Unit 2

Marketing Decisions 1

Q1) What is marketing mix? Discuss the elements of marketing mix. (10 marks)

A1) The marketing mix refers to the set of actions, or tactics, that an organization uses to market its brand or product within the market. Marketing mix involves decisions regarding products to the made available, the price to be charged for the same, and the incentive to be provided to the consumers in the markets where products would be made available for sale. These decisions are taken keeping in view the influence of marketing forces outside the organization (e.g., consumer behaviour, competitors’ strategy and government policy). According to Philip Kotler, ‘marketing mix is the mixture of controllable marketing variable that the firm uses to pursue the sought level of sales in the target market.’

Traditionally there are 4 p’s of marketing mix (product, price, place and promotion) and later on 3 another p’s of marketing mix (people, process and promotion) is introduced. Therefore, there are 7 p’s of marketing mix. The figure shows the 7p’s of marketing mix-

Figure 1: 7 p’s of marketing mix

1. Product:

It refers to the tangible or intangible item offered in the market for sale. The producer must produce quality products that are capable to satisfy the customer needs. All products can be broadly classified into 3 main categories. These are:

• Tangible products: These are items with an actual physical presence such as a car, an electronic device, and an item of clothing or a consumer good.
• Intangible products: These are items that have no physical presence but can be felt indirectly. For example, an insurance policy, online items such as software, applications or even music and video files etc.
• Services: Services are also intangible products but they are the result of an economic activity that does not result in ownership. It is a process that creates benefits for customers. Services depend highly on who is performing them and remain difficult to reproduce exactly. For example, banking service, telecommunication service, BPO etc.

Figure: Product types

2. Price:

It refers to the value of a product. It depends on costs of production, segment targeted, ability of the market to pay, supply - demand and a number of other direct and indirect factors. The pricing should be fair enough to attract the customers. There are often several kinds of pricing strategies, each tied in with an overall business plan.

3. Place:

It refers to the place sale is taken place. It should be in the center place so that it is easily accessible by the customers. Placement or distribution is a very important part of the marketing mix strategy. The seller should also be careful about the storage and warehousing facility. For example, the shopping malls need a wide area located in centre place for the set up as well as storage of the product, the online shopping sites large scale warehouses.

4. Promotion:

It refers to all or any or any the activities undertaken to form the product or service known to the user and trade this may include advertising, word of mouth, press reports, incentives, commissions and awards to the trade. It can also include consumer schemes, marketing, contests and prizes. For example, advertisement in electronic media, rebate etc.

5. People:

The company’s employees are important in marketing because they are the ones who deliver the service to clients. It is important to hire and train the right people to deliver superior service to the clients, whether they run a support desk, customer service, copywriters, programmer etc. It is very important to find people who genuinely believe in the products or services that the particular business creates, as there is a huge chance of giving their best performance. Adding to it, the organisation should accept the honest feedback from the employees about the business and should input their own thoughts and passions which can scale and grow the business. For example, front desk employee of hotel, salesperson etc.

1. Process:

We should always make sure that the business process is well structured and verified regularly to avoid mistakes and minimize costs. To maximise the profit, it’s important to tighten up the enhancement process. For example, process involved from the point of order to the point of delivery of goods in case of online shopping.

2.     Physical evidence:

In the service industries, there should be physical evidence that the service was delivered. A concept of this is branding. For example, when you think of “fast food”, you think of KFC. When you think of sports, the names Nike and Adidas come to mind.

Q2) What are the areas of product design? (5 marks)

A2) In decisions on producing or providing products and services within the international trade is vital that the production of the product or service is strategically and coordinated, both within and with other functional area of the firm, particularly marketing. For example, in horticulture, it's essential that any supplier or any of his “out grower” (sub-contractor) can supply what he says he can. This is often especially vital when contracts for supply are finalized, as failure to provide could incur large penalties. The most elements to think about are the assembly process itself, specifications, culture, the physical product, packaging, labelling, branding, warranty and service.

