Subject: Marketing Management

Q.1 Explain Pricing Policy.

Answer –

Pricing Policy:
1. Introduction:

Pricing is an essential part of any business strategy. It is of great

importance to the producer, wholesaler, retailer and the consumer. For an
organization, price creates the revenue to support existing and future
opportunities. Sometimes, survival of an organization may depend upon
product pricing policies. In a competitive market, importance of pricing
cannot but be overemphasized.

Pricing Policy decisions are influenced by numerous factors. Of the

numerous factors affecting pricing decisions, Cost, Demand and Competition
are the major ones,

1) Product cost:

Product cost is the total expenditure incurred in terms of money

by the producer of the product which includes expenditure towards
procurement of materials, employment of workers, using machinery
including power, communication/distribution channels, expenditure
incurred on sales force etc.

2) Demand for the product:

“Higher the price, lower the demand, and vice versa, other things
remaining the same” is the popular law of demand. Thus, demand for the
product influences the price and vice versa.

3) Competition:

When there is competition, neither an individual nor an

organization can really influence price. Under severe competition, price will
follow the direction of the resultant of the forces of competition.

As discussed above, Pricing Policy mainly depends on product cost, demand

for the product and competition . When data about these factors are
collected, before fixing up the product price by adopting an appropriate
pricing method, the existing pricing policy must be reviewed and updated

taking into consideration, the changed business environment, if any.

The existing pricing policy is to be periodically reviewed and updated in
relation to other policies like selling methods, advertising policy and
production policy and programme. For example, it may be necessary to
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reduce the product price to enable fuller utilization of plant capacity, more
quickly. One of the reasons for not utilizing the installed capacity fully may
be the existing imbalance in the installed production facilities. Such an
imbalance may be due to the reason that the capacity of different equipment
of a plant does not match. In such cases, the following alternatives are
available to the manufacturing organisation to rectify the imbalance in the
existing production facilities:

. To sub-contract part production which is restricting the production.

. To install balancing equipments with higher output potential.
. To introduce shift working.

. If there is consistent imbalance in the production facilities, entire plant can

be replaced by installing new automatic plant.
. Idle equipment may be sold so that entire attention can be diverted to fully
utilized equipments.

In all such cases, production will increase and the increased volume of
production may be sold by a suitable reduction in product price. There can
be many such cases of changing business environment which may affect
short-term and long-term objectives. The following table gives some
marketing objectives and their implications on Pricing Policy decisions:

The existing pricing policy is to be periodically reviewed and update in

relation to policies like selling methods, advertising policy and programme.
For example, it may be necessary to reduce the product price to enable
fuller utilization of plant capacity,more quickly.One of the reasons for not
utilizing the installed the capacity fully may be the existing imbalance in the
installed production facilities.Such an imbalance maybe due to the reason
that the capacity of different equipment of a plan does not match.In such
cases,the Following alternatives are available to the manufacturing
organization to rectify the imbalance in the existing production facilities.

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  To sub-contract part production which is restricting the
production.
 To install balance equipment equipments with higher output
potential.
 To introduce shift working.
 If there is consistent imbalance in the production facilities,entire
plant can be replaced by installing new automatic plant.
 Idle equipment may be sold so that entire attention can be diverted
to fully utilized equipments.

In all such cases, production will increase and the increased volume of
production may be

sold by a suitable reduction in product price. There can be many such

cases of changing

Importance of pricing :

Pricing is an essential part of any business strategy .it is of great

importance to importance to the producer, wholesaler, retailer and the
consumer. For an organization, price creates the revenue to support existing
and future opportunities. Sometimes, survival of an organization may
depend upon product pricing policies.

But pricing a product or service correctly is one of the most

difficult tasks. setting a price too high can reduce an organization’s market
share, while setting a price too low can reduce profit.it must also be borne
in mind that the customer does not make a choice
In mind that the customer does not make a choice in vacuum. Pricing has
an influence on the product image.

Another factor is the pricing under severe competition in an

industry is determined by its basic underlying economic structures , viz.

