calculate Total Variable Cost (TVC) of the output. TVC
includes direct costs, such as cost incurred in labor, electricity, and transportation. Once
TVC is calculated, AVC is obtained by dividing TVC by output, Q. [AVC= TVC/Q]. The
price is then fixed by adding the mark-up of some percentage of AVC to the profit [P =
AVC + AVC (m)].
iii. The advantages of cost-plus pricing method are as follows:
a. Requires minimum information
b. Involves simplicity of calculation
c. Insures sellers against the unexpected changes in costs
The disadvantages of cost-plus pricing method are as follows:
a. Ignores price strategies of competitors
b. Ignores the role of customers
iv. Markup Pricing:
Refers to a pricing method in which the fixed amount or the percentage of cost of
the product is added to product’s price to get the selling price of the product. Markup
pricing is more common in retailing in which a retailer sells the product to earn profit. For

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example, if a retailer has taken a product from the wholesaler for Rs. 100, then he/she
might add up a markup of Rs. 20 to gain profit.
It is mostly expressed by the following formulae:
a. Markup as the percentage of cost= (Markup/Cost) *100
b. Markup as the percentage of selling price= (Markup/ Selling Price)*100
c. For example, the product is sold for Rs. 500 whose cost was Rs. 400. The mark up as a
percentage to cost is equal to (100/400)*100 =25. The mark up as a percentage of the
selling price equals (100/500)*100= 20.
Demand-based Pricing:
Demand-based pricing refers to a pricing method in which the price of a product is
finalized according to its demand. If the demand of a product is more, an organization
prefers to set high prices for products to gain profit; whereas, if the demand of a product is
less, the low prices are charged to attract the customers.
The success of demand-based pricing depends on the ability of marketers to analyze the
demand. This type of pricing can be seen in the hospitality and travel industries. For
instance, airlines during the period of low demand charge less rates as compared to the
period of high demand. Demand-based pricing helps the organization to earn more profit if
the customers accept the product at the price more than its cost.
Competition-based Pricing:
Competition-based pricing refers to a method in which an organization considers
the prices of competitors’ products to set the prices of its own products. The organization
may charge higher, lower, or equal prices as compared to the prices of its competitors.
The aviation industry is the best example of competition-based pricing where airlines
charge the same or fewer prices for same routes as charged by their competitors. In
addition, the introductory prices charged by publishing organizations for textbooks are
determined according to the competitors’ prices.
Other Pricing Methods:
In addition to the pricing methods, there are other methods that are discussed as
follows:
i. Value Pricing:
Implies a method in which an organization tries to win loyal customers by charging
low prices for their high- quality products. The organization aims to become a low cost
producer without sacrificing the quality. It can deliver high- quality products at low prices
by improving its research and development process. Value pricing is also called value-
optimized pricing.
ii. Target Return Pricing:
Helps in achieving the required rate of return on investment done for a product. In
other words, the price of a product is fixed on the basis of expected profit.
iii. Going Rate Pricing:
Implies a method in which an organization sets the price of a product according to
the prevailing price trends in the market. Thus, the pricing strategy adopted by the
organization can be same or similar to other organizations. However, in this type of
pricing, the prices set by the market leaders are followed by all the organizations in the
industry.
iv. Transfer Pricing:

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Involves selling of goods and services within the departments of the organization. It
is done to manage the profit and loss ratios of different departments within the
organization. One department of an organization can sell its products to other departments
at low prices. Sometimes, transfer pricing is used to show higher profits in the
organization by showing fake sales of products within departments.
ADAPTING PRICE
Prices set by a company do not always remain the same. Over time, the original price
established for almost any product will have to be adjusted. The marketing executive will find
it necessary to change the product’s price several times during the course of its life cycle.
They are changed or adapted depending on the needs or situations. A company needs to adapt
its prices to different situations, i.e., it may charge different prices depending on geographic
variation, variations in segments, purchase timing, order levels, delivery frequency, guarantees,
service contracts, and some other factors.
Goals of Price Adaptation
Price adaptations are made to pursue a number of goals;
 change of purchase patterns;
 market segmentation;
 market expansion;
 utilization of excess capacity;
 implementation of channel strategy; and,
 to meet the competition.
Change of Purchase Patterns
Marketers may adapt their prices to influence or change patterns of purchase.
Lower prices may be granted to induce customers to buy in larger quantities, buy in
anticipation of future needs, or concentrate their purchases among fewer supply sources.
Higher prices may be charged from certain customers to discourage them from carrying the
line, thus reducing the intensity of competition in certain markets.
Market Segmentation
Marketers can also adapt their prices to tap segments of a market, which differ in
demand elasticity. These differences in sensitivity to price may come about because of differing
values in use among various classes of buyers and/or differing competitive situations facing the
seller.
Market Expansion
The market for a given product or service may be expanded by offering lower prices to
customers who have lower values in use.
Such expansion may also be accomplished by offering lower prices to present customers to
gain new product or service applications where prior price levels made such applications
uneconomic.
Utilization of Excess Capacity
Price adaptations can also be made to utilize excess production or marketing capacity.
If such capacity exists, adaptation makes a sale possible, which covers direct costs and will
contribute to the firm’s total profits.
Implementation of Channel Strategy
Price adaptation is a major device by which a firm attempts to implement its marketing
strategy with regard to channels of distribution. Price variations may reflect differences in

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marketing tasks performed by various types of resellers or differences in the competitive

environments in which they operate.
Adaptation may encourage certain channels to engage in the various promotion of the line or be
used to represent the line in diverse channels.
To Meet Competition
Adaptation in price is also a device that can be used to meet competition.
The value sets the price ceiling for a given product or service in use or utility offered to the
buyer as well as by the alternatives open to the buyer with respect to other sources of supply.
Where the seller is disadvantaged because production facilities are located far from the
potential buyer, a price adaptation may be made to make the delivered price attractive
compared to the competition.
Price Adaptation Strategies

The price of a company may be adapted following a number of adaptation strategies. A

company may choose one or more of these strategies depending on the policies it decides to
pursue.
Different price-adaptation strategies to be discussed here are;
1. geographical pricing;
2. price discounts, allowances, and promotional pricing;
3. discriminatory pricing; and
4. product-mix pricing.
1. Geographical Pricing
In addition to deciding what price to set for the product, a marketer may also have to
decide whether to charge different prices in different geographic areas.
The basic issue confronting the executive here is recognizing that market conditions and
consumer sensitivities to price vary by geographic area. The difference in price occurs not only
on wide territorial bases but also between districts and even in different parts of the same
district.
Though such an exercise is very costly, the executive could segment the overall market
into tiny geographic areas and set unique prices in each.

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In geographic pricing, a company may charge variable prices depending on the customers
living at different locations or countries.
A company may charge a higher price to distant customers to cover higher shipping and other
costs or even charge a lower price to increase sales. A company may follow different
techniques with regard to realize the money.
They are;
1. barter, compensation deal (receives some percentage in cash and rest in products),
2. buyback arrangement (accepting partial payments through products manufactured by the
buyer), and
3. offset
2. Price Discounts, Allowances, and Promotional Pricing
The standard price established for the product by a marketer is list price. But it is not
always the actual price charged to the customer.
Here, basic prices are modified to reward customers for such acts as early payments, volume
purchases, and off-season buying and called together discounts and allowances.
Marketers sometimes offer a discount or allowance to the buyers, effectively reducing the
product’s list price, making it more competitive in the marketplace, stimulating short-term
demand, or creating product awareness.
In order to attain any of these objectives, a marketer can choose from a variety of discount
and allowance methods. Some of the most commonly used strategies are:
1. Quantity discounts.
2. Cash discounts.
3. Trade discounts.
4. Seasonal discounts.
5. Promotional allowances – loss-leader pricing, special-event pricing, cash rebates, low-interest
financing, longer payment terms, warranties and service contracts, psychological discounting.
6. Forward dating.
7. Other allowances.
Quantity Discounts
Here a marketer reduces the list price based on the number of units purchased.
It can be very effective at both consumer and middleman levels. This type of discount is
allowed to buyers who buy in bulk volume. This discount again may vary with the quantity
purchase.
A marketer can use two forms of quantity discounts, viz. noncumulative and
cumulative. A noncumulative quantity discount applies to the number of units purchased in a
single transaction at a single point in time.
For example, a “3 for $1.00” price is actually a quantity discount since the buyer will pay $0.50
for one unit, but $1.00 for three, a savings of $0.50. At the middleman level, the marketing
executive will use a noncumulative discount.
Usually, larger purchases allow for economies of scale to process the orders and transport them
to the middleman.
On the other hand, the cumulative discount reduces the price based on the number of
units purchased within some time period.
Whether used at the consumer or middleman levels, its purpose is to encourage buyer loyalty to
the seller rather than gain large purchase orders from them.

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Cash Discounts
A cash discount is a reduction in the list price based on the buyer’s early payment in
cash. However, it is not used extensively at the consumer level but is a widely adopted practice
at the middleman level.
Its basic purpose is to stimulate rapid payment and draw in precious cash to the
company. It is paid to customers who pay their bills promptly. Some of the buyers may take the
facility of discount but not pay within the stipulated time, causing financial trouble for the
company.
Trade Discounts
Reducing the product’s list price to an intermediary is called a trade or functional
discount. It is basically offered to the manufacturers’ channel members if they (channel
members) perform certain functions such as selling, storing, and record keeping.
It may vary from channel member to channel member depending on the type and magnitude of
functions performed by them.
Seasonal Discounts
Here the product’s list price is reduced in order to stimulate sales during a particular
time period.
Such a discount may be given to the buyer to induce earlier than necessary purchases of
seasonally used products or to build sales during traditionally off-peak periods. If a buyer buys
a manufacturer’s product in the off-season, he may be offered a seasonal discount by the
manufacturer.
This type of discount allows the seller to roll his product around the year due to which
he can keep his production going on throughout the year.
Promotional Allowances
To encourage intermediaries to promote or otherwise display a product, a marketer can
offer a promotional allowance. If the buyer allows a reduction on the list price to the seller, it
can be termed as allowance.
To ensure dealers’ participation in advertising and sales support programs, sellers
normally offer allowances.
In practice, this allowance can take one of several forms. Some of the commonly practiced ones
are discussed below.
1. Loss-Leader Pricing: More legitimate pricing techniques are known as loss-leader selling,
whereby the price is set below invoice cost in order to reduce inventory size. To stimulate
additional traffic to store, supermarkets and department stores normally drop the price on well-
known brands. On the other hand, leader pricing is merely a reduction from the going price,
also intended to reduce inventory.
2. Special-Event Pricing: Special-event pricing involves advertised sales or price-cutting to
increase revenue or lower costs. To attract more customers, sellers establish special prices in
certain seasons, such as the beginning of the month or the beginning of the year. Special event
pricing entails coordination of production, scheduling, storage, and physical distribution.
Whenever there is a sales lag, a special sales event may be launched.
3. Cash Rebates: To clear their inventories, manufacturers normally offer cash rebates if
products are purchased within a specified time period.
4. Low-Interest Financing: A company can offer low-interest financing to customers instead of
cutting its product price and thus can increase sales.

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5. Longer Payment Terms: Here, buyers are offered the opportunity to buy the product in
installments by charging a higher price of the product.
6. Warranties and Service Contracts: By offering free or a reduced price warranty or service, a
company can promote its sales.
Forward Dating
Such discounts are offered to intermediaries. The marketing executive will offer the
products to the buyer and not charge for the goods until a later date.
For example, the product may be shipped to a buyer in December, but he won’t be billed until
April. The advantage to buyers of this type of price offer is that they can have the products and
possibly sell them before having to make the payment.
Thus, they do not tie up their funds in inventory. For the company, sales are guaranteed, and
production can be scheduled more effectively.
Other Allowances
In addition to the above, marketers can also offer some other discounts to their
customers. Some of them are discussed here. Rebates are cash refunds for buying the product.
They have been very popular at the consumer level. Trade-ins can also be used by the
marketing executive to discount the product’s list price.
It is a price reduction given for used goods when similar new goods are bought. By giving fair
market value, or even more on a trade-in, the executive can effectively change the actual price
charged to the buyer.
Push money (PM) can sometimes be used by the marketer to support particular
products’ sales. Push money is funds passed down to retail sales clerks to encourage them to
emphasize the company’s product instead of his competitors’ ones.
Discriminatory Pricing
To accommodate differences in customers, products, locations, and so on, a company often
modifies its basic price. Types of Discriminatory Pricing are;
1. Customer-Segment Pricing.
2. Product-Form Pricing.
3. Image Pricing.
4. Location Pricing.
5. Time Pricing.
Customer-Segment Pricing
The same product may be sold at different prices to different customer groups though
the production costs are the same. For example, students and freedom fighters may be charged
half fare by transport companies.
Product-Form Pricing
The product of a company may have different versions or sizes. In such a situation, it
may charge different prices for different versions or sizes but not proportionately with respect
to the product’s cost.
Image Pricing
Based on image differences, the price of the same product may be fixed at different
levels.
For example, a particular brand of one-liter soybean oil in the tetra pack maybe charge $45/-.
The same quantity of the same brand in a glass bottle may be charged $70/- thus, the company
is trying to develop two different images of the same product.