1. Product design:

Changes in design are largely dictated by whether they would improve the prospects of greater sales, and this, over the accompanying costs. Changes in design are also subject to cultural pressures. The more culture-bound the product is, for example food, the more adaptation is necessary. Most products fall in between the spectrum of "standardisation" to "adaptation" extremes. The application the product is put to also affects the design. In the UK, railway engines were designed from the outset to be sophisticated because of the degree of competition, but in the US this was not the case. In order to burn the abundant wood and move the prairie debris, large smoke stacks and cowcatchers were necessary. In agricultural implements a mechanised cultivator may be a convenience item in a UK garden, but in India and Africa it may be essential equipment. As stated earlier "perceptions" of the product's benefits may also dictate the design. A refrigerator in Africa is a very necessary and functional item, kept in the kitchen or the bar. In Mexico, the same item is a status symbol and, therefore, kept in the living room.

Factors encouraging standardisation are:

i) economies of scale in production and marketing

Ii) consumer mobility - the more consumers travel the more is the demand

Iii) technology

Iv) image, for example "Japanese", "made in".

2. Production decisions

In decisions on producing or providing products and services in the international market it is essential that the production of the product or service is well planned and coordinated, both within and with other functional area of the firm, particularly marketing. For example, in horticulture, it is essential that any supplier or any of his "outgrower" (sub-contractor) can supply what he says he can. This is especially vital when contracts for supply are finalised, as failure to supply could incur large penalties. The main elements to consider are the production process itself, specifications, culture, the physical product, packaging, labelling, branding, warranty and service.

3. Production Process:

In manufactured products this might include decisions on the type of manufacturing process – artisanal, job, batch, and flow line or group technology. However, in many agricultural commodities factors like seasonality, perishability and supply and demand got to be taken into consideration. Quantity and quality of horticultural crops are affected by variety of things. These include input supplies (or lack of them), finance and credit availability, variety (choice), sowing dates, product range and investment advice. Many of those items are getting to be catered for within the contract of supply.

4. Specification:

Specification is extremely important in agricultural products. Some markets won't take produce unless it's within their specification. Specifications are often set by the customer, but agents, standard authorities (like the EU or ITC Geneva) and trade associations are often useful sources. Quality requirements often vary considerably. Within the Middle East, red apples are preferred over green apples. In one example French red apples, well boxed, are sold at 55 dinars per box, whilst not so attractive Iranian greens are sold for 28 dinars per box. In export the standard standards are set by the importer.

5. Culture:

Product packaging, labeling, physical characteristics and marketing need to adapt to the cultural requirements when necessary. Religion, values, aesthetics, language and material culture all affect production decisions.

6. Physical Product:

The physical product is formed from a spread of elements. These elements include the physical product and thus the subjective image of the product. Consumers are searching for benefits and these must be conveyed within the whole product package. Physical characteristics include range, shape, size, color, quality, quantity and compatibility. Subjective attributes are determined by advertising, self-image, labeling and packaging. In manufacturing or selling produce, cognizance has got to be taken of cost and country legal requirements. Again, variety of these characteristics is governed by the customer or agent. As an example, in beef products sold to the EU there are very strict quality requirements to be observed. In fish products, the Japanese demand more “exotic” types than, say, would be sold within the United Kingdom. None of the dried fish products produced by the Zambians on Lake Kariba, and sold into the Lusaka market, would ever pass the hygiene laws if sold internationally. In sophisticated markets like seeds, the variability and range is so large that constant watch has to be kept on the new strains and varieties soon be competitive.

7. Packaging:

Packaging serves many purposes. It protects the product from damage which could be incurred in handling and transportation and also features a promotional aspect it's often very expensive. Size, unit type, weight and volume are vital in packaging. For aircraft cargo the package must be light but strong, for sea cargo containers are often the only form. The customer also can decide the most effective kind of packaging. In horticultural produce, the developed countries often demand blister packs for mange touts, beans, strawberries then on, whilst for products like pineapples a sea container may suffice. Costs of packaging have always to be weighed against the advantage gained by it. Increasingly, environmental aspects are coming into play. Packaging which is non-degradable plastic, as an example is a smaller amount in demanded. Bio­degradable, recyclable, reusable packaging is now the order of the day. This may be both expensive and demanding for several developing countries.

