Meaning of Marketing
Dr. S. Anthony Rahul GoldenM.Com., M.Phil., NET., Ph.D., MBA.,SET., NET., M.A., M.Sc. (Psy)., M.A., PGDBA.,
Asst. Professor of Commerce., Loyola College (Autonomous), Chennai - 34Mobile No- 91+9176313545 kvsrahul@gmail.com
https://orcid.org/0000-0001-
8071-4801
Anthony Rahul Golden, S. - Author details - Scopus Preview
Marketing is the process of identifying, anticipating, and satisfying customer needs profitably. It involves creating value for customers and building strong customer relationships. In its most practical sense, marketing is the process of identifying customer needs, creating products that satisfy those needs, and communicating their value to the target audience. According to the American Marketing Association, it is formally defined as “the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large”.
Marketing is one of the most important functions of modern business. It acts as a bridge between producers and consumers by identifying customer needs and satisfying them through
products and services. In today's highly competitive business environment, marketing is not
merely selling; it encompasses product development, pricing, promotion, distribution, customer
relationship management, and value creation.
- 1560s: First recorded usage referring to the general act of "buying and selling" or transacting business in a local market.
- 1890s: Began to take on the modern business sense of the "process of moving goods from producer to consumer with an emphasis on advertising and sales".
Meaning and Origin of Marketing
Origin of the Word "Marketing"
The word Marketing is derived from the Latin word "Mercatus", which means market, trade, buying and selling activities.
It is also associated with the English word "Market", which refers to a place where buyers and sellers come together to exchange goods and services.
Etymological Development (Origin)
- Latin: Mercatus = trade, commerce, marketplace
- Old French: Market
- English: Market
- Marketing: Activities related to creating, promoting, pricing, and distributing products in the market. Thus, marketing originally referred to the activities involved in bringing goods to the market for exchange.
The term Marketing refers to all activities undertaken by an organization to identify customer needs, create value, communicate that value, and deliver products or services that satisfy customers profitably.
Simple Meaning
Marketing is the process of understanding customer needs and satisfying them through the creation and exchange of products and services.
Business Meaning
Marketing is not merely selling a product. It begins before production and continues even after the sale through customer service and relationship management.
Definitions of Marketing
1. Philip Kotler's Definition
According to Philip Kotler:
"Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating, offering, and exchanging products of value with others."
Explanation
- Social process because it involves people.
- Managerial process because it requires planning and control.
- Focuses on needs, wants, and exchange.
2. American Marketing Association (AMA)
According to the American Marketing Association:
"Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large."
3. William J. Stanton
"Marketing is a total system of business activities designed to plan, price, promote, and distribute want-satisfying products to target markets."
Modern Meaning of Marketing
In the modern business world, marketing means:
- Identifying customer needs
- Designing products to satisfy those needs
- Pricing products appropriately
- Promoting products effectively
- Delivering products to customers
- Building long-term customer relationships
Marketing is therefore customer-oriented rather than product-oriented.
Key Elements of Marketing
- Need Identification
- Product Development
- Pricing
- Promotion
- Distribution
- Customer Satisfaction
- Relationship Building
Important Features of Marketing
1. Customer-Oriented
Focuses on customer needs and wants.
2. Value Creation
Creates value for customers.
3. Exchange Process
Involves exchange of goods, services, or ideas.
4. Continuous Activity
Marketing begins before production and continues after sales.
5. Goal-Oriented
Aims at customer satisfaction and profit generation.
6. Dynamic Nature
Adapts to changing customer preferences and market conditions.
Evolution of Marketing
The concept of marketing has evolved significantly from simple exchange activities to a customer-centric and technology-driven business function. The evolution reflects changes in consumer behavior, business practices, technology, and market competition.
Meaning of Evolution of Marketing
The Evolution of Marketing refers to the gradual development of marketing concepts, philosophies, and practices from production-oriented approaches to customer-oriented and relationship-based approaches.
Stages in the Evolution of Marketing
1. Production Concept (1860–1920)
Philosophy
"Consumers prefer products that are widely available and affordable."
Characteristics
- Focus on mass production.
- Emphasis on efficiency and low cost.
- Limited competition.
- Demand exceeded supply.
Example During the Industrial Revolution, manufacturers focused on producing large quantities of goods.
Advantages
- Lower production costs.
- Economies of scale.
Limitation
- Ignores customer preferences.
2. Product Concept (1920–1930)
Philosophy
"Consumers favor products that offer the best quality, performance, and features."
Characteristics
- Focus on product improvement.
- Continuous innovation.
- Emphasis on quality.
Example
Manufacturers improving automobile features and durability.
Limitation
- Risk of "Marketing Myopia" (focusing only on products rather than customer needs).
3. Selling Concept (1930–1950)
Philosophy
"Consumers will not buy enough unless the company undertakes aggressive selling and promotion efforts."
Characteristics
- Heavy advertising.
- Personal selling.
- Sales promotion activities.
Example
Insurance companies and door-to-door sales campaigns.
Limitation
- Focuses on sales volume rather than customer satisfaction.
4. Marketing Concept (1950–1980)
Philosophy
"Identify and satisfy customer needs better than competitors."
Characteristics
- Customer-oriented approach.
- Market research.
- Target market selection.
- Customer satisfaction.
Key Elements
- Customer Needs
- Integrated Marketing
- Profit through Customer Satisfaction
Example
Companies designing products based on consumer preferences.
Significance
This stage transformed marketing into a strategic business function.
5. Societal Marketing Concept (1980–2000)
Philosophy
"Deliver customer satisfaction while protecting society's long-term welfare."
Characteristics
- Balances company profits, customer needs, and societal welfare.
- Environmental responsibility.
- Ethical business practices.
Example
Eco-friendly packaging and green products.
Benefits
- Sustainable development.
- Improved corporate image.
6. Relationship Marketing Concept (1990–Present)
Philosophy
"Build long-term relationships with customers rather than focusing only on individual transactions."
Characteristics
- Customer retention.
- Loyalty programs.
- Customer Relationship Management (CRM).
- Personalized services.
Example
Airline frequent-flyer programs and customer loyalty cards.
Benefits
- Repeat purchases.
- Higher customer lifetime value.
7. Digital Marketing Era (2000–Present)
Philosophy
"Use digital technologies to engage customers and create value."
Characteristics
- Internet-based marketing.
- Social media marketing.
- Search Engine Marketing (SEM).
- Email marketing.
- Mobile marketing.
Example
Marketing through Facebook, Instagram, YouTube, and Google.
Benefits
- Global reach.
- Real-time interaction.
- Data-driven decisions.
8. AI-Driven and Smart Marketing Era (2020–Present)
Philosophy
"Deliver personalized experiences using artificial intelligence and data analytics."
Characteristics
- Artificial Intelligence (AI)
- Machine Learning
- Predictive Analytics
- Chatbots
- Personalization
Example
Netflix recommendations, Amazon product suggestions, AI-powered customer service.
Benefits
- Better customer insights.
- Enhanced customer experience.
- Improved decision-making.
Evolution of Marketing at a Glance
| Stage | Period | Focus |
|---|---|---|
| Production Concept | 1860–1920 | Mass Production |
| Product Concept | 1920–1930 | Product Quality |
| Selling Concept | 1930–1950 | Aggressive Selling |
| Marketing Concept | 1950–1980 | Customer Satisfaction |
| Societal Marketing Concept | 1980–2000 | Social Welfare |
| Relationship Marketing | 1990–Present | Customer Retention |
| Digital Marketing | 2000–Present | Online Engagement |
| AI-Driven Marketing | 2020–Present | Personalization & Analytics |
Diagram: Evolution of Marketing
Production Concept
↓
Product Concept
↓
Selling Concept
↓
Marketing Concept
↓
Societal Marketing Concept
↓
Relationship Marketing
↓
Digital Marketing
↓
AI-Driven Smart Marketing.I. Significance of Marketing
Meaning of Significance
The significance of marketing refers to its importance and contribution to
business organizations, consumers, and society.
