This article throws light upon the top seven functions of marketing management. The functions are: 1. Marketing Research 2. Sales Forecasting 3. Advertising 4. Sales Promotion 5. Channels of Distribution 6. Product Packaging 7. Pricing.
Function # 1. Marketing Research:
An industrial enterprise, if, develops products for direct market application without having any idea in advance of consumer acceptance of that product, takes quite a risk (if the product is unaccepted). On the contrary, if another concern tends to learn consumer reaction to the product prior to manufacturing the same, it does not involve any risk associating high expenditures.
Market research, today, has come to be a very important part of the marketing function. Market research when properly conducted and used on a regular basis is just as valuable to the manufacture as is Technical Research and ensures the continued vitality of a business.
Market research may be defined as an organised approach which includes all research activities involved in marketing problems:
(i) Gathering, recording and analysing the utility and marketability of the product;
(ii) The nature of demand;
(iii) The nature of competition;
(iv) The methods of marketing; and
(v) Other aspects of movement of products from the stage of production to the point where they get consumed.
Market research provides an effective sales forecast. Market research promotes soundness of marketing decisions. Marketing or Market research gathers records and analysis all facts about problems relating to the transfer and sale of goods and services from producer to consumer.
Essentially it is designed to discover not only how much the company can hope to sell, but where, to whom and how. Some part of the research can be done right in the company’s own office through the use of its recorded data, a form of market research known as sales analysis. This should provide information on which products arc selling best, in what markets, and to what type of customer.
It is very important that sales records be set up to yield this type of data in usable form. Other sources of information on markets are the published statistics that give an indication of the size of the potential market in various localities. Government and consultants are valuable sources of this type of information.
Objectives of Marketing Research:
i. Market research determines who and where the customer is; what are his needs and wants; what will he buy; where and how he will buy; and how much he will pay.
ii. Market research tells the future of existing products and the products yet to be introduced into the market.
iii. Market research measures sale trends and sales potential.
iv. Market research analysis distribution, economic trends, and profitability.
v. Market research determines advertising effectiveness, consumer reaction and dealer reaction.
vi. Market research studies market potential and market share.
vii. Market research conducts demand and price studies.
viii. Market research popularises the company products and makes them acceptable to the consumers.
ix. Market research keeps a business in touch with its markets.
x. Market research explores new markets and helps developing new products.
xi. Market research safeguards the interests of the company against unforeseen changes in the market.
xii. Market research guides sales promotion efforts.
xiii. Market research analysis user characteristics, attitudes, and opinions with particular emphasis on any shift in market composition or personal preferences.
Scope of Marketing Research:
Major marketing research activities are:
i. Measurement of market potential,
ii. Determination of market characteristics,
iii. Market share analysis,
iv. Competitive product studies,
v. New product acceptance and potential,
vi. Short and long range forecasting,
vii. Studies of business trends,
viii. Establishment of sales quotas and territories,
ix. Testing of existing products,
x. Product mix studies,
xi. Acquisition studies,
xii. Studies of advertisement effectiveness,
xiii. Media research,
xiv. Pricing studies,
xv. Plant and warehouse location studies,
xvi. Packaging research, and
xvii. Distribution channel studies, etc.
Market Research Procedure:
i. Define the problem clearly.
ii. Develop a clear set of research objectives.
iii. Supervise or subcontract the task of collecting the data from existing and would be consumers, etc.
iv. Extract meaningful information from the collected data.
v. Prepare a report presenting the major findings and recommendations coming from the study.
Market Research Techniques:
Some of the techniques used by persons engaged in market research for collecting the data are as follows:
i. Desk Research:
The data is collected from the information published by the company or outside sources, e.g., government agencies, trade associations, etc.
Desk research is done on:
(a) Sales analysis, i.e. past sales, fluctuations sales and promotional expenditures, economics of order size, etc.
(b) Correlation studies, concerned with finding the relationship between two or more variables, e.g., number of new cars produced and number of car batteries sold.
