MARKETING MANAGEMENT

UNIT-1

INTRODUCTION TO MARKETING MANAGEMENT

 Nature of Marketing Management

 Types of products/services
 Marketing Concepts: Product, Production, Selling, Marketing & Societal
 Concepts of Marketing Management
 Elements of Marketing Management
 Classification of goods & services

MARKETING
“Meeting Human Needs Profitably” through goods and services.
Dr Philip Kotler defined marketing as “The science and art of exploring, creating, and
delivering value to satisfy the needs of a target market at a profit.

“Marketing is the process of planning and executing the marketing mix to create
exchanges that satisfy individual and organization’s objective”

“Managing Profitable Customer Relationship”

The two fold of goal of marketing is to attract new customers by promising superior
value and to keep and grow current customers by delivering satisfaction.

According to American Marketing Association

Marketing is the activity, set of institutions and processes for creating,
communicating, delivering and exchanging offerings that have value for customers,
clients, partners, and society at large.

SOCIAL DEFINITION
“Marketing is a societal process by which individuals and groups obtain what they
need and want through creating, offering and freely exchanging products and
services of value with others”

Nature of Marketing
The Nature of Marketing (or Modern marketing) may be studied under the following
points:
1. Human activity: Originally, the term marketing is a human activity under which
human needs are satisfied by human efforts. It’s a human action for human
satisfaction.
2. Consumer-oriented: A business exist to satisfy human needs, hence business
must find out what the desire of customer (or consumer) and thereby produce
goods & services as per the needs of the customer. Thus, only those goods
should be produce that satisfy consumer needs and at a reasonable profit to
the manufacturer (or producer).
3. Art as well as science: In the technological arena, marketing is the art and
science of choosing target markets and satisfying customers through creating,
delivering, and communicating superior customer value. It is a technique of
making the goods available at right time, right place, into right hands, right
quality, in the right form and at right price.
4. Exchange Process: All marketing activities revolve around commercial
exchange process. The exchange process implies transactions between
buyer and seller. It also involves exchange of technology, exchange of
information and exchange of ideas.
5. Starts and ends with customers: Marketing is consumer oriented and it is
crucial to know what the actual demand of consumer is. This is possible only
when required information related to the goods and services is collected from
the customer. Thus, it is the starting of marketing and the marketing end as
soon as those goods and services reach into the safe hands of the customer.
6. Creation of Utilities: Marketing creates four components of utilities viz. time,
place, possession and form. The form utility refers to the product or service a
company offers to their customers. The place utility refers to the availability of
a product or service in a location i.e. Easier for customers. By time utility, a
company can ensure that products and services are available when
customers need them. The possession utility gives customers ownership of a
product or service and enables them to derive benefits in their own business.
7. Goal oriented: Marketing seeks to achieve benefits for both buyers and sellers
by satisfying human needs. The ultimate goal of marketing is to generate
profits through the satisfaction of the customer.
8. Guiding element of business: Modern Marketing is the heart of industrial
activity that tells what, when, how to produce. It is capable of guiding and
controlling business.
9. System of Interacting Business Activities: Marketing is the system through
which a business enterprise, institution or organization interacts with the
customers with the objective to earn profit, satisfy customers and manage
relationship. It is the performance of business activities that direct the flow of
goods and services from producer to consumer or user.
10. Marketing is a dynamic processes: It is series of interrelated functions:
Marketing is a complex, continuous and interrelated process. It involves
continuous planning, implementation and control.

11. Marketing is an Integrated Process: Trade is not a single activity. It is rather a

coordination of many interrelated activities. The interaction between different
activities gives a unique character to marketing. Marketing is a managerial
process in so far as it involves planning and control functions. Marketing is
also a social process as it is concerned with the satisfaction of human needs
and this is one of the most important characteristics of marketing.

12. Marketing is Creative: Marketing creates time, possession and place utilities.
Time utility is created by keeping goods for use in future. Place utility is
created by carrying goods to places where they are required the most.
Marketing creates possession utility by transferring services and products
 from producer to customer. The exchange process between buyer and seller
is an important element of marketing.

13. Selection of Target Markets: No marketer can satisfy everyone in the market.
A marketer has to select target markets rather than a quixotic attempt to win
every market and be all things to all people. Therefore, marketers start with
market segmentation, choosing a target group(s), identifying target group
needs and requirements and meeting these needs in a better way than the
competitors through a suitable marketing mix.

Scope of Marketing
The primary thrust of marketing is on coordinating activities that satisfy customers'
needs and fulfil the organisational goal. It has a broader scope because the activities
are all-pervasive.

1) Study of Consumer Needs and Wants: Goods are produced to satisfy consumer
needs. Therefore the study is done to determine consumer needs and wants. These
needs and wants motivate the consumer to purchase.

2) Study of Consumer Behaviour: Marketers perform a study of consumer behaviour.

Analysis of buyer behaviour helps marketers in targeting the market and also in
market segmentation.

3) Production Planning and Development: It starts with the generation of a product

idea and ends with product development and commercialisation. Product planning
includes packaging and branding to product line contraction and expansion.

4) Pricing Policies: Marketer has to determine pricing policies for their products and
services. Pricing policies differ from product to product. It depends on the product life
cycle, level of competition, marketing goals and objectives, etc.

5) Distribution: Study of distribution channels is essential in marketing. For maximum

profit and sales, goods are needed to be distributed to the ultimate consumers at
minimum cost.

6) Promotion: It includes sales promotion, personal selling, and advertising. The right
promotion mix is important in the accomplishment of marketing goals.

7) Consumer Satisfaction: The product or service offered must satisfy the consumer.
Consumer satisfaction is the main purpose of marketing.
8) Company Analysis: In company analysis, the marketers highlight the cost
structure and the constrained resources of the company about the competitors.
Marketing managers can work with the accounting department to analyse the profit
that the firm is generating from various offerings and different groups of customers. A
brand audit can also be done to know the strengths of the different brands offered in
the market.

9) Competitor Analysis: This is done to build a detailed profile of each player

operating in the related field. Marketing managers analyse the competitors' cost
structure, sources of profits and resources, competencies, product positioning and
product differentiation to ascertain the relative strengths and weaknesses of the
players operating in the market.

Types of Product and Service in Marketing

Management
Types of Products (Consumer Products and
Industrial Products)
Marketers consider goods primarily in terms of whom they are being
targeted. They classify goods based on whether they are consumer goods
or industrial goods.

Generally, products are classified into two types;

1. Consumer Products (convenience products, shopping products,

specialty products, unsought products).
2. Industrial Products (capital goods, raw materials, component parts,
major equipment, accessory equipment, operating supplies, and
services).
Consumer products are those which are bought by consumers for ultimate
consumption and not for resale. These goods can be further classified
based on how consumers buy them. Consumer products include

(1) convenience products,

(2) shopping products,

(3) specialty products, and

(4) unsought products.

Industrial products are those intended for use in making other products or
operating a business or institution. Thus, industrial products are
differentiated from consumer products based on their ultimate use. The
types of Industrial goods are raw materials, component parts, major
equipment, accessory equipment, operating supplies, and services.

