Questions and Answers on Marketing Management: Exam Question and Answers, Interview Questions, MBA Questions, and Question Bank for students on Marketing Management! Also learn about:
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Questions & Answers on Marketing Management
Q.1. Define Market!
Ans. Traditionally, a market is a physical or a meeting place where buyers and sellers gather to buy and sell products and services. These markets exist for products/services that are daily necessities like fruits, vegetables, fish, garments, electronic goods, etc. The transaction for these necessities happens directly with the buyer, which also includes a process of bargaining.
Modern markets are not different from traditional markets except the market need not only be a physical place. Modern markets act like facilitators that allow buyers and sellers of a product or service for exchange. Modern markets can include products/services which are daily necessities along with durable items like plates, knives, fans, etc.
For example- supermarkets (Big Bazaar), hypermarkets, minimarkets, etc., provide all products / services under one roof at fixed prices. Modern markets however, do not allow bargaining like in traditional markets but are considered to be relatively cleaner environment than traditional markets. Modern markets also include online shopping for food (Big Basket), clothes (Myntra), etc., which focus on convenience at prices usually higher than traditional markets.
Ans. Some of the basic features of marketing are:
Marketing is customer centric means, customers is the king for marketing firm. He is the pivotal point for all marketing decisions. The firm has to constantly focus its attention on the changing needs and wants of the consumer, and ways to satisfy them.
Marketing is beneficial for both buyer and seller. The exchange process, provides the seller an opportunity to sell the goods at a profit and buyer is able to satisfy his needs and wants in a better way.
Marketing will be effective and successful only when the business tries to meet the needs of the market based on a value system followed by the entire organisation.
Environment is basically divided as internal and external environment. While, internal environment is controllable, external is uncontrollable. External environment includes political and social environment, competition, technology, cultural, legal, natural environment etc. Marketing operates in an external environment and therefore it has to be adjusted as per the changing environmental conditions.
Marketing is not only significant for profit making organisation but also for non-profit organisation like Educational Institutions, Temples, Mosques, hospitals etc.
Q.3. What are the merits of sales promotion?
Ans. The following are the merits or benefits of sales promotion:
1. Invitation – They include a distinct invitation by alluring customers to consider or try out the new product that encourages customers to make purchase of the product.
2. Differentiation – Sales promotion is conducted when producers have a new product to launch which is different from the existing products. Sales promotion compels consumers to identify the new product differently through sales promotion.
3. Pricing strategies – Sales promotions enable producers to adjust short-term variations of supply and demand of products. Based on this they can test the highest price they can charge on the product and the possible discount price they can offer to the customers.
4. Consumer satisfaction – Customers enjoy some satisfaction from being smart shoppers when they take advantage of special prices under varied retail formats.
5. Revenue generation – It attempts to create sales and revenues in the short-run for retailers especially for complementary products. For example, discounts on new tea product will increase sales of complementing goods like sugar, honey or milk.
Ans. Customers are individuals or businesses who purchase products and services produced by a business. The purchase of products and services depends upon the willingness and the ability of the customer to pay in accordance to their needs and wants. Needs and wants are different from each other, wherein needs are those products/services which are necessities such as food, water, clothing or home.
Alternatively, wants are those products / services which an individual aspires to have in addition to the necessities which an individual can do without. For example, gold or diamond jewellery, an expensive and branded watch, designer clothes, lottery tickets, etc.
Q.5. What are the characteristics of sellers or marketer?
Ans. A seller is an individual or an entity that exchanges any type of goods or service in return for payment. Sellers are also marketers that include intermediaries or vendors, suppliers, advertising and market research agencies, media and entertainment, which facilitate distribution and sale from businesses to customers.
These sellers or marketers:
1. Identify and target a set of customers that form a target market which a marketer believes could be addressed by a business.
2. Recognise the nature of product/service that could cater to the (target) market’s needs.
3. Promote the features and characteristics or solutions offered from consumption of the products/services in accordance to the market’s needs.
4. Distribute the products /services to the target market.
5. Determine relevant pricing strategies that adjust the costs to the market according to the solution provided by the products / services (For example, discounts, freebies, etc.).
