NEB Class 12 Marketing Chapter 3 Marketing function Complete Note
Chapter: 3
Marketing function
The main function of the marketing is to satisfy consumer by transferring goods or services from producers to customers. During the process of transferring goods and services to customers buying and selling activities between buyer and seller take place similarly, for transferring goods from one place to another place, transportation and warehousing activities are essential. Few agencies are also supporting indirectly to the smooth flow of goods and production activities. Such agencies are banks, insurance, market information provider agencies.
- Merchandising function:
Matching the products with buyers needs and making them available in the market is known as merchandising function.
Buying and selling function:
It is primary function of marketing process to transfer of ownership. Only the buying and selling activities make possible to transfer ownership by taking place. Thus, it is said that buying and selling are considered as two side of coin.
Buying Function
Nature of buying:
Buying is the procurement of goods or services for eventual resale to customers or industrial users. It comprises all those activities involved in finding a suitable source of supply. Buying is the process of acquiring goods at the right price, at the right time, in right quantity and quality and from right source of supplier. Buying or purchasing is an important function of marketing. It is a function of exchange. A person or an institution buys goods for different purpose. A person or an individual buys goods for consumption purpose but institution buys goods for business use or resale purpose.
Buying consideration:
Quality and quantity of goods:
Buyer should buy high quality and right quantity of goods. Goods must be sellable. Market research is essential to buy marketable goods. Goods must be purchase on the basis of complete, reliable and up to date information.
Sources of supply:
Search of suitable sources of supply is another important things to be considered in the time of buying. He/she should supply goods at reasonable price at right place in right quantity regularly. The supplier should be financially sound, reliable and well reputed.
Market information:
Buyers should always be aware of issues like what kind of goods or services are available at what price in the market. What types of substitute are available at what price? Before taking buying decision buyer should seriously consider this issue.
Variation in demand:
Despite the same quality the demand for some goods may vary due to change of time and situation. For example, demand of meat during dashain and sweet during tihar rises high. Buyer should consider whether their demand is affected by season, time or not before taking buying decision.
Elements of Buying
1.Purchase planning:
Purchase planning is the process of establishing objectives and tactical to obtain the best value in a specific purchase. Purchase planning is prepared after analyzing needs, wants and demands of customers. Buyers should apply judgement, survey and post sales analysis as the methods of future demand forecasting.
2.Preparation of specification:
A product specification is a detail of a product. It provides technical and financial information about a product. For example: quantity and quality of goods, design of goods brand of goods and so on.
3.Search of suppliers:
Another element of buying is search of supplier. He/she must supply goods and services at a reasonable price at right time at right place in right quantity. Buyer can search such suppliers from business directory, friends and internet.
4.Negotiation and contract:
The agreement between buyer and seller on quality, quantity, price, delivery, modes of transport, payment, etc is called a negotiation. Both parties should be fully abide by the contract. Written form of negotiation is better than oral form.
# Buying Methods:
There are several buying methods. Buying methods are adopted based on the nature of product, volume and the condition of market .Popular buying methods are mentioned below:
On the basis of quantity of goods:
On the basis of the quantity of goods buying methods can be divided into four categories. They are mention as below:
Conservative buying:
It is also called small quantity buying or hand- to mouth buying or current need buying or economical buying. In this method, buyer buys goods in small quantity. In this method of buying the buyers purchase small quantity of goods for the satisfaction of current or immediate need.
Speculative buying:
Another buying method is speculative buying. It is a method in which buying in greater quantity than required with the hope of price of goods rise or doubt of shortage in future. Through this method the buyer buys goods not only for present need but also for future speculation. This method enjoy more benefits like heavy discount in price, minimum transportation cost.
- Buying by tender:
Goods can be purchased through tender notice. Buyers calls for tender giving details of the goods wanted to buy. One or more than one tender may be accepted. Buyers can get goods or services at competitive price but this method of buying is more complex and time consuming.
Contract buying:
Contract buying is another popular buying method. Both buyer and supplier sign a contract for long period of time in contract buying. Both of the parties should abide by this contract. From this method of buying the buyer firm can get regular supply of goods at a certain price for fixed duration.
On the basis of number of supplier:
On the basis of the number of suppliers buying methods can be divided into three categories. They are mentioned as below:
1.Concentrated buying:
There may be several supplier in market. Buyers buy all the necessary goods for long-term from one or few suppliers. This method ensures some benefits, higher quality goods at reasonable cost, regular supply, heavy discount and credit facility etc. Lack of selection facility, monopoly in delivery, lack of market information, limited capacity of suppliers etc. are its disadvantages.