Let’s understand the main two types of product and their subcategories
one by one.

1. Consumer Products

Consumer products are those designed to satisfy the needs and want of the
ultimate consumer.

But, this is not an adequate definition for marketing purposes. The

consumer goods category is far too broad and diverse to be meaningful
when developing product strategies.

Consumer goods include everything from fresh corn to advanced electronic

games and home video recorders, from sweaters and jeans to books and
pens.

As a result of this variation, marketing executives must further classify these

goods, focusing on the buying processes consumers use.
 The product life cycle is broken into four stages: introduction, growth, maturity, and
decline. 00:00/00:00
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The four subgroups of consumer products are;

1. Convenience Products.
2. Shopping Products.
3. Specialty Products.
4. Unsought Products.

The marketing methods of these products varies because the way the
consumers buy them differ. Marketing consideration for various consumer
products are shown below:
 Type of Consumer Product
Marketing
Consider-
ations
Convenience Shopping Specialty Unsought

Less frequent
Frequent Strong brand
purchase, much
purchase, little preference and
planning, and Little product
planning, little loyalty, special
Customer shopping awareness,
comparison or purchase effort,
buying effort, knowledge (or if a
shopping little
behavior comparison of little or even
effort, low comparison of
brands on negative interest)
customer brands, low
price, quality,
involvement price sensitivity
style

Price Low price Higher price High price Varies

Exclusive
Widespread
Selective distribution in
distribution,
Distribution distribution in only one or a Varies
convenient
fewer outlets few outlets per
locations
market area

Advertising and More carefully

Aggressive
Mass personal selling targeted
advertising and
Promotion promotion by by both promotion by
personal selling by
the producer producer and both producers
producers resellers
resellers and resellers.
 Major
Toothpaste, Luxury goods, Life insurance
appliances,
magazines, such as Rolex
Examples televisions,
laundry watches or fine Red Cross blood
furniture,
detergent crystal donations
clothing

Let us now have a brief idea on each of the different types of product:

1. Convenience Goods

These are products that consumers want to buy with as little difficulty and
physical effort as possible. Consumers know what they want., usually have
purchased the product before, and perhaps above all, do not want to spend
considerable time making the purchase.

Goods falling into this group are known as convenience goods – they are
the goods that the customer usually purchases frequently, immediately, and
with a minimum of effort in comparison and buying.

A large number of products, of course, fall into this group. Milk, soap,
candies, and various other low-cost goods for which consumers are not
totally brand loyal are examples of convenience goods.

Marketing executives are especially careful to make sure that this type of
product is readily available. These goods, therefore, receive widespread
distribution.

Marketing executives recognize that consumers do not view all of the

convenience products alike.

Or example, bread is a convenience item for some people who do not

demand only one brand. If a store does not carry a particular brand,
another will be readily substituted.

Other consumers, however, are very loyal to a specific brand and will go out
of their way to find it. Marketers have identified four subgroups of
convenience goods: staple, impulse, emergency.
  Staple goods

Those goods that the consumer buys on a very regular basis plans for the
purchase, and tends to be somewhat brand loyal. Ballpoint-pens soft drinks,
pickles, tobacco products, etc., are usually considered as staple goods.
Brand loyalty for these particular products stems from the desire to simplify
the buying process by automatically selecting one brand and minimizing
purchasing time.

 Impulse goods

Impulse goods are purchased without conscious forethought – they are the
result of a sudden but strongly felt need. Magazines, street foods, ice
cream, are examples of impulse items. One of the most common
misconceptions about impulse goods is that they are bought irrationally.
Though such purchases are not preplanned, they satisfy consumer needs,
and therefore cannot be viewed as wasteful.

 Emergency goods

These goods are closely related in some respects to impulse items because
they are not preplanned purchases. Emergency goods differ from impulse
goods because they may be planned for on short notice, but more
importantly, are purchased to satisfy an immediate and pressing situation.
Candles, matches, antiseptics are certainly emergency goods.

2. Shopping Products

Shopping goods are those consumer goods which the customer in the
process of selection and purchase characteristically compares on such
bases as suitability, quality, price, and style. Shopping products are
infrequently purchased products that customers plan and compare carefully
on brands, price, quality, and style.

Consumers devote much time and effort in obtaining information and

making comparisons in case of buying shopping products.

For example, refrigerators, air coolers, televisions, washing machines, and

clothing are shopping products.
In this category, marketing executives generally distinguish the shopping
products into two types;

1. Homogeneous shopping goods.

2. Heterogeneous shopping goods.

 Homogeneous Shopping Goods

Shopping goods that consumers believe to be essentially the same in terms

of quality, price, styling and suitability for their needs are called
homogeneous shopping goods.

The buyer considers homogeneous products similar in quality, such as

refrigerators, but they think that prices are different for which they tend to
make comparisons.

 Heterogeneous Shopping Goods

Heterogeneous shopping goods are products in which consumers perceive

some discernible differences in suitability, quality, price, or styling. Whether
real or imagined, the differences are important enough to cause consumers
to evaluate the trade-offs between them.

Reversibly, in heterogeneous products such as clothing, consumers

consider product features more important than price.

So a trader of heterogeneous shopping products must carry varied

assortment to cater to individual tastes and should employ well-trained
salespeople to provide information and advice to buyers.

3. Specialty Products

Specialty products are characterized by strong brand preferred and loyalty,

special purchase effort, little comparison of brands, and/or price sensitivity.
These goods include those consumer goods with unique characteristics
and/or brand identification for which a significant group of buyers is
habitually willing to make a special purchasing effort.
The most important factors distinguishing specialty items from other goods
are their high brand recognition and the degree to which consumers will
actively seek them.

Here consumers have particular preferences and will make concerted

efforts to find them.

Examples include expensive men’s suits, fancy groceries, health foods, hi-fi
components, and photographic equipment.

The unique feature of specialty products is that the buyer will look for only
a specific brand. The consumer does not care for substitutes but tries to
procure the wanted brand, which may require considerable time and effort.

Most specialty goods are relatively expensive, carry high-profit margins for
the seller, and are available in a limited number of outlets. They are sold in
a few outlets because consumers are unwilling to accept substitutes and
will seek out stores carrying the brands of their choice.

4. Unsought Products

Unsought products are those consumer products of who’s existence the

consumers are not aware of. If they know about these products, they may
not think of buying. “Unsought goods are goods that potential customers
do not yet want or know they can buy. Therefore, they don’t search for
them at all.

Consumers probably wouldn’t buy these goods if they saw them – unless
promotion could show their value”.

Consumers do not consciously want or actively seek out unsought goods.

Consumers have no intention of buying the product in the first place.

Examples include life insurance and eye donations to the Eye Banks. As
their characteristics indicate, unsought products need aggressive
advertising and personal selling by producers and resellers.

The challenge involved in selling unsought products has led to developing

some of the most advanced personal selling methods. Costly personal
selling is often required since people often avoid these products.
 2. Industrial Products

Industrial goods are those purchased by organizations for use either in

other products or in their operations. Manufacturers, commercial
businesses, non-profit institutions, and government agencies buy industrial
goods. Industrial goods can be classified into raw materials, component
parts, major equipment, accessory equipment, operating supplies, and
services

If a consumer buys an air conditioner for use at home, the air conditioner is
a consumer product. If the same consumer buys the same air conditioner
for use in his factory, it is an industrial product.

