NCERT Solutions for Class 12

Business Studies
Chapter 11 – Marketing

Very short Questions

1. Explain the advantages of branding to marketers of goods and services.

Ans: Branding entails giving a product a distinct name, sign, symbol, or term for
identification. The following are the benefits of branding for marketers.

i) Branding allows a company to differentiate its product from the products of other
companies.
ii) It makes product advertising easier. Only after a product has been given a brand
can it be advertised and thus attract customers. It is illegal to promote a product with
a generic name.

iii) Through effective branding, manufacturers can foster product loyalty and
habituation. As a result, the company can profit from this and charge a different price
for its product.
iv) It aids in the establishment of a foundation if a new product is to be launched.
This is because it is expected that if a new product is launched under a good and
established brand, it will receive a good boost and benefit from the brand's
reputation.

2. List the characteristics of a good brand name.

Ans: The following characteristics define a good brand name.

i) The name should be brief and simple to spell, pronounce, and remember. Ponds,
Rin, and so on.

ii) A brand should suggest the product's benefits or qualities while also fitting its
functions. As an example, consider the words Boost, Fair & Lovely.

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iii) The name should be distinct while also being adaptable to packaging and labeling
requirements. It should also be adaptable to different advertising mediums and
languages.

iv) A brand name should be adaptable and able to accommodate new products
introduced under the brand.
v) It must be distinguishable and legally protectable.

3. What is the societal concept of marketing?

Ans: According to the societal concept of marketing, organizations must identify the
market's and target consumers' needs and efficiently deliver the desired results. The
organization should identify not only the market's immediate needs, but also the
consumers' long-term well-being. Thus, in addition to customer satisfaction,
organizations should strive for ecological, ethical, and social goals such as pollution,
resource scarcity, and so on.

4. List the characteristics of convenience products.

Ans: Convenience products are those that are purchased frequently, quickly, and
with minimal time and effort. A convenience product has the following
characteristics.
i) Such products are easily accessible in convenient locations, requiring little time
and effort.

ii) Convenience products are frequently consumed and have a steady demand. In
general, essential commodities are classified as convenience products.

iii) They are available in small quantities at low and consistent prices.
iv) There is a lot of competition in the market for such products. As a result, these
products will require extensive advertising.

5. Enlist the advantages of packaging of a customer product.

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Ans: The process of developing and designing a product's container is referred to as
packaging. The following are the benefits of good packaging.

i) It allows a product to be distinguished and identified from other products.

ii) It serves as a marketing tool. The use of colors, pictures, and symbols in
packaging aids in attracting customers.
iii) Appropriate packaging adds to the ease of handling the product.

iv) It aids in the protection of the product's quality from any type of damage. It aids
in the prevention of spoilage, breakage, and other damage, particularly during
storage and transportation.

6. What are the limitations of advertising as a promotional tool? Enlist.

Ans: The limitations of advertising as a promotional tool are as follows.

i) It lacks personal communication and thus is less powerful.

ii) Evaluating the effectiveness of the advertisement is extremely difficult.

iii) Advertisements are pre-packaged and cannot be customized to meet the needs of
different consumer groups.
iv) Advertising effectiveness is low because there may be numerous advertisements.

7. List five shopping products purchased by you or your family during the last
few months.
Ans: The following shopping items were purchased.

i) Clothes
ii) Jewelry

iii) Television

iv) Shoes

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v) Household goods

Short Questions

1. What is marketing? What functions does it play with the process of exchange
of goods and services? Explain.
Ans: Marketing is the process by which buyers and sellers interact with one another
in order to purchase and sell goods and services. Previously, different approaches to
marketing's definition were taken. It is also sometimes called as a process which
occurs post-production involving the purchase of the final products, and other times
as a pre-production process involving the merchandising (designing) of the product.
In reality, marketing is said to be a much broader concept. It includes all of the
activities involved in the exchange of goods and services between producers and
consumers. These are the functions that fall under the purview of marketing. It
entails product planning, design, packaging and labeling, standardization, branding,
warehousing, transportation, advertising, pricing, and distribution. It also includes
activities that are carried out even after the product has been sold, such as
maintaining customer relations and gathering feedback. As a result, marketing plays
an important role in the exchange of goods as well as services.

2. Distinguish between the product concept and production concept of

marketing.
Ans: The difference between two concepts of marketing are mentioned below:

Basis of difference Product concept Production concept

Belief It was believed that It was believed that
consumers preferred consumers preferred
superior quality products, readily available and
and that by increasing the affordable products, and
quality of the product, that by increasing
profits could be production volume,
maximized. profits could be
maximized.

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 Focus of the business The emphasis was on The emphasis was on
improving the product's increasing the quantity of
quality, adding new production and lowering
features, and so on. the average cost of
production.

Odology The emphasis is on The emphasis is on

improving the product's increasing the business's
features and quality. production efficiency.