8. Labelling:

Labeling not only serves to precise the contents of the product, but could even be promotional (symbols as an example Cashel Valley Zimbabwe; HJ Heinz, Africafe, Tanzania). The EU is now putting very stringent regulations effective on labeling, even to the degree that the pesticides and insecticides used on horticultural produce got to be listed. This could be very demanding for producers, especially small scale, ones where production techniques won't be standardized. Government labeling regulations vary from country to country. Bar codes aren't widespread in Africa, but do assist available control. Labels may have to be multilingual, especially if the product could also be a world brand.  Translation could be a problem with many words being translated with difficulty. Again, labeling and in promotion terms non­standard labels are costlier than standard ones. Requirements for crate labeling, etc. for international transportation are getting to be addressed later under documentation.

Figure: Product decision areas

Q3) Write a note on product life cycle. (5 marks) (2018)

A3) The term product life cycle refers to the length of time a product is introduced to consumers into the market until it's removed from the shelves. The life cycle of a product is broken into four stages—introduction, growth, maturity and decline. The product life cycle (PLC) starts with the product’s development and introduction, and then moves toward withdrawal or eventual demise. Product Life Cycle comparing sales and Profits sales are at zero within the product development stage, gradually increase during introduction, greatly increase within the growth stage, grow and peak within the maturity stage, and then greatly decrease within the decline stage. At an equivalent time, profits dip below zero within the product development stage, grow and surpass zero within the introduction stage, grow gradually within the growth stage and peak as they're going into the maturity stage. Profits reach zero within the decline stage. The five stages of the PLC are discussed below:

1. Product development/introduction:

The introduction phase is the period where a new product is first introduced into the market. This typically requires a lot of resources and finances. The introduction phase is usually associated with slower growth as the public is not familiar with the product, the sellers may not be adequately trained to sell, and clear and definite distribution channels are yet to be established. Demand for the product is also quite immature at this stage.

2.     Growth

The growth phase is when your product starts to sell at a much faster rate. The public is becoming increasingly aware of your product and word of mouth is starting to spread. The product’s capabilities are now recognised and product development has matured (the rate at which you’re changing your offering slows). In healthcare, this stage can be hard to recognise, but is probably most noticeable when demand for your services starts to sustain regardless of whether you’re advertising or promoting it.

3.     Maturity

The maturity phase is when your product’s sales begin to peak. Demand is strong and the service is now booking out. Very soon, the product will begin to compete with new alternatives being introduced into the market. A good example of this stage in healthcare is the availability of a new pharmaceutical product. Fresh from successful clinical trials, the drug is likely to generate attention in the media. Patients may approach their healthcare providers requesting that particular medication as a result of increased popularity or awareness.

4.     Decline

The decline phase refers to the period when the product reaches its saturation point. In this case, the price can start increasing, though the number of sales will decline. In this phase, a decision is needed: whether to continue with the product with significant changes or to move onto another product altogether. In healthcare, a suitable example could be a medical device or equipment such as a wheelchair. As technology improves, the consumer market, including healthcare professionals who use that particular product may start to see it as old or outdated. They perceive the product as no longer being able to effectively provide the required care to the patient. The device sales will decrease sharply and the company needs to either improve the device, by offering a newer edition, or replace it with a better alternative.

Figure 4: Product life cycle

Example: The Product Life Cycle of Coca Cola

• Development: very little is known about the development of Coca-Cola and how they created the mysterious formula
• Introduction: by 1886, the year of its foundation, the brand already seemed to have the right project
• Growth: less than ten years after its launch, Coca-Cola was already consumed in all the U.S. States
• Maturity: it’s impossible to say exactly when the brand reached maturity, but it’s safe to say that it has spent most of its history until now in this stage
• Decline: since 2012, the net operating revenue of Coca-Cola has fluctuated towards decreasing; while a small decrease is within what’s expected for the maturity stage, investments in marketing and new products must continue

Q4) Define branding. Discuss the components of branding. (2+6 marks) (2018, 2019)

A4) Branding is the process of determining brand of a product/service. Brand may be defined as name, shape, design, colour, logo or combination of all of a product/service. It helps to create a separate identity from the similar product/service in the market. For example, soft drink brands like Pepsi and Coco-cola, smart phone companies like OPPO, Lenovo. Xiaomi etc.

