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MS - 6

Marketing for Managers

ASSIGNMENT SOLUTIONS GUIDE (2011-2012)

Q. 1. (a) Explain the concept of Marketing and substantiate the significance in modern organization in accomplishment of their objectives. Ans. A Layman, in fact, even most individuals engaged in business would immediately relate the term marketing to selling or advertising. Many people tend to regard marketing as synonymous to selling. What is our perception of marketing? Well, marketing certainly includes selling and advertising, but it is definitely much more than these two activities. Let us clarify the concept of marketing by looking at some of the definitions of this term. The American Marketing Association defines marketing as Marketing is the performance of business activities that direct the flow of goods and services from producer to consumer or user. According to Philip Kotler Marketing is a social process by which individuals and groups obtain what they need and want through creating, offering and freely exchanging products and services of value with others. The above definitions of marketing make it evident that marketing starts with determining what is needed and goes on to ensuring that it is provided. In the case of advertising agencies or personal selling, however, marketing would start with the product. As an entrepreneur you may decide to launch your own brand of mobile phones only once you have analysed the section of population which will be your target market and subsequently identified their requirements so that you can best serve their needs.

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Disclaimer / Special Note: These are just the sample of the Answers/Solutions to some of the Questions given in the Assignments. These Sample Answers/Solutions are prepared by Tutor for the help of the student to get an idea of how he/she can answer the questions of the Assignments. Sample answers may be Seen as the Guide/Reference Book/assignment Guide. Any Omission or Error is highly regretted though every care has been taken while preparing these Sample Answers/Solutions. Please consult you Teacher / Tutor before you prepare a Particular Answer.

Needless to say, the whole concept of marketing revolves around the existence and identification of human needs. Let us go further and define a need. Put simply, a need is a state of felt deprivation which leaves a person dissatisfied. Maslows need hierarchy categorises needs into Physiological needs, Safety needs, Social needs, Esteem needs and Self-actualisation needs. Examples are food and shelter for Physiological needs and affection and belonging for Social needs. Marketing is a highly useful activity because it identifies and satisfies needs lying

can be developed to convert it into a want thereby leading to the creation of demand for a product. However, a want will be converted into demand only when the willingness to buy is accompanied by the ability to buy. In other words, a person will buy something only when it can be afforded financially. Marketing thus becomes fruitful when a person decides to satisfy a need and a subsequent exchange takes place. This also clarifies Kotlers definition of marketing discussed earlier. To conclude, we can say that marketing is essentially a process. The process oriented definition would imply that it is the process of identifying consumer needs, converting them into products or services and ensuring the satisfaction of needs profitably. Although, it was earlier thought that production was a more important function than marketing, it is now believed that unless a product satisfies a need it will never sell and therefore customer oriented approaches have to be developed. (b) What is STP strategy? Discuss the concept of positioning by taking an example of your choice and the benefits that firms accrue in a competitive environment. Ans. STP stands for segmentation, targeting and positioning. Segmentation is identifying segments for the product. The objective of segmentation is to find attractive markets. Strategies include break market into components, regroup into market segments or select which segment to target. Positioning is an essential part of good marketing. Perceptual maps are used to determine the position of a product, firm, person, service or idea. Positioning maps or perceptual maps can be simple, yet very

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latent in human beings. A person will move to the next need once his current need has been satisfied. Thus, if the need lying dormant can be identified then a strategy

effective marketing tools. Target is the real objective in market that marketer want to reach. Each individual has wants which are different from others. On the basis of similarity of wants certain group of consumers can be created. These consumers within a group will share similar wants and form a sub-class. Example: Consider the market for smart phones, it will consist of consumers who want the facility of functional internet along with messaging and calling. However , within this class of consumers needing a smart phone, some may prefer only the Apple-phone. This sub-class will be a group in itself. Thus, we can say that a market positioning is a large identifiable group within a market. We have already classified the concept that market positioning is the process of dividing the total marketing into sub-markets. Each sub-market will be homogeneous in important aspects. However, there are a few notable aspects to be kept in mind while studying the inter-relationship between a segment and a market. These are: (a) Different segments will have different ways to satisfy the same need. Example some may prefer tea and others coffee as a stimulating beverage. (b) Mobility of buyers among markets can lead to instability in one market. (c) An organisation can always explore options of improving a product as the buyers may not always he satisfied with product features. There are many bases for segmentation. Some of the popular basis are age, sex, regional distribution, disposable income and benefit sought from a product. In a market segment customers share similar wants. However, each segment may differ in terms of the kinds of benefits they expect and their ability to purchase. Product differentiation however entails that buyers may prefer a certain product over its competitors because of physical features, benefits, convenience and reputation. The scope of product differentiation is narrow as it merely divdes the market into groups. Segmentation, on the other head is a broader term as other than product differentiation it also categorises people on the basis of their demands and wants. Market positioning is a highly use full strategy for the organisation as it leads to many benefits, some of which are:

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(i) It allows a small organisation with limited resources to be effective as it targets only a limited market. (ii) The product of the company will be in accordance with the demand of the market. (iii) Promotional measures can be more specific since they are aimed at a target audience.

Ans. The product life cycle is a significant aspect that provides a look at the various stages that a product goes through once it is released in the market. The course of the product life cycle is generally well shaped and divided into four stages which are as follows: (a) Introduction: This is the stage that marks a launch of a product. Since the product is being introduced this stage is characterised by delay in distribution, customer reluctance and even technical problems. A lot depends on the product itself. The curve will rise steeply upwards if the product is well designed and will increase slowly if not. The customer have to get familiarise themselves with the product so sales will be slow to rise. It is essential therefore that the product is readily available at outlets. The profits at this stage are low because of the heavy distribution and promotion expenses. (b) The Growth Stage: This stage is characterised by a rapid rise in sales. This is because the customers have adopted the product and additional customers have also started to use it. In order to meet the increased demand, the production will be increased and this is also lower manufacturing cost per unit. The profit will decrease and increase because of lower manufacturing and promotion costs. (c) The Maturity Stage: It is obvious that there will come a time when the sale will slow down. At this stage the product is said to have attained maturity. The slowing rate of sales will create over capacity in the industry, which will consequently lead to intensifications of competition. In such a scenario the organisation will have to increase the promotional expenditure to maintain the sales. The profit at this stage will be either stable or will start to decline. This is because mostly the customers have tried

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Q. 2. (a) What do you understand by the term concept of PLC? Discuss taking any two examples of your choice in the recent part.

the product and the market is saturated. In fact they have started to switch to other brands. (d) The Decline Stage: At this stage the sales of the product starts to decline though the decline may be slow or fast. This is because of a change in consumer tastes, advancement in technology and increase in competition, both foreign and domestic. Since the profits start to fall, most organisations will withdraw the product or may reduce the number of products they offer. Promotion budgets will be reduced and the organisation will not attempt to try and retain profits. Products like MP3 players, ipad and iphone are now the Introductory stage. Laptops and computers are on Growth stage. Products like LCD TV and Mosquito repellent are on Maturity stage, while Video and audio cassettes and Pagers are on the Decline stages. (b) List out and explain the three additional marketing mix element essentials in marketing of services. Discus by taking any two services of your choice. Ans. The marketing mix can be defined as the combination of 4PsProduct, price, place and promotion or the set of marketing tools that the firm uses to pursue its marketing objectives. Two elements of the marketing mix are discussed below: (i) Product: The product is a combination of tangible and intangible aspects which is offered to the target customers in order to satisfy their needs. It is important that the marketer views the product as a means to satisfy a consumer need. Such an approach will ensure success in the activities undertaken, as a satisfied customer leads to repeat sales as well as word-of mouth publicity. (ii) Pricing: The price element of the markets mix generates revenue. The price of a product is fixed after considering several factors. Some of these are: (a) Cost: The cost a product should be recovered through the selling price. The price of product includes the fixed cost, the variable cost and the semi-variable costs. (b) Competition: The pricing strategy of the competitors also has to be taken into consideration. When the competition is intense then the pricing freedom is reduced as compared to when competition is less and the firm enjoys leadership in the market. (c) Purchasing Ability of Customers: The purchasing ability of the target market

