Important Questions

1. Basis of Segmentation:
The following factors are considered before dividing the market:
Geographical Factors: On the basis of geographical factors, market may be classified as statewise, region-wise & nation-wise. Many companies operate only in a particular area because people
behave differently in different areas due to various reasons such as climate, culture, etc.
Demographic Factors: This is the most widely used basis for market segmentation. Market is
classified on the basis of population, using ages, income, sex, etc as indicators.
Age: It is known fact that people of different ages like different products, need different things,
& behave differently. Almost all companies use this factor to reach the target market. On the
basis of age, market in our country is divided into childrens market, teenagers market,
adults market, & the market for old people. Companies use the census data to prepare
marketing strategies on the basis of age.
Sex: There is a variation of consumption behavior between males & females. This factor is used
as a basis for segmentation for products like watches, clothes, cosmetics, leather goods,
magazines, motor vehicle, etc.
Family Life Cycle: This is another important factor, which influences the consumers behavior.
Eg: Before making purchases, a bachelor may consult his friends, a boy may ask his parents
& a married man asks his wife. The study of family life cycle helps a company to prepare an
effective promotional strategy.
Psychological factors:
Personality: Most consumers are influenced by personality traits. This is particularly true in the
case of urban consumers. On the basis of personality, consumers may be divided in to
introverts (reserve people), talkative, status, conscious, suspicious & so on.
Economic Factors: On the basis of economic factors, markets have been classified in the westerns
countries as follows:
a. Upper Class

b. Upper-upper class

c. Lower-upper class

d. Middle class

e. Upper-middle class

f. Lower-middle class

g. Lower class

h. Upper-lower class

i. Lower-lower class

In our country, it is classified as upper class (rich), middle class, & the lower class. Another
classification based on income in our country is as follows:
a. Very Rich

b. The Rich class

c. The Aspiration Class &

d. The Destitutes.
Behavior Factors:
Occasions: Sellers can easily find out certain occasions when people buy a particular product.
Eg: Demand for clothes, greeting cards, etc increases during the festival season. Demand for
transportation, hotels etc increases during the holiday seasons.
Benefits: Each consumers expects to fulfill certain desire or to derive some benefits from the
product he purchases. Eg: A person may purchase clothes to save money & another to
impress others. Based upon this, markets may be classified as markets for cheap price
products & market for quality products etc.
Attitude: On the basis of attitude of consumers, markets may be classified as enthusiastic
market, indifferent market, positive market, & negative market.
2. New Product Development:
Introducing a new product is a difficult task, there is no guarantee that the new product developed is
accepted in the market; hence, the risk if high. It is better to adopt a scientific approach for the
development of new products. The following are the different stages of a new product development:
Idea Generation: New product development starts with an idea. The idea may come from any
source. Ex: Competitors, Newspapers, Government, Research & Development, Department, etc.
Screening Analysis: Here the company evaluates all ideas. The intention here is to avoid
unnecessary expenses by stopping further processing of unwanted ideas, which do not suit the
companys requirements. An idea is evaluated with reference to various factors such as
consumer needs, investments, profitability, technology, etc.
Concept Testing: In the stage the concept of the new is tested. The co. evaluates whether the
concepts would suit the co., requirements.
Business Analysis: Here a detail financial analysis is done. It is carried out to find out the financial
marketing competitive & manufacturing viability usually, they analysis is done by the experts.
The task of the management is this step is to identify the product features, estimate the market
demand & the products profitability. Those ideas, which promise more profits with minimum
payback are selected.
Product Development: In this stage, product on paper is converted into a physical product. This is
done by the engineering department or by the research & development department. Proper care

must be taken while developing the product, so that the new product does not become a waste.
For this purpose, research reports, companys budget, product features, etc have to be studied
carefully. Undue haste in developing a new product results in the premature death. On the other
hand, if the time taken is to long, the company may lose the opportunity to the competitors.
Test Marketing: After developing the product, the next stage is to test its commercial viability.
This process is known as test making.
Test marketing is defined as developing a temporary Marketing Mix & introducing the new
product to a market called, the sample market to verify & analyze the market reaction for the
new product. This is one of the most important steps because for the first time, the information
on the new product acceptance by the market is collected.
While, test marketing, the company changes the Marketing Mix namely, Product, Price,
Promotion & Physical Distribution depending upon the test marketing results. If it is accepted, it
chooses the best marketing mix for the product, otherwise the project is rejected.
Advantages of Test Marketing:
a)