6. Provide additional services that can enhance the value of the solutions provided by the products /service (For example, customer care, etc.).
Q.6. What are the demerits of sales promotion?
Ans. The following are the demerits of sales promotion:
1. Short duration – Sales promotion attempts to generate sales only in the short-run.
2. Supplementary marketing strategies – Sales promotion as a marketing strategy cannot work in isolation. It can work only if its format is incorporated with advertising and personal selling.
3. Inferior goods and image – For generating quick money, producers may promote inferior or low quality goods, or packaging. Also, low pricing on a new product may also indicate low brand confidence and possible reduce sales in the long-run. This may adversely affect the image of the brand and reduce short term sales.
4. Ineffective promotion – Ineffective promotion caused by lack of trained and inexperienced salespersons or unavailability of supporting infrastructure may lead to excess stock.
Q.7. What is the importance of pricing?
Ans. There can be no marketing without pricing. It is a very significant element of marketing mix, because it affects both demand and supply i.e. both buyer and seller. Pricing decisions should therefore be taken very carefully, incorporating both the strategic environment and the existing status of the market. Prices should neither be too high nor too low. While too high price, may drift away the customers and cause loss to sales, too low a price may bring less revenue and eventually the firm may be out of business.
The importance of pricing can be seen from the following points:
i. Price affects the profitability position of a firm. It affects the total revenue and net profits of the firm. This is because profit = revenue – cost and revenue = price X quantity sold.
ii. Price act as an agent for economic development of the economy as it affects the level standard of the society.
iii. Price affects the demand of the product. Law of demand states that if price goes up, demand decreases and vice-versa, other things remaining constant.
iv. Price is a quantitative element and can be measured easily. This is important when certain things like quality of the product cannot be evaluated. Price of the product helps in arriving at a conclusion here. High price products are generally perceived to be of better quality and vice-versa.
v. Price greatly influences the decisions relating to promotion and advertisement. Promotions expenditure increases the price of the product.
vi. It is the price which determines the type of customer who will use the product. High-priced products are generally purchased by status-conscious people and higher income group people and low priced goods by general masses.
Ans. 1. To do the entire selling job (as in mail order advertising).
2. To introduce a new product (by building brand awareness among potential buyers).
3. To force middlemen to handle the product (pull strategy).
4. To build brand preference (by making it more difficult for middlemen to sell substitutes).
5. To remind users to buy the product (retentive strategy).
6. To popularise some change in marketing strategy (change in price, etc.).
7. To combat or neutralise competitor’s advertising.
8. To acquaint buyers and prospects with the new uses of the product (to extend the product’s life cycle).
In sum the primary objectives of advertising is to increase sales.
Q.9. Define sales promotion!
Ans. Sales promotion refers to a traditional element of marketing communication. It is used to increase the sales of a product by offering incentives, gifts, and schemes provided to customers at the time of purchase. An organization can provide various offers for promoting a good or service. These offers include coupons, vouchers, prizes, gifts, discounts, and free product samples. Sales promotion not only encourages customers to buy a product or service but also triggers repeated buying. Finally, it helps organizations to make customers loyal towards their products or services.
There are two types of views that are found among marketers in relation to sales promotion. The first view advocates that sales promotion should be coupled with advertising and personal selling. This view does not give much importance to sales promotion as a major element of marketing communication.
The second view asserts that sales promotion and advertising are two distinct functions with entirely different objectives and strategies. Thus, it believes that sales promotion is equal to or even more significant than advertising. Sales promotion stimulates purchase action and advertising develops a brand reputation and builds market value.
Q.10. Define product hierarchy! What are its characteristics?
Ans. The product hierarchy is the intra-level characteristics of the three broad levels of products core, tangible and augmented. In order to recognize the core product, marketers must first define what the core benefits the product will provide the customer. The actual product must be built around the core product.
The product has as many as four characteristics:
i. Quality level
iii. Brand name
All these attributes combined together carefully deliver the core benefit(s) of the product. The augmented product offers additional consumer benefits and service such as warranty and customer training. Marketers must first identify the core consumer needs (develop core product), then design the actual product and find ways to augment it in order to create the bundle of benefits that will best satisfy the customer.