Rivalry among the existing firms

Bargaining power of buyers.

Bargaining power of suppliers

Thrust of new entrants.

Thrust of substitute product/service.

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Interaction between these economice forces makes the conventional pricing
a difficult task.

In a competitive market ,importance of pricing cannot but be

overemphasized.

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Q.3 Explain the importance of consumer behavior for

marketers.

Answer –

Consumer Behavior for marketers :

1. Introduction:

1 .A perspective of marketing is about making a consumer realise that they

want your product, even though initially they might not.

Therefore it is important for marketers to understand how consumers

behave when they are exposed to particular advertising methods and
messages.

For example. Consumer behavioural theories such as the process of

innovation diffusion is vital for marketers as it allows us to understand
how different market segments, which have different purchasing and
thinking characteristics might decide whether or not to buy a product For
example - for a consumer in a relatively high social status earning
reasonable money, a purchase of a laptop might not be such as high
involvement purchase since they have the disposable income to afford it
plus, if they are young to middle age, the chances are they know exactly
what they want to get out of the product since they have been brought up in
a generations where computers run our every day lives. On the other hand, if
the laptop was to be marketed at a OAP, their consumer behaviour to such
product will change the overall marketing effort to persuade such consumers
that they want the product. OAP for example may not know exactly what a
laptop can do for them, and if they are living on a pension, such product
may seem very expensive and carries high amounts of purchasing 'risk' since
they might not fully understand whether the product can solve their initial
need to buy the product. If we relate back to the innovation diffusion model
and general purchasing decision making process theories, marketers may

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then have to increase the amount of information within their marketing
campaign in order to communicate exactly what the laptop can do for them
and how the price justifies they benefit.

If you look at consumer behaviour in another perspective, many marketers

and marketing campaigns rely on people buying their product due to the self
concept theories of consumer behaviour. Products such as Sony laptops rely
on people wanting to spend the extra money on their laptops rather than a
competitor such as del who may have the same spec for a far lower price
because people buy into brands like Sony to show off their image / status. If
you see someone on a train with a dell laptop, you may not take a second
look. Meanwhile, someone using a Sony laptop; people may think Wow,
that’s pretty cool and may start associating the user as successful and
wealthy. Therefore, the Sony laptop user has may have spent the extra
money on Sony rather than dell in order to portray this reaction and create a
positive self image for himself. Look up a theory called the looking glass self
theory (Cooley 1902 or 1922). If brands can understand such form of
consumer behaviour, it works hand in hand with brand management and
product positioning since once the marketers have generated a positive,
prestige image about their products, they then rely on other consumers
buying into this form of 'quality' and portraying their positive self image from
using this product to other consumer who then may think ... 'that guy
lookedcool...iwanttobuy one'....

Another very important consumer behaviour concept for marketers is how

consumers learn about a product. Does a marketing campaign want to use
cognitive learning approaches in its advertising i.e. whereby our product will
be associated with a band or a type of music or do we want to use a form of
instrumental or behavioural learning approaches - A market needs to think
what type of consumers they are targeting, look at their general
characteristic and then work out what is the best approach to generate their
overall campaign objectives. For example, cognitive learning approaches are
used (by theory) on more educated consumers as theorists believe they have
more ability to make a cognition between i.e a song and a product - Check
out some Sony adverts - For example, every time people heard that Jose
Gonzalez tune back in 2005, people immediately thought of thousands of
coloured balls rolling down a hill in San Francisco - then they thought of
Sony

So there you go - that’s a few reasons why consumer behaviour is vital to

understand - because it is the basis of how you are going to target your
prime target audience.

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Q.4 Explain the procedure in Marketing Planning.

Answer –

Procedure in Marketing Planning:

1. Introduction:

Market-oriented strategic planning is the managerial process of developing

and maintaining a feasible balance between the organization’s objectives,
skills, and resources and its changing market opportunities. Strategic
planning aims at shaping the company’s business and products to yield
target profit and growth.