3. Product is a bundle of utilities? Do you agree? Comment.

Ans: When a customer decides to purchase a product, his or her primary focus is on
the utility that he or she will receive from using it. A customer seeks various levels
of satisfaction from a product. A product's benefits can be classified into three types:
functional benefits, psychological benefits, and social benefits. For example, when
a consumer buys a car, it provides him with functional utility as a mode of
transportation. In addition, having purchased a car provides him with a
psychological benefit in the form of pride and self-esteem. It also comes with a social
benefit in the form of peer acceptance. As a result, a product is said to be a bundle
of utilities, and a buyer values all such utilities when purchasing a product.

4. What are industrial products? How are they different from consumer
products? Explain.
Ans: Industrial products are those that are used as inputs in the manufacture of other
goods. These items are not intended for final consumption; rather, they are used as
raw materials and inputs by manufacturers in the production of consumer goods.
Machines, tools, and so on are examples of industrial products. In contrast, consumer
products are those that are used by the ultimate customers for their personal
consumption. Consumer goods include items such as toothpaste, edible oil, furniture,
and so on. The distinctions between industrial and consumer products are
highlighted in the following points.

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 Basis of difference Industrial products Consumer Products

Number of customers There are a limited The number of customers

number of customers. For has increased. Many
example, oil seeds (an people, for example,
industrial product) are consume mustard oil (a
primarily used by consumer product).
mustard oil producers.

Channel of distribution Such products necessitate Such products must

shorter distribution travel through
channels, such as direct significantly longer
selling or a one-level channels before reaching
channel. the final consumer.

However, the
distribution channel for
perishable consumer
goods is limited.

Location Industrial products are Consumer goods are

concentrated only in easily and conveniently
areas where the industries available.
that produce them are
located.

Demand The demand for Consumer product

industrial products is demand is not derived
obtained from consumer demand; rather, it serves
goods demand. as the foundation for

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 demand for industrial
products.

Role of technical When purchasing these Manufacturing of such

features in decision products, technical products does not involve
making features play an any technical
important role. complexities. As a result,
technical features play
little of a role in
purchasing decisions.

5. Distinguish between convenience products and shopping products.

Ans: The difference between convenience products and shopping products is given
below:

Basis of difference Convenience products Shopping products

Demand Convenience products are Shopping products are in

in high demand all the relatively low demand.
time.

Nature of products Convenience goods fall In general, such goods

under the category of are long-lasting in nature.
essential commodities.

Unit of purchase and These items are sold in These items are typically
price small quantities and at a larger in size and have
low unit cost. As a result, high unit prices. As a

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 these items have a low result, the pro gin is also
profit margin. high.

Nature of purchase Such items are purchased Such products are not
on the spur of the purchased on the spur of
moment, without much the moment; instead, the
thought or planning. consumer takes the time
to compare the price,
quality, and other
features of the product.

Example Ice cream, medicines, Jewelry, furniture,

newspapers, and clothing, and so on.
stationery items.

6. 'Products is a mixture of tangible and intangible attributes'. Discuss.

Ans: In general, a product is a tangible asset with physical characteristics. For
example, we consider a motorcycle or a laptop to be products. However, when it
comes to marketing a product, it is important to consider not only the physical or
tangible attributes of the product, but also certain intangible attributes. That is, a
consumer's decision to buy a product is influenced not only by its tangible
characteristics, but also by certain intangible characteristics. In other words, a
consumer buys a product for reasons other than its functional utility, such as brand
recognition, reputation, social satisfaction, and so on. When a person buys a laptop,
he looks for intangible attributes such as guarantee, brand, and so on, in addition to
the physical attributes and functional utility of the model, size, features, and so on.
As a result, a product is a combination of tangible as well as intangible attributes.

7. Describe the functions of labelling in the marketing of products.

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Ans: Labeling plays an important role in product packaging during the marketing
process. Labeling essentially provides information about the product in the form of
a tag (in the case of unbranded local products such as rice, wheat, and so on) or
graphics (such as a lady applying cream on face for a face cream). Labeling serves
several functions, the most important of which are as follows.

i) Contents and Description of Use: The primary function of labeling is to provide

information about the product's use, application, warnings, content, and so on. For
example, the contents of a shampoo bottle are written on the bottle, along with
warnings such as "keep away from children under the age of 10." Similarly, a picture
of noodles describing its appearance can be found on food products such as Maggie
Cuppa Mania. Along with this, the ingredients and method of preparation are
specified.
ii) Identification and Distinction: A label makes it easier to identify a product. It
assists consumers in differentiating their preferred products from others. In a potato
chip product, for example, a man eating potato chips is imprinted for identification.
A label also contains useful information such as the manufacturer's name or address,
net weight, maximum retail price, batch number, and so on.
iii) Standardization and Evaluation: A label also aids in the determination of a
product's grade. This allows marketers to categorize the product into different
categories based on specific qualities or features. For example, a face-cream brand
may be divided into three categories: oily skin, dry skin, and normal skin.

iv) Encourages Production: An appealing label also aids marketers in promoting

the product. It aids in attracting new customers to the product. For example, the label
for Maggi Noodles reads, "Taste bhi, Health bhi." In this case, the label is crucial in
highlighting the product and promoting its sale.
v) Information Necessary for Law: The label also provides and mentions the
information that is required by law to be included. On a packet of tobacco, for
example, it says, 'chewing tobacco is harmful to your health.'