1. Creates Customer Satisfaction
Marketing identifies customer needs and provides products that satisfy those
needs.
Example
Smartphone manufacturers continuously introduce new features based on
customer preferences.
2. Increases Sales and Revenue
Effective marketing attracts customers and increases product demand, leading
to higher sales and profits.
3. Facilitates Exchange
Marketing facilitates the exchange of goods, services, ideas, and
information between buyers and sellers.
4. Promotes Economic Development
Marketing stimulates production, employment, and income generation,
contributing to national economic growth.
5. Creates Utility
Marketing creates various utilities:
Place Utility
Making products available where needed.
Time Utility
Making products available when needed.
Possession Utility
Facilitating ownership transfer.
Information Utility
Providing information about products.
6. Encourages Innovation
Marketing research helps businesses understand customer expectations and
develop innovative products.
7. Improves Standard of Living
Consumers gain access to better products and services, improving their quality of life.
8. Strengthens Brand Image
Marketing helps businesses build strong brands and customer loyalty.
II. Need for Marketing
Why Marketing is Needed?
Marketing is essential because production alone cannot ensure business success. Products
must reach the right customers at the right time and price.
1. To Identify Customer Needs
Marketing research helps understand customer wants and expectations.
2. To Survive Competition
Modern markets are highly competitive. Marketing helps firms differentiate themselves from
competitors.
3. To Increase Market Share
Businesses use marketing strategies to attract more customers and expand their market
presence.
4. To Build Customer Relationships
Long-term relationships increase customer retention and loyalty.
5. To Introduce New Products
Marketing helps create awareness and acceptance of new products.
6. To Adapt to Market Changes
Consumer preferences and technology change rapidly. Marketing helps organizations respond
effectively.
7. To Ensure Profitability
Marketing helps achieve business objectives through customer satisfaction and sales growth.
III. Role of Marketing
Marketing plays different roles in business, society, and the economy.
A. Role of Marketing in Business
1. Market Research
Collects information about customer needs, competitors, and market trends.
2. Product Planning and Development
Helps design products according to customer preferences.
3. Pricing Decisions
Determines suitable prices considering costs, competition, and customer value.
4. Promotion
Creates awareness and persuades customers to buy products.
5. Distribution
Ensures products reach customers efficiently.
6. Customer Relationship Management
Maintains long-term relationships with customers.
B. Role of Marketing in the Economy
1. Increases Production
Growing demand encourages businesses to increase production.
2. Generates Employment
Marketing activities create jobs in advertising, sales, logistics, and research.
3. Supports Economic Growth
Increased production and consumption contribute to GDP growth.
4. Facilitates International Trade
Marketing helps businesses enter global markets.
C. Role of Marketing in Society
1. Consumer Education
Provides information about products and services.
2. Improves Quality of Life
Consumers gain access to better products and services.
3. Encourages Social Responsibility
Promotes environmentally friendly and socially responsible practices.
4. Supports Sustainable Development
Green marketing encourages conservation of resources and environmental protection.
IV. Advantages of Marketing
A. Advantages to Business Organizations
1. Increased Sales
Effective marketing generates higher demand and revenue.
2. Better Customer Understanding
Marketing research helps understand customer needs.
3. Competitive Advantage
Businesses can differentiate their products from competitors.
4. Brand Building
Creates brand recognition and customer loyalty.
5. Market Expansion
Helps businesses enter new markets.
6. Improved Profitability
Customer satisfaction leads to repeat purchases and profits.
7. Business Growth
Marketing supports long-term organizational growth.
B. Advantages to Consumers
1. Greater Product Choice
Consumers have access to a variety of products.
2. Better Product Quality
Competition encourages quality improvement.
3. Information Availability
Advertising and promotions provide product information.
4. Convenience
Products are available at convenient locations and times.
5. Customer Satisfaction
Products are designed according to customer needs.
C. Advantages to Society
1. Higher Living Standards
Availability of quality goods improves living conditions.
2. Employment Generation
Marketing creates numerous job opportunities.
3. Economic Development
Supports industrial and commercial growth.
4. Social Awareness
Marketing campaigns promote health, education, and environmental protection.
V. Drawbacks of Marketing
Despite its advantages, marketing also has certain limitations and criticisms.
1. Increases Product Costs
Advertising, promotion, and distribution expenses increase product prices.
Example
Luxury brands spend heavily on advertising, increasing product costs.
2. Encourages Overconsumption
Aggressive marketing may encourage unnecessary purchases.
3. Misleading Advertisements
Some advertisements exaggerate product benefits and create unrealistic expectations.
4. Creates Artificial Wants
Marketing sometimes influences consumers to desire products they do not actually need.
5. Consumer Manipulation
Psychological techniques may influence consumer decisions excessively.
6. Unhealthy Competition
Some firms may engage in unethical promotional practices.
7. Environmental Concerns
Excessive packaging and promotional materials can contribute to environmental pollution.
8. Privacy Issues in Digital Marketing
Collection of consumer data may raise privacy and security concerns.
9. High Marketing Costs
Small businesses may struggle to compete with large firms that have substantial marketing
budgets.
10. Market Saturation
Excessive promotion may lead to consumer confusion and advertising fatigue.
Comparison of Advantages and Drawbacks
Advantages Drawbacks Increases sales Increases costs Improves customer satisfaction Encourages overconsumption Builds brand loyalty May create artificial wants Generates employment Can lead to unethical practices Supports economic growth Environmental concerns Promotes innovation Privacy issues in digital marketing Conclusion
Marketing is a vital business function that connects producers with consumers and contributes
significantly to organizational success, customer satisfaction, and economic development.
Its significance lies in creating value, facilitating exchange, building relationships, and
promoting innovation. While marketing offers numerous advantages to businesses,
consumers, and society, it also has certain drawbacks such as increased costs, misleading
promotions, environmental concerns, and privacy issues. Therefore, organizations should
adopt ethical, customer-oriented, and socially responsible marketing practices to maximize
benefits and minimize negative consequences. Marketing is indispensable for modern business success, customer satisfaction, and economic
development, but it should be practiced ethically and responsibly.
Market – Meaning, Definition, Features, Importance and Types
A market is a place, system, or arrangement where buyers and sellers come together to exchange goods, services, or information for value, usually money.
In the traditional sense, a market referred to a physical place where people gathered to buy and sell goods. In modern marketing, a market includes not only physical locations but also online platforms and virtual environments where exchanges occur.
Simple Meaning
A market is a meeting point of buyers and sellers for the purpose of exchange.
1. Philip Kotler
According to Philip Kotler:
"A market consists of all the potential customers sharing a particular need or want who
might be willing and able to engage in exchange to satisfy that need or want."
2. William J. Stanton
"A market is people with needs to satisfy, money to spend, and willingness to spend it."
3. Traditional Definition
A market is a place where buyers and sellers meet to exchange goods and services.
Essential Elements of a Market
For a market to exist, the following elements are necessary:
1. Buyers
Persons or organizations willing to purchase goods and services.
2. Sellers
Persons or organizations offering goods and services for sale.
3. Goods and Services
Products available for exchange.
4. Purchasing Power
Buyers must possess money or resources.
5. Willingness to Buy
Customers must have the desire to purchase.
6. Communication
Information must flow between buyers and sellers.
Features (Characteristics) of a Market
1. Presence of Buyers and Sellers
A market requires both buyers and sellers.
2. Exchange Relationship
Goods, services, or ideas are exchanged.
3. Demand and Supply
Market activities depend on demand and supply forces.
4. Competition
Multiple sellers compete to attract customers.
5. Price Mechanism
Prices are determined through interaction between demand and supply.
6. Area of Operation
A market may be local, national, or international.
