Section XII Promotion Sales Promotion. Sales Promotion is an important instrument in marketing to lubricate the marketing efforts.

. Today, sales promotion is a necessity and not merely a luxury or a fashion. It is not expenditure; it is an investment which can play rich dividends. It is integral part of the marketing effort. What is Sales Promotion? Sales Promotion is referred to activities other than personal salesmanship, advertising and publicity, which stimulate consumer purchasing and dealer effectiveness, eg. Displays, exhibitions and showrooms, demonstrations, free samples, coupons, premiums and various other non-recurrent selling efforts not done in ordinary routine. It is a plus ingredient in the marketing mix, whereas advertising and personal salesmanship is essential and basic ingredients in the marketing mix. In short, sales promotion is a bridge or a connecting link covering the gap between advertising and personal salesmanship, the two wings of promotion. The manufacturer or the wholesaler may have a good product, reasonable price, attractive package etc. He may have a good sales force. He may have spent a lot on advertising. Even then he knows that the product may not sell all by itself. He can get orders from the dealers and retailers, but many more things than orders are required to be achieved. The sale of the product has to be promoted through a number of influencers at the place where the retailers and prospective buyers meet face to face i.e. at the point of purchase. In short all the prospective buyers must be attracted, urged or even persuaded to buy your product. Sales Promotion is a vital link between advertising and field-selling. It aims at stimulating consumer purchasing at the point of sale and dealers effectiveness at the retail channel of distribution, particularly because retailing is a highly competitive field.

Why use sales promotion? Sales promotion and Publicity, when combined with advertising and personal selling programmes, really add up to more than the sum of the parts. Sales Promotion is that something Extra (2+2=5). It can arouse enthusiasm create a buying mood or spark an immediate reaction from consumers, dealers and the firms salesperson. Many sales promotion companies involve the use of incentives. Incentives are something of financial value added to an offer to encourage some obvious behaviourial response. Sales promotion is often

thought as special selling effort to accelerate sales. Point-of purchase displays give a real pay off, sales rising by 25-50% or even more. Sales Promotion Objectives:Sales promotion has a dual objective. 1. To increase buying response by ultimate consumers. 2. To increase selling efforts and intensity by dealers as well as by sales personnel. The result of an effective total marketing program is sales success, which entirely depends on positive customer reaction and an intense, well organized selling effort by resellers and sales-persons. One study suggested the following reasons for undertaking actively all forms of sales promotion. a. Calling attention to new products and product improvements. b. Informing buyers of new brands and new package. c. Improving market share. d. Increasing usage rate by present customers. e. Maintaining customer patronage and brand loyalty. f. Obtaining dealer outlets. g. Securing additional shelf-space and added display. h. Creating talking points for sales persons. Strength of Sales Promotion. a. b. c. d. It stimulates positive attitudes towards the product. It gives extra incentives to the customer to make a purchase. It gives direct inducement to take immediate action now rather than later. It has flexibility and it can be sued/altered/changed at any stage of a new product introduction.

Sales Promotions are very effective- When a new brand is introduced. - When we have to communicate a major improvement in our product. - When we want to amplify the results of the advertising. - When we want to increase the number of retail stores to sell our products. Limitations of Sales Promotion:1. Sales Promotion has temporary and short life not exceeding three months. Sales Promotion alone cannot build up brand loyalty. 2. Sales promotions are only supplementary devices to supplement selling efforts of other promotion tools. 3. They are non-recurring in their use. They have seldom re-use values. 4. Too many sales promotions may affect adversely the brand image, suggesting its lack of popularity or overstocking by the company.

5. Advertising agencies accord low status to sales promotions and usually employ junior staff for sales promotion so that they may be trained for more creative jobs. Sales promotions are ineffective When established brands have declining market. There are no product improvements. When there is intensive competition on consumer sales promotion. Kinds of Sales PromotionsThere are two kinds of Sales Promotions Activities intended to educate or inform the consumers and those intended to stimulate the consumers. These are called Consumer Sales Promotion. Activities to increase the interest and enthusiasm of dealers and distributors. These are called Dealer/ Distributor Sales Promotion devices. Consumer Sales Promotion devices are a. Sampling, usually called consumer sampling. Free samples are given to consumers to introduce a new product or to expand the market. The consumer can try the product. b. Demonstrations or instructions educating the consumers in the manner of using the product. c. A coupon is a certificate that reduces price, when a buyer gives a coupon to the dealer to get the product at a lower price (regular price is Rs.10/-, with a coupon it is Rs.8/-) coupons- same as money are accepted as cash by retailers. d. Money refund orders i.e. full purchase price is refunded, helping the introduction of anew product. Refund offer creates additional interest and increases sales considerably. It is a good device for creating new user and to strengthen the brand loyalty. e. Premium offers are temporary price reductions, which appeal to bargain instinct, e.g., instant coffee sold in carafes by one company was very successful, towels, dinner-ware, hair brushes, key chains, artificial flowers, ball pens, toilet soap, blades, were given as in pack premiums. Attractive re-usable jars costing separately Rs.4/- may be given at an extra charge of Rs.2/- only. Liril gave a soapbox almost free with two toilet soaps. f. Price off.e.g.Rs.1/- off on a Brook Bond pack of 500 grams; the price of label is printed on the package. It gives a temporary discount to the customer g. Fashion shows and parades are good promotion aids as it helps in mens and womens sophisticated clothings. h. Contest or sweepstakes for consumer help to stimulate consumer interest in the product. In these contests, participants compete for the prices on the basis of their skill or creative ideas. In sweepstakes, they submit their names to be included in a drawing of prizewinners. This type of Sales Promotion is like a lottery because there is a chance or luck factor that is involved, and prizes are offered and payments to the winner are made.