(c) Ratios, such as stock-turn (the relationship between sales and stocks), profit per rupee invested (earnings/capital) etc.
ii. Postal Questionnaire:
Carefully prepared questionnaires, consisting of questions-short, specific and statistical or open- minded are posted to a selected sample of respondents for collecting specific data from them.
iii. Telephone Interviews:
Telephone interviews are conducted at a personal level with a selected sample of people for collecting their views.
iv. Personal Interviews:
Personal interviews are conducted on a simple question and answer basis. Such interviews give best results with greater reliability.
v. Observational Method:
The marketing research personnel silently observe others and collect the desired information, e.g., by standing outside or in a wine shop, the brands more frequently purchased can be found out.
vi. Statistical Methods:
a. Statistical methods make use of large pre-collected data and logically conclude the market investigations.
b. Bar chart, histogram, frequency polygon, frequency distribution curve and the concepts of average, median, and standard deviation help serve the purpose.
Function # 2. Sales Forecasting:
Forecasting is essentially the art of anticipating what buyers are likely to do under a given set of conditions. The market research conducted by a firm plus the analyses of current sales experience and trends, form the basis for the construction of a sales forecast. The sales forecast is a commitment on the part of the sales department and each of its divisions of the expected sales likely to be achieved in a given period at stated prices.
Sales forecasting should be very accurate because production and stock holding plans and the whole train of events following from these are based on them. Sales forecasting is a basis for developing co-ordinated and goal-directed systems of marketing action. The sales forecast is one of the vital tools of marketing planning since adequate planning and the effective deployment of marketing resources are based on sales forecasting data.
Sales forecasting is essential if more accurate sales budgets, production and purchasing schedules are to be set. Accurate forecasts are vital aids to decision making. Forecasts provide basis for evaluating the functioning and productivity of various segments of business activity. They can guide marketing and other business actions toward the achievement of implicit and explicit objectives.
Sales Forecasting Factors:
The factors to be considered when making the sales forecast are:
i. Government Action:
This is important when most of the purchases are made by government departments, government controlled bodies, nationalised industries, etc., as in U.K.
ii. Economic Trends:
The trends at home which are affected by government action and the trends in world market are both of interest.
Existing competitors and new competitors,
iv. Changes in technology and markets.
v. Internal Factors:
Internal factors such as capacity, available resources product mix and Marketing mix, etc.
Function # 3. Advertising:
Advertising can become an established essential of a country’s economy. It contributes to broad geographic system of distribution; to the volume sales, an essential corollary of mass production; and to the pricing of many products within the economic means of the average man.
Just as communication is vital to good internal management, so is advertising vital to the earning of profit. Running a business without advertising is just like winking at a beautiful girl in the dark-you know what you are doing but she does not know it.
Advertising is generally regarded as a form of communication the purpose of which is to convey concepts about companies, goods and services by means of words, pictures, diagrams, sound, music, colour, shapes and symbol on two levels of significance-the national and the emotional. Advertising is any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor.
Advertising may be defined as commercial messages to the public, designed to inform potential and established consumers and to encourage sales for the advertiser. Advertising can stimulate demand and, where necessary, can even create demand where none exists.
Advertising arouses public interest, fosters a buying attitude and raises consumer demand for the products of a company. Advertising is the pivot of modern trade, commerce and business.
Functions and Objectives of Advertising:
i. Advertising introduces existing and new company products to the public.
ii. Advertising enhances potential buyer’s responses to the company and its offerings.
iii. Advertising tells that a product which the customers want exists and from where it can be procured and at what price.
iv. Advertising is undertaken to reduce selling costs; because large volume of production will lead to economies, if, through advertising, it can be supported by mass distribution.
v. Advertising makes a product stand against its competitor products.
a. finds new users,
b. supports salesmen,
c. increases profit,
d. reaches customers who would otherwise be inaccessible to sales staff, and
e. tells the public, the good qualities of the product, i.e., why people should purchase only this brand.
vii. Advertising convinces retailers that they should keep the products of that company.
viii. Advertising creates a confidence in the minds of buyers regarding quality of those goods or products.
ix. Advertising builds up reputation for the company goods and services.
Functions of Advertising Department:
In general, the functions of an advertising department may be classified as follows:
i. Preparation and control of advertising budget.
ii. Determining the appropriation or allocation of funds to be spent on advertising and sales promotion activities.
iii. Liaison with the advertising agency.
iv. Supervising advertising and marketing research.
v. Keeping in touch with representatives of important media.
vi. Cooperation with the sales and other departments.
vii. Distribution of advertising material.
viii. Production and supervision of sales promotion material.
ix. Merchandising the advertising.
xi. Co-ordination with the employer and public relation department for improving public and employee relations.