“A brand may be a name, term, design, symbol, or the other feature that identifies one seller’s good or service as distinct from those of other sellers” (American Marketing Association).

The branding process is determined by some components which are discussed below-

Figure: Components of branding

1. Brand identity

Brand identity is the visible elements of a brand, such as color, design, and logo that identify and distinguish the brand in consumers' minds. Brand identity should help establish a relationship between the brands and thus the customer by generating a worth proposition involving functional, emotional or self-expressive benefits. For example, the images show the logo of Netflix, snapchat, wats App, google classroom etc.

2. Brand image

Brand Image is how customers think of a brand. It can be defined as the perception of the brand in the minds of the customers. Brand image is claimed to how the brand is currently perceived by consumers. For example, Coca-Cola is a brand known for a product best used at the time of happiness, joy, and good experience. It is the ‘original cola’ and has a ‘unique taste’, Walmart is best known for a retail brand selling goods for a lesser price than usual retailers, The brand image of Nike is considered to be a cult brand which deals only in sportswear.

3. Brand character

Is related to its internal constitution, how it's perceived in terms of integrity, trustworthiness and honesty. This is often also related with the promise of the brand to deliver the experience related to its name. For example, Audi, Loreal etc. are considered as luxurious brand. The image below highlighted some examples of different brand characteristics.

4. Brand culture

Brand culture is the culture that a company cultivates in order to powerfully, consistently and competitively deliver its brand to market. It’s how people work together to bring the brand alive for customers. But brand cultures are more than an expression of the brand itself; they are, by necessity, an expression of the people who work for that brand and the decisions and ways of working and behaving that they agree to work within.  It can be defined as the inherent DNA of the brand and its values that governs every brand experience, brand expression, interaction with the customers, employees, and other stakeholders of the company along with every touch point.

5. Brand personality

Brand personality is a set of human characteristics that are attributed to a brand name. A brand personality is something to which the consumer can relate; an effective brand increases its brand equity by having a consistent set of traits that a specific consumer segment enjoys. This personality is a qualitative value-add that a brand gains in addition to its functional benefits. There are five main types of brand personalities with common traits:

• Excitement: carefree, spirited, and youthful. For example, Tesla, Red Bull, Coca-Cola, Nike
• Sincerity: kindness, thoughtfulness, and an orientation toward family values. For example, Disney, Hallmark, Amazon, Cadbury
• Ruggedness: rough, tough, outdoorsy, and athletic. For example, Harley-Davidson, Timberland, Jeep, Marlboro.
• Competence: successful, accomplished and influential, highlighted by leadership. For example, Volvo, Google, Intel, Microsoft.

6. Brand essence (brand soul)

Brand essence is the core characteristic which defines a brand. It is an intangible attribute that separates one brand from the competition’s brand.  It represents the emotional elements and values of the brand. Essence should be a part of an extended term positioning that does not change with every communication. For example, a brand may want to choose the word “personal” because your customer service is direct and individualized.

Q5) What is brand equity? What are the factors that influence brand equity? (8 marks) (2019)

A5) Brand equity refers to a value premium that a company generates from a product with a recognizable name when compared to a generic equivalent. Companies can create brand equity for their products by making them memorable, easily recognizable, and superior in quality and reliability. Brand equity could also be a marketing term that describes a brand’s value. That value is decided by consumer perception of and experiences with the brand. If people think highly of a brand, it's positive brand equity. When a brand consistently under-delivers and disappoints to the purpose where people recommend that others avoid it, its negative brand equity.