i. Trading Stamps are given for purchasing in a particular shop. Dealer Sales Promotion devices are: a. There is a provision for free display material either at the point of purchase (POP) or point of sale (POS), depending on ones viewpoint. Display reaches consumer when they are buying and actually spending their money. b. Retail demonstrators are supplied by manufacturers for preparing and distributing the product as a sample, e.g. Nescafe Instant Coffee to consumers for trying the sample on the spot or demonstration regarding the method of using the product. c. Trade dealers are offering to encourage retailers to give additional selling support to the product, e.g. Toothpaste sold with 30-40% margin. d. Seller gives buying allowance of a certain amount of money for a product bought. e. Buying back allowance is given to encourage re-purchase of a product immediately after another trade deal. A buy back is a sale opportunity. f. Seller gives free goods, e.g. one free with one or 1 free on purchase of 2, are common free deals. g. Advertising or display allowances may be given. h. Sales contest for salesmen are held. i. Dealer loader (a gift for an order) is a premium for special display done by a retailer. j. Dealer and distributor training for salesmen, which may be provided to give them a better knowledge of a product and how to use it. Dealer sales promotion provides selling the selling devices. Sales promotion devices at the point of purchase inform, remind and stimulate buyers to purchase products. People who see these devices are in a buying mood and thus they can be easily persuaded to buy the products. Tell tags are informative labels affixed on the product, describing in detail the features of the product and its unique selling points. Shelf takers are similar labels attached to the shelves close to the product displays. Counter top racks, posters, mechanized signs are other point of purchase displays. Each form of sales promotion is used to encourage quick movement of products along the channel of distribution and enhancing the tempo of sales campaign. It also creates extra incentive or gives extra value to the channel of distribution itself. Eg. Retailers. Hence sales promotion offers a direct inducement which gives an extra value or incentive to the distributors, their sales force and the ultimate customer. Reasons for sales promotion (Merchandising Aids):1. Introduction of a new product. 2. Stimulus for a new use of a product. 3. Encouragement for increasing frequency of purchase. 4. Appeal to a specific area of the market. 5. Combination offer to encourage the use of other product. 6. Creation of dealer interest and inducing them to stock the articles. 7. Securing shelf space in the retail window. 8. Counter balancing price competition.

9. 10. 11. 12.

Special training of salesmen. Seasonal and grand reduction sales. Capturing bargain hunting on non-brand conscious buyers through bargain sales. Accelerating to slow-selling lines.

Thus the sales promotion is used at the time of introducing a new consumer product, to secure maximum dealer stocking, display space and attention of consumers. Sales promotion involves a lot of expenditure. It also has difficulties, but because it pays rich dividends, sellers have accepted it as an important item in the marketing mix. Not only does it give profit but it also serves other purposes such as provisions of information, creation of demand, repeat buyers, sales stabilization and quick inventory turnover. The successful promotional effort has many ingredients such as personal selling, sales promotion devices, advertising, public relations and publicity. Industrial sales need higher personal salesmanship. In the sale of consumer goods, we need a good combination of personal sales with advertising and a lot of point ofpurchase help. Numerous final customers in mass distribution cannot be approached through personal salesmanship. Hence, we need devices to promote sales, such as contests, sweepstakes, premiums, coupons, product demonstration exhibits, point of purchase display, trading stamps, samples, free trips to Kashmir and so on. The marketing manager must co-ordinate the promotional effort of the Sales manager, Advertising manager, and sales promotion manager. At present advertising agencies help in both advertising and sales promotion devices. Exhibition and Trade Fairs:An exhibition stand or a stall is a form of a showroom, but it is a very distinctive form of showroom. It provides a temporary market place at which buyers and sellers meet. There are various types of exhibitions, international trade fairs, national and local fairs and exhibitions (usually sponsored by a Chamber of Commerce or Trade Association). We may have indoor or outdoor public exhibitions and fairs and shows of- agricultural and industrial machinery and equipment, cottage industries and handicrafts, fashion shows and parades, domestic electric appliance, office machines and appliances etc. An article showed in an exhibition at least makes a good impression without creating actual demand. A man is greatly impressed with a typewriter, time-clock or simple appliance. He makes up his mind to buy one, sooner or later. Usually, people are in a buying mood when they visit an exhibition. A successful stand in an exhibition on a trade fair gives three services to the owner 1. It provides entirely new business, which cannot be secured by any other method. 2. Buyers unwilling to meet salesman or visit the shop or showroom will on their own account, do a lot of purchases at these fairs or exhibitions. These buyers are usually re-sellers.

3. Competitors compete with each other for getting maximum business. The conservative buyer can compare the competitive lines displayed in close distance to one another. They need not disclose their identity. They welcome criticism of their regular suppliers only at such exhibitions. Thus at exhibitions constructive and conservative buyers (re-sellers) can be easily handled and captured by rival sellers. 4. In many trades, exhibitions are held annually at the same period of the year. These exhibitions attract a large number of buyers every day. These annual exhibitions become the basis of many sales campaigns. Buyers purchase all their requirements such as utensils, furnishings, appliances, clothing, fittings etc at these exhibitions. Publicity. Publicity is also called marketing public relations. Publicity is not paid for by the organization. Publicity comes from news reporters, columnists and journalists. It comes to the receiver as a truth rather than as a commercial. Public relations and publicity taken together becomes the fourth major ingredient of promotion mix. These activities are, however, not controllable by the firm. Every firm tries to create a good public relation so as to give good publicity. Defective products, unfair trade practices, anti-social activities often result in unfavourable publicity, consumer ill-will, bad product image, increased consumer protests, government regulations and so on. The firm having a poor public image will have lower profits. Reducing the impact of bad news is as important a creating good publicity. Under the special marketing concept, publicity and public relations are assuming unique importance in the firms promotion mix. Consumerism is altering consumer attitudes not only towards products, but also towards the firm and dealers selling the products of the firm. Public RelationsPublic relation ha now become an important marketing function. The total process of building goodwill towards a business enterprise and securing a bright public image of the company is called public relations. It crates a favourable atmosphere for conducting business. There are our groups of public1. Customers 2. Shareholders 3.Employees 4.The Community.

The markets should have the best possible relations with these groups. Public relations compliment advertising by creating product and servicing credibility. Effective marketing communication is not possible without establishing and maintaining mutual understanding between the company and its customers. The lubricant making the wheel

of marketing run smoothly is public relations. Bright image is created and maintained only by public relations. II. AdvertisingAdvertising is a mass paid communication the ultimate purpose of which is to impart information, develop attitude, and induce an action beneficial to the advertiser. A) Goals of Advertising: - The goals of advertising have been shown in the communication spectrum. The very purpose of advertising is1. 2. 3. 4. 5. 6. 7. 8.

Improve dealer relations. Introduce new products. Enter a new market or attract a new group of customers. Help increase the sales. Help expand the industry sales. Build Image of the organization.