It helps to understand the market reaction to the new product.

b)

Customers perception on the marketing mix is understood.

c)

It avoids costly error of manufacturing, unwanted products. It reduces, the uncertainties

relating to the new product.

d)

It helps in developing suitable marketing mix

e)

It helps in developing proper marketing strategies.

f)

Test marketing also highlights the weakness of the new product, which can be rectified
before launching on a large scale.

g)

Test marketing gives better coordination between the company, intermediaries & the
customers.

h)

It also helps to understand the intermediaries view on the new product.

i)

It brings down the overall cost of new product development by eliminating wastages.
It should be remembered that the market chosen for test marketing must be proper in the
sense that is should represent the entire country so that biased results are not considered.

Commercialization: When once is successful in test marketing, i.e., when the market accepts the
new product, it is launched in other markets on a large scale in a wider market is known as
commercialization. It is from this stage that a new product is really born from the customers
point of view.
3.PRODUCT LIFE CYCLE
Product also has various stages of life as human beings. From the time a product is introduced, till it

is withdrawn from the market, it goes through 5 stages. Analysis of these stages for the purpose of
repositioning the product in the market is called Product Life Cycle management. The following are
the stages in a product life cycle.
I. Introduction Stage
II. The Growth Stage
III. The Maturity Stage
IV. The Saturation Stage
V. The Decline Stage
The

above

stages

can

be

shown

in

the

following

graph:

Life Cycle Stages

Introduction Stages: In this stage, a new product is introduced on a large scale for the first time.
Market reacts slowly to the introduction. In other words, consumers take time to accept the new
product. Initially, the company may suffer losses, sales improves gradually. Most of the products
fail in this stage itself.
Following are the characteristics of this stage:
Consumers do not have the knowledge of the product
Consumers may or may not be strongly in need of the new product.
If there is a need for the product, the company gets readymade demand. Otherwise, it

increases slowly.
Sales are minimum
The competition is less, in fact the company, which introduces new product is called as a
Market Pioneer.
The cost of it is very high because the company spends money heavily on Research &
Development, Sales, Promotion, etc.
Marketing Strategies during the Introduction Stage: A company has to prepare the policies very
carefully in the stages because it has a great impact on the image of a new product. Even a
minor mistake results in the premature death of a product.
The following are the strategies that the company may adopt in this stage:
It may spend heavily on promotion & fix high price. This meets two objectives.
Firstly, heavy promotion creates large demand & high price, brings immediate profits.
This strategy also helps to create brand preference in the minds of the consumer. It is
normally followed when there is a great need for the product, when the product belongs
to the richer class & when products are consumer specialties.
This second strategy is to fix high price but to spend less on promotion. This is preferred
when the product has limited market, in which people have knowledge about the product
& the competition is completely absent.
Another strategy is to charge low price & spend heavily on promotion. This is preferable
when consumers are sensitive to the price & market is wide enough. This strategy brings
good returns in the long run.
The company may charge low price & spends less on promotion. This is preferable when
the consumers are informed about the product, market is very large & there is no
competition for the time being.
In the introduction stage, the competitors are very cautious. They do not enter the market
immediately. They study the strategies of a company & watch the reaction of the consumers.
This helps them to find out the defects of the companys strategy.
Growth Stage: It is called the market acceptance stage. Following are its features:
a.

Consumers & traders accept the product

b.

Sales & profit increase

c.

More competitions enter the market

d.

The focus of competition is on the brand rather than the product

e.

Competitors may introduce new features to the product

f.