The Marketing Manager plays a vital role in strategic planning process. He

defines the business mission, analyses the environmental, competitive, and
business situation, and finally develops objectives, goals and strategies.

The planning procedures that happen at various levels are as below:

1. Corporate strategic planning: These are plans made by the corporate

head quarters to guide the entire enterprise.

2. Division planning: It covers the making of decisions on the amount of

resources to be allocated to each division.
3. Business unit strategic plan: Each business unit devises a strategic plan
to carry that business unit into a profitable venture.

4. Product marketing plan: Each product line or brand within a business

unit develops a marketing plan for achieving its objectives in the market.

The above mentioned planning steps are discussed in detail as follows:

Ø Corporate and division strategic planning :

The corporate establishes the framework within which divisions and

business units prepare their plans. This is done by defining the mission,
policy, strategy and goals of the company. The corporate head quarters
undertakes four planning activities:

1. Defining the corporate mission: Every company has a mission or purpose

and a well-worked-out mission statement, encourages and motivates the
employees with a shared sense of purpose, direction and opportunity.

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2. Establishing strategic business units (SBUs): The company has to
establish strategic business units on the basis of the following three
dimensions: customer groups, customer needs and technology.
3. Assigning resources to each SBUs: The senior management studies the
company’s portfolio and classifies its business by profit potential. After the
company’s strategic business units are identified, appropriate funding is
assigned to each unit.
4. Planning new businesses and downsizing older business: New businesses
can be of the following types – intensive growth opportunities (to achieve
further growth within the company), integrative growth opportunities (to
build or acquire businesses related to the company’s current business) or
diversification growth opportunities (adding new businesses that is totally
unrelated to the company’s current business).

Ø Business strategic planning :

This occurs in the following steps:

The unit defines its specific mission; it performs overall evaluation of

company’s strengths, weaknesses, opportunities, and threats (SWOT
analysis); it develops specific goals based on the SWOT analysis; it develops
a strategy to achieve the goal; it develops detailed supporting programs to
help in the strategy; it implements the clear strategy and well-planned
supporting programs and finally, it keeps a track of the new developments
and results and controls the strategy accordingly.

Ø Product marketing planning:

Each product level (product line, brand) must develop a

marketing plan for achieving its goals. A marketing oriented company
attaches great significance to gathering information on which plans are
based. Their activities center around– customer needs and satisfaction.

The Marketing Manager deals with the following questions:

- Who are our customers?
- What do they buy?
- How do they consider value?
- When do they buy?

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Q.2 Explain the different Marketing Environments and the role

of Culture and Subculture.

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Answer –

Procedure in Marketing Planning:

1. Introduction:

THE MACRO ENVIRONMENT:

The only certain thing in this world is change. Sometimes change occurs
so slowly that it is virtually imperceptible. We are often unaware that change
is occurring until it is too ate too late to do anything about it. At other times
change is so rapid that, even though it is obvious, we find it difficult to react
quickly enough. Although none of us possess the power to foresee the
future , we can be sure that it will be different from today, and that change is
a fact of life. We have little power to stop it, and the sensible course of action
is to welcome change and attempt to adapt to it.

In order for a firm to be able to adapt successfully to changing

circumstances, management needs to have an understanding and
appreciation of the factors and forces influencing such changes, ideally a
firm should be in a position to adapt to changes as they are occurring, or
even in advance. Firms should attempt to capitalize upon change rather than
merely reacting to it. By identifying environmental trends soon enough,
management should be able, at least in part, to anticipate where such trends
are leading and what future conditions are likely to result from such
changes.

Unless firm are able to identify and react to change quickly enough , they
are likely to be dictated to by circumstances beyond their control. Instead of
being part of the changes occurring , and leading the market, they will, of
necessity, be forced into being market followers. Instead of adopting to
change and even going some way towards influencing events, events
will instead influence them, perhaps in an unfavourable way.