C) Selection of Media:Factors to be considered are 1. Objective of the advertisement. 2. Media circulation. 3. Message content. 4. Cost. 5. Time. D) Features of different Media:1. Hoardings: - Useful for wide public appeal. Attracts the attention and acts as a product reminder. Hoarding has to be at aright place and must attract the target consumer. 2. Newspaper: - Mass media circulation. Cost per contact or readership is low. Useful for pre-launching and creating awareness of the product. However, off late regional newspapers have assumed importance. The life of newspaper advertisement is short. 3. Magazines:-With the new techniques, colour combination advertisement in magazines helps the marketer to reach the desired target market. Unlike earlier days, we find number of magazines to suit the tastes and preferences of the different class of customers. Magazines are normally used to read in a leisurely fashion in contrast to the newspapers. Magazines are read over a period of time. This is one of the reasons, newspaper have started issuing special supplements. Eg. Sunday Magazine. 4. Direct Mail: Useful for new product introduction and to get feedback from the customers. Helps to decide on the market potential, marketing strategy etc, depending upon the purpose of the direct mail advertising. Articles or editorial matter does not accompany direct mail advertising.

The major limitation of direct mail advertising is that it suffers from the stigma of being called junk Mail. Another difficulty is in maintaining the record of mailing list with feedback if any. 5. Radio:- Radio advertising is enjoying a renaissance as an advertising and cultural medium and as a financial investment with increasing number of stations, regional advertisement have made an impact on rural consumers. With special listening programmes in the community centers, advertisements have been successful. The major disadvantages are:a. It makes only an audio impression. b. It does not serve any purpose where visual impact is needed. c. Life of a message is short. d. Audience attendance is low. e. TVs have captured the market with vast national coverage. 6. Television: - the fastest growing media with coverage of approx 80% of the population. Advantages area. Product use can be demonstrated. b. Has impact with real life situations. c. Colour pictures and photographs bring life to the advertisement. d. It creates both audio and visual impact. The major disadvantages are a. Extremely expensive. b. Over crowding of the advertisement has lead to lose of its effectiveness as a media option. E) Advertising BudgetIt is organized plan for the expenditure of funds. The advertising budgets are decided depending upon the companys policy, industry norms, government controls etc. Some of the methods are: a. Spending related to Sales the simple rule of thumb is that it is necessary to spend at least x percent of sales revenue in advertising in the widest industry. It is based on the past performance and forecast for the future. Observations: - too simple, easy to understand and justify. Its also a safe policy to adopt. b. Task Approach Here we specify the advertising objectives and the alternatives available to achieve these objectives and the associated costs. The advertising budget is selected based on the alternatives, which will accomplish the objective with minimum cost. It is useful for new products. c. Competitive Budgeting: - The actions of the competitors are considered while deciding the budget. d. Maximum Spending - this is to spend whatever amount is available or can be afforded. It assumes that if advertising is good, then more advertising is better. e. Investment Budgeting Advertising is viewed a capital investment which produces two kinds of returns 1. Current sales.

2. Long-term goodwill. It is essential to know the time lag between implementations and measuring effectiveness. f. Vitale Wolfe Dynamic Model This model assumes that advertisement response depends on1. Sales decay Constant. 2. Sales Saturation level. 3. Sales-response Constant. 1. Sales Decay Constant It is assumed that if no advertisement is undertaken, the product loses its sales through customers who switch to other brands. The hypothesis is that the customers forget the product and are lured away by competitors who advertise.

Sales Responses

X- Sales Decay Constant

Time 2. Sales Saturation Level A practical limit of sales that can be generated by advertising is the important consideration. The sales saturation level is the known sales rate, which will not be exceeded regardless of the advertising level. 3. Sales Response Constant it represents the sales revenue generated by a rupee of advertising expenditure when sales are zero.

Developing an Advertising Plan: The development of an advertising plan consists of nine steps as shown in the figure below and is self-explanatory: -

1. Setting Objectives* Demand Oriented. * Image Oriented. 2. Assigning Responsibilities. In-House Department. Advertising Agency. 3. Establishing a Budget. *All you can afford method. * Incremental Method. * Competitive Parity Method. * Percentage of sales method. * Objectives and task method. 4. Developing Themes. * Product/Service related. * Consumer related. * Other. 5. Selecting Media. * Cost. * Waste * Reach * Frequency * Message permanent * Persuasive impact * Lead Time. 6. Creating Advertisements. * Message Content. * Production Schedule * Variations of basic message. * Placement. 7. Timing Advertisement. * How Often * When 8. Considering Co-operative efforts. * Vertical. * Horizontal 9. Evaluating Success / Failure.

III. Personal Selling: Selling is personal or impersonal process of assisting and /or persuading a prospective customer to buy a commodity or service or to act favourably upon an idea that has commercial significance to the seller. Personal selling is a highly distinctive and, the only form of direct promotion involving face-to-face relationship or interpersonal interaction between the sellers and the potential customers. Personal selling is a two way rather than a one-way communication. Interpersonal interaction in personal selling involves social behaviour. Personal selling refers to oral presentation in conversation (by a sales person) with one or more prospective customers for the purpose of making sales. Due to seller- buyer interaction, personal selling alone can provide immediate feedback of information which enables a salesman to adjust his message in accordance with the reactions of the prospect and to put emphasis upon selling points, in which the prospect has the most interest. Similarly, no other promotion tool is so strong as personal selling when it come s to convincing the prospect and closing a sale and transferring the title from seller to buyer. Personal salesmanship is defined as a direct, face-to-face, seller to buyer influence, which can communicate relevant facts about the product and the firm to the prospect so that he/she can take a buying decision. Personal salesmanship can use the psychology of persuasion very effectively to encourage the formation of a buying decision. However, the outstanding drawback of personal selling is its high per-contact cost. Whereas advertising, publicity, or sales promotion can contact prospective buyers for a few paise per contact, it is not uncommon for the cost of a traveling salesmans call to range from Rs.30/- to Rs.100/- per call. A trained salesman can perform almost any sales task better than any other promotion tool, but prohibitive cost limits the use of personal selling. In designing a promotion mix, a marketing manager must be not only sales conscious but also cost conscious. Advantages of Personal Selling:1. A salesman can pinpoint prospect, whereas advertising can not distinguish precisely a prospect from a suspect. It is a means of mass communication and not an individual communication. Hence, there is minimum waste of effort and expenditure in personal selling or communication. 2. Personal interview in salesmanship assures attention and interest of prospect. Personal selling has flexibility. Sales talks and sales presentations can be fitted to the individual needs and motives of a prospect. This is not possible in advertising. Even the best advertisements may attract attention and interest of hardly 60% of viewers or listeners or readers.

