National Institute of Business Management

Chennai - 020
FIRST SEMESTER EMBA/ MBA
Subject : Marketing Management
Attend any 4 questions. Each question carries 25 marks
(Each answer should be of minimum 2 pages / of 300 words)
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1. Explain pricing policy.
Answer:- Managers should start setting prices during the development stage as part of strategic pricing to avoid
launching products or services that cannot sustain profitable prices in the market. This approach to pricing
enables companies to either fit costs to prices or scrap products or services that cannot be generated costeffectively. Through systematic pricing policies and strategies, companies can reap greater profits and increase
or defend their market shares. Setting prices is one of the principal tasks of marketing and finance managers in
that the price of a product or service often plays a significant role in that product's or service's success, not to
mention in a company's profitability. Generally, pricing policy refers how a company sets the prices of its
products and services based on costs, value, demand, and competition. Pricing strategy, on the other hand, refers
to how a company uses pricing to achieve its strategic goals, such as offering lower prices to increase sales
volume or higher prices to decrease backlog. Despite some degree of difference, pricing policy and strategy
tend to overlap, and the different policies and strategies are not necessarily mutually exclusive.
After establishing the bases for their prices, managers can begin developing pricing strategies by determining
company pricing goals, such as increasing short-term and long-term profits, stabilizing prices, increasing cash
flow, and warding off competition. Managers also must take into account current market conditions when
developing pricing strategies to ensure that the prices they choose fit market conditions. In addition, effective
pricing strategy involves considering customers, costs, competition, and different market segments.
Pricing strategy entails more than reacting to market conditions, such as reducing pricing because competitors
have reduced their prices. Instead, it encompasses more thorough planning and consideration of customers,
competitors, and company goals. Furthermore, pricing strategies tend to vary depending on whether a company
is a new entrant into a market or an established firm. New entrants sometimes offer products at low cost to
attract market share, while incumbents' reactions vary. Incumbents that fear the new entrant will challenge the

incumbents' customer base may match prices or go even lower than the new entrant to protect its market share.
If incumbents do not view the new entrant as a serious threat, incumbents may simply resort to increased
advertising aimed at enhancing customer loyalty, but have no change in price in efforts to keep the new entrant
from stealing away customers.
The following sections explain various ways companies develop pricing policy and strategy. First, cost-based
pricing is considered. This is followed by the second topic of value-based pricing. Third, demand-based pricing
is addressed followed by competition-based pricing. After this, several strategies for new and established
pricing strategies are explained.
COST-BASED PRICING
The traditional pricing policy can be summarized by the formula:
Cost + Fixed profit percentage = Selling price.
Cost-based pricing involves the determination of all fixed and variable costs associated with a product or
service. After the total costs attributable to the product or service have been determined, managers add a desired
profit margin to each unit such as a 5 or 10 percent markup. The goal of the cost-oriented approach is to cover
all costs incurred in producing or delivering products or services and to achieve a targeted level of profit.
By itself, this method is simple and straightforward, requiring only that managers study financial and
accounting records to determine prices. This pricing approach does not involve examining the market or
considering the competition and other factors that might have an impact on pricing. Cost-oriented pricing also is
popular because it is an age-old practice that uses internal information that managers can obtain easily. In
addition, a company can defend its prices based on costs, and demonstrate that its prices cover costs plus a
markup for profit.
However, critics contend that the cost-oriented strategy fails to provide a company with an effective pricing
policy. One problem with the cost-plus strategy is that determining a unit's cost before its price is difficult in
many industries because unit costs may vary depending on volume. As a result, many business analysts have
criticized this method, arguing that it is no longer appropriate for modern market conditions. Cost-based pricing
generally leads to high prices in weak markets and low prices in strong markets, thereby impeding profitability
because these prices are the exact opposites of what strategic prices would be if market conditions were taken
into consideration.
While managers must consider costs when developing a pricing policy and strategy, costs alone should not
determine prices. Many managers of industrial goods and service companies sell their products and services at
incremental cost, and make their substantial profits from their best customers and from short-notice deliveries.

When considering costs, managers should ask what costs they can afford to pay, taking into account the prices
the market allows, and still allow for a profit on the sale. In addition, managers must consider production costs
in order to determine what goods to produce and in what amounts. Nevertheless, pricing generally involves
determining what prices customers can afford before determining what amount of products to produce. By
bearing in mind the prices they can charge and the costs they can afford to pay, managers can determine whether
their costs enable them to compete in the low-cost market, where customers are concerned primarily with price,
or whether they must compete in the premium-price market, in which customers are primarily concerned with
quality and features.