8. Discuss the role of intermediaries in the distribution of consumer non-

durable products.
Ans: Intermediaries are crucial in the distribution of consumer nondurables. They
facilitate the movement of goods from the point of manufacture to the point of

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consumption. In the case of nondurables, the intermediaries perform the following
functions.

i) Arrangement: An intermediary receives goods from a variety of sources. He then

categorizes these items into homogeneous groups based on characteristics such as
size, quality, and so on. For example, an electronic goods seller may receive a supply
of various electronic goods (TV, washing machine, etc.) and then sort them
according to their functions.

ii) Collection: An intermediary keeps a large stock of goods on hand to ensure an

easy flow of supply. For example, an electronic goods seller may keep a large stock
of each type of electronic item.
iii) Allocation and Packing: This function entails dividing larger stock into smaller
units. For example, each electronic item and its spare parts are packed separately.
iv) Creating Variety: An intermediary obtains various goods from various sources
and assembles them in a single location. As a result, it keeps a wide range of goods.
He obtains the products and then sells them in various combinations as desired by
the customers. Most people, for example, prefer a television and a video player
together. As a result, the retailer can sell a mix of the two.

v) Promotion of Product: They help the manufacturers with their promotional

efforts. Manufacturers, for example, use advertising to promote their product.
Intermediaries can help this process by displaying banners and other advertisements.
For example, an electronic goods retailer may display banners highlighting the
features of various products.
vi) Mediation: Middlemen are responsible for negotiating a deal that will satisfy
both the producers and the consumers. They negotiate the price, quality, quantity,
and so on for an efficient transfer of ownership that meets the needs of both parties.

vii) Bearing Risk: Intermediaries buy goods from manufacturers and keep them in
their possession until the final sale. During the process, they are vulnerable to
fluctuations in demand, price, spoilage, and so on. Assume a retailer purchases a
large number of air conditioners. However, after a few months, winter arrives, and
demand for air conditioners decreases. As a result, the stock remains unsold, and the
retailer suffers a loss.

9. Explain the factors determining choice of channels of distribution.

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Ans: One of the most important marketing decisions is deciding which channel of
distribution to use. The following factors influence channel selection.

(i) Product Category: The channel of distribution chosen is determined by the type
of product produced. It is critical to determine whether the product is perishable or
non-perishable, whether it is an industrial or consumer product, whether its unit
value is high or low, and the product's degree of complexity. For example, if a
product is perishable, short channels should be used rather than long ones. Likewise,
if a product has a low unit value, a longer channel is preferred. Similarly, consumer
goods are distributed via long channels, whereas industrial goods are distributed via
short channels.

ii) The Company's Characteristics: The two most important characteristics of a

company that influence channel selection are its financial strength and the level of
control it desires over intermediaries. Shorter channels necessitate more funds than
longer channels, but they also provide greater control over the channel's members
(intermediaries). As a result, companies that are financially strong or want to have
more control over the distribution channel choose shorter distribution channels.
iii) Factors of Competition: The degree of competition and the channels chosen by
other competitors influence the distribution channel selection. Depending on its
policies, a company may choose to use the same channel as its competitors or a
different channel. For example, if a company's competitors choose to sell through a
retail store, the company may do the same, or it may choose a different channel, such
as direct selling.
iv) Environmental Aspects: Environmental factors such as economic constraints
and legal policies all play a role in channel of distribution selection. For example,
the requirement of complex legal formalities at each stage of distribution encourages
companies to choose shorter distribution channels.
v) Market Elements: Other factors influencing channel selection include market
size, geographical concentration of buyers, quantity demanded, and so on. Shorter
channels, for example, are used when potential buyers are concentrated in a small
geographical area. In contrast, if the buyers are spread out over a larger area, longer
distribution channels may be used.

10. Explain briefly the components of physical distribution.

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Ans: Physical distribution is the movement of goods from the point of manufacture
to the point of consumption. The components of physical distribution are as follows.

i) Processing of Order: Order processing consists of several steps, including order

placement, transmission of the order by intermediaries to the manufacturer,
inventory maintenance as needed, delivery of goods, and so on. Because all of these
processes take time, a physical distribution system should be designed to ensure
quick and accurate order processing. In summary, order processing speed and
accuracy are directly related to customer satisfaction. Fast and accurate order
processing leads to higher levels of customer satisfaction.

ii) Transportation of Products: The physical movement of goods from the point
where they are manufactured to the point where they are consumed is referred to as
product transportation. Transporting goods from the point of production to the point
of consumption is required to make them physically available to consumers.
iii) Warehousing: The process of storing manufactured goods prior to the final act
of sale is known as warehousing. If we suppose that a company has a lot of
warehouses then it indicates that the company will be able to provide goods at
various locations more quickly and also on time. However, maintaining warehouses
comes with its own set of expenses. As a result, a company must weigh the relative
benefits and costs of warehousing and strike a balance between the two as needed.
iv) Maintenance of Inventory: Inventory is kept on hand by the companies to
ensure that products are delivered on time. Inventory maintenance, like
warehousing, has a positive relationship with customer service. However, inventory
maintenance comes at a cost because a large amount of capital remains locked up in
the stock until it is sold. As a result, the companies must strike a balance between
customer service and cost.