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Location Pricing
Different prices may be charged for the same product sold in a different location
(geographic or other) though the cost of offering the product is the same. For example, a
cinema hall charges different prices for a front stall, rear stall, or other types of seats.
Time Pricing
If prices are varied by season, day, or hour, it may be termed as time pricing. Hotels,
airlines, public utility companies such as DESA, T&T, etc. normally practice time pricing.
Product-Mix Pricing
The logic of setting or charging a price on an individual product has to be modified
when the product is a member of a product mix.
Six situations may be distinguished involving product-mix pricing;
1. Product-Line Pricing,
2. Optional-Feature Pricing,
3. Captive-Product Pricing,
4. Two-Part Pricing,
5. Byproduct Pricing, And
6. Product-Bundling Pricing.
Product-Line Pricing
If a company maintains a product line instead of a single product, it may set various
prices for a single product in the line to develop different images in the minds of the buyer.
For example, an electronics company may carry 21 inches of color television at three price
levels. Customers will thus associate three price levels with three types of quality.
Optional Feature Pricing
If a company offers optional products or features along with its main products, it can go
for optional-feature pricing.
For example, a hotel can charge a low price for accommodation and charge high for car rental
service being offered by it since guests require transport service in addition to accommodation
facilities.
Captive-Product Pricing
There are some products that require ancillary or captive products to be used properly,
such as a battery for battery-operated toys or films for cameras.
Producers of main products may charge high prices for the captive products and warning
customers not to use ancillary products manufactured by other companies for guaranteed
performance.
Two-Part Pricing
This type of pricing is practiced mostly by service firms. They charge a fixed price for
the basic service and a variable usage fee for other services.
For example, a museum may charge a fixed entry fee and variable fees for seeing different
objects or events. Normally the fixed fee is charged low to encourage the purchase of the basic
fee, which in turn induce buyers to purchase other services.
Byproduct Pricing
Byproducts are sometimes an automatic outcome of the production of certain items such
as petroleum from a paint manufacturing plant.
A company can price byproducts low to increase its revenue and support its main operation.

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Product-Bundling Pricing
A seller may offer its bundle of products at a reduced price than the individual prices
added together.
INITIATING AND RESPONDING TO PRICE CHANGES
As numerous organisations operate in the market. determining the prices of its products
by an organisation is not a one-time activity. Every organisation needs to revise the prices of its
products as a result of the competition it faces. Once the pricing strategies and structures are
developed, there often occur situations where initiating price changes or responding to the
prices changed by the competitors become necessary. The company might be interested in
either increasing or decreasing the prices of its products in certain scenarios. In either case, it
becomes important for it to anticipate the possible manners in which the customers or
competitors might react.
Initiating Price Cuts
There might be numerous situations where it is necessary for an organisation to reduce
the prices of its products. Surplus capacity and deteriorating demand are the two such
situations. Here, the organisation would cut down the prices of its products aggressively so that
sales and market share can be increased. As per the industries like automobile, airline, fast
food, etc., situations like price wars may arise because of implying price cuts in industries with
surplus capacity. This is so because competitors try not to lose their market share. By
incorporating this strategy in its operations, Big Bazaar has become the leading retailer in
India. Following are the circumstances under which an organisation reduces its price :
1) Declining Market Share:
The most inducing factor for cutting prices is the declining market - share of a particular
organisation. The organisation commences price cutting when its market share starts decreasing
as compared to that of its competitors.
For example, the prices of Pantene range of shampoos were slashed by 16% by P&G a
reaction to the reduction in prices of HUL's shampoos Sunsilk and Clinic Plus by 50%. Also
HUL had to slash the prices of Wheel and Surf in the detergent sector since P&G had already
reduced the prices of Tide and Ariel. All these decisions were made only to maintain the
individual market share.
2) Market Domination :
Another circumstance or factor responsible for price cuts is desire to attain market dominance.
In order to dominate the market, organisations sometimes imply the strategy of price cuts
significantly and become price leaders. Implying price reduction strategy results not only in
market dominance but also the disturbed market share of the competitors.
For example, few years back, Hindustan Times and Times of India underwent a price war in
Delhi, chiefly to attain maximum share in the market.
3) Excess Production :
The next circumstance leading to price reduction is excess production. When the level of
production or supply of an organisation surpasses the actual demand, it needs to slash the prices
of its products.
For example, organisations manufacturing consumer durable products, often introduce major
reductions in the prices of their products like TVs, refrigerators, or washing machines, as part
of their consumer promotion schemes.

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4) Economic Downtrend :
During economic recession, the prices of the products have to be reduced by the organisations
so as to match the buying power of consumers.
Price reduction is a strategic decision, which is taken only after the thorough analysis of its
impact on the sale of the product. In case, such decisions are taken carelessly, many types of
traps may arise. The major possible traps are as follows :
1) Low Quality Trap :
Here, price reduction at massive level creates a doubtful perception in the mind consumers
about the quality of products offered by organisations. The consumers think that they are being
offered low quality products by the organisations.
2) Shallow-Pockets Trap :
An organisation may improve its market share through price reduction. but it does not
guarantee market loyalty. The customers who were attracted due to low prices might move to
other organisations offering prices that are even lower.
3) Fragile Market Share Trap :
As a financially. strong organisation is capable of operating at low prices for significantly long
duration, it (financially strong organisation) can give robust competition to financially less
strong organization and reduce its market share.
Initiating Price Increases
Profits can be immensely improved with the help of an effective price increase.
For example, if the profit margin of an organisation is 3 per cent of sales, an increase of 1 per
cent in price will enhance profits by 33 per cent, if the volume of sales is constant. Immediate
increase in the profits is the main advantage of price increases.
Different kinds of factors or situations are responsible for price increases. Cost inflation
is the prime reason behind price increase. Due to increased costs, the profit margin of
organisations shrinks and it forces the organisations to increase the prices of their products so
as to pass the increased costs to the customers and maintain the profit margin.
Another reason leading to price increase is over demand. When the customer needs
exceed the level of supply, organisations need to take several actions; increasing price is one of
them.
For example, worldwide oil and gas organisations frequently increase its prices so as to
balance its demand. It is very essential for organisations to ensure that they are not perceived as
price gouger by customers due to price increases.
Prices are also increased in case of :
 Possibility of inflation
 Possibility of modification in governmental policies or rules
 Release of a big banner or an immensely hyped movie
Customers Actions to Prices Changes
Price changes are not always recognized in a forthright manner by the customers. Generally, it
results in reduced sales, but the buyers might interpret a positive meaning of price increases.
For example, if Titan increases the price of one of its latest models, customers may react in
two ways - they may think either the quality is improved or Titan is only making profit.
Generally, the image and price of a brand are closely associated. Customers perception about
the brand may adversely be affected due to such price changes.
Every element of the business environment, be it customers, suppliers, competitors, channel
partners, or even the government, responds to the price changes.

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In case of frequent buying or buying high-cost products, customers tend to be most price-
sensitive. On the other hand in case of low-cost products, which they buy occasionally, they
hardly identify price increases. Usually, a rise in price results in decreased sales volume, but at
times, the customers may perceive that the goods are of better quality and high in
demand. Alternatively, sales volume increases as a result of price cuts but customers might
infer it negatively assuming that :
 The quality of the product is low
 The sales volume of the product is low
 The organisation promoting the product is in t loss
 The product is in decline stage and new products will replace it soon
 The product price might decrease further
Competitors Actions to Price Changes
Any organisation that is thinking about price change needs to take into consideration the
possible reactions of its target customers and competitors well. In presence of certain factors
like uniform product, well-informed buyers and small number of players, the competitors
definitely react to price changes. It is crucial for an organisation to guess the probable reaction
of each of its competitors.
Analyzing a single competitor is sufficient to draw-out the reactions of all the
competitors, if all of them respond in a similar manner. Alternatively, individual analysis is
required in case of reactions being different from different competitors due to disparity in their
organisational size, policies or market share. In case the price change is followed by some
competitors, it can be expected that rest will also follow it.
In the markets where homogeneous products are largely present, organisations tend to
reduce the prices or improve their product offerings in response to competitors price
cuts. Whereas, in case of markets with non-homogeneous products, following points are
considered by organisations :
1) Intention: They aim to find out the reason behind the price change initiated by the
competitor.
2) Duration: They try to ensure if the price change is permanent or temporary.
3) Forecasting : They forecast the impact on profitability and market share in case of not
responding to competitor's price change.
4) Counter Reaction : Finally, they need to think about the counter reaction they would get
from their competitor, in response to their reaction.
Responding to Competitor's Changes
Assessing competitor's price change and responding to it is very essential for any
organisation. If an organisation comes to know that one of the competitors has slashed its price
and it might impact the profits and sales of the organisation, it may decide to maintain its
present price and profit margin level. In another kind of response, the organisation might
believe that changing price would not impact the market share or profitability much.
The organisation may decide to wait despite of taking any action in order to collect
more information about the impact of price change of competitor organisational profit and
market share.
However, if the organisation takes too much time to decide upon its action, it might
make the competitor more confident and stronger with increase in sales. The most appropriate
response changes as per the situation. It is crucial for an organisation to take into account
several factors like the quality sensitivity and price of the product, the stage of the product in

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the life cycle, its significance in the portfolio of the organisation, the resources and intentions
of the competitor, substitute opportunities, and the relation of cost with quantity.
In case the manager finds any of the below mentioned cases, it might have to maintain
price :
 A major amount of profit will be eroded by price cuts.
 The image of the product as well as the organisation will be disgraced due to price cuts.
 Market share will not be disturbed much if the same price is maintained.
 The market share loss because of not lowering the price can be recovered without excessive
expenditure or effort.
Yet there are times when retaining the same price might bounce back. The likely results are as
follows :
 It might give the attacker more confidence and motivation to disturb the organization.
 It might demotivate the sales team of the organization.
 It might result in more loss of market share than expected to the organization.
 It might make the organisation feel that regaining the market share is more tough and costly
than expected.
Business organisations usually respond to the price changes incorporated by any
competitor. This is because they operate in a competitive environment that is very tough and
are hence bound to respond against any price changes incorporated by their competitors. Any
of the below mentioned, four responses can be made, in case the organisation decides to take
any effective action :
1) Reduction in Price : In case the organisation is operating in a price sensitive market and it
forecasts severe market share loss to the competitor, it decides to slash the price to meet the
price of the competing organisation. The organisation's profits would be reduced temporarily as
a result of price cutting. In order to retain profit margins, some organisations may alter the
product quality, services or promotions, along the price cuts. Such actions may finally diminish
the market share in the long-run. The quality must be maintained by the organisations when
they implement price cuts.
2) Increasing the Perceived Value : In another kind of response, organisation focuses on
enhancing the perceived value of its products instead of reducing the price. The organisation
expresses the superiority of the value of its products over that of the low-price competitors
through its improved communication strategies. Here, maintaining the price and investing
money for improving the perceived value of the product seems more comfortable to the
organisation than operating at lower profit margins due to price cuts.
3) Improving Quality and Increasing Price : Here, the organisation improves the quality of
its products along with increasing its prices rather than implementing any price cuts. It does so
to grab the position of high price-value for its brand. Improved quality reflects enhanced
customer value that justifies the price increase. Higher price, in turn, safeguards higher margins
for the organisation.
4) Launching a Low-Price "Fighting Brand" : The organisation might add a low-priced
product to its product-line or build a separate low-price brand, i.e., a "fighting brand". This
becomes crucial when the market segment is price sensitive and would not be satisfied through
higher quality explanations.