Industrial goods can be classified into;

1. Capital goods.
2. Raw materials.
3. Component parts.
4. Major equipment.
5. Accessory equipment.
6. Operating supplies.
7. Services.

A brief discussion of these different types of industrial product can be

presented as under;
  Capital goods

Capital goods are industrial products that are directly used in production.
Capital goods consist of installations and accessory equipment. Buildings,
plants, and machinery are examples of installations.

Installations are usually bought directly from the producer. Accessory

equipment includes workman’s tools and office equipment like calculators,
fax machines, etc.

Accessory equipment is marketed through intermediaries because the

buyers of those products are scattered over a large geographic area, and
individual purchase volume is small.

 Raw Materials

These are industrial goods that will be used in the making of other
products. Included in this category are natural resources such as forest
products, minerals, water, oceanic products, and agricultural products and
livestock. In most instances, raw materials lose their individual identities
when used in the final product.

Materials and parts become a part of the buyer’s product through further
processing. They include raw materials and manufactured materials and
parts. Raw materials include farm products and natural products such as
jute, cotton, wheat, fruits, crude petroleum, coal, iron ore, and natural gas.

Farm products are supplied by many small producers who sell them to
intermediaries. These intermediaries then process and sell them. Natural
products are of big bulk and low unit value and to be transported from
producer to user.

Producers of natural products are few in number and large. They market
their products directly to industrial users.

Manufactured materials and parts include component matters such as iron,

yarn, cement, and wires, and component parts such as small motors, tires,
and casting. Component materials usually are processed further.
For example, the pulp is made into paper. Component parts enter into the
finished product wholely. For example, amplifiers are fixed in CD players.

Generally, manufactured materials and parts are sold directly to industrial

users. In marketing manufactured materials and parts, more emphasis is
given on price, and service is given more attention than branding and
advertising.

 Component Parts

Unlike raw materials, parts usually have been processed before being used
in the finished product. Although they may not be visible, parts are left
intact and assembled into the total product.

 Major Equipment

This category comprises industrial products used to make, process, or sell

other goods. These include machinery, typewriters, computers,
automobiles, tractors, engines, and so on.

Normally, they are relatively expensive and have a useful life over one year.
Major equipment is not limited solely to the production process. It is found
in wholesale (e.g., forklifts) and retail (e.g., cash registers) operations.

 Accessory Equipment

This equipment includes industrial products used to facilitate the

production process or middleman sales. It does not become part of the
finished product but aids in the overall production or selling effort.

Accessory equipment would include tools, shelving, and many other

products that tend to have a lower cost and shorter life than major
equipment.

 Operating Supplies

Supplies include operating supplies like office stationery, repair, and

maintenance items. Supplies can be treated as convenience products of the
industrial market as they are purchased with minimal effort.
These are products that are incidental to the production or selling
functions. Included in this category are low cost and quickly (within one
year) used up in the company’s operations. Pencils, papers, lubricating oils,
cash register, tape, and maintenance and repair items are included in this
category.

 Services

Business services include maintenance and repair services, factory premise

cleaning, office equipment repair, and business consultancy services. These
services are generally provided through contracts by small producers and
manufacturers of the original equipment.

Services normally should not be considered as a separate product

classification. Depending on the particular service, they are either consumer
or industrial goods. They are activities, benefits, or satisfactions offered for
sale or are provided in connection with the sale of goods.

Industrial services are purchased for use in producing the buyer’s products
or, more frequently, general operations. Like consumer services, industrial
services are not as standardized as goods, nor are they as tangible or as
durable.

As the complexities of business increase, so does the need for a specialized

service. Professional services like accounting, advertising, marketing
research, legal advice, and management consulting rely on more and more.

Services are Acts, Deeds and Performance

Features/ Characteristics of Services:

Services are generally much harder to select owing to the fact that they are
intangible in nature. One can never really be sure of what they are getting until they
have received the services

Most of the time, it is simply impossible to set apart the service from the person
offering it. This is simply because it is the person who is doing the actual work thus
without them no service will be provided.

Services are actually highly perishable which makes it impossible for one to store
them which in turn increases the risk of loss where they are concerned.
The quality of service varies. Depending on the resources, training, experience and
knowledge that they have, different service providers will offer different quality of
service.

 Intangibility
 Inventory
 Inseparability
 Inconsistency

5 Dimensions of Services Quality

 Tangibility
 Reliability
 Assurance
 Empathy

There are also different types of services available in the market and these include;
rented-goods services, owned-goods services and non-goods.

 Rented-Goods Services
Rented goods are a property of someone else that are leased out to a
customer for a certain period of time. The leasee does not get full ownership
of the product. They only get to use it for a certain time period, for which they
are charged a certain amount of money, after which they return the good back
to its original owner.

This is a very beneficial to use when you are looking for a product that you
conveniently use for the short-term or if there is a product that you have urgent need
of but you really do not have the money to buy it. Examples of goods that can be
rented out include cars, tuxedos, hotel rooms and apartments.

 Owned-Goods Services
These are services that are rendered to owners of various goods. They
typically involve the repair or alteration of a good that is owned by a customer.
The good is only given to the second party to be made better after which it is
returned to the owner. In these situations, it is the owner who pays for the
services and not the person being given the good like in the case of the
rentals. The services are usually offered by people who are skilled in different
areas of craft at a fee. These services include dry cleaning, haircuts, car
wash, lawn care, plumbing, watch repair, automobile repair just to mention but
a few.
 Non-Goods
These are services that do not involve the movement of any goods from one
party to another. They are normally quite expensive and the bill is footed by
the consumer. They are also offered by experts in the field and the products
being offered here are mostly intellectual. Remember that no tangible goods
are actually moved. Such services include; legal, medical, counseling,
accounting and consulting services.
MARKETING CONCEPTS
The Marketing Concept is preoccupied with the idea of satisfying the needs of the
customer by means of the product as a solution to the customer's problem (needs).
The Marketing Concept represents the major change in today's company orientation
that provides the foundation to achieve competitive advantage.