2.Diversified buying:
Buyers buys from different suppliers in the diversified buying method. He/she can buy goods from more than one supplier at a time. Flexibility, selection, facility, heavy discount, regular supply etc are its advantages. No guarantee of product quality, no credit facility, more transportation cost, higher cost in suppliers search etc. are its disadvantages.
3.Reciprocal buying:
Reciprocal buying is an arrangement in which two or more organization purchase one another’s goods and services. This is based on the principal of “If you buy from me, I can buy from you.” It is mutual understanding buying method. Guarantee of product quality, reasonable price, easy in purchase, increase in sales etc. are the advantages of reciprocal buying method. No facility of supplier selection, unfavorable terms and conditions, limited scope, higher price etc the disadvantages of this buying method.
On the basis of quality of goods:
On the basis of the quality of goods buying methods can be divided into three categories. They are mention as below:
Buying by inspection:
This is an old, simple and popular method of buying. Producers or suppliers hold exhibition at a convenient place or central market. In this method buyer goes to the stall or market, then inspects goods and decides to buy on the sport. This method becomes suitable only if the customers can go to the suppliers stall easily. It is not effective if the distance between the buyer and seller is long.
Buying by description:
In this buying method seller or producer explains the detail of goods and services to the buyers. He/she describes about brand name, quality, price, warranty, repair and maintenance, discount, services after sales and other characteristics of goods. Specially expensive and technical nature of goods such as equipment, plant and machinery, computer, television etc. are bought by this method.
Buying by sample:
In this method, buyer buys goods after having inspection of sample of goods. While buying by sample, the buyer inspects only sample not the whole goods to be purchased. Quality, color, design, style, utility and other features of the goods can be understood by inspecting the sample. If the supplier does not send the goods as per sample, buyer has the rights to back. It is effective if the distance between the buyer and seller is long.
Selling
# Nature of selling:
Selling is a process which involves creating a relationship with customers, identifying the customer’s needs and wants providing possible solution that meet their needs and wants and closing identification creation and development of product that satisfy the need or wants and prevention of customer in developing exchange relationship. Selling is an act of providing or handover products or services to the buyer in exchange for its value, worth or money. It includes the activities like to find out the demand of the product provide information about availability, advantages and disadvantages.
# Elements of selling function:
The main elements of selling functions are mentioned as under:
- Product, planning and development:
It is a consumer related activity. Since, it is concerned with consumer, it identify the needs, wants, desire and interest of the consumers and provide goods and services. The main aim of it is to fit a product that can match with consumer need and can satisfy consumer want. Product planning and development consists of activities like product designing, branding, packaging, labeling etc.
- Contractual function:
It is an agreement between seller and buyer under this, a seller identifies potential customers, find their location and keep contact with them. Seller should identify potential customers with the help of market information. With the help of modern equipment like telephone internet, sales representative the seller should find out location of buyer.
- Demand creation function:
It is an important element of selling. It is a special effort for stimulating a meant or desire for product to be sold by the seller. It is performed by the producers, wholesalers, retailers etc. It helps to convert potential customers into actual customers. Demand can be created through advertising, publicity, personal selling and sales promotion activities.
- Negotiation function:
It is the process of making agreement between buyers and sellers on terms and conditions of sale, quality and quantity of goods, price of products, means of payment, mode of transport, times etc. It is oral as well as in written form. For evidence, written negotiation is better than oral.
- Contractual function:
It is the last step of selling process. It legally binds both the buyer and seller to obey the terms and conditions of negotiation. Both parties sign on the agreement for its legal certainty, owner transfer, product delivery, money payment etc. are made on the basis of contract made between two parties. It is a specific type of legal contract.
#Physical distribution function:
Physical distribution refers to the combination of activities that are associated with the supply finished product from the production area to the consumers. All the product are produced for selling. There are two primary physical distribution functions:
- Transportation:
Transportation is the physical means whereby goods are transferred from the production place to the place where they are consumed or used. It is an important component of physical distribution and plays vital role in marketing. Transportation creates place utility, expands market, stabilizes price and helps in specialization.
Functions/Features of transportation:
The main functions/ features of transportation are mentioned as below:
- Widening of market:
Transportation helps us to transfer goods from one place to another at considerably low expenses and with great care and speed. Without regions of the world would be in no position to carry out on exchange relationship. Transportation helps to expand market.