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UNIT - V
MARKETING PROMOTION
Promotion is a marketing tool, used as a strategy to communicate between the sellers
and buyers. Through this, the seller tries to influence and convince the buyers to buy their
products or services. It assists in spreading the word about the product or services or company
to the people. The company uses this process to improve its public image. This technique of
marketing creates an interest in the mindset of the customers and can also retain them as a loyal
customer.
Promotion is a fundamental component of the marketing mix, which has 4 Ps: product,
price, place, and promotion. It is also an essential element promotional plan or mix, which
includes advertising, self and sales promotion, direct marketing publicity, trade shows, events,
etc.,
Some methods of this procedure contain an offer, coupon discounts, free sample
distribution, trial offer, buy two items in the price of one, contest, festival discounts, etc. The
promotion of a product is important to help companies improve their sales because customers
reaction towards discounts and offers are impulsive. In other words, promotion is a marketing
tool that involves enlightening the customers about the goods and services offered by an
organization.
Types of Promotion:
Advertising-
It helps to outspread a word or awareness, promote any newly launched service, goods
or an organization. The company uses advertising as a promotional tool as it reaches a mass of
people in a few seconds. An advertisement is communicated through many traditional media
such as radio, television, outdoor advertising, newspaper or social media. Other contemporary
media that supports advertisement are social media, blogs, text messages, and websites.
Direct Promotion-
It is that kind of advertising where the company directly communicates with its
customers. This communication is usually done through various new approaches like email
marketing, text messaging, websites, fliers, online adverts, promotional letters, catalog
distributors, etc.
Sales Promotion-
This utilizes all sorts of a marketing tool to communicate with the customers and
increase sales. However, it is for a limited time, used to expand customers demand, refresh
market demand and enhance product availability
Self-promotion-
It is a process where the enterprises send their agents directly to the customers to pitch
for their product or service. Here, the response for the feedback of the customer is prompt and
therefore, easy to build trust.
Public Relation-
Popularly known as PR is exercised to broadcast the information or message between a
company (NGO, Government agency, business), an individual or a public. A powerful PR
campaign can be valuable to the company.
Online Promotion-

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This includes almost all the elements of the promotion mix. Starting from the online
promotion with pay per click advertising. Direct marketing by sending newsletters or emails.
Key Points of Promotion
 It is a communication tool that incorporates all the elements used to spread awareness and
convince customers to buy goods and services
 It is applicable only for short term sales
 It is one of the variables of the marketing mix
 The effect of promotion is short term
 The result or outcome of the promotion is immediate
 It is an economic marketing tool as compared to advertising
 It can be used for all sorts of businesses irrespective of the size, brand of a company
ROLE OF MARKETING PROMOTION
In a dynamically developing economic environment, it is important for companies to
remain competitive. Marketing management and promotion are used in combination with each
other to attract new customers and increase sales for the business. In the marketing mix,
promotion is one of the four main components. To be successful in business, you need to
understand the basics of promotion and understand the role of promotion. Without promotion,
it is impossible to successfully bring a new high-tech product to the market.
The concept of promotion means the process of persuading people to accept the products,
concepts, and ideas of the company.
Promotion is a combination of various activities to bring information about the merits of the
product to potential consumers and to stimulate their desire to buy it.
Functions of Promotion
The most important promotion functions are:
1. creating an image of prestige, low prices, innovation,
2. information about the product and its characteristics,
3. preservation of the popularity of goods (services),
4. change the way you use the product,
5. the creation of enthusiasm among market participants,
6. convince buyers to move to more expensive goods,
7. answers to consumer questions,
8. favorable information about the company.
The company’s promotion plan usually allocates separate goods and services to push
consumers from awareness to buying. However, the company can also try to express its general
image, position on a particular issue, take part in local life or have an impact on society.
A good promotion plan links goods, distribution, marketing and price components of
marketing.
Informing, Persuading, Reminding
Promotion implies any form of actions used by the firm to inform, persuade and remind
consumers about their products, services, images, ideas, social activities.
The firm can transmit the messages it needs through brand names, packaging, shop windows,
personal sales, industry exhibitions, lotteries, mass media, direct mail messages, outdoor ads,
magazines and other forms. These messages can focus on information, persuasion, fear,
sociability, product performance, humor or comparisons with competitors.
The consumers need to be informed, about new products and their characteristics, while
they do not have any relation to it.

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For products that consumers are well aware of, the main thing in promotion is the
transformation of knowledge about the goods into a benevolent attitude towards it.
For the products firmly established in the market, the emphasis is on reminding - strengthening
the existing attitude of consumers
Benefits of Promotion
What benefits does the company receive when promoting the goods?
 First of all, increasing the brand awareness among consumers.
 Provide relevant information
 Increase in potential customers and traffic of customers
 Increase in profits and sales
 The introduction of products in a constantly competitive market with the help of promotions.
Role of Promotion in the Marketing Mix
Mix-marketing is a concept that deals with the main components of a marketing plan.
The four main components of the marketing mix are price, location, promotion and product.
These four components work together to help create a marketing plan for the business. Without
any of the four parts, the marketing plan can suffer and not be as effective as it could be. You
could rely more on one aspect than others, but they all play a role.
All components of the marketing mix are interrelated. The marketing manager manages
the creation of a product with certain consumer characteristics, assigns a retail price, chooses
the place of sale and delivery channels of the goods, informs the potential buyer about the
advantages of the goods and convinces them to make a purchase.
In today’s highly competitive environment, companies are forced to seek hidden reserves to
create competitive advantages for their products. These reserves are concentrated in the main
elements of the marketing mix.
Elements of the marketing complex is a certain set of tools that affect the market and
significantly affect consumer demand.
In the context of the organization’s Marketing Mix, promotion means all marketing
communications, with which you can draw the consumer's attention to the product, provide the
necessary information about the product and its key characteristics, form a need to purchase
goods and make repeated purchases.
Promotion includes such marketing communications as advertising, promotion in points
of sales, search engine optimization, PR, direct marketing.
Rebates, Sweepstakes & Contests
Sales promotion methods have a more sustainable and lasting effect compared to
advertising. However, it is advertising and merchandising techniques that support the
effectiveness of any incentive.
Reduction in price, discount for the second unit - quite popular measures to increase
consumer demand. However, price methods of raising sales are quite expensive for
manufacturers and are effective only for a short period of time. In contrast to them, non-price
methods of sales promotion (soft-selling) appeared in marketing. In addition to increase
turnover, they help maintain the image of the company and mentally involve the client in
interaction with the product.
Sweepstakes, contests, guaranteed prizes for collected chips - all these are soft tricks that
increase the sales of goods. Sweepstakes and contests can be effective standalone tactics. With
their help, you can expand and strengthen the brand value of the goods to achieve high results
with a limited budget. They create an emotional mood of consumers for the goods, stimulate

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interest and participation. However, it is worth considering the fact that there is a low
selectivity to pre-selected consumer groups. Also, they can undermine the prestige of the brand.
MARKETING PROMOTION MIX
Definition: The Promotion Mix refers to the blend of several promotional tools used
by the business to create, maintain and increase the demand for goods and services.
The fourth element of the 4P’s of Marketing Mix is the promotion; that focuses on creating the
awareness and persuading the customers to initiate the purchase. The several tools that facilitate
the promotion objective of a firm are collectively known as the Promotion Mix.
The Promotion Mix is the integration of Advertising, Personal Selling, Sales Promotion,
Public Relations and Direct Marketing.

1. Advertising: The advertising is any paid form of non-personal presentation and promotion of
goods and services by the identified sponsor in the exchange of a fee. Through advertising, the
marketer tries to build a pull strategy; wherein the customer is instigated to try the product at
least once. The complete information along with the attractive graphics of the product or
service can be shown to the customers that grab their attention and influences the purchase
decision.
2. Personal Selling: This is one of the traditional forms of promotional tool wherein the salesman
interacts with the customer directly by visiting them. It is a face-to-face interaction between the
company representative and the customer with the objective to influence the customer to
purchase the product or services.
3. Sales Promotion: The sales promotion is the short-term incentives given to the customers to
have an increased sale for a given period. Generally, the sales promotion schemes are floated in
the market at the time of festivals or the end of the season. Discounts, Coupons, Payback offers,
Freebies, etc. are some of the sales promotion schemes. With the sales promotion, the company
focuses on the increased short term profits, by attracting both the existing and the new
customers.
4. Public Relations: The marketers try to build a favorable image in the market by creating
relations with the general public. The companies carry out several public relations campaigns
with the objective to have a support of all the people associated with it either directly or
indirectly. The public comprises of the customers, employees, suppliers, distributors,

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shareholders, government and the society as a whole. The publicity is one of the forms of
public relations that company may use with the intention to bring newsworthy information to
the public.
5. Direct Marketing: With the intent of technology, companies reach customers directly without
any intermediaries or any paid medium. The e-mails, text messages, Fax, are some of the tools
of direct marketing. The companies can send the emails and messages to the customers if they
need to be informed about the new offerings or the sales promotion schemes.
SALES FORCE MANAGEMENT
Sales Force Management (SFM) is a sub-system of marketing management. It is Sales
Management that translates the marketing plan into marketing performance.
Actually, sales force management does much more than serving as the muscle behind
marketing management.
Sales force management systems are information systems that help automate some sales
and sales force management functions. They are often found to be combined with a marketing
information system.
Sales Force Management: Definition, Objectives, Process, Strategies, Activities, Roles and
Other Details
Sales Force Management – Definition of SFM
Personal selling is a very important component of the marketing activity. The success of
a business concern depends considerably upon the performance of its salesperson. Salesperson
play a crucial role in communicating company and product information to customers. The task
of selling company’s products and services is entrusted to the salesmen of the company.
A salesperson not only communicates product information to customers but also relays the
reactions of customers towards company and its products to his employer. Hence, the
management of sales force is an important aspect of marketing management. It is concerned
with the task of selection, orientation training, supervision, motivation compensation and
evaluation of the sales force of the company.
Although in some organisation some of the above-mentioned duties are assigned to the
personnel manager but in most cases it is the sales manager who is responsible for successful
performance of these functions.
Sales Force Management (SFM) is a sub-system of marketing management. It is Sales
Management that translates the marketing plan into marketing performance. That is why sales
force management is sometimes described as the muscle behind the marketing management.
Actually sales force management does much more than serving as the muscle behind marketing
management.
Sales managers in modern organization are required to be customer-oriented and profit-
directed and perform several tasks besides setting and achieving personal selling goals of the
firm. Let us understand briefly the sales force management, tasks involved in the sales force
management. Sales managers in modern organization are required to be customer- oriented and
profit-directed and perform several tasks besides setting and achieving personal selling goals of
the firm.
Sales Force Management – Objectives of SFM
Objectives of sales force management are achieved through strategies. Policies provide
the guidelines. Selling strategies have two dimensions – what type of salesforce is needed and
how many of salespeople are needed. The overall size of the salesforce affects the number of
calls made and the frequency with which they are made.