The product hierarchy stretches from the initial stage of the product, i.e., need at the basic level for a particular item of franchise in the process of product planning. There are seven levels of product hierarchy. The products have to be classified under a product-line in accordance with their length and width. They should invariably be named for making it easy to classify the items thereof.
Interview Questions on Marketing Management
Q.11. What are the sources of marketing information?
Ans. Adequate and up-to-date information about changing market conditions is necessary for successful marketing of products. Decisions concerning the type of product, the price policy, the channel of distribution and sales promotion can be made rightly with the help of right marketing information at the right time.
In order to collect marketing information, LSI conduct market research. SSI’s are often unable to afford continuous marketing research. However, they can use personal contacts and other informal methods for collecting required information about markets.
Marketing information can be collected from the following sources:
I. Primary Source:
II. Secondary Source:
(a) Press- (e.g., Economics Times and Business Today).
(b) Govt. publications- (Different Ministries and departments of the Central Government and State Government publish regularly some journals, periodicals etc. Which contain very useful data relating to business e.g. Annual report on the working of public understandings; import policy; guidelines for industries etc.).
(c) Publication of financial institutions- The RBI, public financial institutions and commercial banks publish a lot of useful information (e.g. monthly bulletin of RBI etc.).
(d) Publication of trade associations- Trade associations and chambers of commerce collect and publish useful data for the benefit of their members (useful to analyse business trends in India).
(e) Private concerns and research institutions- Some research institutes like National Council of Applied Economic Research, Indian Institutes of Foreign Trade, etc. Conduct research studies regularly and publish data of various types. Private agencies like FICCI also publish data.
Q.12. What is marketing communication?
Ans. The word ‘communication’ is derived from the Latin word communis which means ‘common.’ We attempt to communicate, that is, to establish a ‘commonness’ with another person. There are three essential parts of communication, viz., the source, message and receiver. True communication takes place only when the message means the same thing (in common) to both the parties i.e., the sender of the message and its receiver.
Marketing communication is undertaken by marketers through the devices of promotion viz., advertising, publicity, personal selling and sales promotion. The effective communication occurs when a sender (source) sends a message and receiver responds to the message which satisfies the sender.
Both must have identical meaning of the message. Effective communication is equal to- receipt of the message plus understanding plus acceptance plus action, which means decision to purchase.
Q.13. How internet is magnifying branding strategy?
Ans. The Internet is magnifying the effects of business intermediaries, the action of interpretation of brands, and the relationship between image and identity. The outcome is that there is more noise, and brands are moderated and mediated more, both by and through the use of the new communication mechanism that is the Internet. In consequence there is a changing relationship between brand image and brand identity, and brand identity and brand reality; customer being a moderating factor.
Brand reality is defined as “…organizing branding so that employees are uniquely proud of the company’s brand leadership and [are] passionately aligned to branding this through activities they work on individually, and in teams…”. The concept of brand reality has a particular significance in the context of the increased communication power facilitated by the Internet.
Consistency in brand communications is important in building and maintaining a strong brand image, but often the ultimate presentation of a brand to customers at the point of purchase is in the control of a retailer domain rather than the manufacturer or brand owner, whether that be on-line or bricks-and-mortar.
Buchanan, Simmons and Bickart found that “context can create conditions in which customers are likely to rely less on previously formed attitudes and more on external cues. Despite the extensive marketing efforts involved in maintaining a high-equity brand’s positioning, retailers are able to negate the equity of an established brand through their display decisions. This deterioration of brand equity has obvious implications for the brand in the long run, but it may even influence profitability in the short run”.
This erosion of brand profitability is a result of retailers leveraging the value of a high-equity brand to create sales for other brands carried in the store as well as for the brand itself; an unwelcome brand linkage from the point of view of the manufacturer but intentional on the part of the retailer.
For a variety of reasons – business activity on the Internet with its increased communication between consumers, the rise of brand extension, co-branding, the increasing importance of brand association and other associative effects – brand constellations are emerging, which further increase the complex relationships between brands and also increase the interference of brand noise through their various structures and intermediaries. In an attempt to conceptualize this, taxonomy of brand linkages is proposed.
Q.14. How are brands classified?