Distribution network increase

g.

The price will be reduced marginally.

Marketing Strategies in the Growth Stage:

a. The company tries to impress upon the consumers that its brand is superior
b. It may introduce new models or improve the quality
c. It may enter new market & sell its products with new distribution channels
d. To attract more buyers, it may reduce the price.
Maturity Stage: This stage indicates the capacity to face the competition, sales increases at a
decreasing rate. Competition becomes severe. It is reflected in various ways such as offering
discounts, modifying products etc.
Marketing Strategies during Maturity Period/Stage: In this stage, the manufactures have to
take responsibility to promote his product. This strategy aims at creating brand loyalty.
Saturation Stage: This is the stage when the sales reach the peak point. Competition intensifies
further & profit begins to decline. Small competitors may withdraw from the market because of
their incapability to face the competition.
Marketing Strategies: This is the stage where the marketing manager must try to reposition his
product. Most of the strategies in this stage are offensive in nature. Each manufacture tries to cut
down his competitors market share by aggressive promotion policy. The objective of marketing
in this stage is to retain the present sales level.
Decline Stage: For all products, sales invariably declines as new products enter the market. In this
stage, there is a sharp decline in the profits, cost increases & market share comes down. Most of
the manufactures withdraw from the market. Some may reduce production & concentrate only
on a limited market
Marketing Strategies: This stage offers one of the greatest challenge to the marketing manager.
He has to decide whether or not to continue with the product. The main task of marketing
manager is to revitalize the demand instead of discontinuing the product immediately. It is better
to withdraw gradually. Those channels of distribution, which are costly & unproductive maybe
removed. In the meantime, the weak points of the marketing mix maybe identified & altered as
required.
Reasons for the Failure of New Product:
1. Poor marketing research
2. Not using the up-to-date technology
3. High price or to costly products
4. Poor design

5. Inefficient marketing
6. Non-cooperation from the middlemen
7. Improper promotional techniques
8. Improper timing of introduction of the new product.
4. Factors Influencing the Price Determination:
The decision to fix the price is influenced by many factors which are controllable & uncontrollable.
They are:
1. Product Characteristics.
2. Demand Characteristics.
3. Manufacturers Objectives.
4. Cost of the Product.
5. Economic Condition.
6. Government Regulation.
I. Product Characteristics:
a. Product Life Cycle: A product manufacturer charges the price depending upon the
stages of the life cycle of the product. Eg: If he has introduced a new product, he may
charge a lower price & increase it when it enters the growth stage.
b. Perishability: According to the general principle, other things being equal, if a
product is perishable, the price will be lower because it has to be sold as early as
possible.
c. Product Substitution: If there is a substitute in the market, then the price will be
either equal to or lower than the price of the substitute, because if the price is more that
the substitute, people may purchase the substitute product only.
II. Demand Characteristics: It is one of the most important factors influencing the price. The
company must forecast demand for its products & its elasticity before fixing the price.
Demand estimation helps a company to prepare sales & the expected price, the consumers are
willing to pay. The expected price of the market is the influencing factor here. According to
the general principle, the final price fixed must neither be lower nor higher than the expected
price.
III. Manufacturers Objective: If the manufacturer wants to increase the market share, he has to
fix the competitive price. In other words, he has to offer more discounts etc. On the other
hand, if his objective is to increase profits, he may fix a higher price.