Brand equity is a marketing strategy of branding. The factors that influence brand equity of an organisation are discussed below-

Figure: Factors influencing brand equity

1. Brand Loyalty:

Brand loyalty central construct in marketing, could also be a measure of the attachment that a customer possesses to a brand. It reflects how likely a customer will switch to a different brand, especially when that brand makes a change, either in price or in product features. As brand loyalty increases, the vulnerability of the cus­tomer base to competitive action is reduced.

2. Brand Awareness:

People will often buy a well-known brand because they're comfortable with the brand. Or there could even be an assumption that a brand that's familiar is probably reliable, in business to remain, and of reasonable quality. A recognized brand will thus often be selected over an unknown brand. The awareness factor is very important in contexts during which the brand must first enter the consideration set. It must be one among the brands that are evaluated.

3. Perceived Quality:

A brand will have associated with it a perception of overall quality not necessarily based on the knowl­edge of detailed specifications. Perceived quality will directly influence purchase decisions and brand loyalty, especially when a buyer isn't motivated or able to conduct an in depth analysis. It can also sup­port a premium price which, in turn, can create margin of profit which can be reinvested in brand equity. Fur­ther, perceived quality is usually the thought for a brand extension. If a brand is well regarded in one context, the idea goes to be that it's top quality during a related context.

4. Brand Association:

The underlying value of a name is typically based on specific associations linked thereto. Associations like Ronald McDonald can create a positive attitude or feeling which can become linked to a brand like McDonald’s. If a brand is well positioned on a key attribute within the product class (such as service backup or technological superiority), competitors will find it hard to attack.

5. Other Proprietary Brand Assets:

The last three brand equity categories we've just discussed represent customers’ perceptions and reactions to the brand; the primary is that the loyalty of the customer and thus the fifth category represents other proprietary brand assets like patents, trademarks and channel relationships. Brand assets are getting to be most precious if they inhibit or prevent competitors from eroding a customer base and loyalty. These assets can take several forms as an example; a trademark will protect brand equity from competitors who might want to confuse customers by employing an identical name, symbol, or package. A patent, if strong and relevant to customer choice, can prevent direct competition. A distribution channel is usually controlled by a brand thanks to a history of brand performance.

Q6) What is packaging? State the essentials of a good package. (8 marks) (2018, 2019)

A6) Packaging means the wrapping or bottling of products to form them safe from damages during transportation and storage. It keeps a product safe and marketable and helps in identifying, describing, and promoting the product. Packaging is that the general group of activities which concentrate in formulating the design of a package, and producing an appropriate and attractive container or wrapper for the product. Packing refers to the wrapping and crating of goods before they're transported or stored. Packaging is that the subdivisions of the packing function of marketing. It involves more than simply placing products in containers or covering them with wrappers. The package contents could also be pre-measured, pre-weighted, pre-stored, pre-assembled, and then placed during a specially designed wrapper, box, carton, can, crate, bottle, jar, tube, barrel, or drum for convenient distribution.

Philip Kotler defines packaging as an activity which cares with protection, economy, convenience, and promotional considerations.

Packaging is major concern for a manufacturing firm. So, on provide efficient packaging solution, an owner must confine mind the subsequent aspects of packaging. Some of the essentials of packaging are:

1. Packaging as per environment – Packaging of products must be done in a manner that it remains healthy until it reaches a customer. The packs must not have any chemicals or harmful products that would harm user in any meA)

2. Packaging in attractive packs – it's only the packets that are visible to customer which he can see for making the purchasing decision of a product thus packaging must display properly about the product such it tends a customer to buy it immediately. It must express with attractive style and best graphics due to this quality of a product are often judged.

3. Packaging provides convenience – Packaging of product must be done as per the use of customer. Like if you're packing a snack or chips, it must be in easy to open and easy to enjoy pack so that a user can enjoy it anywhere and if it's a frozen product than it must be available in proper seal pack in order that it remains for long.

4. Packaging with proper label – A pack must define the product inside it. It must include its direction to use, ingredients, guarantees etc.

5. Packaging must be cost friendly – A business owner of a producing firm must remember that even when he must provide a product in attractive and effective packaging it must suit his pockets. That’s the value involved in packaging must be manageable for the owner.