Five orientations (philosophical concepts to the marketplace have guided and

continue to guide organizational activities:

1. The Production Concept

2. The Product Concept
3. The Selling Concept
4. The Marketing Concept
5. The Societal Marketing Concept
6. The Holistic Marketing Concept

The Five Concepts Described

o The Production Concept: This concept is the oldest of the concepts in

business. It holds that consumers will prefer products that are widely
available and inexpensive. Managers focusing on this concept
concentrate on achieving high production efficiency, low costs, and
mass distribution. They assume that consumers are primarily
interested in product availability and low prices. This orientation makes
sense in developing countries, where consumers are more interested
in obtaining the product than in its features.

o The Product Concept: This orientation holds that consumers will favor
those products that offer the most quality, performance, or innovative
features. Managers focusing on this concept concentrate on making
superior products and improving them over time. They assume that
buyers admire well-made products and can appraise quality and
performance. However, these managers are sometimes caught up in a
love affair with their product and do not realize what the market
needs. Management might commit the “better-mousetrap” fallacy,
believing that a better mousetrap will lead people to beat a path to its
door.

o The Selling Concept: This is another common business orientation. It

holds that consumers and businesses, if left alone, will ordinarily not
buy enough of the selling company’s products. The organization must,
therefore, undertake an aggressive selling and promotion effort. This
concept assumes that consumers typically sho9w buyi8ng inertia or
resistance and must be coaxed into buying. It also assumes that the
company has a whole battery of effective selling and promotional tools
 to stimulate more buying. Most firms practice the selling concept when
they have overcapacity. Their aim is to sell what they make rather
than make what the market wants.

o The Marketing Concept: This is a business philosophy that challenges

the above three business orientations. Its central tenets crystallized in
the 1950s. It holds that the key to achieving its organizational goals
(goals of the selling company) consists of the company being more
effective than competitors in creating, delivering, and communicating
customer value to its selected target customers. The marketing
concept rests on four pillars: target market, customer needs,
integrated marketing and profitability

o The Societal Marketing Concept: This concept holds that the

organization’s task is to determine the needs, wants, and interests of
target markets and to deliver the desired satisfactions more effectively
and efficiently than competitors (this is the original Marketing
Concept). Additionally, it holds that this all must be done in a way that
preserves or enhances the consumer’s and the society’s well-being.

Concepts of Marketing Environment

Marketers need to be good at building relationships with customers, others in company and
external factors. To do it effectively they must understand the major environmental forces
that surround all of these relationships. A company’s marketing environment consists of the
ACTORS and FORCES outside marketing that affect marketing management’s ability to built
and maintain successful relationships with target and customers.

The marketing environment is made up of:

1. Micro-environment and

2. Macro-environment.
1. Micro-environment:

The micro-environment of the company consists of various forces in its immediate

environment that affect its ability to operate effectively in its chosen markets.

This includes the following:

(a) The company

(b) Company’s Suppliers

(c) Marketing Intermediaries

(d) Customers

(e) Competitors

(f) Public

A brief explanations are given below:

 The Company:
In designing marketing plans, marketing management takes other company groups

into account – Finance, Research and Development, Purchasing, Manufacturing,

Accounting, Top Management etc. Marketing manager must also work closely with

other company departments. Finance in concerned with funds and using funds to

carry out the marketing plans.

The R&D Department focuses on designing safe and attractive product. Purchasing

Department is concerned with supplies of materials whereas manufacturing is

responsible for producing the desired quality and quantity of products. Accounts

department has to measure revenues and costs to help marketing know-how.

Together, all of these departments have impact on the marketing plans and action.

Internal Environment (Within the Co.):

The marketing management, in formulating plans, takes the other groups into

account:

1. Top Management

2. Finance

3. R&D

4. Manufacturing

5. Purchasing

6. Sales Promotion

7. Advertisement etc.

Environmental forces are dynamic and any change in them brings uncertainties,

threats and opportunities for the marketers. Changes in the environmental forces can
be monitored through environmental scanning, that is, observation of secondary

sources such as business, trade and Government, and environmental analysis, that

is, interpretation of the information gathered through environmental scanning.

Marketers try to predict what may happen in the future with the help of tools like

marketing research and marketing information or marketing intelligence system, and

continue to modify their marketing efforts and build future marketing strategies. The

company should think about the consumer and work in harmony to provide customer

value and satisfaction.

 Company’s Suppliers:

Suppliers provide the resources needed by the company to product its goods and

services. They are important links in the company’s overall customer “value delivery

system”. Supplier developments can seriously affect marketing. Marketing managers

must watch supply availability – supply shortages or delays, labour strikes and other

events can cost sales in the short run and damage customer satisfaction in the long

run. Marketing Managers also monitor the price trends of their key inputs. Rising

supply costs may force price increases that can harm the company’s sales volume.

In business-to-business marketing, one company’s supplier is likely to be another

company’s customer and it is important to understand how suppliers, manufacturers

and intermediaries work together to create value. Buyers and sellers are increasingly

co-operating in their dealings with each other, rather than bargaining each

transaction in a confrontational manner in order to make supply chain management

most effective and value-added products are sold to the target markets.

 Marketing Intermediaries:

Intermediaries or distribution channel members often provide a valuable link between

an organisation and its customers. Large-scale manufacturing firms usually find it

difficult to deal with each one of their final customers individually in the target

markets. So they chose intermediaries to sell their products.

Marketing intermediaries include resellers, physical distribution firms, marketing

service agencies, and financial intermediaries. They help the company to promote,

sell, and distribute its goods to final buyers. Resellers are distribution channel firms

that help the company to find customers for goods. These include whole-sellers and

retailers who buy and resell merchandise. Selecting and working with resellers is not

easy. These organisations frequently have enough power to dictate terms or even

shut the manufacturer out of large markets.

 Physical distribution:

Firms help the company to stock and move goods from their points of origin to their

destinations. Working with warehouse and transportation firms, a company must

determine the best ways to store and ship goods, and safety marketing services

agencies are the marketing research firms, advertising agencies, media firms, and

marketing consulting firms that help the company target and promote its products to

the right markets.

When the company decides to use one of these agencies, it must choose carefully

because those firms vary in creativity, quality, service and price. Financial

intermediaries include banks, credit companies, insurance companies, and other

businesses that help finance transactions or insure against the risks associated with

the buying and selling of goods. Most firms and customers depend on financial

intermediaries to finance their transactions.

 Customers:

Consumer markets consists of individuals and households that they buy goods and

services for personal consumption. Business markets buy goods and services for
further processing or for use in their production process, whereas reseller markets

buy goods and services to resell at a profit.

Government markets are made up of government agencies that buy goods and

services to produce public services or transfer the goods and services to others who

need them. Finally, international markets consist of the buyers in other countries,

including consumers, producers, resellers and governments. Each market type has

special characteristics that call for careful study by the seller.

 Competitors:

No single competitive marketing strategy is best for all companies. The company’s

marketing system is surrounded and affected by a host of competitors. Each firm

should consider its own size and industry position compared to those of its

competitors. These competitors have to be identified, monitored and outmanouvered

to gain and maintain customer loyalty.

Industry and competition constitute a major component of the micro-environment.

Development of marketing plans and strategy is based on knowledge about

competitors’ activities. Competitive advantage also depends on understanding the

status, strength and weakness of competitors in the market.

Large firms with dominant positions in an industry can use certain strategies that

smaller firms cannot afford. But being large is not enough. There are winning

strategies for large firms, but there are also losing ones. And small firms can develop

strategies that give them better rate of return than large firms enjoy.

 Public:

General public do take interest in the business undertaking. The company has a duty

to satisfy the people at large along with competitors and the consumers. A public is

defined as “any group that has an actual or potential interest in or impact on a

company’s ability to achieve its objectives.

Public relations is certainly a broad marketing operation which must be fully taken

care of Goodwill, favourable reactions, donations and hidden potential fixture buyers

are a few of the responses which a company expects from the public. Kotler in this

regard has viewed that “companies must put their primary energy into effectively

managing their relationships with their customers, distributors, and the suppliers,

their overall success will be affected by how other publics in the society view their

activity. Companies would be wise to spend time monitoring all their publics

understanding their needs and opinions and dealing with them constructively”.