The competitive environment :

There are very few firms that are fortunate enough to have no
competitors . Except in the case of the centrally planned economies , of
which, of course, there are fewer and fewer as they increasingly turn
towards free market mechanisms. On the other hand , there are very few
markets which possess all the characteristics of what the economist calls
a perfectly competitive market structure where no company has any
differential advantage and where all products are homogenous and
companies therefore must accept the market price. Rather , most markets
fall some where in between these two extremes but are characterized by
intense competition.

Supplier environment:

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Suppliers are other business firms and individuals who provide the
resources needed by the marketing firm to produce goods and / or
services . Nearly every firm , whether engaged in manufacturing, wholesaling
or retailing., is likely to have supplier. Large firms such as Marks and
Spencer or the Ford Motor Company are Likely to have numerous
suppliers. For example, Ford must obtain glass windscreens , headlamp
units brake pads, tyres, steel sheet , fabric for interior upholstery and a
number of other materials in order to produce cars.

Whie some of thesse product constitutents will come from major

manfacturers such as British Steel Pilkington's Glass, Lucas and Dunlop,
other compontents, ranging from industrial fasteners to engine gaskets, will
often be supplied by a large number of smaller, less well known companies.

As you will appreciate, Ford depends on possibly hundreds of suppliers for

its manufacturing capability and commercial rosperity. In the same way,
hundreds of firms depend on Ford for orders. The firms that supply Ford wit
finished components are also likely to be supplied with raw materials or
semi-processed goods by a host of other suppliers.

THE DISTRIBUTIVE ENVIRONMENT:

Many firms, particularly in industrial markets where prodcts are often

buyer-specified market and deliver their products direct to the final
cusstomer. Other firms use some form of intermediate distribution system.
The distributio system is then made up of one more 'middlemen' who can be
individuals or other organizations. They range from agents, distributors,
factors and wole salers to retailers.

Because of the seeming permanence of the distributive environment at

any point in time, many firms make the mistake of thinking it is static. In
fact, distribution chanels change and evolve just like any other facet of
business life. As Davidson explains :
Distribution channels resemble the hour hand of a watch. They are always
moving, but each individual movement is so small as to be invisible in
isolation. The cumulative movement over a number of years can, however, be
massie.

Because distribution channels change relatively slow, it is easy for

manufacturers to respond too slowly to their evolution. Existing channels
may be declining in their popularity of efficiency, while new potential
channels of distribution may be developing, unnoticed by the marketing
firm.

THE ROLE OF CULTURE:

A society's culture is completely learned way of life which is handed down

from generation to generation. Cultural influences give each society its own
peculiar attributes. Although the norms and values with a society are the
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result of many years of cltural conditioning, they are not static. It is cultural
changes, and the resulting revised norms and values within a society, that is
of particular interest to the marketing firm. Nowhere is the aspect more
poignant than when the company is marketing internationally.

The English anthropologist, E.B. Taylor, 10 defined culture as:

that complex whole which includes knowledge, brief, art, morals, law,
custom, and any other capabilities and habitss acquried by man as a member
of society.

Taylor's definition is an accepted classic in defining some of the mahor facets

of culture, and in emphasizing that culture is very much a learned
phenomenon. British culture has historically been largely materialstic,
dericed as it is from the protestant work ethic of self-help, hard work, thrift
and the accumulation of wealth. Arguably, other Western cultures such as
the United States, Germany and Japan are even more materialistically
oriented. This factor is often thought to be one of the reasons for these
countries' superior economic performance. Cultural valyes do, however,
change over time, and a number of western core values are currently
undergoing major changes. Some of the changing cultural values are
particularly prevalent among the young include:

-A questioning of materialism and itss values.

-A decline in respecct for authority and the law.
-A belief in the rghtness of militancy and conformation.
-A desire for innovation and change.
-A shift towards informality.

SUB-CULTURAL INFLUENCES:

With in each culture are numerous sub-groups with their own distinguishing
modes of behaviour. In the United States black Americans represent the
largest racial/ethnic sub-culture. In the UK is the Asian community.
American marketing firms realize that it is impossible to treat such a large
group of consumers as a homogeneous mass, a number studies though
indicate that their consumption habits are significantly different from those
of the remainder of Americans. As a result, American firs are now designing
products and advertising campaigns aimed specifically at this large minority
markets. This has now also happend in th UK.