11. Define advertising. What are its main features? Explain.

Ans: Advertising is a marketing technique that is used to promote a product.
Companies use advertising to attract customers to their products and persuade them
to buy them. Newspapers, magazines, television, and other forms of advertising are
common. The following are some of the most important aspects of advertising.

(i) Cost Involved: Advertising is not free. It is a form of paid promotion. The costs
of advertising will be borne by the sponsors.

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ii) Impersonal Mode: Advertising is a form of impersonal communication. In other
words, there is no direct interaction between the customer and the advertiser. As a
result, it lacks personality and creates a monologue.

iii) Specific Sponsor: There are always a few individuals or sponsors who take on
the responsibility of designing it and bearing the associated costs.

12. Discuss the role of 'sales promotion' as an element of promotion mix.

Ans: Sales promotion refers to the incentives provided to buyers in order to persuade
them to purchase the product. It included activities such as providing discounts, gifts,
and free samples, among others. These activities supplement the company's other
promotional efforts, such as advertising and direct selling. They are increasingly
attracting customers and persuading them to buy the product right away. Such
activities are especially beneficial during the launch of a new product. They provide
a temporary boost to sales. Discounts are given by selling the product at a lower
price than the listed price, for example. Quantity gifts are given away as freebies
(such as 20 percent extra or buy 2, get 1 free). When a new brand is launched, free
samples are distributed in the form of small packets. Companies use such incentives
to attract more customers and increase sales.

Long Questions
1. Define marketing. How is it different from selling? Discuss.
Ans: Marketing is the process by which buyers and sellers interact with one another
in order to purchase and sell goods and services. It includes a variety of activities
such as product planning, design, packaging and labeling, pricing, and distribution,
as well as after-sales services such as customer relations and feedback collection.
Selling, on the other hand, refers to the activities that are undertaken to promote the
sale of goods and services. These promotional activities can take the form of
advertising, publicity, and so on. The product is converted into cash during the
selling process. In this sense, selling can be considered a subset of marketing.

Basis of difference Marketing Selling

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 Scope of the term Marketing is a broad Selling is a more specific
term that encompasses a term that refers only to
variety of activities such promotional activities
as planning, designing, and the transfer of
after-sales services, and product ownership from
so on. the seller to the
purchaser. Selling is only
one aspect of marketing.

Means of profit In order to maximize In order to increase

maximisation profits, marketing places profits, selling places a
a premium on increasing premium on increasing
customer satisfaction. sales.

Emphasis Customer satisfaction is The sale of goods and the

the focus of all marketing transfer of product
activities. ownership from the seller
to the purchaser are the
focal points of selling
activities.

Scope of activities Marketing activities Sales activities begin

begin before the product only after the product has
is manufactured and been manufactured.
continue after it is sold.

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 Strategies and efforts It entails production, It only includes product
planning, design, promotion and sales
feedback services, and so strategies.
on.

2. What is the marketing concept? How does it help in the effective marketing
of goods and services?
Ans: The marketing management concept places a premium on customer
satisfaction. It believes that customer satisfaction is critical to the success of any
business. In the long run, any organization can only survive and maximize profits if
it identifies and effectively addresses customer needs. This concept refers to the fact
that people purchase a product in order to meet a specific need (social need,
functional need and psychological need, etc). Any organization must strive to
identify and meet such needs in an efficient manner. That is, all decisions must be
made based on the needs and requirements of the customers. An organization works
and sells based on what the customer wants rather than what it has. The following
are the pillars of the marketing concept.
i. All marketing efforts must be directed toward a specific market segment or group
of customers. Organizations must clearly identify the target customer's needs and
requirements.

ii. It should create products and services that meet the needs of its customers

iii. It should not only work independently toward customer satisfaction, but it should
also strive to satisfy customers better than its competitors.

iv. Profit is at the heart of all marketing efforts. The marketing concept aids in the
efficient marketing of goods and services. Marketing goods and services would be
more effective and efficient if all marketing activities were directed toward customer
satisfaction. Selling would not be a problem if production, pricing, design, and other
decisions were based on the needs of the customers. For example, if customers want
dual-sim mobile phones with high-resolution cameras, GPS, and other features, the
company manufactures them. Similarly, the company's other decisions, such as
pricing, branding, and so on, are based on the needs of the customers.

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3. What is marketing mix? What are its main elements? Explain.
Ans: The marketing mix is the collection of marketing tools used to achieve the
various marketing objectives. The market offering is critical in the marketing
process. To put it another way, for effective marketing, a company must decide on
various aspects of a product, such as its size, quality, and location of sale, among
others. A variety of factors influence such decisions. Some of them are under the
firm's control. The firm, for example, has control over decisions regarding
packaging, branding, pricing, advertising, and so on. However, there are some
uncontrollable factors that influence a firm's decision making. For example,
government policies and bank credit policies are beyond the firm's control. To
achieve marketing objectives, a company continuously modifies the various
controllable factors. These elements are known as marketing tools and serve as the
pillars of marketing. A company selects the best combination of alternative
marketing tools from which to develop a market offeringThe marketing mix is a
collection of marketing tools that a company employs to achieve its marketing
objectives.
The following are the components of the marketing mix.
1. Product: A product is any good or service that adds value and meets a customer's
needs. A car, toothpaste, soap, teacher services, and so on are all examples of
products. In marketing, a product refers not only to the physical product, but also to
the satisfaction of the customer's various needs and utilities. Consumption of a
product, for example, benefits a consumer by satisfying functional needs, social
needs, and psychological needs. Such advantages are also included in the product.
A product also includes after-sales services such as collecting feedback and
resolving customer complaints, among other things. A product's design, quality,
features, labeling, branding, and packaging are all important considerations.