6. Advertising with packaging – sometimes packaging isn't sufficient an owner got to advertise its product with the packaging in order that when a user sees the pack he can identify that this packaging belongs to which company and what's inside the packs.

7. Packaging must abide the packaging rules – As per the rules of packaging the ingredients like spices, snack, chips etc. must be packed in quality packets such they continue to be healthy and is easy to destroy that it doesn't create any harm to environment other than this it's also necessary as per rules that the food products must have mentioned labels over the packaging that described about the product, its direction etc. Also, product quality and expiry are necessary on packaging.

Q7) What is product positioning? What are the strategies of product positioning?  (10 marks) (2018)

A7) Product positioning may be a form of marketing that presents the benefits of your product to a particular target audience. Through marketing research and focus groups, marketers can determine which audience to target based on favorable responses to the product. Product positioning is a crucial component of any marketing plan, but it doesn’t need to be limited to one audience. For instance, a product may have a main audience and also a secondary audience that's also curious about the product, but perhaps during a different way. Each audience will find the product appealing for various reasons, which is why it’s important to tailor marketing messages to focus on the benefits each audience values most.

Examples of Product Positioning

• Tesla and Audi position themselves as a luxury status symbol
• Starbucks positions itself as a trusted source of upscale quality coffee and beverage
• McDonald’s positions itself as a place to get quick and cheap meals
• Microsoft and Apple position themselves as a tech company that offers innovative and user-friendly products.

The product positioning strategy ensures the positioning of product in the market to access the target market. Some of the strategies of product positioning are-

Figure: Product positioning strategy

1) Using Product Characteristics or Customer Benefits:

Probably the most-used positioning strategy is to associate an object with a product characteristic or customer benefit. For example, Honda and Toyota have emphasized economy and reliability and have become the leaders in the number of units sold. Volvo have stressed safety and durability.

2) Positioning by Price and Quality:

The price quality product characteristic is so useful and pervasive that it is appropriate to consider it separately. In many product categories, there exist brands that deliberately attempt to offer more in terms of service, features or performance. Manufacturers of such brands charge more partly to cover higher costs, and partly to help communicate the fact that they are of higher quality. For example, Walmart has positioned itself in the minds of its customer using low pricing rather than high pricing, Patanjali positioned as ayurvedic etc.

3) Positioning by Use or Application:

Another way to communicate an image is to associate the product with a use, or application. Products can of course, have multiple positioning strategies, although increasing the number involves obvious difficulties and risks. Often a positioning-by-use strategy represents a second or third position for the brand, a position that deliberately attempts to expand the brand’s market. For e.g., Campbell’s Soup for many years was positioned for use in lunch time and advertised extensively over noon time radio. It now stresses a variety of uses for soup/recipes are on labels and a broader time for consumption, with the more general theme “Soup is good food”.

4) Positioning by Product User:

Another positioning approach is to associate a product with a user or a class of users. Some cosmetics companies seek a successful, highly visible model as their spokesperson as the association for their brand. Michael Jordan, for example was used by products as diverse as Nike, McDonald’s etc.

5) Positioning by Product Class:

Some products need to make critical positioning decisions that involve product-class associations. For example, Dove positioned itself apart from the soap category, as a cleansing cream product, for women with dry skin.

6) Positioning by Cultural Symbols:

Many marketers use deeply entrenched cultural symbols to differentiate their brand from competitors. The essential task is to identify something that is very meaningful to people that other competitors are not using and associate the brand with that symbol. Examples are Humara Bajaj, Tata Tea, and Ronald McDonald. Each of these symbols has successfully differentiated the product it represents from competitors.

7) Positioning by Competition:

In most positioning strategies, an explicit or implicit frame of reference is one or more competitors. In some cases, the reference competitors can be the dominant aspect of the positioning strategy. It is useful to consider positioning with respect to a competitor for two reasons. First, a competitor may have a firm, well crystallized image developed over many years. Second, sometimes it is not important how good customers think you are; it is just important that they believe you are better than a given competitor. For example, the image below shows that dairy milk is positioned as high quality and low price, KitKat and kinder joy is positioned as low quality and low price etc.