The Advertising Agency:
An advertising agency is a group of specialists in:
ii. Preparation of copy Art,
iii. Production, and
iv. Selection and contact of media, etc.
Who provide expert services and counsel to product manufacturers as regards:
i. The art of advertising,
ii. Preparing advertising policies,
iii. Planning and preparing advertisements,
iv. Sales promotion campaign,
v. Recommendation of media,
vi. Arrangements for radio and T.V. programmes, and
vii. The preparation of copy, etc.
An advertising agency also acts as liaison between advertiser and media.
Types of Advertising:
Advertising may be classed into two principal types:
(i) Institutional or goodwill type, and
(ii) Direct action type.
Institutional advertising is designed to promote an idea or the name of a company in the eyes of the public. Attractive New Year’s gifts or calendars bearing the name of the company can be distributed to the public for institutional advertising or special art paintings can be run in magazines under the company name.
Direct action advertising is designed to sell a firm’s products or services. Newspapers and magazines are full of such advertisements-all inducing the customers to come and buy products of a firm.
An advertising medium may be considered as the carrier of the information to be advertised. Basically the problem is one of the communications. Modern advertising requires a highly complex thoroughly inter-grated communication system, extending from the initiating firm to the consumer.
The process of communication is as below:
An important part of advertising job consists of deciding the best media for carrying the advertising message or information to the target market. The advertiser tries to achieve a certain reach, frequency, impact and continuity with his advertising budget. Therefore, he must give considerations to the geographical area to be covered, type of buyer to be reached, his habits and customs, his psychological reactions and the qualities and cost of different advertising media.
A few commonly used advertising media are:
a General magazines,
b. Trade journals,
c. Business reviews, and
d. Technical journals, etc.
v. Direct mail.
vi. Public transportation.
vii. Outdoor billboards.
viii. Exhibits and displays.
ix. Slides in cinemas.
x. Catalogues, samples and handout leaflets.
xi. Distributing gifts, pencils, calendars, shopping bags, etc., bearing the name of company and its products.
Planning and preparing the Advertisement:
The various steps involved in planning and preparing the advertisement are:
(i) Decide the purpose of advertisement.
(ii) Decide the message to be conveyed to public.
The message should be such that it:
(a) holds the public attention for a long time;
(b) is educative and suggestive; and
(c) is humorous as well, etc.
(iii) Put the idea into symbols of some kind, words, pictures, shapes, music, etc.
(iv) Select the advertising media accordingly-to convey the information to the public.
(v) Keep a written record of the advertising programme.
Function # 4. Sales Promotion:
All the activities that go into the development of sales or those that are intended to raise the demand level for a product very quickly can be grouped under the title Sales Promotion. Sales promotion includes those marketing activities, other than personal selling, advertising, and publicity, that stimulate consumer purchasing and dealer effectiveness, such as displays, shows and exhibitions, demonstrations, and various non-recurrent selling efforts not in the ordinary routine.
Sales promotion focuses the attention of the customer at the actual point of sales in the shops with such effectiveness that both the advertiser and the dealer are benefited. The main purpose is to increase sales. Sales promotion plays a critical role in introductory and maturity stages of the product life cycle and also appears to be especially effective during periods of rapid inflation.
Sales promotion, intended to educate the consumers better and to bring about an increase in sales is used more extensively in highly competitive businesses. The whole idea behind sales promotion is to bring the name of product and that of the manufacturer constantly before wholesalers, retailers and the consumers in order to stimulate their interest in the product.
Sales Promotion Methods:
Sales promotion is the catchall for various promo-tools that are not formally classifiable as advertising, personal selling, or publicity.