7. Physical or Virtual Existence
Markets can exist physically or online.
Importance (Significance) of Market
1. Facilitates Exchange
Markets enable buyers and sellers to exchange goods and services efficiently.
2. Determines Prices
Prices are determined through market forces of demand and supply.
3. Encourages Production
Businesses produce goods according to market demand.
4. Promotes Competition
Competition leads to better quality and innovation.
5. Generates Employment
Markets create opportunities in production, distribution, and selling.
6. Supports Economic Development
Markets stimulate trade, investment, and economic growth.
7. Provides Consumer Choice
Consumers can choose from various products and brands.
Functions of a Market
1. Exchange Function
Facilitates buying and selling.
2. Pricing Function
Determines market prices.
3. Distribution Function
Ensures products reach consumers.
4. Information Function
Provides information about products and prices.
5. Risk-Bearing Function
Helps businesses manage market uncertainties.
Types of Market
A. Based on Area
1. Local Market
Operates within a limited area.
Example:
Vegetable market in a town.2. Regional Market
Covers a larger geographical region.
3. National Market
Operates throughout a country.
4. International Market
Extends across countries.
Example:
Global smartphone market.B. Based on Nature of Goods
1. Commodity Market
Deals in commodities like wheat, rice, cotton, etc.
2. Capital Market
Deals in long-term funds and securities.
3. Money Market
Deals in short-term financial instruments.
C. Based on Competition
1. Perfect Competition
Many buyers and sellers with homogeneous products.
2. Monopoly Market
Single seller dominates the market.
3. Monopolistic Competition
Many sellers offering differentiated products.
4. Oligopoly Market
Few large sellers dominate the market.
D. Based on Time
1. Very Short Period Market
Supply cannot be increased immediately.
Example:
Fresh fish market.2. Short Period Market
Supply can be increased to some extent.
3. Long Period Market
Supply can be adjusted significantly over time.
E. Based on Nature of Transactions
1. Spot Market
Immediate delivery and payment.
2. Future Market
Delivery and payment occur at a future date.
Modern Concept of Market
The modern market concept emphasizes customers rather than physical locations.
Examples:
Online shopping platforms
E-commerce websites
Mobile applications
Social media marketplaces
Today, buyers and sellers need not meet physically; technology enables transactions from anywhere in the world.
Difference Between Market and Marketing
Market Marketing Place or system of exchange Process of satisfying customer needs Consists of buyers and sellers Consists of marketing activities Focuses on exchange Focuses on customer satisfaction A market may exist without marketing activities Marketing requires a market Static concept Dynamic concept One-Mark Answer
Market: A market is a place or arrangement where buyers and sellers meet to exchange
goods and services.
Two-Mark Answer
A market is a place, system, or arrangement where buyers and sellers interact for the
exchange of goods and services. According to Philip Kotler, a market consists of all potential
customers sharing a particular need or want and willing to engage in exchange.
Five-Mark Answer
A market is a place or mechanism where buyers and sellers come together to exchange
goods, services, or ideas. The essential elements of a market are buyers, sellers, goods,
purchasing power, willingness to buy, and communication. Markets perform important
functions such as facilitating exchange, determining prices, promoting competition, and
supporting economic development. Markets may be classified as local, national, international,
monopoly, oligopoly, commodity, capital, and online markets.
Diagram: Market Structure
MARKET │ ┌───────────┼───────────┐ │ │ │ Buyers Sellers Products │ │ │ └──────── Exchange ─────┘ │ Price │ SatisfactionThis topic is one of the foundational concepts in Modern Marketing (Unit I) and is frequently asked in 2-mark, 5-mark, and 10-mark university examination questions.
Importance of Marketing
- Identifies customer needs and wants.
- Facilitates exchange of goods and services.
- Increases sales and profits.
- Creates customer satisfaction.
- Helps in business growth.
- Generates employment opportunities.
- Enhances standard of living.
Marketing Process
The marketing process consists of:
1. Understanding the Marketplace
- Identifying customer needs
- Understanding consumer behaviour
2. Designing Customer-Driven Strategy
- Selecting target markets
- Creating value propositions
3. Developing an Integrated Marketing Program
- Product decisions
- Pricing decisions
- Distribution decisions
- Promotion decisions
4. Building Customer Relationships
- Customer satisfaction
- Customer loyalty
5. Capturing Customer Value
- Sales growth
- Market share
- Profitability
Core Marketing Concepts (CMC)
Needs
Basic human requirements such as food, clothing, and shelter.
Wants
Specific forms of needs shaped by culture and personality.
Demand
Wants backed by purchasing power.
Product
Anything offered to satisfy needs and wants.
Exchange
Act of obtaining a desired object by offering something in return.
Market
A group of buyers and sellers involved in exchange.
Customer Value
Difference between benefits received and costs incurred.
Customer Satisfaction
Customer's perception of product performance compared with expectations.
Customer-Driven Marketing Strategies
Segmentation
Dividing a market into distinct groups of buyers with different needs.
Types
- Geographic Segmentation
- Demographic Segmentation
- Psychographic Segmentation
- Behavioural Segmentation
Targeting
Selecting one or more market segments to serve.
Strategies
- Undifferentiated Marketing
- Differentiated Marketing
- Concentrated Marketing
- Micromarketing
Positioning
Creating a distinct image of a product in the minds of customers.
Positioning Bases
- Quality
- Price
- Benefits
- Usage
- Competitor comparison
Marketing Environment
Marketing environment consists of forces affecting marketing decisions.
Micro Environment
Factors close to the company:
- Suppliers
- Customers
- Competitors
- Marketing intermediaries
- Publics
Macro Environment
Broad external forces:
Demographic Environment
Population characteristics.
Economic Environment
Income, inflation, purchasing power.
Natural Environment
Natural resources and sustainability.
Technological Environment
Innovation and technological advancements.
Political Environment
Government regulations and policies.
Cultural Environment
Values, beliefs, and customs.
Dr. S. Anthony Rahul Golden
M.Com., M.Phil., NET., Ph.D., MBA.,SET., NET., M.A., M.Sc. (Psy)., M.A., PGDBA.,
Asst. Professor of Commerce., Loyola College (Autonomous), Chennai - 34
Mobile No- 91+9176313545 kvsrahul@gmail.com
https://yesrahul.blogspot.com/
https://orcid.org/0000-0001-
8071-4801 https://vidwan.inflibnet.ac.
in/profile/339311 https://www.researchgate.net/
https://scholar.google.com/profile/Anthony-Golden-S citations?hl=en&user=faw7X- UAAAAJ
Anthony Rahul Golden, S. - Author details - Scopus Preview
MARKETING MIX – PRODUCT STRATEGIES
Definition of Product, Classification, Product Mix Strategies and Product Line
Introduction
Product is one of the most important elements of the Marketing Mix. A business cannot successfully market a product unless it understands what customers actually need and the value they expect from it.
A product is not merely a physical object. In modern marketing, a product includes the benefits, features, quality, design, brand, packaging, warranty, service and overall experience offered to the customer.
1. MARKETING MIX
Meaning
The Marketing Mix refers to the set of controllable marketing tools that a company combines to obtain the desired response from its target market.
The traditional marketing mix consists of the 4 Ps:
Product
Price
Place
Promotion
MARKETING MIX
│
┌──────────────┼──────────────┐
│ │ │
PRODUCT PRICE PLACE
│
PROMOTION
Product is the starting point
A company first decides what value it will offer to customers. Then it determines:
How much to charge → Price
Where and how to make it available → Place
How to communicate its value → Promotion
2. PRODUCT
Meaning of Product
A product is anything that can be offered to a market to satisfy a need or want.
A product can be:
A physical good
A service
An experience
An idea
A person
A place
An organization
A combination of goods and services
Simple Definition
A product is anything offered to customers for attention, acquisition, use or consumption that satisfies a need or want.