Indeed,although the UK is more culturally homogeneous than the USA,

firms can no longer ignore the cultural difference of the ethnic population.
Ethnic heterogeneity is slowly being recognized by more enlightened firms as
potential source of marketing opportunities. Cannon highlights a number if
interesting examples of marketing opportunities and problems related to
sub-cultures.

- Products may need to meet special religious needs(e,g, kosher foods).

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- Marketing intermediaries may be different(e.g. the importance of small,
Asian-run, shops)
- Consumer tastes may differ(e.g. Cadbury Typhoo's poundo Yam, aimed
mainly at consumers of Caribbean origin)
- Language can be a problem in marketing communications(e.g.in the UK,
77percent of Pakistani-origin women and 43 percent of Pakistani-origin men
cannot speak working English).

The culturally aware marketing firm will recognize that sub-cultures

represent distinct market segmentss and will seek to increase their awarness
of the needs, attitudes and motivations of sub-groups.

POLITICAL ENVIRONMENT:

To an increasing extent, the operation of business firms is influenced by

the political framework and processes in our society. Marketing management
must be alert to changes in the political attitudes are 'climate', which depend
on the policies of the government of the day. The political environment
cannot be examined in a vacuum. Political philosophies ob their own are
nothing without action. The outcome of political decisions can be seen in the
legislation and economic policies of government. In this sense, you will
appreciate that, although for clarity of exposition we are examining the
various macro-envionmental forces in isolation, in reality they are very much
interrelated. Many of the legal, economic and social developments in our
society and other countries are nothing more than the result of political
decision put into action. For example, in the 1980s the conservative Party
favored a monetarist approach to the managment of the Uk economy. It
attached great importance to the control of money supply and hence
government public expenditure.

ECONOMIC ENVIRONMENT:

Marketing management must understan the effects of the mainly economic

variables that are likely to affect their business operations. We see in the
mass media that inflation is rising or falling, that exchange rates are
affecting the value of the currency or influencing the level of interest
rates.We hear discussion on the level of unemployment, industrial output, or
the current state of the balance of payments. Such economic factors are of
concern to marketing firms because they influence costs, pricess and
demand.

Although world economic forces are of paramont importance to

marketing firms, particularly thhose involved with either importing or
exporting, domestic economic forces usually have the most immediate
impact. The leel of domestic unemployment affects the demand for many
consumer products, especially those classed as 'luxury goods' . This in turn
affects the demand for many industrial products, particularly manufacturing
plant such as machine tools. The rate of inflation and the cost of borrowing
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captial affect the potential returns from new invesment and inhibit the
adoption of new techologies. Governments of every persuasion attempt to
encourage eonomic growt through various policy measures. Tax concessions,
government grants, employment subsides and captial depreciation
allowances are some of the measures that have been used.

TECHNOLOGICAL ENVIRONMENT:

Technology is a major environmental influence upin the marketing firm. It

affects not only the firm's operations and product, but also consumers' life
styles and consumption patterns. Management must be aware of the impact
of technological changess. As Wilson explains in relation to electronics:

The development of the microprocessor and its large production has

revolutionized information collection, processing and dissemination which in
turn is affecting th whole spectrum of marketing activity.

The impact of new information technolog has been particularly marked in

the marketing research area. For example, it is now possible to design and
administer questionnaries via computer terminals. In the past this method
has been used on a limited basis, but is being more and more frequently
used. Computer assisted telephone interviewing (CATI) has revolutionized
the speed with which surveys can be completed. Responses are fed
immediatley into a computer and a report 'hard copy' can be available
immediatley after the final interview is completed As Thomas explains:

On-line interviewing is now in widespread use in the larger data gathering

market research firms. Interviews, using telephone, work from a
questionnaire which is displayed on a VDU and responses are keyed straight
into the computer.

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