2. Price: The price is the amount of money paid by customers to obtain a product.
The price of a product influences its demand. When the price of a product rises, so
does its demand, and vice versa. Marketers must thoroughly examine the various
factors that influence price in order to determine an appropriate price for the product.
When determining a price, for example, the target customers, pricing policy
followed by competitors, firm objectives, and so on must all be considered. The price
should be set in such a way that customers consider it to be in line with the value of
the product. Appropriate discounts and incentive schemes must also be determined.

3. Location: In addition to product and pricing decisions, a company must consider

the product's availability to its target customers. A company must choose the right

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dealers or intermediaries for the distribution of its goods. Other critical decisions
include inventory management, warehousing, storage, and transportation of goods.

4. Promotion: Promotional activities are those that inform customers about the
availability of a product, its features, qualities, and so on. In order to persuade
customers to purchase the product Organizations engage in a wide range of
promotional activities, including advertising, sales techniques, personal selling, and
so on. An organization must carefully select the medium of promotion and then take
the necessary actions. For example, the organization must decide which sales
techniques, such as discounts, free gifts, sales, and so on, to employ.

5. What are the factors affecting the determination of the price of a product or
service?
Ans: The price of a product is the amount of money paid by customers to obtain it,
and this price influences its demand. As a result, pricing is critical in the marketing
of goods. A company's revenue and profits are affected by the price it charges for its
product. Furthermore, pricing serves as a competitive tool. Firms that produce
similar substitutable products compete on the basis of price. As a result, firms must
place a premium on proper product pricing. Marketers must thoroughly examine the
various factors that influence price in order to determine an appropriate price for the
product. The following are the elements that influence the price of a product or
service.

1. Cost of Product: The cost of the product is a major factor in determining the
price. It includes the costs associated with the product's production, distribution, and
sale. Product costs can be divided into three broad categories: fixed costs, variable
costs, and semi-variable costs. Fixed costs are those that do not change in proportion
to the amount of output produced. In order to produce a good, a company, for
example, incurs costs for the purchase of machinery, land, and so on. These are one-
time expenses. Variable costs, on the other hand, vary directly in proportion to the
volume of production. That is, as output increases, so does the variable cost. Variable
costs include things like labor and raw materials. Semi-variable costs vary with
output level but not directly proportionally. Payments made to intermediaries for the
sale of goods, for example, is a semi-variable cost. In general, firms set the price of
a product so that it covers all of its costs. Furthermore, they hope to make a profit
above and beyond the costs they incur. As a result, firms decide on a price that takes
into account both the cost and the profit factor.

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2. Demand for the Product: A company must consider the demand for its product
when determining the price. The elasticity of demand is important in this context.
The proportionate change in demand caused by a given proportionate change in price
is referred to as demand elasticity. The demand is said to be elastic if it changes by
a larger proportion due to a small proportionate change in price. That is, demand is
said to be elastic if a small price increase (or decrease) results in a relatively large
price decrease (or increase). In this case, the firm cannot charge a higher price
because it would cause a significant drop in demand. Demand, on the other hand, is
said to be inelastic if a change in price has little effect on it. In this case, the firm has
the option of charging a higher price because, even at a higher price, demand would
not fall significantly. As a result, the price of goods with elastic demand is generally
lower than the price of goods with inelastic demand.
3. Degree of Competition in the Market: In broad, the lower the price that a
company can charge for its product, the higher the market competition. This is
because, in a high-competition environment, a firm that attempts to charge a high
price will lose customers to competitors. On the other hand, if a company's product
has little competition, it can charge a higher price.
4. Government Regulations: To protect the general public's interests, the
government may intervene in price determination at times. In the case of essential
commodities, for example, the government can set a maximum price that can be
charged.

5. Pricing Objectives: Each firm has different pricing objectives that it considers
when determining a price. Some of the pricing objectives are as follows.
i. Profit Maximisation: Profit maximization is the goal of every business. If, on the
other hand, the firm's goal is to maximize profits in the short run, it may make a
decision to charge a higher price in order to increase revenue. If, on the other hand,
the firm's goal is to maximize profit in the long run, it will charge a lower price in
order to gain a larger market share and benefit from higher sales.

ii. Acquiring Market Share: If a company wants to expand its market share, it will
charge a lower price to attract a larger number of customers to its product.
iii. Surviving Competition: In the face of fierce competition, a company will keep
its product's price low. This is related to the reasons that if it charges a higher price,
it will lose customers to competitors.