- Increase in mobility of labor and capital:
Transportation increases the mobility of factors of production such as labor and capital. Labor has become more mobile with the development of means of transportation. Labours can go from one place to another by the means of transportation. Transportation also increase the mobility of capital.
- Specialization and division of labor:
Transportation helps to bring specialization in production by providing skilled, experienced and knowledgeable human resources advanced technology and quality materials.
- Creation of time and place utility:
Transportation creates time and place utility. It makes product available for consumption at a time when they are needed. Place utility is created by the transportation of those products or surplus. Transportation helps in warehousing and products delivery work.
- Stability in Price:
Transportation brings stability in product price. Transportation helps to stabilise product price by matching demand and supply. It takes products from surplus area to deficit area all the time.
Modes of Transportation
The primary modes of transportations are mention as below.
- Land Transport
The modes of transport which covers majority the landmass of the earth is known as land transportation. Road transport, Rail transport and Pipeline transport are land transport.
Road Transport
Road transportation is widely used mode of transportation all over the world. It is very popular and the most significant mode of transport. Moreover, no other mode of transport is complete without roadway transport. Bus, truck, tractor, motorbike, jeep, animals, porters, carts etc. are major means of road transport.
Features of Roadway Transport
- Small Investment: Roadway transport can be operated in small investment as compared with the other modes of transportation.
- Various Means: Roadway transportation possesses the special characteristics of being used by several types of means of transport such as men, animal, carts, trucks etc.
- Freedom of movement: There are freedom to use means of road transport. Road transport can be used when and where desired and needed. The owner of means of road transport has complete freedom to use it on any road.
- Door to door service: Roadway transport can provide door to door services. Loading and unloading services can be provide as per need and convenience.
Merit/ Strengths of Road Transport
Merit or advantages of road transport are mentioned as below:
- Economy: Road transport is more economy than other modes of transport. It is cheaper and quicker for short distance.
- Flexibility: Road transportation is more flexible than any other modes of transport. Goods and passengers can be picked up and dropped at any place and any time as there are no specific routes and particular time.
- Convenient: The road transport is very convenient. It can provide door to door services. Goods can be loaded and unloaded at various point as per need.
- Safety: Road transport is safer than any other modes of transport. Minimum handling, loading and unloading activities eliminate the risk of loss, damage and theft.
- Suitable for short distance: Road transport is especially suitable for short distance. To cover few kilometer distance it is impossible to use other modes of transport.
- Suitable for perishable and delicate items: Road transport is suitable for perishable and delicate items. There is less risk in road transport.
Weakness of Road Transport
Weakness of road transport are mentioned as below
- Unsuitable for long distance: Road transport is not that suitable for long distance transportation as it is costlier and consume more time. Transportation of goods to foreign country is not suitable by road transport.
- Unsafe: Road transports are risky and unsafe. The probability of an accident is higher in road way transport in comparison with other mode of transport. Goods send by road transport are not fully protected against rain, cold, heat, wind etc.
- Unstable freight Charge: Freight charges of roadway transports are vary from one operator to another and one vehicle to another. They are generally subject to bargaining.
- Unreliable: Lack of specific time schedule and route road transport may cause delay on delivery of goods. Because of breakdown of vehicle and non- punctuality of workers the road transport can not be completely relied upon.
- Less Speed: various road transportation cannot be driven too fast. It is not suitable when quick delivery is required.
Railway Transportation.
Railway transportation is a modes of transportation of land. It can carry a huge quantity of goods at low rate. Rail transportation is regular, uniform and quick compare with another means of land transport. Railway transport has big capacity to carry huge quantity of goods for long distance. It is normally owned and controlled by the government in all countries of the world.
Features of Railway transportation
- Huge Investment: Huge investment is needed for railway transportation. A lot amount is needed to purchase of land, construct railway track, platform and rail.
- Monopoly: Railway transport has the monopoly of its services. A huge amount is needed to operate railway transport which no individual can easily invest. The government operates railway services in monopoly.
- Requires specific infrastructure: Separate lines and tracks are needed for railway transport. The railway line is not suitable for other means of transport.
Strengthen of Railway transport
- Suitable for heavy and bulky goods: It is the most suitable means of transport for carrying heavy and bulky goods over long distance.
- Reliable Service: It is usually provides regular services and followed regular schedule and route. So, it is a more dependable mode of transportation.