VALUE-BASED PRICING
Value pricers adhere to the thinking that the optimal selling price is a reflection of a product or service's
perceived value by customers, not just the company's costs to produce or provide a product or service. The
value of a product or service is derived from customer needs, preferences, expectations, and financial resources
as well as from competitors' offerings. Consequently, this approach calls for managers to query customers and
research the market to determine how much they value a product or service. In addition, managers must
compare their products or services with those of their competitors to identify their value advantages and
disadvantages.
Yet, value-based pricing is not just creating customer satisfaction or making sales because customer satisfaction
may be achieved through discounting alone, a pricing strategy that could also lead to greater sales. However,
discounting may not necessarily lead to profitability. Value pricing involves setting prices to increase
profitability by tapping into more of a product or service's value attributes. This approach to pricing also
depends heavily on strong advertising, especially for new products or services, in order to communicate the
value of products or services to customers and to motivate customers to pay more if necessary for the value
provided by these products or services.

DEMAND-BASED PRICING
Managers adopting demand-based pricing policies are, like value pricers, not fully concerned with costs.
Instead, they concentrate on the behavior and characteristics of customers and the quality and characteristics of
their products or services. Demand-oriented pricing focuses on the level of demand for a product or service, not
on the cost of materials, labor, and so forth.

According to this pricing policy, managers try to determine the amount of products or services they can sell at
different prices. Managers need demand schedules in order to determine prices based on demand. Using demand
schedules, managers can figure out which production and sales levels would be the most profitable. To
determine the most profitable production and sales levels, managers examine production and marketing costs
estimates at different sales levels. The prices are determined by considering the cost estimates at different sales
levels and expected revenues from sales volumes associated with projected prices.
The success of this strategy depends on the reliability of demand estimates. Hence, the crucial obstacle
managers face with this approach is accurately gauging demand, which requires extensive knowledge of the
manifold market factors that may have an impact on the number of products sold. Two common options
managers have for obtaining accurate estimates are enlisting the help from either sales representatives or market
experts. Managers frequently ask sales representatives to estimate increases or decreases in demand stemming
from specific increases or decreases in a product or service's price, since sales representatives generally are
attuned to market trends and customer demands. Alternatively, managers can seek the assistance of experts such
as market researchers or consultants to provide estimates of sales levels at various unit prices.

COMPETITION-BASED PRICING
With a competition-based pricing policy, a company sets its prices by determining what other companies
competing in the market charge. A company begins developing competition-based prices by identifying its
present competitors. Next, a company assesses its own product or service. After this step, a company sets it
prices higher than, lower than, or on par with the competitors based on the advantages and disadvantages of a
company's product or service as well as on the expected response by competitors to the set price. This last
consideration-the response of competitors-is an important part of competition-based pricing, especially in
markets with only a few competitors. In such a market, if one competitor lowers its price, the others will most
likely lower theirs as well.
This pricing policy allows companies to set prices quickly with relatively little effort, since it does not require as
accurate market data as the demand pricing. Competitive pricing also makes distributors more receptive to a
company's products because they are priced within the range the distributor already handles. Furthermore, this
pricing policy enables companies to select from a variety of different pricing strategies to achieve their strategic
goals. In other words, companies can choose to mark their prices above, below, or on par with their competitors'
prices and thereby influence customer perceptions of their products. For example, if a Company A sets its prices
above those of its competitors, the higher price could suggest that Company A's products or services are
superior in quality. Harley Davidson used this with great success. Although Harley-Davidson uses many of the

same parts suppliers as Honda, Kawasaki, Yamaha, and Honda, they price well above the competitive price of
these competitors. Harley's high prices combined with its customer loyalty and mystique help overcome buyer
resistance to higher prices. Production efficiencies over the last two decades, however, have made quality
among motorcycle producers about equal, but pricing above the market signals quality to buyers, whether or not
they get the quality premium they pay for.

2. Explain the different Marketing Environments and the role of Culture and Subculture.
Answer:-The role of Culture and Subculture;
What is culture ?
Culture It is a detailed examination of the character of the total society, including such factors as language,
knowledge, laws, religion, food customs, music, art, technology, work patterns, products, and other artifacts
that give a society its distinctive flavor. In a sense, culture is a societys personality. Culture is the sum total
of learned beliefs, values, and customs that serves to direct the consumer behavior of members of a
particular society.