IV. Cost of the Product: Most of the companies fix the price on the basis of cost. Accordingly,
selling price is equal to total cost plus profit. Total cost includes manufacturers cost,
administrative cost & selling cost.
V. Economics Condition: According to the general economic theory, price will not be lower
during the depression & higher during the inflationary period. The company has no control
over this factor because it is the result of general condition prevailing in the entire country.
VI. Government Policy / Regulation: If government thinks necessary, it may fix minimum price
for a product. If it wants to discourage consumptions, it may increase the price & reduce it to
encourage consumption.
5. Pricing Methods :
I. Cost Plus Pricing: In this method, the cost of manufacturing a product serves as the basis to
fix the price, the desired profit is added to the cost & the final price is fixed. Most of the
companies follow this method. Following are various methods of cost + pricing.
a. Price Based on the Total Cost: Here a percentage of profit is added to the cost to
calculate the selling price. It is usually followed by the whole sellers & the retailers.
For industries such as construction, printing, repair shops, etc. this method is more
suitable.
b. Price Based on the Marginal Cost: It is the method of pricing where the price is
fixed to recover the marginal cost only. Marginal cost is the extra cost incurred to
produce extra units. Hence, this method is suitable only when pricing decisions are
to be taken to expand the market to accept the export orders etc.
c. Break Even Pricing: Under this method, the price is fixed first to recover the total
cost incurred to produces the product. It is fixed in such a manner that the company
neither earns profit nor does it suffer losses. This method is suitable during
depression when there is acute competition, when a new product is to be introduced
or when the product enters the declining stage of its life.
Advantages of Cost + Pricing:
1. This method is simple & hence price can be easily determined.
2. Companies, which cannot estimate the demand may follow this method.
3. It is suitable for long-term pricing policies

Dis-advantages of Cost + Pricing:

1.

It neglects the demand factor of the product

2.

It is difficult to determine the exact cost.

II. Pricing Based Upon Competition: Competition based pricing is defined as a method
where a company tries to maintain its price on par with its competitors. It is suitable when
the competition is serve & the product in the market is homogenous. This price is also called
the going rate price. The company cannot take risk of either increasing the price or
decreasing it. Following are some of the methods based upon competition:
a. Pricing Above the Competition: It is usually followed by well-recognized
manufacturers to take advantage of their goodwill. The margin of profits is too high.
This method is useful to attract upper class & upper middle class consumers.
b. Pricing Below Competition Level: This type of pricing is followed by the
wholesalers & the retailers. They offer various kinds of discounts to attract
consumers. Even established companies follow this method to maintain or to
increase their sales during the off season.
III. Pricing Based on Markets: Depending upon the market of product, the manufacturers may
fix the price for their products. In a perfect market, he has to go for the expected price in the
market. It is also called the market price or going rate price. In case of monopoly, he is free
to fix the price & can effectively practice the price discrimination policy.
In oligopoly where there are few sellers, the price is fixed by the largest seller called the market
leader & others follow him. If price is above this level, he loses sales considerably & if he reduces
it, sales may not increase because competitors immediately react & reduce their price also.Methods
of pricing
6.Define Marketing
According to American Marketing Association, Sales Promotion is A group of activities other
than advertising, personal selling, & publicity that stimulates consumer purchasing & dealers
effectiveness. Eg: Discounts, Samples, Exhibition, etc.
7.Functions of the Channels:
1.

Channels of distribution helps, the goods & services to move from the place of production to
the place of consumption, hence they create place utility.

2.

Goods are brought by the channels when they are needed. Hence they create time utility.

3.

A channel reduces complexity in the distribution system

4.

Inclusion of channel reduces the financial burden of the producers

5.

They provide various services such as standardization, grading, etc.

6.

They supply the market information to the producers

7.

They help producers in promoting their sales.

8.Market Segmentation:
The strategy of dividing the market in order to consumer them. According to Philip Kotler, It is
the subdividing of market into homogenous subsets of consumers where any subset may be
selected as a market target to be reached with distinct Marketing Mix.
9.Product Mix & Product Line: Product line is defined as a group of products offered by a
company which belongs to same family of products or similar to each other or substitutes. Eg:
Product line of ponds for personal care products includes cold creams, talcum powders, etc.
Product Mix is defined as combination of product lines offered by a company. Eg: Product mix
of Bajaj includes two wheelers, home appliances, electrical appliances, financial products etc.
10. Growth of Service Sector in India
India has the second fastest growing services sector in the world with a compound annual
growth rate at 9 per cent, just below China's 10.9 per cent, during 2001 to 2012.
Among the world's top 15 countries in terms of GDP, India ranked 10th in terms of overall GDP
and

12th

in

terms

of

services

GDP

in

2012,

it

said.