- Fixed and Cheap Rates: The freight rate charged by railways are fixed and cheap. It is not changed frequently.
- Unaffected by weather conditions: Railway transportation usually is not affected by weather conditions like other modes of transport.
- High Speed: Railway carries goods and passengers with greater speed than any others modes of transport except the air transport.
- Flexible carrier: It is flexible in the sense that the numbers of wagon attached to a train can be adjusted according to the volume of traffic.
- Safest Carrier: It is one of the safest means of transportation. Moreover, it protect the goods from exposure to sun, rain, snow etc
Weakness of Railway transport
- Requires Large Volume of Capital: Railway transportation requires a huge capital of expenditures for its establishment. It cannot operate economically in those area where the volume of traffic is inadequate.
- Increase in cost of loading and unloading: Railway transportation is affected by the problem of terminals. A terminal is a point where goods have to be loaded and unloaded. It can’t deliver goods at door to door of customers.
- Unsuitable for short distance: railway transportation is unsuitable for short distance. It is as a mean of transportation has many complexities for local level operation.
- High cost for maintenance: Railway mode of transportation is one of the high cost maintenance entity. Be it in the track, wagon, operation of railways is expensive.
- Unsuitable for light goods and short distance: Railway transport is unsuitable for transportation of light goods and short distance.
Water Transport
Transportation that uses water bodies as the surface of movement is known as water transportation. Water transport is the process of moving people and goods by ship, steamer, motor boat etc. over the ocean, sea, river, canal etc. It is suitable for heavy goods and long distance.
Features of water transportation
- Huge Investment: Huge investment is needed for construction of ship. A person or private sector can’t invest in water transport, only government can invest it. Thus, it runs in monopoly.
- Takes place in natural water bodies: Water transportation operates in all kind of natural water bodies such as sea, ocean, river, stream, lake etc. Way for ship is not necessary to construct.
- Flexible: water transportation is flexible in using route and transportation of goods. Its route can be changed according to necessity.
- Slow movement: Although water transportation is cheap it sails at a slow speed. It moves slower than other modes of transportation. It is not suitable for quick delivery.
Strengths / Merits of water transport
The strengths of water transports are given below
- Suitable for heavy and bulky products: Water transportation is the most suitable mode of transportation for huge, heavy and bulky goods such as coal, timber, iron, machinery etc.
- Cheapest transportation mode: The fare charge of water transportation is cheaper than other modes of transportation. The cost of infrastructure is low as compared to other modes of transportation. Water bodies are the gift of nature.
- Low Power Requirement: The power required to drive a ship is very low due to the buoyancy of water.
- Promote foreign trade: Water transportation has joined the whole world into one unit. This transportation is the cheapest and reliable transportation and key to the foreign trade.
Weakness of Water Transport
- Slow Speed: The speed associated with water transportation is slow as compared with another modes of transportation. It takes long time to reach its destination.
- Risky: There are a large number of risk in carrying goods to water bodies. There is always the risk of flood, weather change, storm or sea waves, rocks etc.
- Limited Route: Route related to water transportation are limited and cannot be increased.
- Unsuitable for perishable goods: Water transportation is not suitable for carrying perishable goods. Its speed is slow and the port of destination may be far away from the consumption center.
Air Transportation
Transportation through the mean of air is known as air transportation. It is expensive mode of transportation. Air transportation linked the world in one unit. Airplane, helicopters, parachuting, hot air balloon are the means of air transport. It is expensive and speedy modes of transportation.
Features of air transportation.
- High Speed: It has the highest speed among the existing modes of transportation. Goods can be carried from one place to another in a very short time.
- Unbroken journey: An unbroken journey over land and sea is possible in this mode of transportation.
- Special preparation: Special preparations are necessary for air transportation. It requires wireless, metrological stations, hood light etc.
- Expensive: It is the most expensive mode of transportation due to its high operational cost and limited capacity. It is costly both in construction and operation.
Strengths of Air Transportation
- Suitable for perishable products: Air transportation operates at very high speed. It is suitable for perishable commodities or when time is the most important factors.
- Suitable for High Value Products: It is most suitable for high value products such as gold, silver, diamond etc. It does not take long time to reach its destination.
- Makes inaccessible as accessible: Air transportation helps in carrying goods of those area which are inaccessible by any other modes of transportation.