Characteristics of Culture
1)Culture Satisfies Needs Culture exists to satisfy the needs of people within a society. It offers order,
direction, and guidance in all phases of human problem solving by providing tried and true methods of
satisfying physiological, personal, and social needs. Similarly, culture also provides insights as to suitable
dress for specific occasions (e.g., what to wear around the house, what to wear to school, what to wear to
work, what to wear to church, what to wear at a fast food restaurant, or a movie theater). Cultural beliefs,
values, and customs continue to be followed as long as they yield satisfaction. In a cultural context, when a
product is no longer acceptable because its related value or custom does not adequately satisfy human
needs, it must be modified.
2) Culture is socially acquired We are not born with any cultural knowledge It is the society which teaches
an individual its various cultures and norms of behaving in the society Our society plays a vital role in
teaching its culture to an individual Sometimes people strictly follow their culture only because of the fear
of the society

3)Culture is Dynamic To fulfill the need gratifying role, culture continually must evolve if it is to function in
the best interests of a society. The marketers must carefully monitor the socio culture environment in order
to market an existing product effectively or to develop promising new products. The changing nature of
culture means that marketers have to consistently reconsider: Why consumers are now doing what they do?
Who are the purchasers and the users of their products? When they do their shopping? How and where they
can be reached by the media? What new product and service needs are emerging?

4)Culture is Shared Culture is viewed as group customs that link together the members of the society.
Common language is the critical component that makes it possible for people to share values, experiences,
and customs. Social Institutions transmitting the element of culture and sharing of culture Family : primary
agent for enculturation Educational Institutions : imparts learning skills, history, patriotism, citizenship and
technical training. Religious Institutions : Perpetuate religious consciousness, spiritual guidance, and moral
training. Mass Media : wide range of cultural values.

5)Culture is Learned At an early age, we begin to acquire from our social environment a set of beliefs,
values, and customs that make up our culture. Anthropologists have identified three distinct forms of
cultural learning: 1. Formal learning : in which adults and older siblings teach a young family member
How to behave; 2 . Informal learning : in which a child learns primarily by imitating the behavior of
selected others, such as family, friends, or TV stars. 3. Technical Learning : Which teachers instruct the child
in an educational environment about what, how and why it should be done. Advertising can influence all
three types of cultural learning's.

How Culture Is Learned? : How Culture Is Learned? Culture is learned through :- Enculturation and
Acculturation Language and Symbols Ritual

1) Enculturation and Acculturation Enculturation : The learning of ones own culture is known as
enculturation eg ; when a mother teaches her child about their culture can be called as enculturation.
Acculturation: The learning of a new or foreign culture is known as acculturation eg ; when an american
tries to learn about indian culture would be called as acculturation.

2)Language and Symbols To acquire a common culture, the members of a society must be able to
communicate with each other through a common language. Basically, the symbolic nature of human

language sets it apart from all other animal communication. A symbol is anything that stands for something
else. Symbols can be verbal or nonverbal. Symbols may have several, even contradictory, meanings.
Marketers use symbols to convey desired product images or characteristics. Price and channels of
distribution are also significant symbols of the marketer and the marketers product.

3)Ritual A ritual is a type of symbolic activity consisting of a series of steps occurring in a fixed sequence
and repeated over time. Rituals extend over the human life cycle from birth to death. They can be public or
private. It is often formal and scriptedi.e., proper conduct is prescribed. Important to marketers, rituals
tend to be replete with ritual artifacts (products) that are associated with, or somehow enhance, performance
of the ritual.

Subcultures: Subcultures It is a distinct cultural group that exists as an identifiable segment within a larger,
more complex society. A subdivision of a national culture that is based on some unifying characteristic .
Members share similar patterns of behavior that are distinct from those of the national culture.

Relationship between culture and subculture:

Relationship between culture and subculture Sub cultural traits Of people belonging to Maharashtra
Dominant cultural Traits of Indian Citizens Sub cultural Traits of people belonging to Gujarat

Sub Culture: Sub Culture Categories Nationality Religion Geographic region Race Age Gender Occupation
Social class Ethnicity Examples Indian Hindu, Muslim, Christian Maharashtra, Bihar, Karnataka Brahmin.
Kshitriya , Shudra Child, Teenager, Senior citizen Male , Female Bus driver, mechanic, engineer. Lower,
middle, upper. Similar values and customs.