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will also influence the price. Price elasticity or the responsiveness of demand to change in price has to be taken into consideration. If close substitutes of a product are available, pricing freedom is reduced as the customer will direct purchasing ability towards the substitute if prices are increased. (d) Regulatory Framework: Essential commodities and their prices as well as their distribution are governed by the regulatory framework of the government. At times ceilings are imposed on the maximum prices and this consequently reduces the

that are in way related to a product. These may include the employees of an organisation, the owners and even the society. Thus, careful consideration has to be given to fixation of a price. Q. 3. (a) Discuss the role and importance of physical distribution in accomplishing the marketing goals of a firm. Ans. The products produced by any organisation have to be made available to the customers at the right place and at the right time. The place mix demand of the marketing mix deals with the distribution of products. The distribution strategy of an organisation focuses on establishing a system that will enable a consumer to gain excess to a product as and when he feels the need for it. It emphasis on two aspects: (a) Channels of distribution (b) Physical distribution Many tasks comprise the function of physical distribution. The important ones are: (i) Location and Warehousing: The focus of the physical distribution function is placed on effective inventory management. Consequently decisions have to be taken regarding the number and locations of facilities from where inventory will be managed. The most important consideration is centralisation or dispersal of inventory. Although centralising the inventory can be better controlled but will lead to higher transportation costs. An effective solution is to provide more distribution centers near the market. The warehouses can be, private or cooperative. Those companies which have to move a large volume of products can use their own warehouses while others can use public warehouses.

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pricing freedom of an organisation. (e) Social responsibility: The price of a commodity will affect all those parties

(ii) Methods of Transportation: One of the most important tasks of physical distribution is to ensure that the product reaches the customer. The management therefore has to decide on the form of transportation as well as the carriers. The companies have a choice among railroads, trucks, ships and airplanes. Factors such as cost, speed, reliability and product features will have to be considered before the optimal mode of transportation is chosen. (iii) Inventory Control: An organisation has to effectively maintain control over the size and composition of inventories. Sales forecasts are used to predict the market demands on inventory. The desired level of customer satisfaction that a company wishes to achieve will also influence the inventory size. Inventory costs such as acquisition costs and carrying costs will also help to determine the optional size of inventory to be maintained. (iv) External Agencies: Many factors become relevant only if an organisation wishes to establish and maintain its own distribution channels. Hence one of the foremost decisions that needs to be taken is whether an organisation would like to outsource the distribution function through a well established agency. This will in turn require an in depth look at cost and benefits. (v) Material Handling: Another important aspect of physical distribution is to select the appropriate equipment which will be required to handle products. This can help to reduce breakage, spoilage etc. (b) What are the major pricing strategies available to the marketer? Discuss each of them in terms of this merits and demerits. What pricing strategy would you support in the following cases Ans. Price is one of the most important elements of the marketing mix. It has always been one of the significant factors affecting buyer choice. Out of all the elements of the marketing mix, it is the only one, which produces revenue while the others incur costs. The various pricing methods used by organisations are: (i) Cost Plus Pricing: The most basic method to determine price is to add a standard mark up to the cost of the product. The mark up or the percentage for profit that the seller desires varies among different products. On a general note, it can be said that mark ups will be higher for seasonal items, specialty items or demand inelastic items. However, mark up pricing cannot be regarded as ideal method since it ignores

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demand as well as competition. In spite of this mark up pricing remains popular because of the following reasons: q It is easier to determine cost than to estimate demand. q It allows stability since cost of getting information may be very high and mark up pricing makes it possible to take decisions without being dependent on external knowledge. q It is considered to be fair to both buyers and sellers. This is because sellers earn a fair return and buyers are not exploited. q If other firms in the industry are using the same method then it will provide competitive stability. Cost plus pricing is considered suitable for public utilities, customised products and product tailoring. It is also popular in India because the government supports it, sellers dominate the market and the method is simple to apply. (ii) Pricing for a Rate of Return: An organisation may have to modify the price in accordance with the change in cost. It may reverse them to maintain a stable percentage mark up over cost or to maintain projects as a certain percentage of sales or to maintain a stable return on invested capital. Example: An organisation sells 50,000 units at a price of 10 rupees per unit. The costs are: Variable costs 3, 00,000 Fixed costs 2, 00,000 Total investment in cash, Inventory and equipment 6, 00,000 If variable costs go up by 10% the price will be revised in the following manner: Total cost 5, 00,000 (iii) Marginal Cost Pricing: This is another variant of pricing based on costs. In this case the organisation sets a price that will cover only the marginal cost and not the total cost. The firm takes into consideration only those costs which can be attributed to the output of a particular product. The reasons why marginal cost pricing is preferred by many organisations are: q The producer is able to follow an aggressive pricing policy. q It is useful for pricing over the life cycle of a product. However, it is not without limitations. These are:

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may be influenced to take business which contributes less and consequently not have free capacity when more important business opportunities arise. q If a firm using this method lowers prices, other organisations will follow suit leading to intensification of competition. (iv) Going Rate Pricing: In this method an organisation instead of using its own costs as a base, focuses attention on the cost of the competitors. This is especially true of those organisations which follow the price leader firm and disregard their own costs. It is a method often used because it is perceived as a representative of the entire industrys judgement of an adequate price. (v) Customary Pricing: In certain cases the prices of certain goods attain a rather fixed stature because of having remained in that range over a long duration of time. As a consequence of this even change in products is not allowed to cause a change in price. This is because such a move may change the perception of the customers regarding the product or cause intensification of competition. If at all such a move has to be exercised, pricing policies of competing organisations must be reduced first and changes should be tested out in a limited market. (i) Low priced Tablet Computer For low priced Tablet computer, I would support Going Rate Pricing method. This is because there is tough competition in computer market and we have to take a share of the market. (ii) CNG fitted small car For CNG fitted small car, I would support Pricing for a rate of return method. This is because, there may be competition in the market yet I would look for a stable return on invest capital on the CNG fitted small car. Q. 4. (a) What makes manager rely on primary data for marketing decision? Substantiate with suitable examples Ans. Primary data are original data collected specifically for a current research. Primary data are collected from customers, retailers, distributors, manufacturers or other information sources. Primary data facilitate the decision-making process. A manager has before him a number of alternative solutions to choose from in response to every marketing problem and situation. In the absence of market information he may make the choice on the

q An organisation

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basis of his hunch. By doing so the manager is taking a big risk because he has no concrete evidence to evaluate this alternative in comparison with others or to assess its possible outcome. But with the help of information provided by marketing research the manager can reduce the number of alternate choices to one, two or three and the possible' outcome of each choice is also known. Thus the decision-making process becomes a little easier. Primary data helps to reduce the risk associated with the process of decision-making. Primary data helps firms in discovering opportunities which can be profitably exploited. These opportunities may exist in the form of untapped customer needs or wants not catered to by the 'existing firms. Food Specialities Limited (manufacturers of Nescafe Coffee, Lactogen powder milk) have recently introduced in the Indian market a dairy whitener (as a substitute for milk) called `Every Day' to be used for making tea, coffee. The product has proved to be a success because it is most convenient for use in offices, where tea and coffee is consumed in large quantities, but milk is not easy to procure. Every Day fulfils a slot in the market for powder milk which was not being catered to by the existing milk powders. (b) Discuss the factors that are major determinants of promotion mix in the following situations. (i) Mid size FMCG Company Ans. For a Mid size FMCG Company, following factors are the major determinants of the promotion mix: 1. Type of product 2. Nature of Market 4. Available budget, and 5. Company policy. Type of Product: For a mid size FMCG company, repeat messages will influence and remind the existing consumers, and persuade the new consumers. Newspaper and magazine advertisements, TV spots and Cinema Slides, offer of incentives to consumers and organisation of contests will, therefore, constitute the promotion mix' of such consumer goods. Nature of Market: For a mid-size FMCG Company, the target audience is both large as well as widely dispersed in different parts of the country, advertising and sales promotions will be more effective and economical promotional methods than

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the others. This is why advertising and sales promotions are so dominant among consumer goods companies. Personal selling also has a role to play among consumer goods companies but limited mainly to wholesalers and retailers who receive greater focus for activities such as pushing inventories, conducting displays, etc. The Available Budget: Each method of promotion has certain costs associated with it. The level at which each promotion method is to be used and the selection of the promotion mix, is dependant on the promotion budget of the firm. It is a mid size FMCG company and it will have mid size promotional budgets. It will go for less sophisticated methods. Company Policy: Besides, the policy of the company would be a factor for deciding the promotion strategy. (ii) Banking services Ans. For Banking Services, factors as mentioned below will act as the major determinants of the promotion mix: 1. Type of service 2. Nature of Market 4. Available budget, and 5. Company policy. Type of Service: Repeat messages will influence and remind the customers and persuade the new customers. Newspaper and magazine advertisements and TV spots should be used for its promotion. Nature of Market: The target audience of banking service is both large as well as widely dispersed in different parts of the country, advertising and sales promotions will thus be both more effective and economical promotional methods than the others. The Available Budget: The budget of the bank will be a factor for using the promotion method. If the bank has big promotional budgets, it can go for sophisticated methods. Company Policy: The promotion policy of the bank will also be a factor in determining the use of promotion mix. s s

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