Service Positioning- Importance & Challenges

The concept of service positioning involves establishing a distinctive place within the minds of target customers relative to competing services. For example, LICI position itself as Jindagi ke sath bhi jindagi ke bad bhi, Amul positioned itself as the test of India etc.

Importance of service positioning are-

1. Effective service positioning makes prospects

Good service positioning entices a potential prospect to learn more about the product offering. It also is the first level of qualification. Ideally the seller wants a recipient to react to his message by thinking either “that’s me,” or “that’s not me.”

2. Pay attention to how the competitors are positioned

In the marketing classic, “Positioning: The Battle for your Mind,” Rise and Trout lament that “too many companies start marketing and advertising as if the competitor’s position didn't exist. They advertise their products during a vacuum and are disappointed when their messages fail to urge through.” Most B2B technology companies complain about long sales cycles. But failure to differentiate is that the main reason prospects take so long to decide. They're confused. They can’t tell one option from others; most are saying the same thing.

3. Good positioning never gets old or stale

To claim a position requires patience and conviction. Good positioning never gets old or stale. That’s because the positioning statement should be a conceptual idea and not necessarily copy a good idea are often expressed in many various ways. The positioning statement becomes the central theme for all marketing from your web site to collateral materials to press releases. But regardless of how clever or compelling your positioning statement is, it won’t stick unless is executed consistently and repeatedly over a long period of time; like several years.

1. It helps to display relative performance of competing firms on key attributes.
2. It helps to make predictions hoe the future development changes can be made.

The challenges of service positioning are-

1. It is difficult to position and make aware about the intangible products.
2. There is lack of coherent definitions of services.
3. It is difficult to highlight the differentiating characteristics of services.
4. It is difficult to interpret the services like products.
5. The positioning strategies overlap between products and services.

Q8) What is pricing? What are the factors that influence pricing? (2019)

A8) Pricing is the method of determining the value a producer will get in the exchange of goods and services. In determining prices, the business will take under consideration the value at which it could acquire the products, the manufacturing cost, the marketplace, competition, market condition, brand, and quality of product. The objectives of pricing should consider:

• The financial goals of the company (i.e., profitability)

• The fit with marketplace realities (will customers patronize that price?)

• The extent to which the worth supports a product's market positioning and be consistent with the other variables within the marketing mix

• The consistency of costs across categories and products (consistency indicates reliability and supports customer confidence and customer satisfaction)

• to satisfy or prevent competition

Several factors influence the pricing decisions of a firm and that they are often divided into two broad divisions, namely internal factors and external factors.

Figure: Factors influencing pricing decisions

Internal Factors:

If the management has control over the factors, it'll come under internal factors, if not it'll come under external factors. Therefore, the inner factors are within the control of the management and are particularly associated with the inner environment of a firm.

The internal factors affecting pricing decisions are:

1. Company Objectives:

This has considerable influence on the pricing decisions of a firm. Pricing policies and techniques must be in conformity with the firm’s pricing objectives. For example- if a company desires a targeted rate of return on capital investment, then the pricing decisions are so made that the entire sales revenue from all products, exceeds the whole cost by a sufficient margin, to supply the specified return on the entire capital investment.

2. Organization Structure:

Another significant internal factor affecting pricing decisions is that the organizational structure of the firm. Generally, the top management has full authority for framing pricing objectives and policies. Some firms allow workers’ participation in deciding and thus in such firms, all the staff give their views and suggestions for the pricing policy. This is often helpful to the firm if the firm has several products, requiring frequent pricing decisions and where prices differ in several markets.

3. Marketing Mix:

Price, product, promotion and place are the four ‘p’s of a marketing mix. The pricing policy of a firm must consider the other components of a marketing mix also, because these factors are closely related. Moreover, these factors will change consistent with changing market conditions and may vary for each market. Thus, marketing research and thus the marketing data system are often utilized to form the acceptable pricing policy.

4. Product Differentiation:

If a product is different from its competitive products, with features like a new style, design, package, etc., then it can fetch a better price within the market. For instance - Lee, Arrow and Park Avenue shirts are sold at a high price within the market. Thus, if the product has distinguishing features, then the firm has greater freedom in fixing the costs and customers also will be willing to pay that price.