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iv. Quality Focus: If a company focuses on improving product quality, it will charge
a higher price to cover the additional costs.

6. Method of Marketing: The firm's marketing methods, such as distribution,

advertisement, customer service, branding, and so on, also have an impact on price
determination. For example, if the company uses a lot of advertising to promote the
product, it will charge a higher price.

6. What do you mean by channels of distribution? What functions do they play

in the distribution of goods and services? Explain.
Ans: Individuals, institutions, and agents who facilitate the distribution process are
referred to as distribution channels. As a product's potential consumers are dispersed
across a larger geographical area, it becomes more difficult for the producers or
manufacturers to directly contact the customers in order to sell their products.
Distribution channels are crucial in this case. They facilitate the movement of goods
from the point of manufacture to the point of consumption. For example, it would
be difficult for a sugar manufacturer in Punjab to contact customers in other parts of
the country. To make the process easier, it would sell its product to wholesalers, who
would then sell it to retailers. Finally, the product is sold to the customers by the
retailers. Furthermore, channels of distribution reduce consumers' efforts by
providing a variety of goods and services in a convenient single location. A
customer, for example, can purchase a wide range of goods at a retail store. Thus,
the term "channels of distribution" refers to the group of people, agents, and
organizations that facilitating the exchange or transfer of goods and services from
the producer to the consumer Distribution channels serve the following purposes.

1. Arrangement: An intermediary receives goods from a variety of sources.

However, the goods received vary in size, quality, and features. Based on their
characteristics, the intermediary arranges or sorts these goods into homogeneous
groups.

2. Collection: A middleman gathers and retains a large stock of goods to ensure a

continuous and smooth supply flow.
3. Allocation and Packing: A middleman divides the goods into small, marketable
units. It repacks the goods into handy packets.

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4. Creating Variety: An intermediary obtains various goods from various sources
and assembles them in a single location. As a result, it keeps a wide range of goods.
A grocer, for example, keeps a wide variety of products for sale.

5. Product Promotion: They help manufacturers with their product promotion

efforts. Manufacturers, for example, use advertising to promote their product.
Intermediaries can help this process by displaying banners and other advertisements.

6. Mediation: On the one hand, middlemen interact with producers, and on the
other, with customers. As a result, they serve as a conduit between producers and
customers. They bargain over price, quality, and other issues, and work to meet the
needs of both parties.
7. Risk-bearing: Intermediaries purchase goods from producers and keep them in
their possession until the final sale. During the process, they are vulnerable to
fluctuations in demand, price, spoilage, and so on. Assume a retailer purchases a
large quantity of sugar. However, as time passes, the price of sugar rises, reducing
demand. As a result, the retailer may suffer a loss as the stock remains unsold.

7. Explain the major activities involved in the physical distribution of products.

Ans: Once the product has been manufactured, packaged, promoted, branded, and
priced, it must be made available to consumers. That is, they must be transported
from where they are produced to where they will be consumed. Physical distribution
of products refers to the physical movement of products from the point of
manufacture to the point of consumption. It entails the four major activities listed
below.
1. Processing of Order: The most important aspect of the buyer-seller relationship
is the processing of orders and the delivery of goods. Order processing consists of
several steps, including order placement, transmission of the order by intermediaries
to the manufacturer, inventory maintenance as needed, delivery of goods, and so on.
All of these processes take time. The physical distribution system should be designed
in such a way that orders are processed quickly and correctly. In general, order
processing speed and accuracy are directly related to customer satisfaction.
Consumers are more satisfied when orders are processed quickly and accurately. As
a result, a proper order processing system is critical.
2. Transportation of Products: The physical movement of goods from the point
where they are manufactured to the point where they are consumed is referred to as

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product transportation. A product's potential customers are dispersed across a large
geographical area. They must be transported from the point of production to the point
of consumption in order for the goods to be physically available to them. Sales
cannot take place unless the products are physically transported and made available
at the point of consumption.

3. Warehousing: There is a time lag between the act of production and the act of
sale or consumption in most cases. This means that the goods must be properly stored
and sorted before being sold. Warehousing refers to the process of storing and
sorting products. Proper warehousing ensures efficiency in product delivery and
sale, which leads to higher customer satisfaction. For example, warehousing allows
a company to keep products in stock and ensure timely delivery of goods as needed.
However, maintaining warehouses comes with its own set of expenses. As a result,
a company must weigh the relative benefits and costs of warehousing and strike a
balance between the two as needed.
4. Maintenance of Inventory: Maintaining a stock of products is what inventory
entails. Inventory is kept on hand by the companies to ensure that products are
delivered on time. Inventory and customer service are inextricably linked.
Maintaining a higher inventory allows a company to ensure timely delivery of goods
to customers and, as a result, improve customer service. However, inventory
maintenance comes at a cost because a large amount of capital remains locked up in
the stock until it is sold. As a result, the companies must strike a balance between
customer service and cost. The decision to keep inventory is influenced by a variety
of factors, including how well the distribution system responds to orders and
deliveries, the cost of keeping the inventory, the firm's objectives, and so on. The
company must choose an appropriate inventory while considering the various costs
and benefits involved.