3. Product is More Than a Physical Object
Consider a smartphone.
The customer is not purchasing only a piece of hardware.
The customer is receiving:
Communication
Entertainment
Camera facilities
Internet access
Social connectivity
Status
Convenience
After-sales service
Warranty
Therefore:
Customers buy benefits, not merely physical products.
4. Three Levels of Product
A modern product can be understood at three levels.
1. Core Product
The basic benefit that the customer is actually buying.
Example – Automobile
The customer is actually buying:
Transportation
2. Actual Product
The physical or tangible product with specific features.
Includes:
Brand
Design
Quality
Features
Packaging
Style
Example
For a car:
Tata
SUV design
Safety features
Colour
Engine
Interior
3. Augmented Product
Additional benefits and services provided along with the actual product.
Includes:
Warranty
Free installation
After-sales service
Delivery
Maintenance
Customer support
Financing facilities
Example
When buying a car, the customer may receive:
Warranty
Roadside assistance
Free servicing
Insurance assistance
Product Levels Diagram
AUGMENTED PRODUCT
Warranty • Service • Delivery
▲
│
ACTUAL PRODUCT
Brand • Quality • Design • Features
▲
│
CORE PRODUCT
Basic Customer Benefit
5. CLASSIFICATION OF PRODUCTS
Products can broadly be classified into:
Consumer Products
Industrial Products
A. CONSUMER PRODUCTS
Consumer products are products purchased by final consumers for personal or household use.
They are classified according to the way consumers buy them.
Four major categories:
Convenience Products
Shopping Products
Specialty Products
Unsought Products
1. Convenience Products
These are products purchased frequently, immediately and with minimum effort.
Examples
Milk
Bread
Toothpaste
Soap
Newspapers
Biscuits
Characteristics
Frequent purchase
Low price
Widely available
Little comparison
Minimum buying effort
Example
A customer goes to a nearby shop and buys toothpaste because the existing tube is finished.
2. Shopping Products
Products that consumers compare carefully based on:
Price
Quality
Design
Features
Suitability
Examples
Furniture
Television
Refrigerator
Laptop
Clothing
Example
Before buying a refrigerator, a customer compares LG, Samsung, Whirlpool and other brands.
3. Specialty Products
Products having unique characteristics or strong brand identification for which customers are willing to make special purchasing efforts.
Examples
Luxury cars
Premium watches
Designer jewellery
High-end cameras
Example
A customer specifically wants a Rolex watch and is willing to travel to an authorized dealer to purchase it.
4. Unsought Products
Products that consumers:
Do not normally think about purchasing, or
May not know about.
Examples
Life insurance
Funeral services
Certain emergency medical services
Marketing Requirement
These products usually require:
Aggressive promotion
Personal selling
Awareness campaigns
Consumer Product Classification – Summary
| Type | Buying Effort | Examples |
|---|---|---|
| Convenience | Very low | Milk, soap, bread |
| Shopping | Moderate/high | Furniture, laptop |
| Specialty | Very high | Rolex, luxury car |
| Unsought | Usually not planned | Insurance, funeral services |
B. INDUSTRIAL PRODUCTS
Industrial products are goods and services purchased by business organizations for further processing, production, resale, or business operations.
They include:
Materials and Parts
Capital Items
Supplies and Business Services
1. Materials and Parts
These become part of the final product.
Examples
Steel used by automobile manufacturers
Flour used by a bakery
Electronic chips used in smartphones
2. Capital Items
These assist in production but do not become part of the final product.
Examples
Machinery
Factory buildings
Computers
Generators
3. Supplies and Business Services
These support organizational operations.
Examples
Office stationery
Cleaning materials
Accounting services
Legal services
Advertising services
6. PRODUCT MIX
Meaning
A Product Mix is the complete range of products and product lines offered by a company.
Example – Hindustan Unilever
A company may offer product lines such as:
Personal care
Home care
Foods
Beauty products
The combination of all these product lines constitutes its product mix.
Dimensions of Product Mix
There are four important dimensions:
Product Mix Width
Product Mix Length
Product Mix Depth
Product Mix Consistency
1. Product Mix Width
Meaning
Width refers to the number of different product lines offered by a company.
Example
Suppose a company has:
Shampoo
Soap
Toothpaste
Detergent
It has four product lines.
Therefore:
Width = Number of product lines
2. Product Mix Length
Meaning
Length refers to the total number of individual products/items across all product lines.
Example
Suppose:
| Product Line | Number of Products |
|---|---|
| Shampoo | 4 |
| Soap | 5 |
| Toothpaste | 3 |
| Detergent | 4 |
Total:
4 + 5 + 3 + 4 = 16
Therefore:
Product Mix Length = 16
3. Product Mix Depth
Meaning
Depth refers to the number of variants offered for each product within a product line.
Variants may differ by:
Size
Colour
Flavour
Model
Packaging
Example – Shampoo
A company may offer:
100 ml
200 ml
400 ml
Anti-dandruff
Herbal
Damage repair
The number of variants indicates the depth.
4. Product Mix Consistency
Meaning
Consistency refers to how closely related the different product lines are in terms of:
Production requirements
Distribution channels
End use
Technology
Example
A company selling only:
Shampoo
Conditioner
Hair oil
has high product-mix consistency because all products relate to hair care.
Product Mix Dimensions – Easy Memory
Remember:
Width = How many lines?
Length = How many products in total?
Depth = How many variants?
Consistency = How closely related?
7. PRODUCT MIX STRATEGIES
Product Mix Strategies are decisions taken by companies regarding the number, variety, quality and relationship of products they offer.
Major strategies include:
Expansion of Product Mix
Contraction of Product Mix
Alteration of Existing Products
Trading Up
Trading Down
Product Differentiation
Product Diversification
1. Expansion of Product Mix
A company increases the number of products or product lines.
Example
A company producing only soaps enters:
Shampoo
Toothpaste
Face wash
Purpose
Increase sales
Reach new customers
Reduce dependence on one product
2. Contraction of Product Mix
The company reduces the number of products or product lines.
This happens when certain products:
Generate low profits
Have declining demand
Increase costs
Become outdated
Example
A smartphone company discontinues an unpopular model.
3. Alteration of Existing Products
The company modifies an existing product.
Changes may include:
Design
Quality
Packaging
Features
Ingredients
Example
A beverage company introduces a new bottle design.
4. Trading Up
A company introduces higher-priced and higher-quality products to improve its brand image and attract premium customers.
Example
A mass-market automobile manufacturer launches a premium SUV.
5. Trading Down
A company introduces lower-priced products to attract price-sensitive customers.
Example
A premium electronics brand introduces an affordable smartphone model.
6. Product Differentiation
The company makes its product different from competitors.
Differentiation can be based on:
Quality
Design
Features
Technology
Service
Brand image
Example
Volvo differentiates its automobiles through emphasis on safety.
7. Product Diversification
The company enters new product categories.
Types
Concentric diversification
Horizontal diversification
Conglomerate diversification
Example
A company originally producing clothing enters food processing and financial services.
8. PRODUCT LINE
Meaning
A Product Line is a group of closely related products marketed under the same company or brand and designed to serve similar customer needs or perform similar functions.
Example
A company's smartphone product line may include:
Basic model
Mid-range model
Premium model
Foldable model
All are smartphones, so they form one product line.
Product Line vs Product Mix
This distinction is very important for examinations.
| Basis | Product Line | Product Mix |
|---|---|---|
| Meaning | Group of closely related products | Entire range of products offered by a company |
| Scope | Narrow | Broad |
| Contains | Individual products within one related category | All product lines |
| Example | Company's shampoo products | Shampoo + soap + toothpaste + detergent |
| Relationship | Part of product mix | Includes several product lines |
Easy Formula
Product Mix = Collection of Product Lines
Product Line Decisions
Companies make several decisions regarding their product lines.
1. Product Line Length
The number of products included in a product line.