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A company takes into account its competitive setting, because this influences all its
sales-related policies; which in turn affects the formulation of strategies. Marketing plans are
long-term and strategic. Mostly, sales plan is short-term and tactical. A company may operate
in pure competitive environment which is hardly found in practice, but makes our
understanding of other types of competition more incisive.
In practice, we may encounter monopolistic competition which is most common, or
oligopolistic competition where there are, a number of competitors. Mostly, the qualitative
personal selling objectives respond to the competitive setting in which an organisation operates.
Qualitative objectives have a bearing on the sales job.
A company may have the objective to rely 100 percent upon personal selling. It then
needs a larger and a trained salesforce. Another company relies more on advertising, and
expects the salesperson to provide just the support service, and order booking service. It may
do well with an ordinary salesforce, not so large in size.
Quantitative selling objectives also influence both the nature of the sales task on hand,
and the size of the salesforce. A larger sales volume target requires more effective and large-
sized salesforce that covers the territory intensively. Sales-related marketing policies provide a
framework within which the salesforce performs.
In many firms, the sales force is the only group specifically charged with, and
compensated for, generating sales revenues. Field sales people efforts are the firm’s critical
persuasive component. Some sales forces are huge. In India, two dozen life insurance firms
employ more than 20 lakh agents to sell their products; GE, IBM, Pfizer each employ tens of
thousands of salespeople around the world.
In B2B marketing, the field sales force has always been critical; salespeople typically
introduce products/services directly to end users. Business customers increasingly want
vendors to possess real expertise in their specific industries/functions.
They expect salespeople to help solve business problems, not just sell widgets. In turn,
many B2B vendors have expanded product lines, added solutions specialists to help knit
together disparate products/services into integrated offers.
By contrast, in B2C, mass communications/digital marketing are often the main
communication channels for reaching consumers; the sales force plays a supporting role. But as
the retail industry concentrates, a few large retailers/distributors secure significant power; B2C
field sales efforts are increasing.
Some FMCG firms now spend more heavily on direct selling relationship management
to wholesalers/retailers than on advertising to consumers! Example- At P&G, more than 400
persons work exclusively with Walmart.
Sales Force Management – Identifiable Processes Involved with SFM
Sales force management systems are information systems that help automate some sales
and sales force management functions. They are often found to be combined with a marketing
information system. Sales force automation includes sales lead tracking system that lists
potential customers through paid phone lists or customers of related products. Some of the
other elements of sales force automation include sales forecasting, order management a product
knowledge.
Some of the identifiable processes involved with sales force management are:
i. Setting targets and objectives based on inputs
ii. Assigning executives for achieving sales objectives
iii. Control processes are achieved within a given time frame and given markets

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iv. Management of system to handle uncertain environment

It is not just about the control systems involved with sales force management process but also
the various metrics involved.
Some of the metrics that are implemented in the sales force management processes are:
i. Time management- measures the tasks and time required for each task
ii. Call management- planning for customer interactions
iii. Opportunity management- if the sales force management process is correctly implemented,
sales opportunity will be created
iv. Account management- In case of multiple opportunities with a customer, the account is to
be measured by the tools, processes and objectives
v. Territory management- managing sales territories is of utmost experience for managing sales
figures
There are certain distinct advantages and disadvantages of the sales force management
systems as mentioned below:
i. Understanding the economic structure of an industry
ii. Identifying segments within a market
iii. Identifying a target market
iv. Identifying the best customers in place
v. Doing marketing research to develop profiles (demographic, psychographic, and behavioral)
of core customers
vi. Understanding competitors and their products
vii. Developing new products
viii. Establishing environmental scanning mechanisms to detect opportunities and threats
ix. Understanding one’s company’s strengths and weaknesses
x. Auditing customers’ experience of a brand in
xi. Developing marketing strategies for each of one’s products using the marketing mix
variables of price, product, distribution, and promotion
xii. Coordinating the sales function with other parts of the promotional mix, such as
advertising, sales promotion, public relations, and publicity
xiii. Creating a sustainable competitive advantage
xiv. Understanding where brands should be in the future, and providing an empirical basis to
write marketing plans regularly to help get there
xv. Providing input into feedback systems to help monitor and adjust the process.
The disadvantages are:
i. Difficulty in adopting the system
ii. Too much of time spent on Data Entry
iii. Losing personal touch in the process of automation
iv. Laborious process of continuous maintenance, information updating, information cleansing
and system up gradations
v. Cost involved in Sales Force Automation Systems and Maintenance
vi. Difficulty in integration with other management information systems
Major Steps in Sales Force Management:
1. Establishing Sales Force Objective:
Sales people must be given clear, feasible and attainable objectives.
2. Designing Sales Force Strategy, Structure, Size and Compensation:
(i) Sales Force Strategy:

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This includes deciding the type of persons required, type of products added in product line etc.
(ii) Structure:
Strategy influences the structure.
Possible structures are:
(a) Territorial Sales Force Structure:
A particular territory in which each sales person is assigned to sell company’s full line.
Sales area is small so selling can be done more effectively. The sales man can understand the
needs of the area and can design his strategy accordingly. This strategy is cost effective as well.
(b) Product Sales Force Structure:
It is used when the products are numerous, unrelated and complex. In this, sales force
sells along the product line. Kodak films and industrial goods are sold by separate sales force,
i.e. for industrial films technical sales force is there and a separate sales force sells commercial
armature films.
(iii) Sales Force Size:
It denotes the number of employees.
(iv) Compensation:
Proper compensation is required. Both monetary and non-monetary compensation would
complete the compensation plan.
Different methods of compensation and incentives are:
(a) Straight salary plan – Sales men are paid a fixed salary.
(b) Straight commission plan – Where only selling commission is paid on every unit sold.
(c) Salary plus commission plan – Where a fixed minimum salary is ensured and commission is
paid on every unit sold.
(d) Commission plus approved expenses – In this plan, in addition to a commission, some
approved expenses are reimbursed by the firm.
(e) Salary plus group commission plan – As the name suggests, this method advocates payment
of a fixed amount as salary. In addition the entire group is paid some commission which is an
incentive for good or efficient performance as a group.
3. Training Activities:
The activities involved in training are:
(i) Spelling out the aims of the sales training
(ii) Determining the needs of training
(iii) Identifying needs of individual salesman
(iv) Deciding about the nature and type of training required
(v) Content of training
(iv) Change in the methods of training
(vii) Developing the instructional material and training aids
(viii) Timing the training
(ix) Evaluating the effectiveness of the training
(x) Training the trainer
5. Supervising Sales People:
The senior management must supervise the sales force on a regular basis. The
importance of control cannot be undermined or given less emphasis than any other function.
Supervision helps the management in knowing what is going on. Also it helps in taking a
corrective action, if required, at an early stage.

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Another important objective of supervision is control. The management can show its concern
for its people, and thereby motivate them by regular and routine supervision. But such a system
must be used in moderation, lest the employees start feeling hassled and demotivated.
6. Evaluating Sales People:
Regular evaluation of sales people helps the management in identifying people who are
good or who are bad. Those who are good and efficient must be awarded for their task. Bad
ones must be motivated and trained to improve and if after all efforts they do not improve then
punitive measures must be adopted.
Sales Force Management – 6 Sales Force Management Tasks for an Effective Selling
Effort
To mount an effective selling effort, six sales force management tasks are critical. Tasks
1, 2, 3 address developing sales strategy, tasks 4, 5, 6 deal with implementing sales strategy.
We then discuss strategic/key account management.
Developing Sales Strategy:
Task 1 Set, Achieve Sales Objectives:
Sales objectives are desired results. They derive from the strategic focus in the market-
segment strategy- Increase customer retention, increase customer use, attract customers from
competitors, and secure new business.
Achieving sales objectives is the sales forces central task. The firm makes profits,
survives/grows, and enhances shareholder value only by selling products / services to
customers. Sales objectives turned into specific performance requirements are sales quotas.
Defining Sales Objectives:
The firm may choose among several sales performance measures. Most firms set sales
objectives in terms of sales revenues (dollars) or sales units. But focusing solely on sales can
short-change profits; hence, profitability objectives — profit contribution (gross profits less
direct sales force costs) — are also popular. Well-set sales objectives specify how much, by
when the sales force must meet performance targets.
Relating Sales Objectives to Marketing Objectives:
Integrating market strategy with sales strategy is a difficult challenge for many firms. A
useful way of driving integration is to rigorously translate marketing objectives into sales
objectives.
Breaking Down Sales Objectives:
Typically, the sales force breaks down overall sales objectives into control units —
sales regions, sales districts, individual sales territories. Senior sales managers gain significant
insight by comparing actual sales performance versus sales objectives for these control units;
they see if a particular region, district, territory is performing well or poorly.
Firms also establish sales objectives in time units — quarterly, monthly, weekly.
Calendarizing allows the firm to monitor performance continuously; it sets the stage for making
course corrections when performance falls short of objectives.
Alternative Sales Performance Measures:
Sales-/profit-based objectives are the most popular performance measures, but other
metrics have value:
i. Close rate — proportion of sales attempts resulting in actual sales.
ii. Customer retention — proportion of customers at start of year that are still customers at end
of year — opposite of customer defection (churn). Relates to customer lifetime value (CLV).
iii. Customer satisfaction — specific metrics focusing on customer experience.

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iv. Market share — performance versus competitors.

v. Price realization — extent to which the firm achieves planned price levels.
The firm should choose sales objectives carefully, based on the business, firm strategic
situation.
Task 2 Determine, Allocate Selling Effort:
The best way to determine/allocate selling effort is by examining the makeup/functions of
the sales force:
Sales Force Size:
The firm should employ the right number of well- trained, motivated salespeople.
Managing headcount is typically a crucial HR function; sales managers often wage difficult
internal battles to optimize sales force size. Figure 16.1 shows an underlying conceptual
framework — sales response function.

When selling effort is low, the firm makes few sales — A. As selling effort increases,
sales increase — B. Ultimately, sales top out at a maximum level — C — even if the firm were
to add extra sales people — D. The firm should continue hiring until the marginal revenue from
adding a salesperson equals that salespersons marginal cost. Many sales managers find this
curve intuitively reasonable, but do not know their sales force position on the curve.
Two approaches to the sizing decision:
Experimental:
Sales managers change sales force size, then see what happens.
Two broad hypotheses follow:
1. Sales force is too small, perhaps at B.
2. Sales force is too large, perhaps at D.
Sales managers should decide what criteria would support/reject each hypothesis, then select
one or more sales districts/regions for trial — increase/ decrease sales force size — and similar
districts/ regions as controls. If the experimental data support hypothesis 1, the firm should add
salespeople; if the data support hypothesis 2, the firm should reduce sales force size.
Analytic:
Three steps:
1. Determine total number of selling hours required to achieve sales objectives:
Two broad approaches for calculating required number of selling hours:
i. Single-factor model,
ii. Portfolio model
i. Single-Factor Model:

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Table 16.1 classifies current/ potential customers into categories — A, B, C, D (column I)

according to a single value measure — sales potential (II).
Multiplying number of customers (III) by selling time per category (IV) gives the required
annual selling time per category (IV).

Summing column (V) entries yields required selling time for all customers — 44,100 hours
(VI).
ii. Portfolio Model:
Customers and selling time are classified on multiple dimensions; Figure 16.2 illustrates
customer potential, firm share.

The firm trisects each dimension — low, medium, high — then identifies customer
numbers in each matrix cell (III), required selling time per customer (IV). From this point on,
calculations for single-factor/portfolio models are identical.
2. Determine available selling hours per salesperson:
Sales managers must calculate the time available for selling per annum. To illustrate-
365 days less 104 (weekends) less 31 (holidays/vacations) = 230 × 10 hours per day = 2,300
hours. But salespeople conduct many activities beyond selling. Assume salespeople spend just
30 percent of time actually selling; annual selling hours per salesperson = 2,300 × 30% = 690
hours.
3. Calculate required sales force size:
Total number of selling hours required (Table 16.1) = 44,100, divided by available
selling hours per salesperson = 690: 44,100 / 690 = 64 sales people.
In practice, this calculation provides a ballpark estimate for sales force size. The firm should
expect some variation from actual size, but significant variation demands consideration/action.

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Sales Force Activities:

The main sales force job is making sales. But claims on salesperson time include
checking credit/ inventories, collections, customer service, delivering products,
education/training, gathering market intelligence, internal communications, meetings,
qualifying sales leads, receiving payments, record- keeping, report writing, sales planning, and
travel. In many firms, even the best salespeople spend less than 20 percent of time face-to-face
with customers trying to make sales.
Firms regularly deploy technology to improve salesperson effectiveness. Most
salespeople use e-mail, laptop/tablet computers, smartphones; they have standardized slide
shows/interactive web-based demos for presentations. Other devices/applications -
Salesforce(dot)com - enable advertising coordination, best-practice/knowledge sharing,
delivery of well- designed sales literature/working models, scheduling reseller/customer/sales
force training/meetings, technical support, trade show participation.
Virtual meeting applications - GoToMeeting, Skype, Google Hangouts - reduce travel time by
allowing remote face-to-face sales meetings. Sales managers should develop guidelines
specifying salesperson time commitment to various activities.
Time allocation differs across sales territories. Salesperson activities also evolve based
on customer life cycle, other variables.
Selling Effort Allocation:
Selling effort (selling time) should mirror the structure of sales objectives. If the firm
sets sales objectives by product, it should allocate selling effort by product. If the firm sets sales
objectives by product/market segment, it should allocate selling effort by product/market
segment.
As with sales objectives, the firm should break down selling effort allocations by
individual control units - sales regions, sales districts, sales territories. Sales managers must
make these selling effort allocations, then ensure salespeople stick to guidelines. Left to
individual salespeople, such decisions are unlikely to optimize firm performance.
Telesales/Live Chat:
Many firms have reduced sales costs by adding telesales/live chat departments.
Telesales functions differ markedly from firm to firm - lead generation, interfacing with
potential/current customers, partnering with the field sales force.
Task 3 Develop Sales Approaches:
The value proposition anchors the sales approach - the central message the salesperson
delivers to customers. Because customer needs differ across market segments, the firm should
offer different value propositions across market segments.
Hence, salespeople selling multiple products to multiple segments must employ
multiple sales approaches. Aided by sales/marketing managers, salespeople should develop
approaches for specific customers, competitive threats. All sales approaches are more effective
when salespeople earn customer trust.
Two main components:
I. Tailoring Sales Messages for Different Customer Targets:
Customer needs, competitive offers drive the sales approach. Sometimes customers are
clear about needs; other times, individual decision-makers/ influencers have different
perspectives. Sales people must decide whom to target; they must also decide how to tailor
sales messages for each person.