These tools (methods) may be sub-classified as:
i. Consumer Promotion:
Persuading consumers to buy ; these include samples, money-refund offers, prices-off, premiums, trading stamps, contests and competitions (Le., the winner customer will have a trip to Europe, etc.)
ii. Trade Promotion:
Incentives to distributors and others to hold stocks of company product; these include special discounts, buying allowance, one or two free units per bulk container, dealer competitions such as free holidays, push money, etc.
iii. Sales force promotions:
Bonuses, contests, sales rallies etc., for the salesmen.
iv. Good public relations:
It develops goodwill and increase sales. Every proposed business policy should first be analyzed in terms of its effect upon the company image.
v. Good customer relations:
Good customer relations are basically the result of their past transactions with the company. Speedy handling of complaints, assistance in emergencies, abiding by announced policies etc., all develop good customer relations and increase future sale of company products.
Displays at points of sale, using posters, banners, placards and leaflets, to attract the customer’s attention to the product.
vii. Product exhibitions, demonstrations, and conferences.
viii. Holding competition and awarding prizes to winners.
Latest Product styling and appealing product packaging catch the eye of the consumer and increase sales volume.
Functions of Sales Promotion Department (or Manager):
i. Product package detailing.
ii. Service to salesmen.
iii. Service to dealers.
iv. Making displays.
v. Helping the dealer in demonstrations, door to door canvassing, etc.
vi. Publicity, (through slides, films, and calendars, etc.)
Function # 5. Channels of Distribution:
Producers generally do not sell their products directly to the final users. Between them and the final user stand a number of marketing intermediaries performing a variety of functions and bearing a variety of names. The marketing intermediaries are called channels of distribution, trade channels or marketing channels.
Each company usually confronts a number of alternative ways to make its product reach the market. They vary from direct selling (direct channel) to final user, to using one, two, three or more intermediaries. Channels of distribution refer to the exchange of ownership of the product until it reaches the final user. Distribution channels are characterized according to the number of channel levels.
Commonly used channels of distribution are:
(a) Represents a two level distribution channel.
(b) Represents a three level distribution channel.
(c) Represents a four level distribution channel.
It can be observed from the above discussion that goods are sold either:
1. Direct from Producer to Consumer:
The direct channel is very effective and profitable for goods which have a high profit margin, e.g., office machinery such as photocopying machines, accounting machines, computers, etc.
Moreover, the more specialized or technical the product (e.g., machine tools), the better is to sell it directly; because the ordinary retailer is seldom in a position to give demonstration, etc., and specialized service later on.
In direct selling, the producer has maximum control over selling practices and policies.
2. From Producer to Consumer via. a Middleman (e.g., a Wholesaler, Retailer or Both):
Selling through a middleman is known as Indirect Distribution. This method does very well for products with a low profit margin, e.g., consumer goods-tooth paste, face creams, etc.
Going through a middleman say a wholesaler usually results in larger orders.
Middleman buys goods in bulk and thus enables a producer to avoid risks connected with stocking of goods. The risk may be in the form of a fall in price or physical deterioration of the goods.
Middlemen keep the producer informed about the prevalent market trends.
Middlemen such as wholesalers many times pay immediately to the producers the price of goods and thus help producers whose financial resources are not big.
Function # 6. Product Packaging:
Packaging is the Art, Science and Technology of preparing goods or products for transport and sale. Packaging is the means of ensuring safe delivery of the product to the ultimate consumer in sound condition at minimum overall cost. A package is a complex part of the product. A package most clearly bridges the traditional realms of production and marketing.
Packaging is an important activity of a sales promotion department because an attractive package catches fast the attention of the customers and speaks itself to them. The term packaging means to cover the final product for shipment from the factory to the wholesalers, retailers or the consumers.
Until recently, packaging had been considered a minor element in the marketing of products but now it is regarded as a major factor in promoting company sales.
Packaging of products is done for the following purposes:
i. To protect the products against damage in transit.
ii. To protect the contents from being spoiled (tinned food products).
iii. A packaged good is convenient to handle or transport.
iv. A packaged good is safe to store.
v. An attractive package possesses considerable sales appeal and thus promotes sales of the product.
When the products are sold on a self-service basis such as in super-bazars (markets) and discount houses, it is only the package that attracts public attention, describes product’s features, gives the consumer confidence and makes a favourable overall impression.
The package for a product must:
(a) Speak about the product.
(b) Catch the attention of consumers.
(c) Look clean and sanitary.
(d) Prevent spoilage of product.
(e) Be of convenient size and shape to carry.
(f) Be easy to open.
A large variety of products taking from food and drugs to automotive parts and hardware all need suitable packaging.