2. Product Line Stretching
A company adds products beyond its current range.
Types
Downward Stretching
Adding lower-priced products.
Upward Stretching
Adding premium products.
Two-Way Stretching
Adding both lower-priced and higher-priced products.
3. Product Line Filling
Adding more products within the existing range.
Example
A company has ₹20, ₹50 and ₹100 products.
It introduces a ₹75 product to fill the gap.
4. Product Line Modernization
Updating existing products using:
New technology
New design
New features
Example
A smartphone company updates its existing model with a better processor and AI camera.
5. Product Line Featuring
Giving special promotional attention to one or more products in the product line.
6. Product Line Pruning
Removing products that are:
Unprofitable
Outdated
Low-selling
Costly to maintain
PRODUCT STRATEGY
A Product Strategy is a long-term plan concerning the development, positioning, modification, branding, packaging, and management of products to satisfy customer needs and achieve organizational objectives.
Major Product Strategies
1. Product Development Strategy
Developing new products for existing or new markets.
2. Product Modification Strategy
Improving existing products.
3. Product Differentiation Strategy
Making products distinct from competitors.
4. Product Diversification Strategy
Entering new product categories.
5. Product Elimination Strategy
Removing products that are no longer profitable.
6. Branding Strategy
Creating a strong identity for products.
7. Packaging Strategy
Designing attractive and functional packaging.
8. Product Positioning Strategy
Creating a distinctive position in customers' minds.
A Complete Example: Apple
Consider Apple's product strategy.
Product Lines
iPhone
iPad
Mac
Apple Watch
AirPods
These product lines together form Apple's Product Mix.
Product Line
The iPhone range itself is one product line.
Product Mix Width
Number of major product lines.
Product Mix Depth
Different models, storage capacities, colours, and configurations within each line.
Product Strategy
Apple uses:
Product differentiation
Premium positioning
Continuous product development
Strong branding
Product line extension
Ecosystem strategy
Another Example: FMCG Company
Suppose a company sells:
Product Line 1 – Shampoo
Herbal
Anti-dandruff
Damage repair
Product Line 2 – Soap
Neem
Sandal
Aloe vera
Product Line 3 – Toothpaste
Whitening
Herbal
Sensitive teeth
Then:
Product Mix Width = 3 product lines
Product Mix Length = 9 products
Product Mix Depth = Number of variants within each product
Product Mix Structure
PRODUCT MIX
│
┌───────────────────┼───────────────────┐
│ │ │
Product Line 1 Product Line 2 Product Line 3
│ │ │
Shampoo Soap Toothpaste
│ │ │
┌────┼────┐ ┌────┼────┐ ┌────┼────┐
Herbal Anti- Repair Neem Sandal Aloe Herbal Whitening
Importance of Product Strategies
Effective product strategies help a company:
Meet customer needs.
Create competitive advantage.
Increase sales.
Build brand loyalty.
Enter new markets.
Respond to technological changes.
Remove unprofitable products.
Improve profitability.
Strengthen market position.
Achieve long-term growth.
Important Distinctions for Examination
Product vs Product Line
Product: An individual offering.
Product Line: A group of related products.
Product Line vs Product Mix
Product Line: One group of related products.
Product Mix: All product lines offered by the company.
Width vs Length vs Depth
Width → Number of product lines
Length → Total number of products
Depth → Number of variants
Consistency → Degree of relationship among product lines
Short Examination Questions
2 Marks
Define Product.
What is a Product Mix?
Define Product Line.
What is Product Mix Width?
What is Product Mix Depth?
What is Product Line Filling?
What is Product Line Stretching?
What is Trading Up?
What is Trading Down?
What is Product Diversification?
5 Marks
Explain the classification of consumer products.
Explain the dimensions of Product Mix.
Explain Product Line Decisions.
Discuss the major Product Mix Strategies.
Differentiate between Product Line and Product Mix.
10/15 Marks
Define Product and explain its classification with suitable examples.
Explain Product Mix and discuss its dimensions and strategies.
What is a Product Line? Explain the major Product Line Decisions.
Explain Product Strategies in detail with suitable real-life examples.
Quick Revision Chart
PRODUCT
│
├── Meaning
│
├── Levels
│ ├── Core
│ ├── Actual
│ └── Augmented
│
├── Classification
│ ├── Consumer Products
│ │ ├── Convenience
│ │ ├── Shopping
│ │ ├── Specialty
│ │ └── Unsought
│ │
│ └── Industrial Products
│ ├── Materials & Parts
│ ├── Capital Items
│ └── Supplies & Services
│
├── Product Mix
│ ├── Width
│ ├── Length
│ ├── Depth
│ └── Consistency
│
├── Product Mix Strategies
│ ├── Expansion
│ ├── Contraction
│ ├── Modification
│ ├── Trading Up
│ ├── Trading Down
│ ├── Differentiation
│ └── Diversification
│
└── Product Line
├── Line Length
├── Stretching
├── Filling
├── Modernization
├── Featuring
└── Pruning
Key Takeaway
Product is not simply a physical item. It is a bundle of benefits, features, services and experiences offered to satisfy customer needs. A successful marketer must therefore decide what products to offer, to whom, in what variety, with what features, under which brand, and how the product should be positioned against competitors. Product Mix and Product Line decisions help the organization manage this entire range strategically.
.JPG)
New Product Development, Product Life Cycle (PLC) and Branding Strategies
These three topics are closely connected with Product Strategy. A company must continuously develop new products, manage products throughout their life cycle, and build strong brands to remain competitive.
1. NEW PRODUCT DEVELOPMENT (NPD)
Meaning
New Product Development is the systematic process of identifying opportunities, developing ideas, testing them, and introducing a new product into the market.
A "new product" does not necessarily mean something that has never existed before. It may be:
A completely new product
An improved existing product
A modified product
A new version or model
A new product introduced into a new market
Simple Definition
New Product Development is the process of transforming a new product idea into a marketable product that satisfies customer needs and achieves organizational objectives.
Why is New Product Development Necessary?
Businesses cannot depend permanently on existing products because:
Customer needs change.
Technology changes rapidly.
Competitors introduce new products.
Existing products may become outdated.
Market demand changes.
New market opportunities emerge.
Product sales may decline.
Companies seek higher growth and profitability.
Example
Mobile phones provide a good example. A company that continues selling only old-generation phones may lose customers to competitors offering better cameras, processors, AI features and battery technology.
Stages of New Product Development
The traditional New Product Development process consists of eight major stages:
Idea Generation
↓
Idea Screening
↓
Concept Development & Testing
↓
Marketing Strategy Development
↓
Business Analysis
↓
Product Development
↓
Test Marketing
↓
Commercialisation
Let's understand each stage clearly.
Stage 1 – Idea Generation
Meaning
Idea Generation is the systematic search for ideas for new products.
Ideas may come from:
Customers
Employees
Dealers
Suppliers
Competitors
Research and Development
Market research
Social media
Technological developments
Example
Customers complain that their smartphones have poor battery life.
A company may develop an idea for a smartphone with a significantly longer battery life.
Important Point
Idea generation produces many ideas; it does not mean that every idea will become a product.
Stage 2 – Idea Screening
Meaning
Idea Screening means evaluating new product ideas and eliminating those that are unsuitable, risky, or unprofitable.
The company asks:
Is there customer demand?
Can we produce it?
Is it technically feasible?
Is it profitable?
Does it fit our brand?
Do we have the required resources?
Example
A company may generate 100 product ideas but select only 5 for further investigation.
Objective
To identify good ideas and eliminate poor ideas as early as possible.
Stage 3 – Concept Development and Testing
Concept Development
A product idea is converted into a detailed product concept.
Example
Idea: A healthy beverage.
Concept: A low-sugar, natural fruit drink targeted at health-conscious young consumers.
Concept Testing
The product concept is presented to potential customers to obtain their reactions.