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Examples- Procurement - price; engineers - product design; manufacturing - production

efficiency. The salesperson must orchestrate the sales approach for each customer
role/individual. Social media can help isolate response patterns, provide salespeople with useful
clues.
II. Designing a Process to Explain Benefits/ Values:
Selling is a process for facilitating customer buying. A standardized process is
undesirable, but sales managers should guide sales people’s approaches via well-designed
training programs, coaching, and counseling.
Good sales managers break the selling task into discrete easy-to-learn steps that follow a
strategic sequence:
i. Set Call Objectives:
Know the desired results from each sales call at each stage in the buying process. Many
salespeople use pre-call planning processes to set call objectives.
ii. Determine Sales Interview Tone:
Decide how strident/aggressive to be in different situations.
iii. Elicit Needs:
Develop procedures, including market research, to elicit/identify customer needs.
iv. Present Product Benefits/Customer Solutions:
Present benefits/values in the context of customer needs.
v. Handle Objections:
Anticipate, address customer objections. Objections differ across products/customers.
vi. Close the Deal:
Learn how to close a sale — ask for the order. Learn when to accept rejection, move to
another customer; learn how to better qualify prospects. A more recent, but controversial,
approach — the Challenger Model — recommends that salespeople challenge customers.
Regardless, specific influence principles may help persuade customers:
i. Liking — people buy from people they like.
ii. Reciprocity — if you give, people give back.
iii. Social proof — people follow the lead of others.
iv. Consistency — people fulfill commitments (especially public, written).
v. Authority — people defer to experts.
vi. Scarcity — people value what is scarce.
Implementing Sales Strategy:
Tasks 1,2,3 address developing sales strategy. Tasks 4,5,6 focus on implementing sales strategy
- ensuring the sales force delivers the planned levels/ types of selling effort.
Task 4 Design the Sales Organization:
Task 4 addresses sales organization design; firm choices should reflect strategic
realities. Example- If the product line is complex/heterogeneous, perhaps the firm should have
multiple sales forces.
Three critical questions:
1. Should the Firm Conduct Its Own Selling Effort, or Outsource to Others?
Many firms outsource functions — call centers, computer systems, financial processes,
legal, payroll, production operations, and security. Should the firm outsource selling effort?
Three crucial issues:
i. Control:

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Employee-based sales forces are more likely to follow managerial direction. Outsourced
agents, brokers, reps earn commissions; hence, the firm may exercise little control over time
allocations, effort.
ii. Cost:
Employee-based sales forces typically incur substantial fixed costs - salaries,
travel/entertainment, sales management, overhead allocations - regardless of sales. Third-party
sellers on commission are a variable cost - no sales, no costs!
iii. Flexibility:
To modify an employee-based sales force takes time - onboarding salespeople, equip-
ment. Third-party sellers typically work with strict performance criteria, short-term contracts;
hence, relatively easy termination.
2. How Should the Firm Organize/Reorganize an Employee-Based Sales Force?
Three interrelated variables for organizational design:
i. Desired degree of centralization/decentralization
ii. Number of management levels
iii. Managerial span of control
Specialization is one of the most important design variables. Should the firm specialize selling
effort? If so, how?
a. Unspecialized:
We generally consider two organization forms as unspecialized — salespeople face no
geographic bounds in searching for sales opportunities; the firm organizes territories by
geography. In both cases, salespeople sell all products to all customers, for all applications.
b. Specialized:
Specialization takes various forms — product, maintenance/new business, distribution
channel, market segment, customer importance/ size (strategic/key accounts). Generally,
specialized selling effort leads to higher sales, but also higher selling costs.
3. How Should the Firm Design Sales Territories?
Within the sales organization structure, the firm must design/redesign sales territories.
Frequent territory design changes are undesirable; they disrupt customer-salesperson
relationships.
Four standard design steps embrace sales potential, salesperson workload:
i. Design by Sales Potential:
The firm identifies geographically contiguous territories with roughly equal sales
potential. Some trial territories are geographically larger than others. Example- Equivalent
potential territories for Rasna might be Guwahati or several northeastern regions.
ii. Calculate Workload:
Use sales-effort allocation decisions (Task 2) to determine workload. From the initial
territory design, some salespeople have time left over; other salespeople have insufficient time.
iii. Adjust Initial Design for Workload:
Make territory design adjustments to optimize sales potential, salesperson workload.
iv. Continuous Monitoring:
Sales managers monitor salespeople/territories, adjust periodically.
Task 5 Create Critical Organizational Processes:
All sales organizations employ processes - sales planning, pipeline analysis, sales
forecasting, evaluation methods, reward systems - to help implement planned selling effort.
Today, many firms enable these processes using powerful tools/analytics - Salesforce(dot)com.

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Sales Planning:
The firm should actively engage salespeople in a detailed sales planning process.
i. Top down - senior sales managers work with regional/district sales managers to decompose
overall firm sales objectives into individual control units - sales regions, districts, territories.
They also decide broad selling effort allocations by product, market segment.
ii. Bottom up - salespeople analyze territories, work with district sales managers to agree on
objectives, develop sales action plans.
Pipeline Analysis, Sales Forecasting:
The sales pipeline (SP) comprises stages in the selling process; customers move from
prospects (potential customers) to buyers. SP serves as a systematic, visual approach to
categorizing potential customers through the selling process. Pipeline analysis tracks success as
customers traverse these stages to actual sale.
IBM’s pipeline — Figure 16.3 - comprises:
i. Discover- Salesperson- Believes customer intends to buy.
ii. Identify- Customer- Interested in IBM as supplier.
iii. Validate- Customer- States a need, buying vision.
iv. Qualify- Project sponsors- Work with IBM team on preliminary solution.
v. Conditional Agreement- Project sponsors- Conditionally approve proposed IBM solution.
vi. Business Won- Customer, IBM team- Sign contract.
vii. Customer Expectations Met- Customer- Satisfied with purchase, installation moves
forward. IBM receives payment as scheduled.

Individual pipeline systems use various stages, but operate similarly, tracking success at
different stages. Rigorous pipeline analysis leads to better sales forecasts.
Software applications allow salespeople/sales managers to track/manage sales pipelines, decide
where additional resources are appropriate. These applications have many tools for better
analyzing customer data, securing insight.
We cannot overstate the importance of good sales forecasting. At a minimum, good
forecasts are important for financial budgeting, production planning. Poor forecasting can lead
to significant problems.
Evaluation Methods:
The most critical evaluation measure for salespeople is sales performance versus sales
objectives. Sales managers should also assess selling effort - quantity, quality. Are salespeople
working hard? Are they working smart? Most good sales management systems allow managers

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to customize dashboards to track metrics on direct sales activity — calls per day, calls per
account, time at new accounts.
Reward Systems:
Reward systems are powerful motivators for sales people.
In a truly motivating system, salespeople will answer YES to these questions:
i. Can I achieve my sales objectives?
ii. Do I value the rewards I will earn for meeting these objectives?
iii. Do I believe I will truly receive the rewards I earn?
iv. Is the reward system fair?
Sales reward systems vary widely.
Components:
i. Financial Compensation:
Various combinations of three financial rewards:
a. Base salary- Paid regardless of sales performance (in the short run).
b. Bonus- Paid for achieving sales quota — typically target sales revenues (sometimes profit).
c. Sales Commission- Variable compensation based on sales (or profits).
ii. Recognition:
This important reward is relatively inexpensive, but can be a powerful motivator.
Creative sales managers recognize salespeople for various performances — highest revenues,
best sales growth, most profitable sales. Many firms recognize high performers annually with
membership in a Presidents Club, including a trip (with spouse) to an exciting destination.
iii. Promotions, Work Assignments:
Promotions, more interesting job possibilities are highly motivating for some
salespeople.
Generally, financial compensation is a salespersons most important motivator. By developing a
fair, consistent compensation plan, the firm drives the behavior it desires.
Task 6 Staff the Sales Organization:
Salespeople are one of the firm’s most important resources. Sales managers must ensure
the sales force is fully staffed, all territories filled, at all times. Sales managers must plan for
natural attrition, dismissal, promotions/transfers. They should inventory salespeople — develop
candidate pipelines - ready to fill a territory when one opens up.
Many firms have a policy of recruiting salespeople internally; they may create career
paths in related departments - sales support, customer service. Others recruit externally,
continually interviewing candidates to bring fresh perspectives/expertise.
Staffing process steps to hire, prepare effective salespeople:
i. Recruiting:
Sizing, defining the pool from which to select salespeople.
ii. Selecting:
Using criteria to choose salespeople from the recruitment pool.
iii. Training:
Ensuring salespeople have the knowledge, skills, and abilities to be effective.
iv. Coaching:
Continuous efforts by first-line sales managers to improve selling effectiveness.
v. Retaining:
Maintaining high-performing salespeople.
vi. Replacing: Weeding out poorly performing salespeople; filling vacancies.

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Sales Force Management – Activities of SFM

Sales management is an integral system of marketing management. It translates the
marketing plan into performance. Sales management is hence described as the muscle behind
the marketing management.
Sales management involves the following activities:
(a) Need definition – Defining the manpower requirement and the skills sought in them.
(b) Recruitment – Recruiting the desired kind of people.
(c) Training – Training the sales team to enhance the desired skills and to make them efficient
in the task assigned to them.
(d) Compensating – The recruited sales people must be suitably compensated. This is necessary
because unless they are compensated suitably, they might join a competitor and give away our
trade secrets or even if they stay with our firm they may be demotivated and may not perform
as required.
Compensation should be such that neither employees nor employer feels exploited
(e) Motivating – Motivating the employees is as important an activity as any other activity. A
motivated sales person will definitely sell more as compared to a non-motivated salesman. It
makes a good business sense to motivate people to work more efficiently.
The steps in sales-force management are the same as those in personnel management.
Sales-force management work starts with job analysis; viz. determining the job objectives, the
component duties and responsibilities performance criteria, and reporting relationship. The
output of the job analysis is the written job description that is used in deriving the necessary
qualifications (job specifications) of the employee.
Qualified job applicants must be found, and this requires decisions on recruiting sources and
methods. From the supply of applicants, those meeting the requisite job specifications are
selected.
After selection, the selected persons undergo initial training and throughout their careers
with the company – receive continuing training through diverse training systems.
Compensation plans are designed to provide appropriate levels and methods of compensation.
When the Sales person is assigned to work in the field, other personnel functions start to
operate. Motivational plan is introduced to motivate the salesperson to make more productive
use of his working time. Controlling sales personnel requires analysis of selling records and
evaluations of sales performance.
Involvement of Sales Executives in Sales Force Management:
Sales-force management is a concern of sale executive’s at all organisational levels. For
most of the sales executives, effective performance by sales personnel is the utmost
responsibility. Above the salespeople, there are sales supervisors who devote much time and
energies to manage the sales-force. Others, who are above the level of sales supervisors spend
less time on managing sales persons activities, but are concerned with their effectiveness.
Middle-level sales executives, such as regional sales managers, serve in line-capacities
managing lower level sales executive who, in turn, manage the sales-force. Other middle-level
executives specialise either in sales training or in brand promotion (a phase of marketing) that
affects the job of salespersons.
At the top of managerial hierarchy, the chief sales executive has general responsibility,
not only for managing subordinate sales executives, but also for the management of other sales
and marketing activities. As sales executives move to and although middle management levels,