3. Advertisement has a broad sales message. It cannot be adjusted to reactions and objections of any one prospect. Salesman can adjust sales presentation on the spot to meet objections and reactions of his prospect in order to gain action. 4. Advertising can attract attention and arouse interest but usually it is left to the salesman to close the sale and affect transfer of title. 5. Actual demonstration of the product or its use is recognized, as the most powerful means of convincing. Advertising (except TV ads) cannot use demonstration. But salesman can use it easily. 6. Personal selling is the best means of two-way communication continuously between the company and its customers. Top management can be fully informed about many vital matters such as competition, customer reactions and comments, market trends, dealer demand etc. This feedback of information cannot be adequately achieved through other means of promotion. Hence, personal salesmanship has a permanent place in promotion and distribution. In retail trade we need personalized services and relations with customers and these can be offered only to salespersons. Limitation of Personal Selling. 1. The greatest limitation is the high cost of personal selling particularly in inflationary conditions. The cost of developing and maintaining efficient sales force is quite high. 2. Good and competent salespersons are scarce. When compared to other occupations, sales profession is becoming less attractive. A general shortage of sales force in the West has compelled retailers to depend more on self-service principle. That is why self-service stores are popular in many western countries. However, many big companies select and train their sales force and they also systematically develop their salespersons, as personal selling, though costly, is very effective and indispensable.

Comparison of Personal Selling and Advertising. Personal Selling Advertising. 1. Directed at individual 1. Directed at mass audience. 2. Personal, direct contact. 2. Impersonal, indirect contact. 3. Working in dept. 3. Working in breadth. 4. Two-way traffic of communication. 4. One-way flow of communication. 5. Direct and quick feedback 5. Organized and delayed feedback. 6. High level of adaptability. 6. Less directly adaptable. 7. Effective 7. Less effective. 8. Less Efficient-expensive & time 8. Efficient cheaper per contact. consuming. 9. Push effect. 9. Pull effect.

Since 1951, due to rising trend of wages and social benefits costs, selling costs per sale contact are also increasing steadily. Advertising costs on the other hand have shown decreasing tendency due to new means of communication like radio, TV etc. In mail order industry, advertising is used exclusively. In insurance industry, insurance services are sold almost entirely by personal selling. Similarities between Advertising and Selling. As tools of communication, advertising and selling need to be understandable, interesting, believable and persuasive in order to achieve their purpose. The process must penetrate the sensory mechanisms (e.g. Sight and sound) of the customers or prospects in order to be effective in modifying attitudes and preferences of buyers. In terms of perceptual cognitive process, both are designed to induce favourable thoughts towards the company, its products and services, and its people. Both try to induce favourable feelings. If the market is considered as having three phases- pre-purchase, purchase and post purchase, it is obvious that advertising fits mainly in the pre-purchase and post purchase phases. In the pre-purchase phase it acts as a market cultivating force and prepares the market for personal selling efforts. In the post purchase stage, it provides a rationalization to the buyer reassuring him about his wise purchase. Rarely advertising can achieve the purchase action. In contrast, personal selling is of importance in all three phases as indicated in the figure given below: Market Phase Selling Advertising Pre-purchase Purchase Post Purchase Key Terms of Advertising1. AIDA Awareness, Interest, Desire, Action. 2. DAGMAR Define advertising goals and measure advertising results.

Section XIII Distribution and Transportation. 1. Selecting Channels of Distribution: To describe the major channels is risky because it may suggest orthodoxy that odes not exist. Nevertheless what follows is an outline of the most frequently used channels for consumer and industrial products. Distribution of Consumer Goods: - Five channels are widely used in the distribution of consumer products. In each, the manufacturer also has the alternative of using sales branches or sales offices. Obviously, our suggestion that there are only five major channels is an oversimplification. But one that seems necessary if we are to discuss this unwieldy subject in a few paragraphs. a. Producer - Consumer: - the shortest, simplest channel of distribution for consumer products is from the producer to the consumer, with no middlemen involved. The producer may sell from house to house or by mail. b. Producer-Retailer-Consumer: - Many large retailers buy directly from the manufacturers and agricultural producers. c. Producer-Wholesaler-Retailer-Consumer: - If there is a traditional channel for consumer goods, then it has to be this. Small retailers and small manufacturers by the thousands find this channel the only economical feasible choice. d. Producer-Agent-Retailer-Consumer: - Instead of using the wholesaler, many producers prefer to use a manufacturers agent, a broker, or some other agent middleman to reach the retail market, especially large-scale retailers. For example, a manufacturer of a glass cleaner selected a food broker to reach the grocery store market, including the large chains. e. Producer-Agent-Wholesaler-Retailer-Consumer: - To reach small retailers the producer mentioned in the preceding paragraph often use agent middlemen, who in turn call on wholesalers who sell to the small stores. Distribution of Industrial Products: - Four types of channels are widely used in reaching industrial users. Again a manufacturer may use a small branch or a sales office to reach the next institution in the channel, or sometimes, two levels of wholesalers may be used in some cases. a. Producer-Industrial User: - this direct channel accounts for a greater dollar volume of industrial products than any other distribution structure. Manufacturers of large installations, such as locomotives, generators and heating plants, usually sell directly to the users. b. Producer-Industrial Distributor- User: - Producer of operating supplies and small accessory equipment frequently uses industrial distributors to reach their markets. Manufacturers of building materials and air conditioning equipment are only two examples of firms that make heavy use of the industrial distributors.