Ans. Brands can be classified into different types as:
1. Manufacturer’s Brand:
Brand used by a manufacture to produce output under his own name is called manufacture’s brand like HCL, SONY, Godrej, Panasonic etc. These are mostly used at the national level and are therefore also called as national brand.
2. Distributor’s Brand:
These brands are developed and owned by the distributor or reseller like wholesalers and retailers. When manufacturer is unable to promote the brand on his own, they prefer to produce the product under distributor’s brand. In India, distributor’s brand is popular in handicraft, woollen, sport industries etc.
3. Individual Brand:
When different brand names are used for different products, it is called individual brand. Here the promotional expenditure is high as different brands have to be promoted individually e.g. Surf, Wheel and Washing Powder.
4. Family Branch:
Here all the products of a company are sold under one family brand name. This strategy of selling goods under one brand is less expensive as separate promotion for different brand names is not required e.g. Lakme for all its beauty products.
5. Umbrella Brand:
In this case all the products may be under the umbrella of one company or manufacturer. Example: – in India, Godrej, Hindustan Unilever Limited, Tata etc.
6. Multiple Brand:
In this case the same product is offered by the company under different brand names. This policy is useful as it promotes competition between brand managers of two different brands and also increases company’s total market share.
Q.15. What is the meaning of “Price”?
Ans. Price is the monetary valuation about the tangible and intangible benefits perceived by the consumer or user. There is a great interrelationship between this variable with the rest of the commercial mix components. Due to this relationship, any change in the product distribution or promotion affects the fixing of the international price.
There has to be consistency among the marketing mix components, and the fixing of international prices has to be carried out in total agreement with the objectives of the international marketing strategy designed.
For example- to penetrate a particular country market, the company has to adapt its product according to the statutory rules of that destination market (such as sanitary and packaging requirements). These adaptations are going to affect directly export price.
Q.16. What are the Functions of Packaging?
Ans. A good packaging process should serve the following functions:
1. Protection of the Product:
The most important function of packaging is to protect the product from damage during handling or distribution, from extreme temperatures, contamination, loss of content properties and pilferage.
Examples are given as follows:
(a) Protection during handling – For example, glass items, electronic appliances and anything fragile and intricate are bubble wrapped before secondary or tertiary packaging.
(b) Protection from extreme temperatures – For example, perfumes are normally packaged in thick glass bottles to protect them from extreme temperatures.
(c) Contamination – For example, bottled water, juice boxes, wafers and chips packets are sealed from dust, dirt, duplicity and contamination.
(d) Loss of liquid or vapour – For example, aerated water (soda, soft drinks, etc.) bottles have sealed caps to avoid loss of liquid or fizz. These caps can be tightened multiple times during consumption of the aerated water at regular intervals.
(e) Pilferage – Pilferage means theft of part of contents of a package or spilling the contents but leaving the package through bogus resealing. A good package protects the product from pilferage. Continuing the milk example, pilferage of milk can be easily avoided in tetra pack rather than milk bags.
2. Provide Easy Handling:
Packaging should provide easy handling during transit from the producer’s business to the customers. For example, medicinal tablets are packaged in a blister pack made from plastic and aluminium that maintains the tablet composition and shape when purchased from the chemist.
3. Convenient to Display:
A package’s size and shape should be suitable for displaying and stacking the product in a retail store. For example, medicinal tablets are packaged in small sized rectangular boxes that can be easily stacked and displayed in the chemist shop. However, odd-shaped products like chairs, shoes, etc. will require a specialised space or section in a retail store.
4. Perform Functionality:
The packaging should be functional that facilitates a practical and suitable way to dispense the ingredients inside a packaged product. For example, the small hard mints “Tic Tac” manufactured by the Italian confectioner Ferraro is packaged in small transparent plastic boxes with small rectangular open-close seal that lets out one tic-tac at a time when shaken lightly on the palm of one’s hand.
Q.17. What is the relationship between price and market?
Ans. Although the fair value may be close to where the market is trading, other pricing factors in the market place mean fair value is used mostly as an estimate of the option’s value. Moreover, fair value will depend on the assumptions regarding volatility levels, dividend payments and so on that are made by the person using the pricing model. Different expectations of volatility or dividends will alter the fair value result.