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they retain concern for management of sales-force. As they move up, added pressures cause
them to relate their efforts among growing set of responsibilities.
In addition to sales-force management responsibilities, they participate increasingly in long-
term planning and forecasting, structuring of product line, setting prices, planning promotional
programmes, managing marketing channels, and physical distribution.
Sales Force Management – Sales Force Management and Salespersons
It is a key question in selling strategy. The considerations are the expectations of the
organization from the salesforce and the measurement of performance. Each organisation has
its individual requirements. Each organisation has its own strengths and weaknesses in terms of
the product it sells.
It also depends upon the target audience catered to, e.g., medical representatives selling
to doctors must be specially trained in pharmacology, and are B.Sc. in bio-sciences or
chemistry or B.Pharma. Competitive setting and pricing strategies also affect the type of people
needed. Different selling jobs do need different selling abilities.
A driver doubling as salesperson of a soft drink manufacturing company requires a
different capability than a sales engineer selling elevators to a miner.
Sales personnel are considered in terms of the expectation an organisation makes. Their job
description spells out their duties and responsibilities. Their job specifications spell out the
qualifications and experiences needed. Salespersons are suitably placed in the organisation,
matching the job and the person.
Product Market Analysis:
Selling task varies from customer to customer, and market to market. To take an
extreme example, a salesman may sell a single product to several different types of customers.
Another extreme is to sell a diversity of products to a single type of customer. In practice,
salespeople sell limited range of products to limited type of customers.
Salespersons can be product specialists or market specialists or product market specialists. The
nature of product-market interaction is important. Product-market grids can be constructed by
companies to show these interactions. We can prepare a much more comprehensive grid.
We can choose any combination of product-customer group as our market. Product
specialization is necessary for complex, technical products. A salesperson here serves as an
advisor. Market specialization is chosen for non-technical products having several markets or
customer-group, but each with a unique set of problems.
It, therefore, calls for a different selling approach or specialized services. Thus, a paint
manufacturer may have different salespersons for domestic paints, industrial paints and marine
paints. In many situations, a salesman must master several product-lines and an ability to deal
in different types of customers.
Other considerations in deciding the type of salespersons needed are the size of the customer
organizations and the geographical location of the territory.
Role in Securing Orders:
A salesperson’s role in securing orders also affect the type of salespersons required. In
different selling environments, the order securing process operates differently, e.g., some have
to solicit orders aggressively such as computer salesmen, whereas some just accept orders
which come their way such as a salesman of government textbooks prescribed for primary and
secondary schools. Pepsi and Coke are pre-sold to the customers, and so the driver doubles up
as salesman and jots down the order from the retailer. A person selling knowledge books will
have to be more aggressive.

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Promotional strategy also influences the type of salespersons needed. Reliance on pull
strategy needs just order takers. Reliance on push strategy requires order getters.
Some salespersons assist the trade in making sales. These efforts result in orders in future.
Sales engineers act as advisors and design consultants in industrial marketing.
Size of the Salesforce:
The second dimensions of selling strategy is the size of the salesforce. An organisation
first decides what type of salespeople it requires and then how many of them are necessary so
as to meet the sales and profit objectives. Too few salespeople mean loss of opportunities and
too many of them, unnecessary expenditure. The exact number of salespeople a company must
have is difficult to pinpoint.
Three basic approaches are used to compute the salesforce size:
(i) Workload Method:
The basic workload is to be distributed equally amongst the salespeople. Here, we have to
divide the total workload by the workload an individual salesman can possibly handle.

The above-described approach is appealing to sales managers, as it is conceptually easy

to follow. This approach, however, neglects the profit as an objective, though the number of
calls and frequency of calls do have some consideration for profit. Another fallacy is the
assumption of equal distribution of workload amongst the salespersons. Some salespeople
achieve in lesser time what others achieve taking far longer. The quality of time does matter as
much as the quantity of time spent.
Sales Potential Method:
In a job description of salesman, we list several activities. The performance of one set
of activities represents one sales personnel unit. An individual salesman does not always equal
to one sales personnel unit. He may represent more than one unit or less than it, depending
upon his effectiveness. We have to consider the number of sales personnel unit required and the
number of salespersons required to perform them.
These two equal if salespeople were to perform all the activities listed in the job
description. Job descriptions are based on average performance of average salesmen. The sales
volume in rupee terms that each sales personnel unit (or salesman) would generate can be
estimated from this. This amount is divided by sales forecast or sales volume objective. The
figure is adjusted for salesforce turnover. The answer indicates the number of salespeople
needed.

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Consider the following equation:

The above model does not consider the time for recruitment, selection, training and
development of the salespeople. All these factors contribute to the sales productivity. A
salesperson who attains a desired productivity by a training period of 5 months, requires a lead
time for recruiting him of 5 months. The above model makes one more assumption. It assumes
all sales territories have equal potential, while in reality this is not so. Sales job description
must be sharply drawn to estimate the correct sales productivity. Salesforce turnover is a matter
for reviewing the experiences, retirements and promotions.
Sales forecast itself is also dependent upon the size of the salesforce. In the planned
period, we take a realistic account of sales personnel units available (manpower inventory) at
our disposal. Any addition to the salesforce takes some time. Manpower inventory available
enables a realistic sales forecast.
Sales volume potential of a growth-oriented company is a function of the effectiveness
and number of salespersons it has got. Sales forecast is a product of the number of salespersons
and the average sales productivity. Geographical expansion and slowing down of the growth
rate, we reverse the above and calculate manpower required by determining the sales forecast
first, and then dividing it by sales productivity of an individual salesman.
Incremental Method:
This is the soundest method conceptually. The proposition here is that net profits rise up
when additional sales hands are recruited provided that the additional sales revenue exceeds the
additional cost of employing the new hand. The application of this method requires two
essential inputs – additional revenue and additional costs.
Suppose there is a company which has experienced an increase in sales turnover with an
increase in the number of salespeople. Its cost of goods remain more or less the same at 60 per
cent of sales. All salespeople receive the same salary of Rs. 1.5 lakh per annum. They get in
addition a commission of 7 per cent in sales they generate.
A travelling allowance of Rs. 2,000 per month is paid to the salespeople. The company
has now 10 salespeople on its pay roll and wants to consider whether it can add new hands. The
increases expected in sales volume, cost of goods sold and gross profit by adding eleventh to
sixteenth salespeople.
The net profit contribution of each additional salesperson is calculated. Till we add 15th
salesperson, we get additional net profit contribution of Rs. 24,000. However, if we add the
16th person, there is a negative net profit contribution of Rs. 35,000. Thus, the optimum size of
the salesforce for this company is 15 salespersons.
This method is sound conceptually, but is difficult to apply in practice. The sales
response to a particular selling effort function needs to be established to apply this method. It is
necessary for applying this model that sales responds to the number of salesperson employed.
Sales response function is not so easy to establish, unless a company has got the capability to

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conduct sophisticated research. In addition, other promotional methods apart from personal
selling may affect the sales. This model also ignores the competitive activity, and the
investment effect of personal selling expenditure.
Customer Tailored Selling Strategies:
Strategy of selling ultimately is tested against interactions of the salespeople with the
customers; which lead to the realization of the selling objectives. The type of salespersons
required and their number are the first two key decisions taken by a company. Later, the focus
is on developing an individual selling style, which is mutually beneficial. All said and done, a
salesman achieves success by his interactions with the customers.
His behaviour may vary from customer-to-customer. The extent of this variation is a
matter of selling skills. This calls for pre-planning and the actual performance during the call.
We have already seen the significance of prospecting. We have seen how competitive setting
affects his sales planning. Each call has some definite goals. Selling strategy is planned to
realize these goals. Salespeople must be thoroughly acquainted with the selling techniques they
can use, and management has a responsibility in doing so.
Multilevel Marketing:
It is already banned in China and a ban is under consideration in the UK. It is under
investigation in the US. A person signs up with the company. There may be joining fees. He
buys a set of products and start selling them to people. He also recruits other salespersons who
in turn are encouraged to recruit more salespersons, thus resulting into a selling pyramid. The
person earns commissions on what he sells plus what the pyramid under him sells. If the
stretched targets are achieved, there is bonus commission. Bonus commissions are handsome,
going up to 21 per cent of sale value.
The initial investment consists of joining fee which is Rs. 4,200 for Amway and an
annual fee of Rs. 1,800. Others are not so expensive. Tupperware has no joining or renewing
fee, but expects an initial sale of Rs. 4,600 worth of goods without commission. In other words,
it’s a joining fee of Rs. 1,150 (at 25 per cent commission foregone).
Amway who sells dish-cleaners offers 15 per cent commission on what one sells. A person is
entitled to one point for every Rs. 30 of sales. Thus, a sale of Rs. 6,000 earns a person 200
points. Beyond 200 incentive points a month, there is an additional commission by way of
incentive. This additional commission is variable and varies according to sales. A person shares
the incentive commission with other recruits.
More money is made as the network grows. How many persons should be there in the
down line? If we take 10 persons under us, and each of these 10 take another 10 below them
(level 2), we reach statistically the entire population of the earth which is 6 billion at present at
level 8. If we come across in practice levels 29 or 37, it is because the dropout rate is very high.
Most of MLM chains sell high-priced products. It puts people off. The company benefits by
saving on salaries. There is no haggling with distributors. The scheme works only up to certain
levels. With 10 people down line, one can continue up to level 4. The operating costs which are
very high are to be met out of commissions earned. A salesperson has to devote so much time
and time itself is money. As the market gets exhausted soon beyond certain levels, this cannot
be called a sustainable business.
Direct Selling:
Direct selling is characterized by low investments and high returns. It has the potential
to fetch $ 1 billion plus by 2013; if it grows by 17 per cent per annum. The current Indian
market for direct selling products is around US $600 million. It provides employments to

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around 1.8 million people, of which 1.2 million are women. It is a Rs. 3,300 crore industry
today in India.
Direct Selling Companies:
The Indian direct selling is currently estimated at around Rs. 7,400 crore in 2017-18,
excluding the insurance business. It is projected to grow at 12.5 per cent to touch Rs. 64,500
crore by 2025. Most firms recorded over 30 per cent growth last fiscal in smaller towns.
Oriflame wants to strengthen its network in Tier I and Tier II towns. Oriflame is a Swedish
cosmetics company which will add 150 products to its portfolio, taking the total count to 275
SKUs.
Forever Living Products is a rival direct selling cosmetic player. Amway India is the
largest direct selling FMCG Company in the country. It wants to strengthen its rural presence
by setting up pick-up and ordering centre in more than 400 locations. Its revenues are Rs. 1128
crore in 2008 and expected to grow by 27 per cent. It has a product portfolio of 100 plus
products.
Women Empowerment:
McConnell was a door-to-door bookseller who discovered that people were more
interested in free samples of his perfumes than in his books. In 1886, he founded a perfume
company and employed women to sell them directly. In 1996, they started operations in India.
Avon also allows women to run their own business without sacrificing the family life.
Oriflame:
Oriflame came to India in 1995 and has today a salesforce of around 1.3 lakh consultants.
Oriflame was set up abroad in 1967. (3.6 million independent consultant – 2017)
Modicare:
Modi group is one of India’s leading direct selling companies which has 34 center’s across the
country. Direct selling provides opportunities of employment to people at home.
Amway India Enterprises:
This is the largest direct selling company in India. It has presence in 23 cities and 2.5
lakh houses. It is expanding. It is a subsidiary of $ 6 billion Amway Corporation. Amway India
started operations in 1998. It markets concentrated home care and personal care products.
Selling concentrates is their core competency. LOC (liquid organic cleaners) costs Rs. 322 a
litre. It can be diluted 164 times; the cost works out to Rs. 2 a litre. It has registered a turnover
of Rs. 10 crore in July, 1999. In September 1999, they reached Rs. 90 crore. The parent
company operates in 80 countries. It has more than 1 lakh active distributors. Most of them are
women. Direct selling keeps distribution and advertising costs down. It has to incur expenses
on training.
Hindustan Lever:
Hindustan Lever has decided to set up its own multi-level network of direct sellers. It
will use this network to sell Aviance, a range of premium explanation-demanding products,
developed at the US- based Unilever Beauty and Skin-care Research Centre.
Multilevel Marketing:
Multilevel marketing has a two-dimensional approach – personalised selling of products
with minimum promotional expenses and creation of a staunchly loyal salesforce. This team is
expected to rope in more people as a part of the chain. The distributor earns profits not only
from what she merchandises on her own, but also bonuses from what her ‘down-line’
merchandises. The down-line is an important feature within this concept of marketing. It