c. Producer-Agent-User: -Firms without their own marketing department finds this a desirable channel. Also, a company that wants to introduce a new product or enter a new market may prefer to use agents rather than its own sales force. d. Producer- Agent-Industrial Distributor- User: - This channel is similar to the preceding one. It is used when, for some reason, it is not feasible to sell through agents directly to the industrial users. The unit sale may be too small for direct selling, or decentralized inventory may be needed to supply users rapidly in which case the storage services of the industrial distributor are required. II. Some Generalization about Distribution Channels. 1. Channel design should begin with the final customer and work backward to the producer, because consumer-buying habits should determine channels of distribution. 2. The channels finally selected must be totally appropriate to the basic objectives of the firms marketing programme. If management sets as its goal the widest possible distribution of its product line, then obviously an exclusive franchise policy at the retail is not appropriate. 3. The Channel should provide a firm with access to a predetermined share of the market. A manufacturer of coal finding equipment seeking the broadest possible market would make a mistake by using channels that include only large department stores and sporting goods stores at the retail level. 4. The channels must be flexible enough so that the use of one channel does not permanently close off another. A manufacturer of small appliances (irons, toasters for example) distributed only through appliance wholesalers, who in turn distributed to the appliance retailers. The company had an offer from a drug chain to buy the products directly from the manufacturer. The appliance retailers threatened to discontinue the line if the manufacturer placed it in the drug stores and the producer decided to turn down the drug chains offer. Subsequently, a competitive manufacturer accepted a similar offer and profited considerably. 5. There is a high degree of inter-dependence among all firms in the channel for any given product. There can be no weak link in the chain if it is to be successful. 6. Channels of distribution and middlemen are always on trail, and changes occur constantly. Middlemen survive only when their existence is economically sound and socially desirable. Furthermore, new middlemen and channels arise to do new jobs or do the existing jobs better. III. Factors Effecting Choice of Distribution Channels:Because a channel of distribution should be determined by customer buying patterns, the nature of the market is the key factor influencing managements choice of channels. Other major considerations are the product, the middlemen, and the company itself. Basically, when selecting its channels of distribution, a company should follow the criteria of the three Cs Channel Control, Market Coverage, and Cost that is consistent with the desired level of customer service.

* Market Considerations perhaps the most obvious point to consider is whether the product is intended for the consumer or the industrial market. If it is going to the industrial market, off course retailer swill not be included in the channel. In either case, other significant market variables should be considered a. Number of potential customers- With a relatively small number of potential customers, a manufacturer may use its own sales force to sell directly to consumers or industrial users. For a large number of customers, the manufacturers would most likely use middlemen. A related point is the number of different industries to which a firm sells. One company marketing drilling equipment and supplying only to the oil industry, sold directly to the users; a paper product manufacturer, on the other hand, made extensive use of industrial distributors to reach many different industries. b. Geographic concentration of the market- Direct sale to the textile or the garment manufacturing industry is feasible because most of the buyers are concentrated in a few geographic areas. Even in the case of a National market, some segments have a higher density rate than others in densely populated markets, and thus sellers may establish sales branches there, but they would prefer to use middlemen in the less concentrated markets. c. Order Size A good product manufacturer would sell directly to large grocery chains because the large order size and the total volume of business make this channel economically desirable. The same manufacturer, however, would use wholesalers to reach the small grocery stores whose orders are usually too small to justify direct sales. * Product Considerations:a. Unit Value - The unit value of a product affects the amount of funds available for distribution. Consequently, the lower the unit value, the longer, usually, are the channels of distribution. However, when product of low unit value are sold in large quantities or are combined with other goods so that the total order is large, shorter channels may be economically feasible. b. Perishability- Products subject to physical or fashion perishability must be speeded through their channels. The channels are usually short. c. Technical nature of the Product An industrial product is highly technical and is often distributed directly to industrial users. The producers sales force must provide considerable pre-sale and post sale services. Wholesalers normally cannot do this. Consumer products of a technical nature provide a real distribution challenge for manufacturers. Ordinarily manufacturers cannot sell the goods directly to the consumer. As much as possible, manufacturers try to sell directly to retailers, but even servicing of the product often poses problems. * Middlemen Considerations:a. Services provided by middlemen- each producer should select middlemen who will be able to provide the marketing services that the producer either is unable to provide or cannot economically perform.

b. Availability of desired middlemen The middlemen whom the producer desires may not be available. They may be carrying competitive products and may not wish to add another line. c. Attitude of Middlemen towards manufacturers choice of channels are limited because their marketing policies are not acceptable to certain types of middlemen. Some retailers or wholesalers, for example, are interested in carrying a line only if they can get an exclusive franchise in a territory. *Company Considerations:a. Financial resources - A financially strong company needs middlemen less than one that is financially weak. A business with adequate finances can establish its own sales force, grant credit, or warehouse its own products. A financially weak firm would have to use middlemen who could provide these services. b. Ability of Management Channel decisions are effected by the marketing experience and ability of the management. Many companies lacking marketing know-how prefer to turn the distribution job over to middlemen. c. Desire for Channel control- Some producers establish small channels simply because they want to control the distribution of their products, even though the cost of the more direct channel may be higher. By controlling the channel, producers can achieve more aggressive promotion, can control better the freshness of the merchandise stocks and can control better the retail prices of the products. d. Services provided by seller Often producer channel decisions are influenced by the marketing services they can provide in relation to those demanded by middlemen. For example, often a retail chain will not stock a given product unless it is pre-sold through heavy manufacturer advertising. Use of multiple channels of distribution:A manufacturer is likely to use multiple channels (also called dual distribution) to reach different markets when selling. The same product (sporting goods, typewriters) to both the consumer and the industrial markets. Unrelated products (oleo margarine and paint or rubber products and plastics).

Dual distribution is also often used to reach the same market, but one in which there are differences in. 1. Size of the buyers or 2. The densities within parts of the market. A manufacturer of good products will sell directly to large grocery chains but may use wholesalers to reach smaller stores. A producer of industrial machinery may use its own sales force to sell directly to users in concentrated markets, but it may employ manufacturers agents to reach customers in sparsely populated markets.

A significant development in dual distribution (and a source of channel conflict) has been the increased use of competing channel system by manufacturers to sell the same brand to the same market. A paint manufacturer or a tire manufacturer, for instance, may distribute through a series of retail stores, which it owns. At the same time this producer uses conventional channels of independent wholesalers and retailers to reach the same market. Manufacturers may open their own stores (thus creating dual distribution) when they are not satisfied with the market coverage provided by existing retail outlets. Or manufacturers may establish their own stores primarily as testing grounds for new products and marketing techniques.

I.

Consumer Goods Distribution Channels. Manufacturers of Consumer Goods.

Agent

Merchant Wholesaler

Agent

Merchant Agent Wholesaler.