Every company is surrounded by seven types of public, as shown below:

1. Financial—banks, stock-brokers, financial institutions.

2. Media—Newspaper, magazines, TV.

3. Government—Government departments.

4. Citizen—Consumer Organisations; environment groups.

5. Local—neighbourhood residents, community groups.

6. General—General Public, public opinions.

7. Internal—Workers, officers, Board of Directors.

2.Macro Environment:

The macro-environment consists of broader forces that not only affect the company

and the industry, but also other factors in the micro-environment.

The components of a macro-environment are:

(a) Demographic Environment

(b) Economic Environment

(c) Physical Environment

(d) Technological Environment

(e) Political Environment

(f) Legal Environment

(g) Social and Cultural Environment

A. Demographic Environment:

Demography is the study of population characteristics that are used to describe

consumers. Demographics tell marketers who are the current and potential

customers, where are they, how many are likely to buy and what the market is

selling. Demography is the study of human populations in terms of size, density,

location, age, sex, race, occupation and other statistics.

Marketers are keenly interested in studying the demography ethnic mix, educational

level and standard of living of different cities, regions and nations because changes

in demographic characteristics have a bearing on the way people live, spend their

money and consume.

For example, one of the demographic characteristic is the size of family. With the

number of small families increasing in India, the demand for smaller houses and

household items has increased significantly. Similarly, the number of children in a

family has reduced significantly over the years. So, per child spending in a family has

increased significantly.

According to the World Health Organisation, young people in the age group of 10-24

years comprise 33% of the population and 42% of our population consists of age

group, 0-24 years. Teen-agers in the age group below 19 years comprise 23%. The

senior citizen age group above 65 years comprise only 8% of total population. About
58% of the working population is engaged in agricultural activities, with highest, that

is 78% in Bihar and Chattisgarh and lowest 22% in Kerala.

Since human population consists of different kinds of people with different tastes and

preferences, they cannot be satisfied with any one of the products. Moreover they

need to be divided in homogeneous groups with similar wants and demands. For this

we need to understand the demographic variables which are traditionally used by

marketers, to segment the markets.

Income:

Income determines purchasing power and status. Higher the income, higher is the

purchasing power. Though education and occupation shapes one’s tastes and

preferences, income provides the means to acquire that.

Life-style:

It is the pattern of living expressed through their activities, interests and opinion. Life-

style is affected by other factors of demography as well. Life-style affects a lot on the

purchase decision and brand preferences.

Sex:

Gender has always remained a very important factor for distinction. There are many

companies which produce products and services separately for male and female.

Education:

Education implies the status. Education also determines the income and occupation.

With increase in education, the information is wider with the customers and hence

their purchase decision process is also different. So the marketers group people on

the basis of education.

Social Class:
It is defined as the hierarchical division of the society into relatively distinct and

homogeneous groups whose members have similar attitudes, values and lifestyle.

Occupation:

This is very strongly associated with income and education. The type of work one

does and the tastes of individuals influence one’s values, life-style etc. Media

preferences, hobbies and shopping patterns are also influenced by occupational

class.

Age:

Demographic variables help in distinguishing buyers, that is, people having

homogenous needs according to their specific wants, preferences and usages. For

instance, teenagers usually have similar needs. Therefore, marketers develop

products to target specific age groups.

The youth are being targeted through advertisements and promotional campaigns,

stores are being designed with ‘youthful’ features, youth events are being sponsored,

and even new technology is developed with their tastes in mind.

a great demand for school uniforms, bags, shoes, books, stationary, confectioneries,

food, albums, bicycles and other similar products.

B. Economic Environment:

Economic environment is the most significant component of the marketing

environment. It affects the success of a business organisation as well as its survival.

The economic policy of the Government, needless to say, has a very great impact on

business. Some categories of business are favourably affected by the Government

policy, some adversely affected while some others remain unaffected. The economic

system is a very important determinant of the scope of private business and is

therefore a very important external constraint on business.

The economical environmental forces can be studied under the following categories:

(i) General Economic Conditions:

General Economic Conditions in a country are influenced by various factors. They

are:

1. Agricultural trends

2. Industrial output trends

3. Per capita income trends

4. Pattern of income distribution

5. Pattern of savings and expenditures

6. Price levels

7. Employment trends

8. Impact of Government policy

9. Economic systems.

(ii) Industrial Conditions:

Economic environment of a country is influenced by the prevalent industrial

conditions as well as industrial policies of a country.

A marketer needs to pay attention to the following aspects:

1. Market growth

2. Demand patterns of the industry

3. Its stage in product life cycle.

(iii) Supply sources for production:

Supply sources required for production determines inputs which are available

required for production.

They are:

1. Land

2. Labour

3. Capital

4. Machinery and equipment etc.

Economic environment describes the overall economic situation in a country and

helps in analysis GNP per capita rate of economic growth, inflation rate,

unemployment problems etc.

C. Physical Environment:

The physical environment or natural environment involves the natural resources that

are needed as inputs by marketers or those that are affected by marketing activities.

Environmental concerns have grown steadily in recent years. Marketers should be

aware of trends like shortages of raw materials, increased pollution, and increased

governmental intervention in natural resources management. Companies will have to

understand their environmental responsibility and commit themselves to the ‘green

movement’.

Potential shortages of certain raw materials, for examples, oil, coal, minerals,

unstable cost of energy, increased levels of pollution; changing role of Government

in environment protection are a few of the dangers the world is facing on physical

environment forces. Other aspects of the natural environment which may

increasingly affect marketing include the availability and cost of raw materials,
energy and other resources, particularly if those resources and energy come from

non-renewable sources.

D. Technological Environment:

The technological environment is the most dramatic force now facing our destiny.

Technological discoveries and developments create opportunities and threats in the

market. The marketer should watch the trends in technology. The biggest impact that

the society has been undergoing in the last few years is the technological

advancement, product changes and its effects on consumers.

Technology has brought innumerable changes in human lives, be it in the field of

science, medicine, entertainment, communication, and travel or office equipment.

Name any field, and one can see changes in product or efficiency and faster

services.

One of the most dramatic forces shaping people’s lives in technology. Technology

has released such wonders as penicillin, open-heart surgery and birth control pill. It

has released such horrors as the hydrogen bomb, nerve gas, and the sub-machine

gun. Every new technology is a force for “creative destruction”. Transistors hurt the
vacuum tube industry, xerography hurt the carbon paper business, autos hurt the

railroads, and television hurt the newspapers.

Instead of moving into the new technologies, many old industries fought or ignored

them and their business declined. Yet it is the essence of market capitalism to be

dynamic and tolerate the creative destructiveness of technology as the price of

progress.

Technology essentially refers to our level of knowledge about ‘how things are done’.

That is understanding this aspect of the marketing environment is much more than

simply being familiar with the latest hi-tech innovations. Technology affects not only
the type of products available but also the ways in which people organize their lives

and the ways in which goods and services can be marketed.