"India has the second fastest growing services sector with CAGR at 9 per cent, just below
China's 10.9 per cent, during the last 11-year period from 2001 to 2012," the survey said.
It said that services share in world GDP was 65.9 per cent but its share in employment was only
44

per

cent

in

2012.

In India, the services sector had a high share in income at 56.9 per cent in 2012 with a lower
share

of

28.1

per

cent

in

employment,

it

added.

In 2013-14 the growth rate of the services sector at 6.8 per cent is marginally lower than in
2012-13. This is due to deceleration in the growth rate of the combined category of trade, hotels,
restaurants,

transport,

storage

and

communications.

The survey, which was tabled in Parliament today, said that services in India are emerging as a
prominent sector in terms of contribution to national and states' incomes, trade flows, FDI
inflows

and

employment.

Further, it said that the immediate challenge in this sector is revival of growth.
India's services sector which was growing at a steady rate of over 10 per cent since 2005-06 has

shown

subdued

performance

in

the

last

three

years.

Revival, it said, could be achieved through reforms and speeding up of the policy decision
making,

targeted

approach

with

focus

on

big

ticket

services.

"Some services like software and telecom were big ticket items that gave India a brand image in
services. While further focus on these services is needed to retain and further our lead, the time
has come to focus on some other high potential big ticket items that have high manufacturingsector

and

employment

linkages,"

it

added.

Going forward, it said, 2014-15 seems to augur well for the services sector with expansion in
business

activity

in

India.

"There are also signs of revival in growth of the aviation sector with the announcement of new
players like Air Asia and Tata-SIA Airline after a turbulent period of withdrawals and losses by
some

airlines,"

it

added.

Indications of revival in the world GDP and trade growth in general and of developed countries
in

particular,

could

help

in

revival

of

the

tourism

and

shipping

sectors.

"With a stable government in place and growing optimism which could translate into investment
and growth, some quick reforms and removal of some barriers and obsolete regulations in the
services sector could help. The downside risk however is the fragile global situation," it said.
The survey said many issues including domestic The survey said many issues including
domestic regulations hinder growth prospects of the services sector, which if addressed deftly
could

help

the

sector

and

lead

to

exponential

gains

for

the

economy.

Listing some general issues, it said that there is an urgent need for a nodal agency and marketing
for

the

sector.

Despite having strong growth potential in various services sub-sectors, there is no single nodal
department

or

agency

for

services.

Services activities cover issues beyond trade and a more proactive approach and proper
institutional mechanism is needed to weed out unwanted regulations and tap the opportunities in
the sector in a coordinated way, it added. There is also need for promotional activities for
service exports like setting up a portal, showcasing India's competence in non-software services
in

exhibitions,

engaging

dedicated

brand

ambassadors

and

experts.

It also said that there is plenty of scope for disinvestment in services PSUs under both central
and

state

governments.

"Speeding up disinvestment in some services-sector PSUs could not only provide revenue for
the
The

government
sector

is

but
also

also

speed

facing

up

credit,

the
tax

growth

of

and

trade

these

services,"

policy

related

it

said.
issues.

"These include use of 'net' instead of 'gross' foreign exchange criteria for export benefit
schemes, the issue of retrospective amendments of tax laws like amendment to the definition of
royalty to include payment of any rights via any medium for use of computer software, tax
administrative measures to tackle delay in refunds, introducing VAT refund for foreign tourists,"
it

said.

Further it said that India need to revamp its port services as it does not have world class
facilities.
"Third-generation ships are not able to enter the harbour and goods have to be offloaded outside
in smaller ships, adding to costs. Its immediate focus should be on building world class ports
providing

world

class

services,"

it

said.

On railways, it said that a proposal has been initiated by Indian Railways, for making suitable
changes in the existing FDI policy in order to allow foreign investment in railways, to foster
creation

of

world

class

rail

infrastructure.