Retailers

Retailers

Retailers

Retailers

Ultimate Consumers

Industrial Goods Distribution Channel. Industrial Goods Producers

Merchant Wholesalers

Merchant Wholesalers

Industrial Distributors. Agents. Agents.

Users of Industrial Products.

II. Determining Intensity of Distribution:After deciding upon the general channels they will use, manufacturers should next determine the number of middlemen the intensity of distribution to be employed at the wholesale and retail levels. There are three major courses of action, but they are not neatly compartmentalized. Instead, they form a continuum or points on a scale, running from intensive distribution through selective distribution to exclusive distribution. Intensive Distribution Ordinarily manufacturers of consumer convenience goods adopt the policy of intensive distribution. Consumer demand immediate satisfaction with this class of product and will not defer purchases to find a particular brand. Retailers often control the extent to which the policy of intensive distribution can be implemented. For eg. A new manufacturer of toothpaste may want distribution in all super markets, but the retailers may limit their assortment to the four fastest selling brands. Intensive distribution places most of the burden of advertising and production on the shoulders of the manufacturer. Retailer will not pay to advertise a product that is sold by all the competitors. Selective DistributionSelective distribution covers a wide range of distribution intensity. A business that adopts this policy may have only a few outlets in a particular market, or it may have a large number but still something short of intensive distribution. Selective distribution lends

itself especially well to consumers shopping speciality goods and industrial accessory equipment, for which most customers have a brand preference. A company may decide to adopt a selective distribution policy after some experience with intensive distribution. The changes usually hinges upon the high cost of intensive distribution or the unsatisfactory performance of some middlemen. Certain customers perennially order in small, unprofitable amounts, others may be poor credit risks. Eliminating such marginal middlemen may reduce the number of outlets, but it can actually increase a companys sales volume substantially. Many companies have found this to be the case, simply because they were able to do a more thorough selling job with a smaller number of accounts. Exclusive Distribution Under an exclusive distribution policy, the supplier agrees to sell only to a particular wholesaling middlemen or retailer in a given market. Under an exclusive distributorship (with a wholesaler) or an exclusive dealership (with a retailer) the middlemen is sometimes prohibited from handling a directly competing product line. Exclusive dealership is frequently used in the marketing of consumer speciality products such as expensive suits. Producers also often adopt an exclusive distribution policy when it is essential that the retailer carry a large inventory. This form of distribution is also desirable when the dealer or distributor must furnish installation and report service. Manufacturers of farm machinery and large construction equipment frequently use exclusive distribution ship for this reason. Intensive Number of wholesalers or retailers used Many Sell your product in every outlet where final customers might reasonably look for it. Selective Limited Use a limited number of wholesalers and/or retailers in a given geographic area. Exclusive One. Use only one wholesaler or retailer in a given market.

Evaluation of Exclusive Distribution from Manufacturers Standpoint Exclusive distribution policies help a manufacturer control the retail segments of its channels. The producer is better able to set the retail price for its products, and it is in a position to approve advertisements featuring its products. The dealers are more likely to be co-operative and to promote these products aggressively, realizing that their future is tied to the success of the manufacturer. On the other hand, in using this distribution policy, a company substantially limits the number of its sales outlets. Also, the producer will suffer if its exclusive dealers dont serve their customers well. Essentially, the manufacturers have all its eggs in one basket

in each market. A producer is pretty much dependent on its retailers. And if the manufacturer later wants to terminate the exclusive arrangements, a great deal of ill will may develop. Evaluation of Exclusive Distribution from Retailers Standpoint A significant advantage of being an exclusive dealer is that the dealer reaps all the benefits of the manufacturers marketing activities in the particular market and gets all the repeat sales. The main drawback to being an exclusive dealer is that the retailer may become too dependent upon the manufacturer. If the producer does a good job with the product, the dealer may prosper. But if the manufacturing firm fails, the dealer is powerless to do anything but to sink with that product concerned. Dealership agreements often require the retailer to invest a considerable sum of money in equipment and facilities. If the agreement is then cancelled, the retailer stands to lose a major investment. It is a one-sided arrangement in this respect particularly if the brand is strong and the franchise is valuable. TRANSPORTATION METHODS. Sr.No 1. 2. 3. Selection Criteria Speed Cost of Transportation Reliability in meeting delivery schedules Flexibility (variety of product carried) Number of geographic locations served. Rail Medium Medium Medium Water Slowest Lowest Poor Roadways Fast High Good Pipeline Slow Low Excellent Air Fastest Highest Medium

4.

Widest Variety Very many, but can go only where tracks are laid Not Long hauls of bulky products when costs are high

Widest Variety Limited

Medium

Very limited Very limited

Somewhat limited Many

5.

Unlimited

6.

Products suitable

Bulky, Short low value, hauls (no nonlong hauls perishable and high value goods)

Oil, natural slurred products

High value where speed of delivery is important.

Section XIV Marketing Organizations. The modern marketing organization is the product of a long evaluation from very humble beginning. It has passed through the following stages 1. Simple sales department. 2. Sales department with ancillary functions such as customer services etc. 3. Separate marketing department. The growth of the companies has necessitated adding various marketing functions such as Marketing Research, New Product Development, Advertisement, and After Sales Services etc. 4. Modern Marketing Department- The relation between Vice President Sales and Vice President Marketing, strained due to rivalry and distrust. The VP-Marketing concentrated more on planning and developing Strategy. The VP-sales concentrates more on short run business, preoccupied with Sales. Therefore, companies changed the organization system to ensure Marketing occupied the prominent place. Types of Marketing Departments a. Functional Organization Marketing Manager

Advertising Manager

Sales Manager

Market Research Manager

Advantages1. Simplicity in administration. 2. Specialists. Disadvantages1. Inadequate planning for specific products unless proper precautions are taken. 2. Too much of responsibility on the specialists. 3. Co-ordination becomes difficult unless administered properly. b. Geographical Organization- Here the concept of regional sales manager is used. Advantages1. Better control. 2. Nearer to customer. 3. Benefit of local language etc. Disadvantages-

1. Too many generalists required with administrative capability. c. Product Management Organization the product management system creates a focal point of planning and responsibility for individual products. The product managers role is to create product strategies and plans, and to ensure that they are implemented and monitored to achieve the results. d. Matrix Organization- In order to minimize the conflict between Regional Sales manager and the Marketing Managers of the company, the new organization system called matrix Organization is becoming popular. The responsibilities are jointly shared. It takes care of the advantages of the earlier organization. Typical Product Management Organization Marketing Vice President

Sales Manager

Marketing Regional Manager.