Computer-aided design (CAD) and computer-aided manufacturer (CAM) have

shortened the time required for new products to reach the market and increased the

variety of products that can be produced cost effectively. The benefits of CAD/CAM

are clearly evident in the car industry. Mass production is in standardized models.

Computer systems have also contributed substantially to the growth of various forms

of direct marketing such as direct mail, direct response marketing etc.

E. Political Environment:

The political environment consists of factors related to the management of public

affairs and their impact on the business of an organisation. Political environment has

a close relationship with the economic system and the economic policy. Some

Governments specify certain standards for the products including packaging.

Some other Governments prohibit the marketing of certain products. In most nations,

promotional activities are subject to various types of controls. India is a democratic

country having a stable political system where the Government plays an active role
as a planner, promoter and regulator of economic activity.

Businessmen, therefore, are conscious of the political environment that their

organisation face. Most Governmental decisions related to business are based on

political considerations in line with the political philosophy following by the ruling

party at the Centre and the State level.

Substantial number of laws have been enacted to regulate business and marketing

to protect companies from each other, to protect consumers from unfair trade

practices, to protect the larger interests of society against unbridled business

behaviour. Changing Government agency enforcement and growth of public interest

groups also bring in threats and challenges.

F. Legal Environment:

Marketing decisions are strongly affected by laws pertaining to competition, price-

setting, distribution arrangement, advertising etc. It is necessary for a marketer to

understand the legal environment of the country and the jurisdiction of its courts.

The following laws affected business in India:

1. Indian Contract Act 1872

2. Factories Act 1948

3. Minimum Wages Act 1948

4. Essential Commodities Act 1955

5. Securities Contracts Regulation Act 1956 (SEBI Act)

6. The Companies Act 1956

7. Trade and Merchandise Act 1958

8. Monopolies and Restrictive Trade Practice Act 1969

9. The water (Prevention and Control of Pollution) Act 1974

10. The Air (Prevention and Control of Pollution) Act 1981

11. Sick Industrial Companies (Special Provisions) Act 1985

12. Environment Protection Act 1986

13. Consumer Protection Act 1986

14. Securities and Exchange Board of India Act 1992

15. Different Taxation Laws.

G. Social and Cultural Environment:

Socio-cultural forces refer to the attitudes, beliefs, norms, values, lifestyles of

individuals in a society. These forces can change the market dynamics and

marketers can face both opportunities and threats from them. Some of the important

factors and influences operating in the social environment are the buying and

consumption habits of people, their languages, beliefs and values, customs and

traditions, tastes and preferences, education and all factors that affect the business.

Understanding consumer needs is central to any marketing activity and those needs

will often be heavily influenced by social and cultural factors. These cover a range of

values, beliefs, attitudes and customs which characterize societies or social groups.

Changes in lifestyle of people affect the marketing environment.

As health problems in people have increased because of significant changes in their

lifestyle, they have become concerned about their food. They prefer to eat low fat,

low or no cholesterol food. This is specially true for people above 40 years. To a

great extent, social forces determine what customers buy, how they buy, where they

buy, when they buy, and how they use the products.

In India, social environment is continuously changing. One of the most profound

social changes in recent years is the large number of women entering the job

market. They have also created or greatly expended the demand for a wide range of

products and services necessitated by their absence from the home. There is a lot of

change in quality-of-lifestyles and people are willing to have many durable consumer

goods like TV., fridge, washing machines etc. even when they cannot afford them

because of their availability on hire-purchase or instalment basis.

Culture influences every aspect of marketing. Marketing decisions are based on

recognition of needs and wants of the customer, a function of customer perceptions.

These help in understanding of lifestyles and behaviour patterns as they have grown
in the society’s culture in which the individual has been groomed. Thus a person’s

perspective is generated, groomed and conditioned by culture.

Marketing environment can also be classified as:

(i) Controllable Forces and

(ii) Uncontrollable Forces.

MARKETING MIX
The marketing mix is the pillar of a marketing strategy and consists of a series of

tools to guide a company through the ups and downs of its industry.

It drives decision making during the whole process of bringing a product or service to the
market. There are many models of marketing mix that have followed over time. Let’s see
what they are and how they have evolved.

McCarthy classified various marketing activities and grouped them under four dimensions:

1. Product
2. Price
3. Place
4. Promotion

That’s why it is called the 4Ps of marketing mix. The image below depicts the 4Ps of
marketing mix according to the earliest formulation of McCarthy.
1. PRODUCT:

“A Product can be anything that can be offered to a market for attention, acquisition, use or
consumption that might satisfy a want or need. It includes physical objects, services, persons,
places, organizations and ideas.” - Kotler, Wong, Saunders & Armstrong.

Product is what satisfies consumers’ needs and wants. It can be tangible (an actual product)
or intangible (a service, ideas or experiences): what is being sold? As you can see from the
elements listed in the image above, it groups all the marketing decisions connected to the
aspect, design and characteristics of a product/service.

All the products and services that a company decides to offer its customers is known as
product mix. The product is a curial part when development marketing mix strategy that
includes price, promotion and place.

A product is any item or service sold to customers or clients. For this purpose, it is important
to understand the components that make up a product. These generally include:

➢ Product Variety ➢ Product Quality ➢ Product Size

➢ Package

➢ Branding
➢ Labelling
➢ After Sale Service, Guarantees and Warranties
All these together will make up or define what a product really is.

1. Product Variety:
Customers are no longer satisfied with the same product for a long time howsoever good it
may be. The present day customer wants variety in the products that are offered to them.
Newness in the product is a must to satisfy the customer these days.

2. Product Quality:

It is very important for the manufacture to see that the product confirms to quality standards
specified. Control of quality standard is a basic requirement. Different quality standards are
established for different type of products by the law or manufacture themselves.

3. Product Size:

Availability of the product in various sizes not only suits the different requirements of
different target groups but also the varying requirements of an individual customer at
different points of time.

4. Package:

Products also need to be packaged in some way. Packaging is really important for a handful
of reasons. It's also something for which we pay. So that's again part of the product.

5. Branding:

Branding which is a really important component to a lot of products. This is what sets a
product apart in a lot of cases. Branding it also makes a difference in price. So that's another
aspect or component of the product.

6. Labelling:

Labelling is an important component of product decision. It is a silent informer, and also

works a promotional tool. It provides the customer, with every detail about the product like
composition of the product, net contents, benefits, how to use it properly and safety, how to
preserve it, expiry date etc. As a promotional tool, it carries attractive graphics and design,
strong and deep colours etc. to attract the customers.

7. After Sale Service, Guarantees and Warranties:

Increasing industrialization has resulted in more use of electronic gadgets appliances,

machinery etc. all of which require after-sale services. Guarantees, warrantees, repairs, spare
parts etc. increase the value of the product. Better are the after-sale services, better is the
response of the customers towards the product.

2. PRICE:

A brilliant product in the correct location with excellent advertising cannot make a sale
conceivable unless it is properly priced. Thus, price is one of the most influential factors that
affect the buyer’s decision. It’s that one variable that can change a company’s status
overnight and immediately affect revenues and profits.
Price is the cost to buy a product/service. For a consumer, it represents the money to spend
for attaining certain benefits; for the company, it is the money asked for the offering. Price
also refers to consumers’ perceived value and includes the sacrifice that they are willing to
make in terms of time or effort. Price is critical for a marketing mix, because it is the only
element that generates profit. All the other marketing mix dimensions produce costs.