Customers may be asked:
Do you like the product?
Would you buy it?
What price would you pay?
Which features do you prefer?
Importance
Concept testing reduces the risk of launching an unwanted product.
Stage 4 – Marketing Strategy Development
The company develops a preliminary marketing strategy.
It decides:
Target Market
Who will buy the product?
Value Proposition
Why should they buy it?
Price
What price should be charged?
Distribution
Where will it be sold?
Promotion
How will customers be informed?
Example
For a new fitness smartwatch:
Target market → Young fitness-conscious consumers
Positioning → Affordable smart fitness technology
Distribution → Online and electronics stores
Promotion → Social media and influencer marketing
Stage 5 – Business Analysis
The company evaluates whether the proposed product makes business sense.
It estimates:
Sales
Costs
Investment
Profit
Break-even point
Market potential
Important Question
Will the product generate sufficient returns to justify the investment?
If the expected returns are inadequate, the project may be discontinued.
Stage 6 – Product Development
The selected concept is converted into an actual product.
Activities include:
Product design
Engineering
Prototype development
Packaging
Branding
Quality testing
Safety testing
Example
A smartphone company develops prototypes and tests:
Camera
Battery
Screen
Processor
Software
Durability
Stage 7 – Test Marketing
The company introduces the product on a limited scale to test the market.
It observes:
Customer response
Sales
Distribution effectiveness
Pricing
Promotion
Competitor reaction
Example
A food company launches a new snack in selected cities before making it available throughout India.
Advantage
Test marketing helps identify problems before a large-scale launch.
Limitation
It can be:
Expensive
Time-consuming
Risky because competitors may learn about the product.
Stage 8 – Commercialisation
Meaning
Commercialisation means the full-scale introduction of the product into the market.
The company decides:
When to launch
Where to launch
How much to produce
Distribution channels
Promotional campaign
Sales force
Example
After successful testing, a company launches its new product throughout India.
New Product Development – Example
Suppose a company wants to launch a smart water bottle.
| Stage | Activity |
|---|---|
| Idea Generation | Customers want reminders to drink water |
| Idea Screening | Company checks feasibility |
| Concept Development | Smart bottle connected to mobile app |
| Marketing Strategy | Target health-conscious consumers |
| Business Analysis | Estimate cost, sales and profit |
| Product Development | Build and test prototype |
| Test Marketing | Launch in selected cities |
| Commercialisation | Full-scale market launch |
2. PRODUCT LIFE CYCLE (PLC)
Meaning
The Product Life Cycle refers to the stages through which a product passes from its introduction into the market until its withdrawal or decline.
Simple Definition
Product Life Cycle is the pattern of sales and profits of a product over its life in the market.
Stages of Product Life Cycle
Traditionally, PLC consists of four major stages:
Introduction
Growth
Maturity
Decline
Sales
│
│ ┌───────────────┐
│ ┌──┘ └───
│ ┌──┘ └──
│ ┌──┘
│ ┌──┘
│ ┌──┘
│─────┴────────────────────────────────────── Time
Introduction Growth Maturity Decline
Stage 1 – Introduction
Meaning
The product is introduced into the market for the first time.
Characteristics
Low sales
High promotional expenditure
High production cost
Low or negative profit
Limited distribution
Few competitors
Marketing Strategy
The company focuses on:
Creating awareness
Encouraging trial
Establishing distribution
Building the brand
Example
A newly launched technology product generally requires extensive advertising and demonstrations to educate customers.
Stage 2 – Growth
Meaning
The product gains acceptance and sales increase rapidly.
Characteristics
Rapid sales growth
Increasing profits
More competitors
Wider distribution
Growing customer awareness
Marketing Strategy
The company may:
Improve product quality
Add new features
Enter new market segments
Expand distribution
Increase promotion
Example
A successful new smartphone model may experience rapid sales growth after receiving positive reviews.
Stage 3 – Maturity
Meaning
The product reaches its highest level of market acceptance and sales growth begins to slow.
Characteristics
Sales reach peak
Strong competition
Market becomes saturated
Promotional expenditure remains high
Profit margins may decline
Marketing Strategy
Companies may use:
Product modification
Market modification
Price changes
New promotional campaigns
New packaging
New uses
Example
Established products such as toothpaste, soft drinks and detergents often operate in mature markets.
Stage 4 – Decline
Meaning
Sales and profits begin to fall due to:
Changing customer preferences
New technology
New competitors
Substitute products
Market changes
Marketing Strategies
The company may:
Continue the product.
Reduce marketing expenditure.
Find new markets.
Modify the product.
Reduce product variants.
Discontinue the product.
Example
Traditional DVD players experienced decline after streaming services and digital entertainment became widespread.
PLC Characteristics – Summary
| Stage | Sales | Competition | Profit | Main Objective |
|---|---|---|---|---|
| Introduction | Low | Low | Low/Negative | Create awareness |
| Growth | Rapidly increasing | Increasing | Increasing | Build market share |
| Maturity | High/Stable | Very high | High but declining | Defend market share |
| Decline | Falling | Declining | Falling | Harvest/Withdraw |
Important Point about PLC
Not every product follows exactly the same PLC pattern.
Some products may:
Grow very rapidly.
Remain mature for decades.
Experience temporary decline and revival.
Disappear quickly.
Therefore, PLC is a general marketing framework, not a fixed rule applicable identically to every product.
Example of Product Life Cycle
DVD Player
Introduction: New technology attracts early buyers.
↓
Growth: More households purchase DVD players.
↓
Maturity: Most interested households already own them.
↓
Decline: Streaming services and smart TVs reduce demand.
3. BRANDING STRATEGIES
Meaning of Brand
A brand is a name, term, sign, symbol, design, or combination of these that identifies the products or services of a seller and differentiates them from competitors.
Examples
Apple
Nike
Coca-Cola
Tata
Samsung
Meaning of Branding
Branding is the process of creating and managing a distinctive identity, image and value for a product, service, or organization.
Simple Definition
Branding is the process of giving a product a distinctive identity that helps customers recognize, remember, and differentiate it from competing products.
Importance of Branding
For Customers
Easy identification
Reduces purchase risk
Indicates expected quality
Builds trust
Simplifies purchasing
For Businesses
Differentiates products
Builds customer loyalty
Supports premium pricing
Creates competitive advantage
Facilitates new product launches
Major Branding Strategies
1. Individual Branding
Each product has a separate brand name.
Example
A company may market different products under different brand names.
Advantage
If one product faces a problem, other brands may remain less affected.
2. Family Branding
Several products use the same brand name.
Example
A company uses one corporate or family brand across several related products.
Advantage
New products can benefit from existing brand recognition.
3. Corporate Branding
The company's name itself becomes the major brand.
Examples
Tata
Sony
Samsung
Customers associate the company name with its products and reputation.
4. Individual Product Branding
Each product is given a unique identity even though the products belong to the same company.
This allows products to develop their own positioning.
5. Brand Extension
An existing successful brand name is used for a new product category.
Example
A company known for one product category uses its established brand name to enter another category.
Advantage
Lower promotional costs
Existing brand recognition
Customer trust
Risk
If the new product fails, the established brand's reputation may also be affected.
6. Line Extension
An existing brand name is used for new versions, flavours, sizes, models, or variants within the same product category.
Example
A beverage brand introduces:
Regular
Zero sugar
Lemon flavour
Different package sizes
These are line extensions.
Brand Extension vs Line Extension
| Basis | Line Extension | Brand Extension |
|---|---|---|
| Meaning | Existing brand enters new variants in the same category | Existing brand enters a different product category |
| Product category | Same | New |
| Example | New flavour of an existing beverage | Beverage brand launching clothing |
| Risk | Relatively lower | Relatively higher |
7. Multi-Brand Strategy
A company introduces several brands within the same product category.
Example
A company may operate multiple brands of detergents targeting different consumer segments.