Advertising Manager

Product Manager

Product Group Managers Brand Managers

Section XV Sales Management The meaning of sales management has changed gradually over the years. The definition in 1948 agreed that Sales management means the planning, direction and control of personal selling including recruiting, selecting, equipping, assigning, routing, supervising, paying and motivating, as all these tasks apply to the personal Sales force. I) Objectives of Sales Management Major Objectives 1. Achieving sufficient sales volume. 2. Providing contribution to profit. 3. Achieving continuous growth. Sales management plays an influential role in charting the course of future operations. It provides the higher executives with many of the facts required for making high level marketing decisions and setting the realistic sales and profit goals. Sales management is concerned with net profit. It should re-orient its thinking, worrying more about securing sales and profits and less about maintaining percentage relationship rigid. As the definition suggests the sales management must take care of the various areas. The objectives are required to be well defined in terms 1. Planning. 2. Direction. 3. Control of personal selling. 4. Recruiting. 5. Selecting. 6. Routing. 7. Supervising. 8. Motivating. 9. Promoting. 10. Transfer. 11. Termination. II) Functions of Sales Manager 1. Sales mangers are the administrators in charge of personal selling activity and their primary assignment involves management of the personal sales force. 2. To organize the sales effort both within and outside the organization. 3. Serve as companys most important points of contact with customers and other external public. 4. To build and maintain an effective distribution network. 5. Participate in setting and achieving the company budget and activities such as establishing quotas and territories.

6. Participate in making marketing decisions on products, marketing channels and distribution channels, advertising and other form of promotions and pricing. The modern sales manager is both an administrator in charge of personal selling activity and a member of the executive group that makes marketing decisions of all types. III) Role of Sales Manager in Recruiting, Selection and Training. There is no job in sales management more critical and crucial than that of hiring salesmen. The areas to be discussed are: 1. Recruiting: - Recruiting the wrong salesmen can cost a company a fortune. The inept salesmen can damage his image and also the companys image. Earnings of low quality salesmen are low and low earnings cause low morale, which is expensive. An unproductive sales force leads to low sales volume and disappointing profits. This makes the sales manager look bad and can cost his job. The sales manager must give careful thought and attention. He must keep abreast of the better techniques and procedures of recruiting. This recruiting must be planned and systematic. Continuous recruiting can build and maintain all times a reservoir of applicants. Job Analysis is the study of what the salesman is to do, how to do it. It is determining or deciding the duties and the responsibilities, the activities and the assignment under which the salesman will be expected to do. Job description results from job analysis. Job Specification follows the job description. It is in terms of physical, mental, environmental experience and personality. 2. Selecting:- Steps involved are a. Determining whether an applicant measures up to the firms specifications. b.Hiring him if he does fit the bill. The selection tools are a. Application Blanks: The value of the application blank and the reliance placed on it are reflected in the fact that it is one of the two selection tools most widely used and the other is personal interview. b. The physical examination. c. Interviews: Personal interviews could be formal, structured or informal, unstructured. The interview reveals many points of the prospective candidate. d. References: They are the tools used by the management to have the information about the candidates. e. Psychological Testing: These are designed to determine the performance or absence of personal traits essential in successful selling. It may take a valuable contribution to better selection of salesmen. 3. Training: - A sound, effective training programme can justify its cost on several bases. a. The more expert the sales force is, the larger the sales volume and the greater the gross margin. b. Salesmen become productive and profitable more quickly.

c. The better trained the salesmen are, the better able they are to control and even to reduce direct selling expenses. d. Good training leads to fewer dismissals and resignations. e. Drop in turnover. IV. Salesmens Compensation: The sales compensation package must attract, hold and develop good salesmen. The compensation must satisfy the needs of both the sales manager and the salesmen. The compensation depends on various factors like 1. Industry norms. 2. Company Policy. 3. Going Market Price. 4. Type of Job. 5. The purpose for which the salesmen are employed. 6. Monetary benefits and fringe benefits. Levels of Compensation: 1. Straight Salary this is fixed compensation with regard to the firms expenses and the salesmens income. Advantages:a. It gives more power to the sales Manager to control, to direct and to guide. b. It is clear, simple, specific, economical to administer. c. Gives the Salesman security. d. Useful for industrial products where the time realization is long. Disadvantages:a. Lacks incentive and motivation. b. Closer follow-up required. c. Need to review frequently with costs going up. d. Problem of fitting salaries to salesmen, old salesmen may be overpaid and new underpaid. 2. Straight Commission: This is related with the performance of the salesman. Advantages a. Powerful incentive. b. Freedom of operation c. Easy to attract better salesmen. d. Package to salesman varies depending on his performance. Disadvantagesa. Lacks control. b. Difficult to monitor. c. Job of setting commission to the territories is difficult. d. Not practical for industrial goods. 3. Salary plus Incentives: - A fixed compensation to meet the necessity and variable commission to act as an incentive. It combines the advantages of earlier system. Advantages:

a. Sales people have both the security of stable income and the stimulus of financial incentives. b. Selling costs can be controlled. c. If sales people are made to realize that the company is sharing their financial risks, a more co-operative spirit should develop between them and the company. Disadvantages:a. Clerical Costs are high. b. More records are required to be maintained. c. Likely that plan becomes too complicated if proper thought is not given. d. Ratio between base salary and incentive to be designed carefully. *********************************************************************** *

Section XVI Service Marketing and Non-Profit Marketing.

I) Service Marketing: - Service marketing encompasses the rental of products, the alteration of repair of products owned by customers and personal services which have the following characteristics of intangibility, perishability and inseparability from the service provider and variability in quality. The intangibility of service means they cannot be displayed, transported, stored, packaged or inspected before buying. This occurs for repair services and personal services. The perishability of many services mean they cannot be stored for future use, e.g. unused Cinema Ticket for Monday cannot be used for a Sunday show. Services are usually in separable from the service provider. The quality of Car repair depends on the mechanic we hire. The impact of these characteristics is greater for personal services. They are more intangible, more inseparable, and more perishable from the services provider and have more quality variations than product-rental services or owned goods services. In service marketing the service dominates the offering and the product augments itself. II- Basic Differences between Services and Products. Services 1. Services are often intangible; services are acts, deeds, performances, efforts. Most services cannot be physically possessed. The value of a service is based on an experience; there is no transfer of title. 2. Services are usually perishable. Unused capacity cannot be stored or shifted from one time to another. 3. Services are usually inseparable. One cannot separate the quality of services from the service provider. Products. 1. Products are tangible products like objects, things, materials etc. The value of the product is based on ownership; transfer of title does take place.