8. Expenditure on advertising is a social waste' Do you agree? Discuss.

Ans: Advertising expenditure is frequently regarded as a social waste. Advertising
is criticized for increasing the company's costs unnecessarily, undermining social
values, and exacerbating, building up consumer needs and desires for a variety of
products. However, proponents of advertising argue that advertising through
increased sales reduces costs and aids the growth process. The following
considerations aid in determining whether advertising is a waste of time.

Class XII Business Studies www.vedantu.com 21

1. Higher Cost: Advertisement costs add to the overall cost of the business.
Companies, in turn, pass on the increased costs to customers in the form of higher
prices. Advertisement supporters, on the other hand, argue that it lowers the per unit
cost of production. This is related to the reasons that advertising can attract a larger
number of customers to the product, implying an increase in demand for the product.
Manufacturers increase production in response to increased demand. As production
increases, the per unit cost of production decreases. As a result, even though
advertising costs add to the cost, this increase in cost can be offset by a decrease in
per unit cost due to increased demand and production.

2. Weakens Social Values: One of the most common criticisms leveled at

advertising is that it undermines social values and instead promotes materialism in
society. Advertisement draws customers' attention to new products and encourages
them to buy them. Customers are dissatisfied with their current situation as they gain
more knowledge about the availability of new products. In the process, they
frequently end up purchasing items that they do not even need. However, such a
cycle of dissatisfaction and product acquisition never ends, and materialism grows.
Advertisements, on the other hand, are said to merely inform buyers about the
availability of various products, and that the final decision to purchase the product
is left to the consumer. Customers' knowledge is increased and they are kept
informed as a result of advertising.

3. Creates Confusion: Customers are said to be confused by a large number of

advertisements for similar products. For example, advertisements for various hair
oils claim that using their product will result in healthy and long hair. With so many
advertisements, the consumer becomes perplexed as to which product of which
brand should be purchased. Ad supporters, on the other hand, disagree with this
criticism and argue that advertisements provide consumers with a choice. After
considering various factors such as price, style, quality, and so on, consumers can
make an informed decision for themselves.

4. Promotes Inferior Goods: It is argued that both superior and inferior quality
products are advertised. Advertisement can also be used to increase demand for
inferior goods. Such a claim, however, is only partially correct. This is due to the
fact that quality is a relative concept. What one consumer considers to be inferior
may be considered superior by another. Advertisements promote a wide range of
products, and consumers buy them if they meet their needs.

5. Objectionable Advertisements: Advertisements, it is said, frequently undermine

social values and are in poor taste. The language, images, and content of
advertisements may not always appeal to the general public. For example, women

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in male-oriented products (such as shaving creams, deodorants, and so on) are
frequently chastised. In response, some argue that good or bad taste is a subjective
phenomenon that varies from person to person. What is acceptable to one person
may be offensive to another. As a result, while advertising expenditure is criticized,
the criticisms are not entirely accurate. On the one hand, they can be abused and
have drawbacks, but on the other hand, one cannot deny the benefits of advertising.

9. Distinguish between advertising and personal selling.

Ans: Advertising is a faceless, paid form of communication used by marketers to
promote their products and services. Personal selling, on the other hand, entails the
seller communicating directly with potential customers. That is, it entails direct face-
to-face communication between sellers and customers for the purpose of product
sale. The distinctions between advertising and personal selling are highlighted in the
following points.

Basis of difference Advertising Personal selling

Personal v/s impersonal It is an impersonal form It is a form of personal

of communication in communication in which
which the seller the seller interacts
communicates with directly with potential
customers via various customers.
media such as television,
newspapers, and so on.

Reach Advertising has a greater It has a more limited

reach because it reaches a reach because only a few
large number of people at people can be contacted
the same time. directly.

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 Flexibility It is rigid because It is adaptable because
advertisements are the seller can change the
standardized and cannot message to meet the
be adjusted to meet the needs of different
needs of different customers.
customers.

Target group It is better suited for It is better suited for

large-scale marketing to a marketing to a small
large number of group of consumers.
consumers. Advertising,
for example, is Personal selling, for
appropriate if marketing example, is more
is to be done for ultimate effective when marketing
customers. to intermediaries and
retailers.

Cost involved The cost per person is Personal selling is a

low because advertising relatively costly
reaches a large number of endeavor.
people at the same time.

Time involved Advertising reaches a Because personal selling

large number of people at only allows you to
the same time. As a contact a small number
result, it can cover the of people, it takes a
entire market in a significant amount of

Class XII Business Studies www.vedantu.com 24

 relatively short period of time and effort to cover
time. the entire market.

Customer feedback Customer feedback and Because the seller

reactions cannot be contacts the customers
judged through directly, he receives
advertising. feedback and judges their
reactions.

Medium of It entails communication It is personal

communication via mass media such as communication through
television, newspapers, salespeople.
radio, and so on.

Objectives The primary goal of The primary goal of

advertising is to pique the personal selling is to
interest of customers in raise product awareness
the product. and induce purchase
decisions.