Advantages
Captures different market segments.
Increases market coverage.
Prevents competitors from gaining space.
Disadvantage
The company's own brands may compete with one another.
8. New Brand Strategy
A company creates a completely new brand name when entering a new product category or market.
Example
A company may create a new brand because the existing brand image does not fit the new product.
9. Co-Branding
Two or more established brands are combined in one product or marketing initiative.
Example
A credit card carrying the names of both a bank and an airline.
Advantages
Combines brand strengths.
Expands customer reach.
Enhances credibility.
10. Private Branding / Private Label
Retailers sell products under their own brand names, even though another manufacturer may produce them.
Example
A supermarket sells selected products under its own store brand.
11. Rebranding
Rebranding means changing or updating an existing brand's:
Name
Logo
Packaging
Positioning
Visual identity
Brand communication
Why Rebrand?
Changing customer preferences
Modernization
Mergers
New market positioning
Changing brand image
Branding Strategy Example
Consider a company selling beverages.
Existing Brand
Brand A – Cola
Line Extension
Cola Zero
Diet Cola
Lemon Cola
Different bottle sizes
Brand Extension
Brand A enters:
Snacks
Energy drinks
Multi-Brand Strategy
Company launches:
Brand A
Brand B
Brand C
to target different market segments.
Relationship Between NPD, PLC and Branding
These three concepts are interconnected.
New Product Development
↓
Product Launch
↓
Introduction
↓
Growth
↓
Maturity
↓
Decline
↓
Product Modification /
Repositioning / Withdrawal
Throughout this process:
Branding helps create awareness, differentiation, customer trust and loyalty.
Integrated Example
Suppose a company develops a new electric scooter.
New Product Development
The company:
Generates the idea.
Screens the idea.
Tests the concept.
Develops the product.
Conducts test marketing.
Commercialises the scooter.
Product Life Cycle
After launch:
Introduction → Growth → Maturity → Decline
Branding
The company develops:
Brand name
Logo
Design
Brand promise
Advertising
Customer service
It may later use line extension by introducing different battery capacities or models.
Quick Revision Chart
NEW PRODUCT DEVELOPMENT
│
├── Idea Generation
├── Idea Screening
├── Concept Development & Testing
├── Marketing Strategy
├── Business Analysis
├── Product Development
├── Test Marketing
└── Commercialisation
PRODUCT LIFE CYCLE
│
├── Introduction
├── Growth
├── Maturity
└── Decline
BRANDING STRATEGIES
│
├── Individual Branding
├── Family Branding
├── Corporate Branding
├── Brand Extension
├── Line Extension
├── Multi-Brand
├── New Brand
├── Co-Branding
├── Private Label
└── Rebranding
Examination Questions
2 Marks
What is New Product Development?
Define Product Life Cycle.
What is Branding?
What is Brand Extension?
What is Line Extension?
What is Co-Branding?
5 Marks
Explain the stages of New Product Development.
Explain the stages of Product Life Cycle.
Discuss the importance of Branding.
Explain different Branding Strategies.
10/15 Marks
Explain the various stages involved in New Product Development with suitable examples.
Explain the Product Life Cycle and discuss the marketing strategies appropriate at each stage.
What is Branding? Explain the major Branding Strategies with suitable examples.
Explain New Product Development, Product Life Cycle and Branding Strategies as important Product Strategies.
Key distinction to remember
New Product Development = How a new product is created and launched.
Product Life Cycle = How the product behaves in the market over time.
Branding Strategy = How the product is identified, differentiated and positioned in the customer's mind.
PRICING AND DISTRIBUTION STRATEGIES
Pricing and distribution are two important elements of the Marketing Mix. Price determines what the customer pays for the product, while distribution determines how the product reaches the customer.
PART I – PRICING
1. Meaning of Price
Price is the amount of money charged by a seller for a product or service. From the customer's perspective, it is the amount of money given in exchange for the benefits received from a product or service.
Simple Definition
Price is the monetary value that a customer pays to obtain a product or service.
For example, if a customer pays ₹25,000 for a laptop, ₹25,000 is the price paid for that product.
An important marketing point
Price is different from the other elements of the marketing mix because:
Product, Place and Promotion generally involve expenditure, whereas Price directly generates revenue for the firm.
2. Definition of Pricing
Pricing is the process of determining the appropriate amount to be charged for a product or service.
Pricing is the managerial process of fixing the monetary value of a product or service by considering costs, demand, competition, customer value and organizational objectives.
Thus:
Price = Amount charged
Pricing = Process of determining that amount
3. Importance of Pricing
Pricing is important because it:
Generates revenue.
Determines profitability.
Influences customer demand.
Helps establish market position.
Influences brand image.
Helps face competition.
Determines market share.
Supports business growth.
Influences customer perception of value.
Helps recover production and marketing costs.
Example
A luxury brand may deliberately charge a high price to communicate premium quality and exclusivity.
A budget brand may keep prices low to attract price-sensitive customers.
Therefore, price is not merely a financial decision; it is also a marketing and positioning decision.
4. Pricing Objectives
Before fixing a price, a company must determine what it wants to achieve through pricing.
Major pricing objectives are:
1. Profit Maximization
The company aims to earn the highest possible profit.
Example: A luxury product may be priced at a high margin because customers are willing to pay more.
2. Survival
During difficult market conditions, a company may reduce prices to continue operating and generate cash flow.
Example: A business facing intense competition may offer temporary discounts to retain customers.
3. Sales Maximization
The company aims to increase the quantity of products sold.
It may use competitive or attractive prices to encourage more purchases.
4. Market Share Maximization
The company aims to capture a larger share of the market.
Example: A new smartphone company may initially offer attractive prices to gain customers from established brands.
5. Market Penetration
A company may set a relatively low initial price to enter a market rapidly and attract a large number of customers.
6. Market Skimming
A company may initially charge a high price for an innovative or differentiated product and gradually reduce it.
This allows the company to earn higher margins from customers willing to pay more.
7. Maintaining Price Stability
Some companies try to avoid frequent price changes in order to maintain customer confidence and stable relationships with distributors.
8. Quality Leadership
A company may charge a premium price to support a positioning based on superior quality.
Example: Premium automobiles and luxury watches often use high prices as part of their positioning.
9. Meeting Competition
The company may set prices with reference to competitors.
It may choose to:
Price below competitors
Price at the same level
Price above competitors
depending on its strategy.
5. Factors Affecting Price
Price is influenced by both internal and external factors.
FACTORS AFFECTING PRICE
│
┌───────────┴───────────┐
│ │
INTERNAL EXTERNAL
│ │
• Marketing objectives • Demand
• Costs • Competition
• Marketing strategy • Consumer behaviour
• Product characteristics • Economic conditions
• Organizational factors • Government policies
• Distribution channels
• Market conditions
A. Internal Factors
1. Marketing Objectives
Pricing must support the company's objectives.
For example:
Survival → lower price
Market penetration → competitive price
Premium positioning → higher price
2. Cost of Production
Cost is one of the most important pricing factors.
Costs include:
Raw materials
Labour
Manufacturing
Packaging
Transportation
Advertising
Administration
A company generally needs to charge a price sufficient to recover costs in the long run.
3. Product Characteristics
Unique products can often command higher prices.
Example: A technologically advanced product may be priced higher than a standard product.
4. Marketing Mix Strategy
Price must be consistent with:
Product
Promotion
Place
Positioning
A premium product generally requires a pricing strategy consistent with its premium positioning.
5. Organizational Factors
Pricing decisions may involve:
Top management
Marketing department
Finance department
Sales department
Product managers
B. External Factors
1. Demand
When demand is high, the company may have greater pricing flexibility.
When demand is low, the company may need to reduce price or provide incentives.
2. Competition
Competitors' prices strongly influence pricing decisions.
Example
If three smartphone brands offer similar specifications at ₹20,000, a fourth company cannot ignore those prices while fixing its own price.