5. Cost of the Product:

Pricing decisions are based on the cost production. If a product is priced but the value of production, the firm has got to suffer the loss. But the cost of production is often reduced, by coordinating the activities of production properly, the firm can reduce the price accordingly.

External Factors

1. Demand:

Market demand for a product or service has great impact on pricing. If there's no demand for the product, the product can't be sold at all. If the product enjoys good demand, the pricing decision is often aimed to utilize this trend.

2. Competition:

There has been a revolutionary change experienced within the Indian market after the liberalization and opening from the economy. The impact of competition is more pronounced than within the earlier days. The market is flooded with too many products, both Indian and foreign. The number, size and pricing strategy, followed by competitors have a significant role to play within the pricing decision. If the product can't be differentiated with special features, a firm cannot charge a higher price than that of its competitors.

3. Buyers:

If there are not any ready takers for the product, it's said to have failed within the market. Pricing decision is thus related to the characters, nature and preferences of the buyers.

4. Suppliers:

They supply the required items of production to the firm. As already acknowledged, the firm can reduce the price, if it can reduce the value of production. If not, the standard tendency is to charge the increased cost of production to the consumer. For example- the price hike for petrol or diesel will automatically increase the price of vegetables, fruits, provisions, etc. If a firm could get the required raw materials at reasonable rates from suppliers, then it also can price the goods at a less rate.

5. Economic Conditions:

This also affects the pricing decision of a firm during a depressed economy, business activities will be considerably less, but in a boom condition, there'll be hectic business activity. Therefore, economic conditions affect the demand for goods and services. So, during a depressed economy, so as to accelerate business one sells goods at a lesser price, but during a boom period, goods are often sold at a high price.

6. Government Regulations:

The government has the power to regulate the activities of business firms, so that they are doing not charge high prices and don’t indulge in anti-social activities. The govt. Does this by passing various acts;

For example- the MRTP Act, Consumer Protection Act, etc.

Q9) Discuss about the different pricing strategies. (5 marks)

A9) The pricing strategies of marketing are-

Figure 9: Pricing strategies

1. Price Skimming

Under price skimming, the produces/service provider determines high price for their product/service.  Price skimming is typically associated with luxury items and only works if you have a product or service that is highly valuable or perceived as highly valuable. Brands like Rolex, Mercedes-Benz, apple and Louboutin use a price skimming model.

2.     Penetration Pricing

Under penetration pricing strategy, the companies follow low-priced solution in order to capture as much market share as possible. After capturing the market, it gradually increases its prices.  For example, OTT platforms, internet and network service providers etc. Penetration pricing only works if the solution can achieve economies of scale since high volume has to compensate for the low per-unit price.

3.     Price Discrimination

A price discrimination strategy is when you set a different price for the same product based on the market status of the buyer.  For example, movie theatres sell discounted tickets for children and seniors. Railway tickets follow price differentiation for adults, senior citizens, students etc.

4.     Value-Based Pricing

Value-based pricing is a strategy that uses the value customer’s gain from the product or service as the basis for the cost, ignoring the cost of production. This strategy works well when your product or service is innovative and can’t be easily swapped with an alternative. For example, the true cost of production for software development is really minimum wage for the developer plus the cost of the equipment and software involved in the development process. However, app programmers are paid more than that because they have a highly desirable skill set and hiring someone else to do the work is more effective and efficient than learning to code and trying to create an app by self.

5.     Time-based pricing

A time-based pricing strategy is typically used by companies whose product or service has high-seasonality or last-minute purchases. For example, airline tickets, hotel booking, tourism packages etc.

6.     Freemium

It is a portmanteau of “free” and “premium,” and a freemium business model involves offering a free version of your product or service and then upselling users into a paid version. For example, the music streaming platform Spotify uses this model, offering a free version that allows users to listen to music, but if they want to download files to listen to offline, skip songs unlimitedly or adjust their audio quality, they have to upgrade to a paid account.