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consists of a chain of individual entrepreneurs, all of whom are introduced in the system by a
sponsor. The more people a sponsor adds to the chain, the more she earns.
Mutli-level marketing is practised in India by companies like Medicare, Avon Beauty Products,
Tupperware and Oriflame. The latest entrant is Amway India Enterprises.
Viral Loop:
Multilevel marketing spreads very fast vims-like. Amway and Tupperware thrive on
this concept. It is a consumer-dealer initiative. Each franchisee of sorts is also a franchisor of
sorts. The chain continues, and the business spreads. Ponzi scheme of Charles Ponzi in 1919
was also based on this concept. Brownie Wise made Tupperware sales to spiral even beyond
the company’s production capacity. She was the effervescent face of the company.
Sales Force Management – Role of Marketing in SFM
One in nine Americans works in sales. Thus, understanding sales/sales management
roles, aligning selling efforts with marketing, is more crucial than ever. Marketing and sales
must be on the same team, each performing its own critical functions. We do not pretend this is
easy. Marketing and sales often have different perspectives. Marketing tends to have a long-
term, more strategic view; sales must deliver short-term revenues.
Creative tension is often beneficial for firm performance, but badly coordinated sales
strategies can lead to distracting internal competition among product managers. A multiproduct
firm may have several product-market strategies, each comprising several market-segment
strategies. The sales strategy must integrate these various market strategies into sales strategies
reflecting a broad range of products/ services sold to several market segments.
Well-managed firms implement processes to tightly coordinate marketing, sales efforts. They
encourage disciplined communications/reporting, create joint assignments, rotate jobs, co-
locate marketing/ sales personnel, and improve sales force feedback. The sales force retains
responsibility for securing deep customer insight, proposing actionable solutions, accessing
resources to solve customer problems.
Marketing develops market plans with significant sales force input, in sync with the
overall market planning process. Senior marketing/sales managers meet frequently to hammer
out realistic/coordinated marketing/sales objectives, priorities in a spirit of cooperation. Some
firms even appoint sales/marketing coordinators; their job is to ensure effective senior
marketing/sales manager interactions.
Leading Sales Efforts:
The sales management job is to make salespeople successful. All sales managers, junior
and senior, should lead from the front, spending time in the field with salespeople — coaching,
inspecting, observing, teaching, selling.
Sales managers should empower salespeople to take initiative, by fostering a culture of
acting like it’s your own business. The most effective sales managers innovate new ways of
delivering customer value; help drive entry into attractive markets; spearhead evolution of new
sales models/ sales organizations.
To secure the best results, sales leaders treat human resource expenditures as
investments; they view selling as a training ground for general management. The most effective
leaders advance the science of sales and the art of the customer relationship. They make fact-
based decisions, like allocating sales resources — salespeople, strategic/key account managers,
telesales — across market segments/sales channels.
They leverage sophisticated data, intellectual capital by:
i. Using internal data sources to garner insight on customers/customer behavior.

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ii. Supplementing firm products with advisory services to offer customer solutions.
iii. Building specialist expertise to fashion/develop customer solutions.
iv. Working with specialists to install/implement solutions for customers.
Sales leaders understand viscerally that customer success drives firm success. They
create a risk-taking culture where failed experiments for delivering customer value are
accepted, expected. They penalize repeated mistakes, but celebrate/reward learning from honest
mistakes. They hire, develop people willing to try, fail, learn. Sales leaders discover/ develop
best practice, by following the fail or scale principle.
Perhaps the most critical leadership function is encouraging salespeople to live the
mission — providing a rationale for the sales job over and above financial rewards. Salespeople
who internalize a greater purpose build credibility, trust with customers; they develop a
powerful differentiator for defeating competitors.
Strategic/Key Account Management:
Realizing the 80:20 rule applies to revenue, profit distributions, many firms implement
strategic/ key account (SKA) programs. These firms identify the most important
current/potential customers, then provide additional resources, greater attention than to regular
customers. Winning/losing an SKA is a significant organizational event. In most SKA
programs, strategic account managers (SAMs) are responsible for building/sustaining
relationships with individual strategic accounts. Successful SKA programs adopt the
congruence model.
Critical decisions:
i. Strategy:
Deciding firm commitment to the SKA program, overall resource allocation, number of
strategic accounts, revenue/profit targets, types of firm/SKA relationships.
ii. Organization Structure:
Concerned with SKA program placement, reporting structure, interfaces with other functions.
iii. Human Resources:
Securing/training/retaining appropriate SAM personnel.
iv. Systems and Processes:
Methodologies for helping SAMs do their jobs — SKA planning systems, customer
profitability measurement, benchmarking, best-practice sharing.
Sales Force Management – Managing the Sales Force: Features and Managerial Decisions
Managing the sales force involves the implementation of personal selling strategy. The
two key decisions in personal selling strategy are on selling styles and sales-force size. The
decisions on selling styles determine the range and nature of activities required for management
of sales-force. The decision on size of sales-force determines the magnitude of these activities.
These key decisions result from planning how to achieve the sales volume and related company
goals.
Once the sales people have been appointed the task of managing the sales force begins.
Managing the sales force is very important because the sales job is very dynamic and there are
no fixed predictions. Consumer thinking keeps changing from time to time and from one
situation to another.
There are targets that need to be achieved in a fixed time period, customers need to be
satisfied, reports need to be prepared, market intelligence is to be gathered and many more
activities need to be done by the sales people.

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All these activities or functions of the sales force needs to be coordinated and managed
in a professional manner. The motivation and enthusiasm of sales people is the key to success.
Good management of the sales force can ensure high levels of motivation and enthusiasm
which will bring revenue and profit to the organization.
Key Features in Managing the Sales Force:
1. Select the Right Candidate: Half the job of managing is completed if the candidate selected
is the right candidate fits the job description. Managing a sales person who is suitable for the
job is less challenging then managing someone who does not fit into the job. Example- An
FMCG Sales person recruited for an automobile sales position is a misfit. It will become very
difficult to manage the sales person in such a situation.
2. Train the New Sales Person: Sales people, no matter how many years of experience they
have, need to be given training on a regular basis. The training is necessary because of the
changing market conditions, culture of the new organization etc. It may also act as a motivating
factor for the sales people.
3. Provide a Mentor: The best way to manage the sales force is to identify a mentor for the
team of sales people. A mentor is an experienced person who has been exposed to various
markets and situations. A mentor supports, guides and motivates the sales people.
4. Provide a Plan: To achieve any objective a plan is required. In sales too, there are a number
of objectives that need to be achieved, like, sales volumes, revenue, profit, number of new
customers, customer satisfaction levels etc. To achieve all these objectives a plan needs to be
given to the sales people. A plan facilitates the actions of the sales people and allows for
corrections or modifications if needed.
5. Develop Soft Skills: Soft skills are all those skills other than the formal education or
technical qualifications. Soft skills include, time management, etiquettes and manners, people
skills, speaking skills, dressing sense etc. Sales people should develop their soft skills, as they
are in constant touch with the customers and they are also the face of the company. The more
the sales people develop their soft skills the more confident they will become and managing the
sales force will become easy.
6. Review Performance: The sales people have a plan for the sale’s tasks to be accomplished.
This plan needs to be reviewed with the superiors like the sales manager etc. The review helps
the sales person to understand what has been achieved and what needs to be achieved. The
review also provides a platform for the sales people to express their opinion and this gives them
a sense of belonging.
7. Motivate: Motivation is the essential element in managing the sales force. Managers need to
learn the art of motivation and keep their sales team highly motivated. Lack of motivation will
lead to ill thinking and it will become difficult to manage the sales force.
8. Reward: Sales people work hard and are under tremendous pressure. To keep a positive
atmosphere and motivation levels high, the sales force needs to be rewarded from time to time.
The rewards can be in the form of money, vacations, electronic gadgets, family outings etc.
9. Promote: Sales is a fast pace field. Once targets are achieved and customers are satisfied the
sales people develop a sense of accomplishment and expect promotions to the next level.
Timely promotions help to keep the sales force organized and productive.
10. Remuneration and Incentives: The remuneration package is also very important, every
individual works to earn money. Sales people bring in the revenue for an organization, and they
are the ones who are in constant touch with the customers and the products. For efficient

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management of the sales force the salary structure and incentives should be as per industry
standards and the sales force should not feel exploited.
11. Good Working Culture: The sales people are in constant pressure to achieve the sales
targets and generate revenue, there is a lot of stress on the sales force. Managing the sales force
is possible only with a good. working culture, where the environment is friendly, supportive
and professional.
12. Adopt Technology: The sales force has a lot of presentations to make, reports to prepare
and demonstration to be made. If technology is adopted, all these activities can be carried out a
lot more easily and managing becomes less challenging.
Management of Sales Force: Sales management has dual responsibility, generating sales
volume and developing sales man power. Long run success of the firm in generating sales
volume hinges upon the development of sales man power. Sales people are an invaluable
human resource of the firm. They have practically unlimited potential for growth and
development. The effective management of the sales people is a major task of sales
management. In its essentials, sales management is just personnel management applied to the
sales department.
Effective management of sales force requires leadership plus administrative skills in planning,
organizing, directing, motivating and controlling the personnel selling portion of the promotion
mix.
Sales managers must determine the number and types of sales people required to
implement the sales plans and programmes at a given time. Then sales people must be secured
and their activities are planned, organised and directed in order to achieve the set sales
objectives.
There are some areas for managerial decisions regarding the sales force:
1. Recruitment and selection
2. Training
3. Remuneration and expenses
4. Supervision and direction
5. Motivation
6. Control and evaluation or assessment of sales performance
1. Recruitment and Selection: Job analysis can provide job specifications at the required sales
positions. Recruitment deals with securing as many qualified people as possible so that some of
them can be selected to fill the vacancies. Possible sources of applicants including company
personnel, friends, middle men, sales people of other companies, educational institutions,
newspapers and trade journal advertising.
The selection process in the information gathering, information evaluation and decision making
required to screen applicants and choose among them.
There are three screening stages:
i. Screening of applications
ii. Psychological and other tests
iii. Interview each screening makes an important contribution
Proper selection will ensure the right person for the right job. It will reduce cost of training as
well as selling costs. We shall also have stable sales force. Above all proper selection can have
higher efficiency in selling.
The usual procedure of scientific selection of sales people may be summarized as follows:
i. Securing applications on the basis of job description and job specification

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ii. Screening of applications, reference contacts, credit checks etc.

iii. Preliminary interviews
iv. Psychological tests – interest, aptitude and intelligence tests
v. Final interview
vi. Medical examination
vii. Appointment and induction
Personal interview is an indispensable device in selecting sales people. Interview is the
heart of the selection technique. It gives accurate and reliable mental picture about the fitness or
otherwise of the candidate for a sales position. To be most effective, tests should be prepared
specifically for the sales positions and be based upon job specifications.
Psychological tests are of the four major types; Intelligence tests, Aptitude tests, Interest tests
and personally tests. Tests offer only one source of information to be used in the selection
process. At best they should be used to screen out applicant from further consideration and not
as the basis for acceptance or final selection.
2. Training:
Good salesmen are not born. They are made by all well planned and well executed
training programmes. Trained salesmen are able to secure sales orders more quickly, sell more
and are easier to manage. Properly selected persons must undergo adequate training before they
put on their selling jobs. Training is necessary to secure effective and efficient sales. It also
facilitates managerial control. Trained sales force can exercise effective self-control and self-
supervision.
Sales people must have knowledge, skill and attitude training if they are to be effective in their
selling field.
Knowledge training includes:
i. Knowledge of the products
ii. Knowledge of types of customers
iii. Knowledge of the company organization, plans, policies and procedures
iv. Knowledge of promotion mix
v. Knowledge of salespersonship to do the sales jobs
vi. Knowledge of market and competition
Sales knowledge training can he imparted through lectures, sales training conferences,
plant visits, individual study and correspondence between sales managers and their people.
Sales skill training is given on the job by a skilled trainer. Skills in each step of the sales
process will have to be developed.
In addition to actual sales presentation, salesperson have to be trained on other parts of
the sales calls, including approaching the customer, identifying sales prospects, as well as
techniques of over coining objections, closing of sales and follow up procedures. Role playing
and video tape play back techniques are used in sales skill training. The objective of such skill
training is to use sales knowledge effectively.
This is accomplished through practice under an experienced trainer. Sales attitude
training tries to strengthen sales man’s positive attitude toward his company, product and sales
manager and to transform his negative attitude into positive ones. Personal conference with
sales managers, self-development courses, visual aids and correspondence are all employed to
impart proper sales attitude. In salesperson’s training, field training is essentially on the job
training.