Methods of packaging depend upon the nature of product, i.e., whether it is:
The properties of the product that help design the packaging system are its:
The mechanical properties of the packaging material and the compatibility of the goods and the package also deserve consideration.
Product can be packaged in:
i. Corrugated shipping containers.
ii. Metal cans.
iii. Paper foil cans.
iv. Glass bottles.
v. Plastic bottles.
vi. Plastic film pouches and bags.
vii. Paper cartons.
viii. Paper wraps.
ix. Card board cartons.
x. Wooden crates.
xi. Cushioned containers.
xii. Fibre board containers.
Small products can be packaged in cardboard cartons. Large products such as machine tools or refrigerators can be put into wooden crates or packaging cases and (articles) firmly bolted to the side/back and bottom of the case so that there is clearance all round between the outside of the article and the inside of the case or crate.
Product packaging methods have improved a lot in recent years, e.g.:
(i) A refrigerator can now be packed in a large fibre board container on a completely automatic machine.
(ii) Delicate precision instruments that formerly required cushioned containers are now suspended in plastic envelopes in rigid boxes.
(iii)Furniture which would be carefully enclosed in costlier wooden crates is now being boxed in fibre board cartons.
(iv) Packaging of food in plastic and other special paper containers has contributed to its protection from getting spoiled.
(v) Lumber can be shipped in palletized load instead of being piled in a truck.
Function # 7. Pricing:
Pricing is the holy of holies of antitrust enforcement with its per se prohibition of price conspiracies and strong suspicion of the conscious parallelism and price leadership of oligopolistic competition and of so called administered pricing.
The price of the products is the means whereby manufacturers obtain a fair return for their labours and replace and increase their wealth and purchasing power in return for supplying the products. All business enterprises face the task of setting a price for their products or services. Price goes by many names, e.g., fares, tuitions, rents assessments and plain old price.
The task of pricing is faced in the following situations:
(i) When a company makes a new product and it has to set price for the first time.
(ii) When circumstances such as inflation or shortages lead a firm to consider initiating a price change.
(iii) When market competition initiates a price change.
(iv) When a company produces several products that have interrelated demands and/or costs.
Factors affecting price fixation:
i. Fair trade laws. Manufacturers make agreement, with dealers who retail their products, on the price it can be sold to the public.
ii. Nationally advertised prices and government restricted prices of different products.
iii. Desired customer clientele. Pricing policy depends upon the buying habits of the customers who buy the products and whether, they (i.e., customers) are price conscious people.
iv. Company monopoly. Whether the company has a monopoly or it is in a competitive position.
v. Manufacturer’s suggested prices, depending upon the cost of manufacture and selling the product.
vi. Type of Merchandises, i.e., whether they are novelties or special interest items, etc.
vii. Nature of sales. Whether the product sells seasonally, (e.g., refrigerators) or throughout the year (e.g., televisions and transistor radios).
viii. Price lining is a policy of keeping merchandise in fairly well defined price range, e.g., selling shoes at Rs. 139.95 Rs. 254.95 and Rs. 371.95, etc.
ix. Whether large volume with low unit profit or relatively small volume with high unit profit is desired.
x. Suitable channels of distribution.
1xi. Sales promotional strategy.
Pricing policy can be expressed diagrammatically (refer Fig 31.9). Assume that company has a sales of Rs. 100,000 and gross margin of Rs 45,000, it means that it has an average marks up of 45% on the total sales. This does not mean that every product was marked up 45% of sales; actually some product had more than this, and others less than this but the overall average markup reached 45%.
What is markup. Markup or gross margin represents the difference between what the shopkeeper has paid to the wholesaler for getting the product and the price at which he has sold the product to the consumer. In other words markup is the reward or profit to the shopkeeper for rendering a service in bringing the merchandise to the customer.
i. Operating expenses,
iv. Damaged merchandise, and
Four distinct areas namely 1, 2, 3 and 4 can be seen in Fig. 31.9. A dynamic pricing policy demands that the seller must be aware of the aggregate sales volume in each area so that his overall total sales will average out to the markup necessary to provide desirable overall profits. Different products may sell in different areas, some at bigger profits, others at lesser profit but the overall position must not be less than average markup value.