- Most Suitable transportation: Air transportation is most suitable when the other means of transportation there are dislocated due to flood, earthquake etc.
- Short Route: Air transportation can follow the shortest possible route as there is no track or road involved. Aircrafts fly in a straight way in the sky. They do not need to go up and down and sharp turn.
Weakness of Air Transportation
- Costly: The cost of operations of air transportation is higher as compared with other modes of transportation. It makes this mode of transportation one expensive entity.
- Uncertain and unreliable: Air transportation is highly uncertain and unreliable mode of transportation. It is depend on the atmospheric condition. It is easily effected by weather change, storm, heavy rain fog etc.
- Limited Capacity: It has limited capacity compared with rail and ship transportation. It can carry only certain amount of goods. It is unsuitable for heavy and bulky goods.
- Depend on other means of transportation: Air transportation depends on other means of transportation. It can carry goods only from one airport to other airport. To take goods from airport to consumer and production place to warehouse it depends on other means of transportation.
Factors Affecting Selection of Mode of Transportation
There are various modes of transportation. A marketer consider the following factors to select the best mode of transportation
- Product option: Product option refers to the types of product that can be transported using a certain mode of transportation. We should choose the suitable mode of transportation according to our types of product.
- Cost: Transportation cost effect on the price of a product. The distributor should, as far as possible, select the less costly mode of transportation. Cheap and economical mode transport helps to reduce the distribution cost and price of the product.
- Speed: The distributor should select quick and fast speed mode of transportation as far as possible. Air transport is the fastest way. Human and animal are slow means of transportation. Decision regarding the speed depends upon time and nature of product to be delivered.
- Consistency/ Regularity: Regular, consistent and dependable mode of transportation should be selected in order to deliver the product in time.
- Safety: Distributor should select the safe mode of transportation. If goods are transported by safe means there are less chances of damage and losses during the transit. Railway and pipeline modes of transportation are safer than water and air transportation.
- Availability: All the mode of transportation cannot be found every time whenever needed. The marketer should select the best one among the availability modes of transportation. So, while selecting mode of transportation, the distributor should consider their availability.
- Capacity: Capacity refers to the amount of product that can be transported at one time using a particular transportation mode. High capacity makes the transportation cost low. So, while selecting the mode of transportation the marketer should consider the capacity factor of the mode of transportation.
Warehousing
Warehousing means storage of raw materials as well as finished product. It stores products and materials on a large scale. It stores in an orderly and systematic manner and making them available when required. Warehousing refers to the holding and preservation of goods until they are dispatch to the customers. Warehouse helps the businessmen to continue the process of production throughout the year and sell their products whenever it is on demand.
Function/ Importance of warehousing:
Storage:
Storing is the primary function of warehousing. Products that are not required immediately are stored in warehousing. It helps producer for regular production of goods. Warehouse helps producers to control market.
Regular Supply of Goods:
Another primary function associated with warehousing is regular supply of goods. Warehouse provides facilities the smooth supply of goods for the purpose of sale. By managing the optimum level of the products, it balances the supply and products with demand.
- Facilities further processing:
Warehousing provides the facilities for processing, packaging, grading, blending etc. of the goods for the purpose of sale.
Price stability:
Storage is necessary to regulate the price of the products. When products are stored in optimum level, it balances the demand of the market. Stability in price increases trust to customers towards products. As a result, market situation can be strengthen and made favorable.
Creation of time utility:
It is not necessary that the timing of production and consumption of all products coincide each other. At times, the produce products need to be used or consumed after certain period. In such time, it bridges the time between production and consumption by creating time utility.
Stock of trade:
Storage has to be done by middleman since consumers are not interested in storing goods because of limited space and purchasing power.
- Increases in Quality
In some case, goods are stored to improve their quality and value with the passage of time. For example: rice, wine, cheese, tobacco etc. Some products gain more quality if they kept in a warehouse longer time.
- Protects Perishable goods: Warehouse protects perishable goods for long time. Lack of warehouse perishable goods eg. Fruits, milk, vegetables etc. become useless within two or three days but by using cold storage they remain fresh and safe and can be supplied to the market after long time.
Types of warehousing:
There are various types of warehouse. The types of warehouse mention a below:
Private Warehouse:
Warehouse that are owned, managed and controlled by manufactures and merchant for fulfillment of their storage necessities are known as private warehouse. Producers, agents and wholesalers build private warehouses. Private warehouse become safe, economical and accessible. But, it has some weakness such as freezing of capital, inflexibility of place and so on.