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The trainee learns by watching an experienced salesperson in actions, and by practicing

sales techniques under the guidance of the experienced or trained salesperson. We have also
programmed instruction for sales training. Readymade programmed instructional courses can
be prepared by skilled and expert trainers. At present video tape, closed circuits for broadcasts
are used for training salesmen. Training is a continuous process as we have new products, new
problems and new competitions.
3. Remuneration and Expenses (Compensation):
Perhaps the major motivating factor in selling is compensation given to the sales people.
Sales compensation plan has four elements:
i. Salary
ii. Commission based on productivity
iii. Expenses (traveling, loading and boarding)
iv. Fringe benefits
The compensation is based on the objective setup by the marketing programme and the
personal selling objectives. It should provide stability of earning as well as incentives for
salesmen to increase sales volume, profit, and the like. It should also facilitate managerial
control on salesmen’s activities.
It should be simple, easy to understand and expensive to administer. It should be fair to
both the company and its sales force, and competitive with compensation plans in the industry
area.
A part for reimbursement of expenses and fringe benefits, there are five ways of paying
compensation to sales force:
i. Straight salary
ii. Straight commission
iii. Drawing account
iv. Bonus and
v. Combination
The judicious combination of salary’ plus commission is considered the best plan. It is
desirable as it gives security of income as well as necessary incentive to stimulate salesmen to
put forth their best efforts. Traveling salesmen are allocated definite sales territories and they
have to fulfill certain sales quotas also. Overall sales quotas are worked out on the basis of sales
forecasts.
They are compensated for their want of pocket expenses at fair rates. Bonus or profit
sharing plans are additional incentives offered to the salesmen for extra ordinary performance.
Non-financial incentives such as price, appreciation and recognition, grant of status and
prestige, job security, social acceptance, sales contests etc. are supplementary devices to
motivate sales people to maximum efficiency.
Non-financial motivation satisfies higher level egoistic and psychological wants of
above the average salesmen. Of course, it is assumed that economic needs of salesmen are duly
satisfied by economic incentives.
Job evaluation assures base rate for jobs assuming economic security. Incentive plan
links compensation with sales secured. Performance approval provides performance or merit
reward. Profit sharing or bonus allows salesmen to share in the fruits of company’s prosperity.
Essential of Sound Compensation Plan:
Fair and adequate compensation is the first essential of a sound compensation plan.
The plan must reward the salesmen for:

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i. Selling a satisfactory volume

ii. Selling goods or services which assure the highest gross profit and
iii. Selling at the lowest possible cost
Thus volume, profit and low cost are the chief determinants of salesmen’s
remuneration. A plan of remuneration must provide stability of earnings for salesmen,
managerial control over salesmen’s activities, incentive to obtain more volume and it must have
built in flexibility to adjust itself with the changing economic conditions. The plan must be
simple to understand and easy to operate.
An ideal plan of remuneration to salesmen will be:
i. Salary or base wage with cost of living adjustment
ii. All out of pocket expenses as such traveling, boarding etc.
iii. An agreed commission on a sliding scale
iv. Additional financial compensation such as pension plan, provident fund, life insurance
protection etc.
v. Profit sharing or bonus e.g., 10 percent of original salary, permitting salesmen to participate
in the corporate prosperity.
Mixed method of remuneration in the form of salary + commission + expenses + fringe benefits
can be considered as a golden plan as it will remove the demerits of pure salary or commission
only. It will also act as the best motivator for salesmen.
4. Supervision and Direction:
Supervision involves both the direction (and motivation) and control of salesmen and
the continual development of their abilities. Direction and control exercised by the sales
manager are acceptable to the sales force when they perceived that this will help them to
accomplish their own personal objectives also. Leader must be able to make his subordinates
inclined to follow him in pursuit of their own interests.
Hence, sales manager as a leader must know his men, their needs attitudes, aspirations
and perceptions. He should know his men not only as individual but also as groups. Individual
and group behaviour both play an important role in managerial supervision, direction and
control. Just as buyer behaviour is important in the buying process, exactly in the same manner,
employee behaviour is important in management of people.
Supervision must be tailored to needs of the individual salesmen just as selling process
must be tailored to individual customers. The skilled supervision has to formulate the best mix
or combination of authority, knowledge and persuasion in accordance with the needs of
situation. Authority is expressed through orders and directions with necessary sanctions for
disobedience.
Persuasion is demonstrated through giving explanations for policy and reasons or the
needs for action. Knowledge is exhibited in guiding and counseling the salesmen in their
activities and work with certain customers.
Supervision, direction and control involve:
i. Observing, monitoring and reporting the performance; of the sales force
ii. Counseling and coaching sales people to remove the defects and weaknesses in their
performance
iii. Giving them adequate information regarding company plans and policies and changes in
those policies
iv. Receiving feedback and solving their business and personal problems

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v. Motivating the sales people through appropriate non-financial incentives in order to satisfy
egoistic demands of sales people
Sales supervision is directly concerned with the basic need of motivating salesmen by
satisfying their needs for security, opportunity, self-expression, respect and good conditions of
work. Human relations are of first importance in the sales department.
Under democratic managerial style we have consultative direction involving continuous
communication and cooperation between the sales manager and his salesmen. Personal
communication is most effective. Communication by means of correspondence should be
supplementary. The sales manager is responsible to develop and maintain the morale of the
sales force. Morale is the mental readiness of the sales force to cooperate with the management
in the accomplishment of objectives. If morale is high output is also high.
5. Motivation of Salesmen:
Ability or capacity to work is different from the will to work. You can buy a man’s
time, his physical presence at a given place, his muscular motions per hours or clay, but you
cannot buy his willingness to work, his enthusiasm or his loyalty. You have to earn these
things. These are not priced goods. Motivation is the act of stimulating someone or oneself to
get a desired course of action, to push the right button to get a desired action- a compliment, a
pay rise, a smile, a promise of promotion, praise, public recognition of merits and so on.
Salesmen are the most important single resource with the sales manager and this
resource has unlimited potential. This can be tapped only through appropriate measures of
motivations.
In addition to financial incentives, we need non-financial incentives or motivators to
moving salesmen to accomplish sales goals. Non-financial incentives fulfill egoistic and higher
level psychological wants of human beings.
i. Sales Contests:
The sales contests are an important device to motivate salesmen. Sales contests use the
spirit of rivalry. It uses the personal desire to excel. It provides an incentive to show better
performance and secure more satisfactory results. Contests are employed to increase sales on an
entire product line, to launch and introduce new products, to increase the number of sales calls
and sales demonstrations, to obtain new customers, and to evaluate the real capacity of
salesmen. The contest should have normally a period of one to three months. It can be a part of
a special sales campaign.
However, sales contests have a few disadvantages. They may lead to jealousy among
salesmen. There may be charges of unfairness due to high pressure selling. If contests are
widely used, they can remove many disadvantages. Contests awards must be cash prizes or
merchandise prizes or their combination. Awards must be tempting and substantial.
ii. Sales Conventions and Conferences:
These are the devices of group motivation. They provide opportunities for salesmen to
participate, gain social satisfaction and express their views on matters directly affecting their
work. They promote team work, dissolve social barriers, inspire and raise salesmen’s morale.
Besides sales contests and conventions, we have other methods of motivation, such as
individual counseling, company magazines and bulletins providing valuable sales information,
promotions, pay rise, banners, personal communication by sales manager with his sales force
and so on.
6. Control and Evaluation:

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Main Aspects of Control Process:

The process of control of sales force has three aspects:
i. Salesperson’s efforts must click with the marketing plan and the promotion mix of the firm.
ii. Salesperson’s performance must fit into planned standards of efficiency and salesmen’s
achievements must help to achieve the ratio of selling expenses to sales.
iii. Provision of supervision and guidance to individual salesmen, if needed.
Methods of Control:
(i) Personal contact and face to face communication between the salesmen and sales manager.
(ii) Correspondence with salesperson and
(iii) Salesperson’s reports, personal contact and personal supervision can help and inspire
salesmen. Correspondence and reports should not involve excessive clerical work.
Control of the salesforce and sales operations has five important dimensions:
(a) Allocation of sales territories
(b) Assignment of sales quotas
(c) Salesperson’s authorities
(d) Routing and scheduling of sales personnel and
(e) Evaluation of sales performance
Sales Territories:
Realistic sales planning is always based on sales territories rather than on the total
market. A sales territory becomes a sales manageable unit of planning and control. A sales
territory is a particular grouping of customer and prospects assigned to a sales person. A
salesperson is expected to product maximum sales turnover from his area with the minimum
amount of time and efforts.
The sales territories are designed to assist sales management in its attempts to improve
market coverage and customer service, reduce selling expense ratios, secure more effective
coordination of personal selling and advertising efforts and finally to improve the evaluation of
sales performance.
Setting up of sales territories involve selection of a basic geographical control unit and
determination of sales potential present in each control unit. The commonly used control units
are states, districts, cities and trading areas. Sales potential involves identification of the
potential buyers contained within each geographical control unit – who are our customers, how
many are there, what are their needs etc.
Sales territories enable sales organisation to manage personal selling efforts more
economically. It is also much easier to secure good competitive service on a localised basis.
The morale of salesforce is much better when salesmen are assigned to specific sales territories.
In assigning sales personnel to territories, management should consider more profitable
alignment of selling efforts with sales opportunities. In the allocation of sales territories, we
must consider the density of potential customers in the area, degree of competition, the
frequency of product bought, and number of calls required to complete a sale and the facilities
of transport available in the area.
ONLINE MARKETING
Online marketing, also known as digital marketing or internet marketing, is a form of
marketing that uses the internet and technology to connect with potential customers.
Traditional marketing channels include billboards, radio, print, and television, while online
marketing shows up in social media, websites, emails, and other forms. The methods,

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strategies, and channels that fall under the umbrella of online marketing are diverse, but they all
seek to use the internet to connect to larger and more targeted audiences.
Online marketing benefits
In the same way that the internet has changed how we live, think, and communicate, it has
opened up new possibilities and new benefits to marketers. In addition to offering a wider
reach, online marketing is:
 Cost-effective. Digital messaging can be cheaper and more efficient to produce than print . It
can duplicate faster, and it can be highly targeted to reach only the most relevant audiences,
which means it usually offers a strong ROI.
 Fast. Your audience can act on your messaging right away, giving you a quick turnaround on
your investment.
 Trackable. It’s easy to know whether your audience is clicking, opening emails, sharing, or
making purchases. If you know what isn’t working, you don’t need to waste time and resources
on it. If you know what is working, you can lean into it.
 Targeted. Online marketing allows companies to target specific audiences and customize their
messages.
 Personal. Digital methods can be automated and responsive to online consumer behavior,
which means that an unlimited number of individual customers get timely, relevant, and
personalized information.
 Impressive. The content you share online is a chance to demonstrate expertise and create brand
recognition.
 Attractive. Many online marketing methods are inbound, which means that by creating
accessible and appealing content, you can draw in the right customers rather than blasting and
hoping it reaches those who are looking for it.
Online marketing offers businesses the opportunity to connect with large audiences, often
efficiently and affordably, in real time.
Types of online marketing
There are many types of online marketing, and just as the internet continues to change
and evolve, the way businesses use it to market their products and services will change along
with it. You don’t need to use every type, but successful marketers will select at least a few that
complement each other and work best for their goals.
Common types of online marketing include:
 Content marketing
 Social media marketing
 Influencer marketing
 Affiliate marketing
 SEO (search engine optimization)
 Web design
 Email marketing
 Paid advertising
 Display advertising
 Online events and webinars
 Conversion rate optimization
 Influencer marketing
 Marketing automation
 Customer relationship management

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