Application Based Questions

1. As marketing manager of a big hotel located at an important tourist

destination, what societal concerns would be faced by you and what steps would
you plan to take to take care of these concerns? Discuss.
Ans: According to the societal concept of marketing, organizations must identify the
market's and target consumers' needs and efficiently deliver the desired results. The
organization should identify not only the market's immediate needs, but also the
consumers' long-term well-being. Thus, in addition to customer satisfaction,

Class XII Business Studies www.vedantu.com 25

organizations should strive for ecological, ethical, and social goals such as pollution,
resource scarcity, and so on.

• Rainwater harvesting

• Solar geyser use

• waste recycling

• proper drainage

• use of CNG-powered vehicles

2. Suppose you are the marketing vice president of an insurance company,

planning to design a new mediclaim policy for senior citizens. What information
would you like to collect to perform this task and how will you collect such
information? Discuss.
Ans:
• Senior citizen's age

• Income

• Medical information
• Working or not working

3. What shopping products have been purchased by you/your family in the last
six months. Make a list and specify what factors influenced the purchase of each
of these products.

Ans:
• Washing Machine: Brand, Price, Specifications, and Warranty
• Dress Material: Cost and Fashion

• Price, quality, comfort, and design of a cot bed

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• Sandal: cost, brand, size, and material

4. What information is generally placed on the package of a food product.

Design a label for one of the food products of your choice.

Ans:
• Product name

• Brand

• Price

• Manufacturing date and expiration date

• Weight
• Ingredients used
• Directions for use

• FPO mark
• Preservatives used

5. For buyers of consumer durable products, what ‘customer care services’

would you plan as a manager of a firm marketing a new brand of motorcycle.
Discuss.
Ans:
• Monthly Payments

• Exchange Offer

• Free Servicing

• Warranty

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Case Problem

Nokia takes a four-lane road to consumers.

NEW DELHI: After having grabbed a king-size 79% share of the Rs 15,000-
crore mobile handset market in India, Nokia India has found a new way of
connecting people. The mobile handset manufacturer has embarked upon a
brand new retail strategy that is based on a classification of its consumers into
four major groups that separates people in terms of usage, income level and
lifestyle. The classification is based on an extensive survey – the Nokia
Segmentation Study — that was carried over two years involving 42,000
consumers from 16 countries. It studied the impact lifestyle choices and
attitudes have on the mobile devices consumers buy and how they use them.
The strategy, which was announced globally in June last year, is being unfolded
in India now. While the nitty-gritty of the new strategy is still being worked out,
it is likely that the company would follow separate marketing strategies for the
four different segments. The advertising campaigns could be different for the
segments. Nokia’s entire product portfolio has now been realigned towards
these four groups to address the specific needs of each. The first of these
segments Live, aimed at first time users whose basic need is to stay in touch
with voice as the main driver, would have basic handsets low on features and
price. “These may be functional phones but the target group for these phones
range from SEC C (low socioeconomic class) to SEC A1+ (very high
socioeconomic class) markets,” says Nokia India marketing head Devinder
Kishore. The second segment Connect looks at more evolved users who look for
more functionality and features and connectivity. Accordingly, phones in this
segment would have GPRS, camera and music capabilities. The next two
categories, Achieve and Explore, are aimed at high-end users and have Nokia’s
top-end handsets. For example, Achieve segment looks at enterprise users who
need to have business functionalities in their phones. Nokia’s new E-series has
been put under this segment with handsets having QWERTY keyboards and
full Internet capabilities. Aimed at high-end lifestyle users, Explore would be
the most prominent segment for the company in the coming years. Says Nokia
India multimedia business director Vineet Taneja, “This segment would see the
most vibrant growth in the coming year. It will look at five different areas –
applications, imaging, mobile TV, music and gaming. We are fast developing
the ecosystem to support these areas.” Nokia acquired music solution and
content provider LoudEye and GPS solution provider Gate5. It is all slated to
launch its most high-profile handset, which boasts of having a 5 megapixel
camera and GPS capabilities apart from iPod quality music, in February. Says

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Taneja, “There is increasing demand for convergence and multiple
functionalities in high-end handsets. The N-series will try to address that.”
Nokia feels that the new platform strategy wherein different handsets are
launched under a platform, like the N-Series, will become a status and style
statement and drive numbers.

Questions

1. Identify the four market segments that Nokia plans to address as per the news
report above.
Ans: Live, Connect, Achieve, and Discover

2. What is the basis of classification of the market used by the company?

Ans: SEC Socio-Economic Class, Usage, and Way of Life

3. What do you mean by realignment of product portfolio? Illustrate this from

the case above.
Ans: Product portfolio realignment refers to the development of a portfolio in
relation to the needs. The four different handsets are planned to meet the needs of
various customers.

4. Identify the points that can be highlighted in marketing campaigns for each
segment.
Ans:
• Price

• Model

• Performance

• Technology
• User-Friendliness

5. What are the different considerations in the mind of consumers of each

segment while purchasing mobile phones as given in the above case?
Ans:

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• First Segment: Mobile users for the first time. The primary consideration in this
case is price.

• Second Segment: Users who think about features and functionality. Both features
and price are important considerations in this case.

• Third Segment: High-end customers. The main considerations here are its
uniqueness and functionalities.

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