Types of Subcultures Different subcultures are divided into various factors they are:- Age Region Gender
Social Class

1)Age Subcultures Consumers undergo predictable changes in values, lifestyles, and consumption patterns
as they move through their life cycle. Four Major Age Trends:- Baby Youth Middle aged Elderly Consumer
Behavior changes accordingly with the change in the age trend

2)Regional Subcultures Regional subculture is the culture practiced in different states of a country People
have distinct lifestyles resulting from variations in climate, culture, and ethnic mix of people. Consequently,
different product preferences exist.

3)Gender Subculture The Subculture based on Male-Female divide is known as Gender Subculture. The
needs and wants of men and women differ to a great extent. Accordingly, their buying habits also differ

4) Social Class Human Societies are socially stratified The roles performed by various people are valued
differently Differentiation among roles and their relative evaluation leads to stratification of society. Social
Classes are easily identifiable market segments which can be reached with relative ease since they have
distinctively defined media habits. Consumer Behavior changes with the change in the social class

3. Explain the importance of consumer behavior for marketers.

Answer:- Consumer behavior is an important consideration when constructing a marketing plan. While
revenue, sales numbers and all profit generating departments are important, when it comes down to it
consumer behavior is a big part of the marketing puzzle.
Businesses that cannot understand how a consumers mind operates will have a more challenging time
figuring out how to target a campaign that will attract or catch attention.
Trying to discover what drives, attracts and motivates consumers is pretty valuable information. Marketers
who can successfully figure out what makes potentially interested consumers tick will have gained a terrific
opportunity to use the information in order to develop a strong campaign.
Pre-technology a lot of this information could not be seen by the naked eye, or if so, would take an
enormous amount of time to compile and analyze. Today, through technology, marketers have an easier
means to collect and reflect upon the information collected and learn more about consumer behavior from
different perspectives. As a result, marketing experts can use this information to improve upon marketing
strategies.
According to Lars Perner, Ph.D. of the Marshall School of Business as USC, the study of consumers helps
firms and organizations improve their marketing strategies by understanding issues and continues to
describe how the psychology of how consumers think, feel, reason and select between different
alternatives.

He cites brands and products as examples.

Other consumer behavioral factors of value are gaining perception of how consumers are influenced by their
environments, shopping routines, decision making processes, and motivations.
Professor Perner also suggests there are four main benefits related to consumer behavior:
Marketing Strategies this includes grasping good timing, effective advertising techniques and pleasing
customers.
Public Policy Gaining knowledge of public policy and how products can impact (i.e. side effects) is
critical.
Social Marketing This factor involves ensuring ideas are passed to consumers rather than aggressive
sales. This could include awareness or if society is resistant, alternative methods.
Better Consumers Studying consumer behaviors make marketers better consumers too.
Understanding how to utilize the information gleaned from consumer behavior is the key. Armed with this
information marketers can focus on producing products and/or services targeted markets are actually
interested in, and they can also figure out how to develop effective campaigns..
If these two objectives can be accomplished, then the chance of converting marketing efforts to sales
increases Seems if a good glimpse in consumer behavior can be made, then the rest comes more naturally.
The most obvious is for marketing strategyi.e., for making better marketing campaigns. For example, by
understanding that consumers are more receptive to food advertising when they are hungry, we learn to
schedule snack advertisements late in the afternoon. By understanding that new products are usually initially
adopted by a few consumers and only spread later, and then only gradually, to the rest of the population, we
learn that (1) companies that introduce new products must be well financed so that they can stay afloat until
their products become a commercial success and (2) it is important to please initial customers, since they
will in turn influence many subsequent customers brand choices.
A second application is public policy. In the 1980s, Accutane, a near miracle cure for acne, was introduced.
Unfortunately, Accutane resulted in severe birth defects if taken by pregnant women. Although physicians
were instructed to warn their female patients of this, a number still became pregnant while taking the drug.
To get consumers attention, the Federal Drug Administration (FDA) took the step of requiring that very
graphic pictures of deformed babies be shown on the medicine containers.
Social marketing involves getting ideas across to consumers rather than selling something. Marty Fishbein,
a marketing professor, went on sabbatical to work for the Centers for Disease Control trying to reduce the
incidence of transmission of diseases through illegal drug use. The best solution, obviously, would be if we