Price mix is the combination of different ‘price-related variables’ determined by a producer

to fix the price of the product or service he offers. These variables include the cost of making
the product, the factors that influence the pricing decisions, the various pricing strategy, the
pricing objectives, etc.

The product’s price stipulates the product’s future, customer acceptability and is an
instrument against the competitors. Thus, it should be weighed above other marketing
elements since it is the only marketing mix component that generates revenue while other
elements create cost.

There are many factors that affect price, some of the internal ones are:

 Fixed costs (they don’t vary based on the production output, e.g.: lease
payments, insurance, property taxes, interest expenses, depreciation...)
 Variable costs (they vary based on the production output, e.g.: employees, raw
material, packaging...)
 Companies objectives
 Production capacity
 Product life-cycle
 Brand.

Instead, external influencing factors can be:

 Market coverage (percentage of the market covered with a marketing strategy)

 Market share (resulting percentage from the difference between a company’s sales
and the total amount of product/service sold in the segment)
 Competition
 Target segment
 Economic context
 Demand
 Laws, regulations and taxes
 Substitutes
 Distribution channels (presence or absence of intermediaries)

It is one of the most difficult takes of the marketing manager to fix the right price. The
marketing manager has to do a lot of exercise to determine the price. He should
determine the price in such a way that the firm is able to sell its products successfully.
Pricing also involves establishing policies regarding credit and discount. The
variables that vitally influence pricing are demand of the product in question, its cost,
and the buying capacity of various kinds of customers, actual and potential
competition, and government regulation.

The price – mix includes the following decisions:

 ➢ Determination of unit price of the product

➢ Pricing policies and strategies.

➢ Discounts, rebates and levels of margins.

➢ Credit policy and

➢ Terms of delivery, payment, etc.

3. PLACE:

The element Place in marketing mix strategy ensures the availability of product to the
intended end consumer. We need to ensure 3 specific aspects of availability:

 ➢ The right place - Groceries must be made available at every local supermarket
or the next-door kirana store. A hatchback car however, will only be available for
purchase in company showrooms.
 ➢ The right time - Umbrellas must hit the market before the onset of monsoon
season and must be available throughout the season, to be replaced with woollen caps
and mufflers as winter sets in. Winter wear available in the hot months will attract
negligible sales because of seasonality.
 ➢ The right quantity - You buy only one LED TV set after browsing through
numerous models at different digital stores, all offering appealing features at a broad
price

range. However, while purchasing vegetables, you visit just a handful of roadside stalls;
observe only few aspects ensuring freshness of product, and buy by weight.

In recent times products are not sold just offline in retail stores, wholesale markets and
community marketplaces. An exponential increase in online purchase of a wide ranges of
goods in predominant through websites, online stores and e-commerce interfaces.

Simply put, place in 4Ps of marketing means the methods by which a product is transported
from the producer along a series of intermediaries to be delivered to the intended end user or
customer.

Now the next obvious question in your mind is: how does product reach the market? Let me
introduce you to the concept of distribution channels.

Place in marketing mix, in layman terms, means Distribution. This is because the place of
production isn’t the same as the place of consumption. Companies establish processes to
implement distribution methods to overcome this gap between manufacturers and consumer
marketplace.

Elements/Components of Place Mix:

o Transportation:
  Transportation as a component of physical distribution is very essential for the firm as
it increases the market for the product. Decisions relating to transportation includes
choice of mode of transport to be used, whether to own vehicles or hire them, how to
schedule deliveries, who will bear the transport cost from manufactures to wholesaler
and them to retailer.

o Warehousing:
 Warehousing provides storage function to the firm and thereby creates time utility.
The long-time gap between production and distribution, seasonal production of
certain commodities continuous demand for the products and such other factors have
made it necessary for the firm to store its products. Warehousing decisions mainly
include decisions relating to choice of public or private warehouse or cold storages,
and number of places where goods have to be stored to be released quickly in time of
demand.

o Inventory Level:
 It is very necessary for a firm to carry enough stock of goods to meet the demand as
and when required. It involves decisions as to how much to stock, who long to stock
and at how many places to stock.
Since inventory has a cost and can affect the whole business, decisions regarding it
should be taken very carefully. Inventory decisions are taken in light of various
factors such as mode of transportation, location of warehouse, communication
facilities available etc.

o Channel Level and Intermediaries:

 Marketing channels are characterized by different channel levels. Depending upon the
number of intermediaries, there can be different channel levels viz. direct marketing
where manufactures sells directly to the consumers, one level channel where goods
are sold through one intermediary and so on. Firm has to also decide the number and
type of intermediaries to be employed.

4. PROMOTION:
Promotion in 4Ps of marketing mix implies the process of acquainting the target

consumers about the brand and convincing them to buy the product or service. The
purchasing behaviour of consumers is heavily impacted by Promotion, and it is one of the
most powerful Ps of the marketing mix.

Promotion is a marketing tool, used as a strategy to communicate between the sellers and
buyers. Through this, the seller tries to influence and convince the buyers to buy their
products or services. It assists in spreading the word about the product or services or
company to the people. The company uses this process to improve its public image. This
technique of marketing creates an interest in the mindset of the customers and can also retain
them as a loyal customer.

There are major objectives of promotion are:

1. To present information to consumers and others.

2. To increase demand.
3. To differentiate a product.
Elements/Components of Promotion:

1. Advertising:

This is a non-personal promotion of products and services. Marketers use advertising as a

vital tool for increasing brand awareness. Advertisers show promotions to masses of people
using email, web pages, banner ads, television, radio, etc.

2. Direct Marketing/ Direct Selling:

This is a one-to-one communication between a sales representative and a potential customer.

Direct selling influences people to decide to buy certain products or services. It is one of the
most effective ways of promoting your brand because the sales rep can tailor the promotion
precisely to those who are most likely to make a purchase. On the other hand, this is the most
expensive form of sales because companies need to pay for one person’s time.

3. Sales Promotion:

This is a set of short-term activities that are designed to encourage immediate purchase. Sales
promotions are a campaign that uses time-sensitive offers sales, discounts, coupons, etc., to
engage existing consumers and bring in a larger audience. Many companies make this a core
component of their marketing efforts, though sometimes it’s the most annoying type of
communication for people.

4. Public Relations:

This type of promotional method determines the way people treat the brand. Companies using
PR try to build a firm and attractive brand image by planting interesting news stories about
their activities in the media. Public relations are not fully controlled by the company, though,
as some reviews and web pages may negatively highlight the brand. If a company adequately
solves these issues, people will reward them with positive word-of-mouth consideration.

THE 7PS OF MARKETING MIX:

In 1981, the professors Bernard Booms and Mary Jo Bitner published Marketing strategies
and organizational structures for service firms where they presented the 7Ps of marketing
mix. This updated version added 3 dimensions to the original 4Ps: PEOPLE, PROCESS
AND PHYSICAL EVIDENCE.