3. Consumer Perception
Customers do not always judge products purely by cost.
They consider:
"Is the product worth the price?"
Therefore, perceived value is extremely important.
4. Economic Conditions
Factors such as:
Inflation
Recession
Interest rates
Income levels
Purchasing power
influence pricing.
5. Government Regulations
Government policies may affect prices through:
Taxes
Duties
Price controls
Consumer protection laws
Competition regulations
6. Distribution Channels
Intermediaries such as:
Wholesalers
Distributors
Retailers
may add margins, affecting the final consumer price.
7. Social and Cultural Factors
Consumer attitudes and cultural practices can influence demand and therefore pricing.
6. Pricing Strategies
A pricing strategy is the approach adopted by a company to determine and manage the price of its products.
Major strategies include:
1. Cost-Plus Pricing
The company calculates the cost and adds a predetermined profit margin.
Formula
Selling Price = Cost + Profit Margin
Example
Cost = ₹800
Profit margin = ₹200
Selling Price = ₹1,000
Advantage
Simple and easy to calculate.
Limitation
It may ignore consumer demand and competitors' prices.
2. Value-Based Pricing
Price is based primarily on the customer's perceived value rather than simply on production cost.
Example
Two watches may cost almost the same to manufacture, but one may sell for much more because of its brand reputation and perceived value.
3. Competition-Based Pricing
Price is determined with reference to competitors' prices.
The company may price:
Below competitors
Equal to competitors
Above competitors
4. Market Penetration Pricing
A company introduces a product at a relatively low initial price to attract customers rapidly and gain market share.
Example
A new streaming service offers a very low introductory subscription to attract customers.
Objective
Large market share quickly.
5. Price Skimming
A company initially charges a high price and gradually reduces it.
Suitable for
Innovative products
Technologically advanced products
Products with limited competition
Products targeting early adopters
Example
New high-end electronic devices are sometimes launched at premium prices and later become cheaper.
6. Psychological Pricing
Pricing is designed to influence consumers' psychological perception.
Examples
₹99 instead of ₹100
₹999 instead of ₹1,000
The customer may perceive ₹999 as significantly cheaper than ₹1,000 even though the difference is only ₹1.
7. Promotional Pricing
Temporary price reductions are offered to encourage purchases.
Examples:
Festival discounts
Clearance sales
Buy One Get One
Limited-period offers
8. Discount Pricing
Customers receive reductions from the normal price.
Types include:
Quantity discount
Cash discount
Trade discount
Seasonal discount
9. Premium Pricing
A relatively high price is charged to position the product as:
Premium
Exclusive
High quality
Prestigious
10. Bundle Pricing
Several products are combined and sold at a single price.
Example
A software company offers:
Word + Excel + PowerPoint + cloud storage
as one package.
11. Dynamic Pricing
Prices change according to:
Demand
Time
Customer conditions
Availability
Market conditions
Example
Airline ticket prices may vary according to demand, booking time and seat availability.
PART II – DISTRIBUTION STRATEGIES
7. Meaning of Distribution
Distribution refers to the activities involved in making a product or service available to customers at the right place and right time.
Simple Definition
Distribution is the process of moving products from producers to final consumers through appropriate channels and intermediaries.
8. Distribution Channel
A distribution channel is the path through which a product moves from the producer to the final consumer.
Direct Channel
Producer → Consumer
Example
A farmer sells vegetables directly to customers.
One-Level Channel
Producer → Retailer → Consumer
Example
A clothing manufacturer sells through retail stores.
Two-Level Channel
Producer → Wholesaler → Retailer → Consumer
Example
Many FMCG products follow this traditional channel.
Three-Level Channel
Producer → Agent → Wholesaler → Retailer → Consumer
This may be used when additional intermediaries are required.
9. Distribution Strategies
The three major distribution strategies are:
Intensive Distribution
Selective Distribution
Exclusive Distribution
1. Intensive Distribution
The product is made available through as many outlets as possible.
Suitable for
Convenience products
Frequently purchased products
Examples
Soft drinks
Biscuits
Toothpaste
Newspapers
Packaged water
Objective
Maximum market coverage
2. Selective Distribution
The company selects a limited number of suitable intermediaries in a particular market.
Suitable for
Shopping products
Consumer durables
Electronics
Furniture
Example
A television manufacturer may appoint selected authorized dealers rather than selling through every possible shop.
Advantages
Better control
Better customer service
Lower distribution costs than intensive distribution
3. Exclusive Distribution
The company gives distribution rights to very few or a single authorized distributor/dealer in a particular territory.
Suitable for
Luxury products
Premium automobiles
High-end products
Example
A luxury automobile brand may sell through selected exclusive dealerships.
Objective
Brand image
Strong control
Premium positioning
Comparison of Distribution Strategies
| Basis | Intensive | Selective | Exclusive |
|---|---|---|---|
| Number of outlets | Very large | Limited | Very few |
| Market coverage | Maximum | Moderate | Limited |
| Control | Low | Moderate | High |
| Suitable for | Convenience goods | Shopping goods | Specialty/luxury goods |
| Example | Biscuits, soft drinks | Electronics | Luxury automobiles |
10. Physical Distribution Activities
Distribution is not simply about choosing intermediaries. It also involves physical movement and availability of products.
Important activities include:
Transportation
Moving goods from one location to another.
Warehousing
Storing goods until they are required.
Inventory Management
Maintaining appropriate stock levels.
Order Processing
Receiving and fulfilling customer orders.
Material Handling
Loading, unloading and moving products.
Logistics
Coordinating the movement and storage of products efficiently.
Example: Distribution of a Biscuit
Suppose a biscuit manufacturer produces biscuits in Chennai.
Manufacturer
↓
C&F Agent / Distributor
↓
Wholesaler
↓
Retailer
↓
Consumer
The company must ensure that the biscuits:
Reach retailers on time.
Are stored properly.
Are available in sufficient quantities.
Reach customers before expiry.
Pricing and Distribution Relationship
Pricing and distribution cannot be treated independently.
For example:
Premium Product
A premium product may use:
High price + Exclusive distribution + Premium promotion
Mass-Market Product
A mass-market product may use:
Competitive price + Intensive distribution + Mass promotion
Therefore, the 4 Ps must work together.
Quick Revision Chart
PRICING
│
├── Meaning & Definition
├── Pricing Objectives
│ ├── Profit
│ ├── Survival
│ ├── Sales Growth
│ ├── Market Share
│ ├── Penetration
│ └── Quality Leadership
│
├── Factors Affecting Price
│ ├── Internal
│ └── External
│
└── Pricing Strategies
├── Cost-Plus
├── Value-Based
├── Competition-Based
├── Penetration
├── Skimming
├── Psychological
├── Promotional
├── Premium
├── Bundle
└── Dynamic
DISTRIBUTION
│
├── Distribution Channels
│ ├── Direct
│ ├── One-Level
│ ├── Two-Level
│ └── Three-Level
│
├── Distribution Strategies
│ ├── Intensive
│ ├── Selective
│ └── Exclusive
│
└── Physical Distribution
├── Transportation
├── Warehousing
├── Inventory
├── Order Processing
└── Material Handling
Important Examination Questions
Short Answer
Define Price.
What is Pricing?
What are Pricing Objectives?
What is Penetration Pricing?
What is Price Skimming?
What is Psychological Pricing?
Define Distribution.
What is a Distribution Channel?
What is Intensive Distribution?
What is Exclusive Distribution?
Essay Questions
Define Pricing and explain the various objectives of pricing.
Discuss the internal and external factors affecting pricing decisions.
Explain the major pricing strategies with suitable examples.
Define Distribution and explain the different channels of distribution.
Explain Intensive, Selective and Exclusive Distribution Strategies with suitable examples.
Differentiate between Intensive, Selective and Exclusive Distribution.