Public warehouse:
It is either owned by companies or by government who charge a certain amount for warehousing facility. In public warehouse various merchants or private firms can store their products by paying a certain amount for charge is known as public warehouse. Public warehouse can be divided into following three types:
- General merchandise warehouse
- Special commodity warehouse
- Cold storage warehouse
- Bonded warehousing:
They are licensed or owned by government warehouse which accept imported goods for storage till payment of duty is made. This type of warehouses generally found in the airports, sea ports or railway stations. Bonded warehouses are established as per government rules and regulations and operated under government supervision. Bonded warehouse is very helpful to importer and exporter and provides facility for international trade.
Facilitating Functions
Functions that are facilitating the merchandising and physical distribution functions of marketing are known as facilitating functions. In other words the secondary functions that support and assist the function of buying, selling, warehousing and transportation functions.
Standardization
A standard is anything which serves as a basis of comparison. It is a measure that is generally accepted as having fixed value. It is the process of setting up basic specification for a particular product. Standardization determines the primary characteristics of a product based on which they can be categorised. A standard is measured in qualities, quantities. colour, size, style of a product and so on. It involves determination of basic features of a product. It is one of the most important facilitating function of marketing. It brings convenience a buying and selling the products,
Grading
Grading is the process of classifying products into lots which have similar attributes. Grading means separation of products on the basis of predetermined standards of shape, size, colour, weight, test, quality, performance and other significant characteristic. It is the act of separating or shorting of individual product into series of well – defined classes or grades. It facilitates people to identify the product easily eg .Mustang apple,
Grading is an important function of standardization. It implies the division of products into classes made up of unit possessing similar characteristics of size and quality.
Importance of Standardization and Grading
Standardisation and grading an intent marketing function that facilities the process of marketing In this regard. The primary importance associate standardization and grading of products is mention below
- Buying and selling facilitation: Standardization and grading facilitate merchandising function i.e. buying and selling. Since, the buyers become assured about the quality of the standardized products: they do not insist on having a detailed examination. Likewise, seller can be confident in selling the product since the quality of the product is confirmed.
- High faith in product: Standardization and grading create the high image of a product since they are homogenous and consistency in quality. Customers do have high faith in these products and buy them without any hesitation. In such scenario: it becomes easy to sell the product and get better price.
- Wider market: Standardized and graded product enjoy a wider market as the product since they are homogeneous and consistency in quality. Customers do have high faith in these products. Moreover, it is easy to communicate the characteristics of the product which is crucial in expanding the market.
- . Elimination of risk: Products are standardized and graded in reference to the habits, tastes and the buying behaviour of consumer. In this regard, the risk of selling standardized and graded products is greatly reduced.
- Finance raising: Standardized product is often accepted as a collateral security for loan. It thus helps the producer to raise finance for its various activities.
- Less price fluctuation: In most of the cases, the price of standardized products is fixed by producer. In this regard, the price of the product remains fair as they fluctuate less
- No need for inspection: Standardized products are uniform in reference to the standard specified. In this regard, there is no need for inspection of quality and other attributes.
Financing
Financing is another facilitating function of marketing. It is known blood of marketing. Marketing functions cannot be performed without adequate finance. There should be optimal level of finance in an organization
Producers need finance to purchase of raw materials and manufacturing of products. Similarly, dealers, whole sellers and retailors need finance for purchase of goods and for their resale to the customers. Finance is needed at every activity of marketing. Unless sufficient finance is available, the producers, wholesalers and retailers cannot perform their functions efficiently and effectively. Thus, finance is necessary for manufacturing, selling and distributing functions. Banks and finance companies help to fulfill financial requirements of an organization.
Risk Bearing
There are three major marketing risks; (a) physical damage or loss, (b) decline in price, and (c) bad debts. Physical damage may be caused by different accidents. Development of new technology or change in fashion may be the cause of decline in price or economic loss in goods. Similarly, extending too much and unworthy credit risks increase bad debt risks. An increase in the bad debt risk is a negative sign for growth and development of business.
These risks cannot be totally eliminated. Some risks can be transferred to insurance company, some can minimised, and others are unavoidable. Therefore, efficient management of risk is the major concerned of marketers. Risks of loss by fire, theft, goods loss in transit, and life insurance for employee and partners in a partnership will be covered by insurance co. The premiums that the company would be required to pay are determined by the degree of risk involved
Market Information
Market information means collection and analysis of market to take right decision at the right time. It designed to support rational marketing decision making. It is also known as market intelligence systems.