2. Products can be stored; product surpluses in one period can be applied against product shortages in another period. 3. Products can be graded or built to specifications. The quality of a product can be differentiated from a channel members quality. 4. Services may vary in quality over time. 4. Products can be standardized through It is difficult to standardize some services mass production and quality control. because of their labour intensiveness and the involvement of the service user in diagnosing his or her service needs.

III A Classification System for Services 1. By Market - Final consumer- tutoring, taxi, car wash, life insurance, - Organizational Consumer Management Consulting, Machinery repair, Accounting services, Legal services. - Rental goods Car Rental, Boat Rental, hotel room rental, tool rental - Non-Goods Dry Cleaning, Tutoring, legal services, hair styling. - Professional Legal Services, Medical Services, Accounting Services, Management Consulting. - Non-Professional Taxi, Uniformed Security, Janitorial Shoe Shining.

2. By degree of tangibility

3. By Skill of service Provider

4. By Goal Provider

Service Profit United Parcel Service, Insurance firm, executive recruiting service, Non Profit Universities, Museums, US Postal Services. 5.By Degree of Regulation Regulated- American Telephone & Telegraph, Banks, Insurance, Films. Non-Regulated Electrical Utility, Taxi, Computer Time Sharing, Catering, Lawn Care, Housing Painting. 6.By Degree of Labour Equipment Based Automated car wash, computer Intensiveness time-sharing, dry cleaning, air travel. People Based Executive Recruiting, tennis instruction, accounting, and uniform security. 7.By degree of customer High Contact- Universities, large appliance repairs, air contact travel, hotels Low contact- lawn care, janitorial service automated at wash.

Of

Special Considerations for Service Marketer 1. Service cannot be stockpiled. 2. The entire service mix is usually not visible to the consumer. 3. The intangibility of services makes pricing difficult. 4. The intangibility of services makes promotion difficult. 5. The existence of direct service organization- consumer relationship. 6. Makes employee public relations skills important. 7. Services often have high costs and low reliability. 8. Peripheral services are frequently needed to supplement the basic service offering.

V- Non Profit Marketing It is conducted by organization that operates in the public interest or to foster a cause and do not seek financial profit. It may involve organizations (religious groups, labour union, trade associations), people (political candidates), places (resorts, industrial sites) and ideas (stop smoking), as well as products and services. The non-profit organizations conduct exchanges; these are not necessarily in the form of rupees for goods and services. E.g. Politicians request votes in exchange for promise of better and more effective government service. VI- Basic Difference Between Non-Profit and Profit Oriented Marketing:Non-Profit Marketing 1. Non-profit marketing is concerned with organizations, people, places and ideas, as well as products and services. 2. Exchanges can be in the form of votes I return for better government or the use of zip code in return for improved service and lower rate increase. 3. Objectives can be more complex because success or failure cannot be measured strictly in financial terms. 4. The benefits of non-profit services are often distributed unequally. Profit Oriented Marketing 1. Profit-oriented marketing is largely concerned with goods and services. 2. Exchanges are generally in the form of collars for goods and services. 3. Objectives are generally stated in terms of sales. Profit and recovery of each. 4. The benefits of profit-oriented marketing may or may not be distributed equally. 5. It seeks to serve only those market segments that are profitable. 6. Profit oriented marketing has oneconstituency clients.

VII- Classification System for Non-Profit Marketing. By Degree of Tangibility -Organization: - Foundation, University, Religious Institution, Government. -People:political candidates, volunteers, philanthropists -Place: - Resort, industrial site, convention city. -Ideas- Family planning, gun control, patriotism. -Products: - Postage stamps, Susan, B Anthony, Dollar Coin, Professional Journals. -Services: - Medical, Child Care, Education. Government Affiliated Service Federal, US Army, Postal Service. State State Universities, State Employment Services. Local- Community College, Sports Areas. Private (Not government affiliated) - Private Hospitals,

By Organization Structure.

By Overall Objective

By Constituency

charitable organization. Co-operative Consumer Cooperative, Farm Cooperative. Health- Use of health clinic, increase blood donations, stop smoking campaign. Education Library use, graduation from high school, college attendance. Welfare- use of childcare centers, increase jobs of state employment services. Other- Raising of funds, use community facilities, improve image. Client/User- Voter, patient, general public. Donor- Philanthropist, foundation, government, general public.

VIII- Examples of Exchange Process for organizations, People, Places and Ideas. Marketing Entity Organizations, Fraternities. College, Benefit to members Social experience, convenient place to live, assistance from upper classmen and graduates People Political Candidates Benefits to voterEfficient government, better services, election of candidates with similar views. Places major cities as sites Benefits to attendeesfor conventions Central locations, cultural facilities, superior accommodations and transportation. Ideas purchase of union Benefits to consumersmade products. Awareness of product quality, feeling of support for fellow workers, better economy. Benefits to FraternitiesMembership dues, greater on campus exposure, improved facilities. Benefits to candidatesElection, prestige, power.

Benefits to citiesRevenues, prestige, loosening of tax burden for residents. Benefits to unionsStability in size of work force, less company resistance to union image.

Section XVII References/ Bibliography Title of the Book 1. Marketing Management- Analysis, Planning & Control 2. Fundamentals of Marketing 3. Market Management 4. Fundamentals of Marketing 5.Marketing for Non profit Organization 6. Sales Management 7. Salesmanship 8. Marketing Planning 9. Promotional Strategy 10. Marketing Management 11. Advertising Author/Authors. Philip Kotler. Stanton. S.A.Sherlekar Cundiff, Still, Govoni Philips Kotler Still, Gundiff & Govoni C.A. Kirkpatrick E. Kelley Engel Dholakia, Khurana, Bhandari & Jain David Ogilvy.