5. PEOPLE:
People are fundamental in delivering any product or service. They represent

everyone involved during the buyer’s journey, buyer themselves included: employees,
partners, customers and even the relationships established among them.

Mood, character and behaviour adopted during a service delivery affect the quality perceived
by the customer. If the offering expects to satisfy more consumers simultaneously, they can
influence their experience with each other. Just think of being at the cinema. If people start
talking during a movie, you get upset and can’t follow the story anymore.
Some of the variables that affect this dimension are:

 ➢ Employees recruitment and training

 ➢ Uniforms
 ➢ Scripting
 ➢ Queuing systems and wait management
 ➢ Handling complaints and understanding service failures
 ➢ Managing social interactions.

6. PROCESS:
Processes are all the mechanism, planning and decision making that ensure a smooth

delivery of a product or service. Some of the variables included are:

➢ Designing processes
➢ Blueprinting (or flowcharting): it enables marketers to identify bottlenecks and
contact point with customers
➢ Deciding between standardization versus personalization
➢ Locating fail-points, critical incidents and system failures
➢ Monitoring and tracking service performance
➢ Analysing resources requirements and allocation
➢ Creating and measuring key performance indicators (KPIs)
➢ Aligning with guidelines
➢ Preparing operational manuals.

7. PHYSICAL EVIDENCE:
Finally, physical evidence represents all the environmental elements that

surround consumers during a service/product delivery. They are characterizing factors

that can positively or negatively impact the delivery experience. For example: interior design,
colours, layout, equipment, furniture or facilities.

This dimension also comprehends the experience before and after a transaction. For instance,
invoices and souvenirs are physical evidence underlying the fact that the product or service
was delivered.

Booms and Bitner stated that, “The physical evidence is the service delivered and any
tangible goods that facilitate the performance and communication of the service.”

It is the proof that a seller has provided (or not) what a customer was expecting. A physical
evidence of an actual product is the good itself.

According to this framework, here are some variables:

➢ Facilities (furniture, equipment, access...)
➢ Spatial layout (functionality, efficiency...)
➢ Signs (directional signage, symbols, other signs)
➢ Interior design (furniture, colour schemes, layout...) ➢ Ambient conditions (noise, air,
temperature...)
➢ Design of material (stationery, brochures, menus...) ➢ Artifacts (souvenirs,
mementos...).

CLASSIFICATION OF GOODS AND SERVICES

William J. Stanton “Product is a set of tangible and intangible attributes including

packaging, colour, price, manufacturer’s prestige, retailer’s prestige and

manufacturer’s and retailer’s services which buyer may accept as offering

satisfaction of wants and services”.

Product can be broadly classified on the basis of

(1) Use

(2) Durability

(3) Tangibility
Let us have a brief idea about the various categories and their exact nature under

each head, noting at the same time that in marketing the terms ‘product’ and ‘goods’

are often used interchangeably.

1. Based on use, the product can be classified as:

(a) Consumer Goods; and

(b) Industrial Goods.

(a) Consumer goods: Goods meant for personal consumption by the households or

ultimate consumers are called consumer goods. This includes items like toiletries,

groceries, clothes etc. Based on consumers’ buying behaviour the consumer goods

can be further classified as :

(i) Convenience Goods;

(ii) Shopping Goods; and

(iii) Speciality Goods.

 Convenience Goods : Do you remember, the last time when did you buy a

packet of butter or a soft drink or a grocery item? Perhaps you don’t

remember, or you will say last week or yesterday. Reason is, these goods

belong to the categories of convenience goods which are bought frequently

without much planning or shopping effort and are also consumed quickly.

Buying decision in case of these goods does not involve much pre-planning.

Such goods are usually sold at convenient retail outlets.

 Shopping Goods: These are goods which are purchased less frequently and

are used very slowly like clothes, shoes, household appliances. In case of

these goods, consumers make choice of a product considering its suitability,

price, style, quality and products of competitors and substitutes, if any. In

other words, the consumers usually spend a considerable amount of time and

effort to finalise their purchase decision as they lack complete information

prior to their shopping trip. It may be noted that shopping goods involve much

more expenses than convenience goods.

 Speciality Goods : Because of some special characteristics of certain

categories of goods people generally put special efforts to buy them. They are

ready to buy these goods at prices at which they are offered and also put in

extra time to locate the seller to make the purchase. The nearest car dealer

may be ten kilometres away but the buyer will go there to inspect and

purchase it. In fact, prior to making a trip to buy the product he/she will collect

complete information about the various brands. Examples of speciality goods

are cameras, TV sets, new automobiles etc.

(b) Industrial Goods: Goods meant for consumption or use as inputs in production

of other products or provision of some service are termed as ‘industrial goods’.

These are meant for non-personal and commercial use and include

(i) raw materials,

(ii) machinery,

(iii) components, and

(iv) operating supplies (such as lubricants, stationery etc).

The buyers of industrial goods are supposed to be knowledgeable, cost

conscious and rational in their purchase and therefore, the marketeers follow

different pricing, distribution and promotional strategies for their sale. It may be

noted that the same product may be classified as consumer goods as well as

industrial goods depending upon its end use. Take for example the case of

coconut oil. When it is used as hair oil or cooking oil, it is treated as consumer

goods and when used for manufacturing a bath soap it is termed as industrial

goods. However, the way these products are marketed to these two groups are

very different because purchase by industrial buyer is usually large in quantity

and bought either directly from the manufacturer or the local distributor.

2. Based on Durability, the products can be classified as :

(a) Durable Goods; and

(b) Non-durable Goods.

(a) Durable Goods : Durable goods are products which are used for a long period

i.e., for months or years together. Examples of such goods are refrigerator, car,

washing machine etc. Such goods generally require more of personal selling

efforts and have high profit margins. In case of these goods, seller’s reputation

and presale and after-sale service are important determinants of purchase

decision.

(b) Non-durable Goods: Non-durable goods are products that are normally

consumed in one go or last for a few uses. Examples of such products are soap,

salt, pickles, sauce etc. These items are consumed quickly and we purchase

these goods more often. Such items are generally made available by the

producer through large number of convenient retail outlets. Profit margins on

such items are usually kept low and heavy advertising is done to attract people

towards their trial and use.

3. Based on tangibility, the products can be classified as:

(a) Tangible Goods; and

(b) Intangible Goods.

(a) Tangible Goods : Most goods, whether these are consumer goods or

industrial goods and whether these are durable or non-durable, fall in this

category as they have a physical form, that can be touched and seen. Thus, all

items like groceries, cars, raw-materials, machinery etc. fall in the category of

tangible goods.

(b) Intangible Goods : Intangible goods refer to services provided to the

individual consumers or to the organisational buyers (industrial, commercial,

institutional, government etc.). Services are essentially intangible activities which

provide want or need satisfaction. Medical treatment, postal, banking and

insurance services etc., all fall in this category. Marketing Products Based on Use

Based on Durability Based on Tangibility Durable Non-Durable Tangible (Goods)

Intangible (Services) Consumer Goods Industrial Goods Convenience Goods

Shopping Goods Speciality Goods Raw materials Machinery Components

Operating Supplies