Information is vital resource in marketing management. It has to be collected, processed and interpreted. Market information must be reliable as well as up to date. All marketing decisions are taken after analysing marketing information. There are various sources of market information. Internal published record, bulletin published by Chamber of Commerce, description published by Central Bank, business journal, market research, newspapers, channel members, trade Association, Consumers’ Association, Government Reports and so on are the main sources of market information. Computer based information system provides more facility to marketers.
Lesson – 5
Product
A product may be tangible goods, services, place, person or idea.It is the most important element of marketing mix. Product can be anything that satisfies human wants.
- Concept of products
Physical concept:
It is also called a traditional or tangible concept of product. As per this concept, things having physical existence is called product.
Service concept:
It is also called intangible concept. According to this concept, the product can’t be seen and touched but can be felt. It is done by one party for another.
- Augmented concept:
It is the total benefits received by customers while buying an actual product. It consists of additional benefits that a buyer receives on obtaining an actual product.
Total product concept:
This concept incorporates all three concept of product i.e. tangible, intangible and augmented. This concept includes the total features, benefits, advantages etc.
Level of product;
- Core product:
core product represents the core, problem solving benefits or services associated with a product. The core product is an answer to the question ‘What is a customer really buying?’
- Actual product:
Actual product represents all the features and qualities of a product.
- Expect product:
Expected product refers to all the aspects that a customer expects. Once he buys the product.
- Augmented product; augmented product stands for the additional benefits associated with the product that set it apart from a competitor’s product.
- Potential product; This is all about transaction and augmentation the product may go through in future.
Classification/ Types of product;
- Consumer product; A consumer product that is purchased by an individual for personal or household use or consumption.
Classification of consumer product.
- Convenience products; Convenience products are those products which are relatively inexpensive and purchased on a regular basis with a minimum shopping effort.
Features;
- Convenience products are brought by consumers frequently.
- Convenience products are easily identifiable.
- The prices of a convenience products is comparatively lesser.
- Convenience product have short life.
- Consumers are well aware of convenience product.
Marketing consideration of convenience products;
Retailers ; Consumers normally purchase a product from a retailer that is convenient for them. In this regard it is important to give the priority to the retailer.
Wide distribution; Consumers purchase convenience product without planning at their place of convenience . It is thus important that convenience product is made available at every nook and corner possible.
Product display; Display of product in a shop is necessary to create awareness and impression in the mind of consumers.
Profit margin; Price of convenience profit is low; Hence, the focus should be on mass selling with minimum profit margin.
Shopping product; Product that requires enough information and comparison before buying are known as shopping product. Consumers lack information regarding shopping products. They must have complete knowledge to do the decision of purchasing.
# Feature:
- Consumer purchase shopping products on a less frequently basis.
- Shopping product are comparatively durable in nature.
- The price of shopping product is high
- Shops that sell shopping product are limited in number compared to the convenience products.
# Marketing considerations of the shopping products:
Role of retailers:
Consumers do not purchase shopping products regularly. Due to this, a few number of retailer are enough to sell this products.
Impact on buying habits:
Promotion and distribution policies of these products affect the buying habit of consumers. So, the marketing manager should focus on the promotion that helps to increase the consumption rate of consumers.
Provide information:
Consumers that purchase shopping product are not that aware of the products. As a seller, one should regularly provide information to the consumers.
Packaging:
Packaging doesn’t play an important role in the selling of these products. So, sale these products marketing manager should consider the improvement of quality rather than the packaging.
Specialty product:
Specialty products are defined as that certain group of consumers aim to purchases due to their loyalty to a specific brand because of the unique characteristics they possess. In other words, specialty products are with unique characteristics and high value and thus, require special purchasing efforts.
# Marketing considerations:
- Distribution:
It is fine for producers to sell the specialty products through limited retailers. However, these retailer must be made aware of quality, packaging, discount and other aspects.
- Promotion:
A combined promotional effort of both the producers and retailers is essential for specialty products.
- Profit margin:
Though the volume of sales of specialty product is low, they are sold to consumers for whom price is not an issue.
- After sales service:
Specialty products are durable in nature. Consumers thus, look forward to a user friendly after – sales- service.
Unsought products:
Unsought products are consumer products that a consumer is either unaware of or don’t possess real desire to purchase it.