"The proposal envisages allowing FDI in all areas of the rail sector except railway operations.
Even in railway operations, FDI is proposed in PPP projects, for suburban corridors, high speed
train

systems,

and

dedicated

freight

lines,"

it

said.

While privatization of railways has been successful in some countries like Japan, it has failed in
some

others

like

the

UK.

Marketing
Marketing is a process than involves a variety of activities designed to change behaviors or
influence ideas. These activities include, but are not limited to, advertising, logistics, marketing
research, product design, and selling.
11.Functions of Marketing
The following are the functions of marketing;

Researching

Buying

Product development and management

Production

Promotion

Standardization and grading

Pricing

Distribution

Risk bearing

Financing

After sales-service

(1)Research function: the research function of marketing is that function of marketing that enables
you to generate adequate information regarding your particular market of target. You must carry out
adequate research to identify the size, behavior, culture, believe, genders etc. of your target market
segment, their needs and want, and then develop effective product that can meet and satisfy these
market needs and want.
(2)Buying function: the function of buying is performed in order to acquire quality materials for
production. When you design a good product concept, you should also ensure you're buying the
essential materials for the product.
This function is carried out by the purchase and supply department, but your specifications of
materials goes a long way in assisting the purchasing department to acquire the necessary materials
needed for production.
(3)Product development and management: product development is an essential function of
marketing since it was the duties of the marketing department to identify what the market need or
want and then design effective product based on the identified need and want of the market. Product
development passes through some basic stages carried out by the marketers to develop a targeted
market specified product. And you can also manage your product by evaluating it performance and
changing them to fit the current market trend.
(4)Production function: production is the function performs by the production department.
Though, this is interrelated to the department of marketing, because your product must possess the
essential characteristics that can meet the target market needs and want as identified during your
market research, such characteristics as in your product Test, Form, Packaging etc.
(5)Promotion function: promotion is one of the core functions of marketing since your finish
product must not remain in the place of production, hence, you as a marketer must design effective
communication strategies to informing the availability of your product to your target market.
(6)Standardization and grading: the function of standardization is to establish specified
characteristics that your product must conform to, such standard as in having a specify test,
ingredient etc. That makes your product brand so unique.
Grading comes in when you sort and classify your product into deferent sizes or quantities for
different market segment while maintaining your product standard.
(7)Pricing function: you perform the function of pricing on your product offerings by designing

effective pricing systems base on your product stage and performance in the product life cycle.
Price is the actual value consumers perceive on your product, so you as a marketer should ensure
that your value of your product is not too high or too low to that of your costumers.
(8)Distribution function: the function of distribution is to ensure that your product is easily and
effectively moved from the point of production to the target market, the kind of transportation
system to employ e.g. Road, rail, water or air, and ensures that the product can be easily accessed by
customers. You as a Marketer should also design the kind of middlemen to engage in the channel of
distribution, their incentives and motivations etc.
(9)Risk bearing function: the process of moving a finished product from the point of production to
the point of consumptions is characterized with lots of risks, such risks as in product damaging,
pilferage and defaults etc. So you must provide effective packaging system to protect your product,
good warehouse for the storage of your product until they are needed, effective transportation
system to speedily deliver your product on time.
(10)Financing function: financing deals with the part of marketing to providing incomes for your
business. It refers to how you can raise capital to start operation and remain in business. It refers to
your modes of payment for the goods and services transferred to your costumers.
(11) After sales-service: in a more complex and technical product, you as a marketer should make
provision in order to assist your customers after they have purchased your product. In terms of
machines or heavy equipment product that requires installation or maintenance, most marketing
organization renders such services like installing the machine or maintaining it for stipulated
periods on time for free or by a little service charge.
After sales services is an effective marketing strategy to building a long lasting customer
relationship, staying ahead of your competitors while making profit for your organization.
Adequate understanding of these functions enables you as a marketer to know what is required to be
done to having an effective transfer of ownership between you and your costumers, creating a big
picture of your business, while also making profit for your organization.