could get illegal drug users to stop. This, however, was deemed to be infeasible. It was also determined that
the practice of sharing needles was too ingrained in the drug culture to be stopped. As a result, using
knowledge of consumer attitudes, Dr. Fishbein created a campaign that encouraged the cleaning of needles
in bleach before sharing them, a goal that was believed to be more realistic.
As a final benefit, studying consumer behavior should make us better consumers. Common sense suggests,
for example, that if you buy a 64 liquid ounce bottle of laundry detergent, you should pay less per ounce
than if you bought two 32 ounce bottles. In practice, however, you often pay a size premium by buying the
larger quantity. In other words, in this case, knowing this fact will sensitize you to the need to check the unit
cost labels to determine if you are really getting a bargain.
There are several units in the market that can be analyzed. Our main thrust in this course is the consumer.
However, we will also need to analyze our own firms strengths and weaknesses and those of competing
firms. Suppose, for example, that we make a product aimed at older consumers, a growing segment. A
competing firm that targets babies, a shrinking market, is likely to consider repositioning toward our market.
To assess a competing firms potential threat, we need to examine its assets (e.g., technology, patents,
market knowledge, awareness of its brands) against pressures it faces from the market. Finally, we need to
assess conditions (the marketing environment). For example, although we may have developed a product
that offers great appeal for consumers, a recession may cut demand dramatically.

4. Explain the procedure in Marketing Planning.

5. What is the role of Consumer Behavior in marketing? Explain.

Answer:- the role of Consumer Behavior in marketing
Consumer Behaviour refers to the study of buying tendencies of consumers. An individual who goes for
shopping does not necessarily end up buying products. There are several stages a consumer goes through
before he finally picks up things available in the market. Various factors, be it cultural, social, personal or
psychological influence the buying decision of individuals.

Marketers need to understand the buying behaviour of consumers for their products to do well. It is really
important for marketers to understand what prompts a consumer to purchase a particular product and what
stops him from buying.

What marketers need to understand ?

The psychology of consumers (what they feel about a particular product and their brand on the whole).

How consumers are influenced by their immediate surroundings, family members, friends, co workers and
so on.

What a consumer thinks when he goes out for shopping ?

A marketer needs to first identify his target consumers and understand their lifestyles, psychologies, income,
spending capabilities, mentalities to offer them the right product.

Individuals from lower income group would never be interested in buying expensive and luxurious
products. He would first fulfill his basic physiological needs like food, air, water etc. Trying to sell a
Mercedes or a Rado watch to someone who finds it difficult to make ends meet would definitely be a
disaster.

Kelloggs K special would hardly find any takers in the low income group. In this segment, individuals
would be more interested in buying fresh fruits, vegetables, pulses which are necessary for their survival
rather than spending on health supplements.

It is really essential for the marketers to understand the needs of consumers. Find out what they are actually
looking for?

There are ideally two different ways which enable marketers to understand their consumers.

Primary Research
Secondary Research
Primary Research - Primary Research refers to a research methodology where marketers interact with
consumers directly and gather as much information as they can. Information is generally collected through
surveys, questionnaires, feedback forms, interviews etc.

Secondary Research - Secondary Research often refers to relying on information which has been collected
by others at some point of time.

The background and family status of an individual also influence his/her buying behaviour.

Selling a laptop to an individual who is not much educated would be pointless. Remember consumers would
show interest in your products only if they are of any use to them or their immediate family members. A low
grade worker would never be interested in purchasing business suits or formal shirts.

Canned juices are a hit among middle and higher income group where individuals are really conscious about
their health and fitness. Individuals who live hand to mouth would never spend on sugar free tablets, health
supplements, or for that matter Diet Coke.

It is also important to give complete information to end-users. Do not hide anything from them. It is not
ethical. All tobacco products come with a warning. Individuals should be familiar with not only the benefits
but also the side effects of the products.

Marketers must also take into account:

Age group of consumers
Geographical location
Lifestyle of consumers
Social Status of consumers
Funky designs, loud colours would be a hit among teenagers whereas middle aged and elderly people would
prefer subtle colours and sophisticated designs.

Salwar Suits are extremely popular in North India whereas females prefer saris and skirt blouses in eastern
and southern parts of India.

Individuals from posh localities and good jobs would show keen interest towards buying exclusive and
unique products as compared to individuals who do not come from an affluent background.

6. What are the basic principles of organization Design? Explain the techniques and methods for
designing Organization structure.
NIBM MBA solved Assignments
Dear Students,
SMU MBA WINTER 2014 Assignments are available. For Booking ,Kindly mail us on
kvsude@gmail.com OR call us to +91 9995105420 or S M S your Email ID us in the following Format
On +91 9995105420 we will reach back you with in 24H
25 x 4=100 marks