This means that at any one time there may be many views held simultaneously on what the fair value of a particular option is. In practice, supply and demand will often dictate at what level an option is priced in the marketplace. Traders may have a fair value on an option to get an indication of whether the current market price is higher or lower than fair value, as part of the process of making a judgment about the market value of the option.
The volatility figure input into an option-pricing model reflects the assumptions of the person using the pricing model. Volatility is defined technically in various ways, depending on assumptions made about the underlying asset’s price distribution. For the regular option trader it is sufficient to know that the volatility a trader assigns to a stock reflects expectations of how the stock price will fluctuate over a given period of time.
Volatility is usually expressed in two ways- historical and implied. Historical volatility describes volatility observed in a stock over a given period of time. Price movements in the stock (or underlying asset) are recorded at fixed time intervals (for example every day, every week, or every month) over a given period. More data generally leads to more accuracy. Implied volatility relates to the current market for an option.
Volatility is implied from the option’s current price, using a standard option-pricing model. Keeping all other inputs constant, you can put the current market price of an option into any theoretical option price calculator and it will calculate the volatility implied by that option price.
Q.18. What are the strategies for price leadership?
Ans. The price leadership strategy prevails in competitive market environment. The leading firm then makes pricing moves that are duly acknowledged by other members of the industry. Thus, this strategy places the burden of making critical pricing decisions on the leading firm; others simply follow the leader. The leader is expected to be careful in making pricing decisions.
A faulty decision could cost the firm its leadership because other members of the industry would then stop following in its footsteps. For example, if, in increasing prices, the leader is motivated only by self-interest, its price leadership will not be emulated. Ultimately, the leader will be forced to withdraw the increase in price.
The price leadership strategy is a static concept. In an environment where growth opportunities are adequate, companies would rather maintain stability than fight each other by means of price wars. Thus, the leadership concept works out well in this case. In the auto industry, General Motors is the leader, based on market share. The other two domestic members of the industry adjust their prices to come very close to any price increase by General Motors.
Usually, the leader is the company with the largest market share. The leadership strategy is designed to stave off price wars and ‘predatory’ competition that tend to force down prices and hurt all parties. The leaders chastise companies that deviate from this form through discounting or shaving. Price deviation is quickly disciplined.
Q.19. Explain the role and importance of packaging!
Ans. There are several factors attributing to using packaging as a marketing tool.
These factors are:
Packaging is given importance because of an increasing number of products sold on a self-service basis especially among the developed economies. Self- service implies that there are no sales personnel or middle-men involved but the package can attract attention, describe the product features, create consumer confidence and make a favourable impression on potential customers.
2. Consumer Affluence:
Another factor that influences the importance of packaging includes consumer affluence or a customers’ willingness to pay relatively more for the convenience, appearance, dependability and prestige of better packages.
3. Company or Brand Image:
A growing importance to company or brand image and reputation also contributes to involving packaging as a marketing tool. Companies are attempting to endow their brands with distinct identities and features which are conveyed to the customers through packaging.
4. Innovative Approach:
Innovative approaches to packaging are also an important factor that benefits both the consumers with convenience and companies with more profits. For example, soap dispensers or plastic pump bottles are an easier and convenient way to wash hands and store beside the wash basins.
5. Product Differentiation:
A good packaging should be an effective means to differentiate the product from other competing products. Branding along with packaging can lead to such product differentiation. For example, Maggi brand is associated with instant noodles.
Exam Questions and Answers on Marketing Management
Q.20 What is product value equation?
Ans. Every product has an implied value equation, which takes into account the relationship between its quality, convenience, and price. This relationship will vary for different consumer segments. The team’s first job is to analyze their products’ value equations and benchmark them against the competition.
The team should investigate:
i. Product positioning, which includes brand value, relative share position, and private-label development.
ii. Competitive landscape, which includes the pricing supply curve, relative cost structure, and market discipline (leaders and followers).
iii. Consumer motivation, which includes segmentation of needs and benefits, long-term price elasticity, the impulse-buying dynamic, and life-cycle profitability in each segment.
The objective is to ensure that the pricing structure supports the value equation as well as captures the full value of any advantages in cost, quality, or service. We call this “pricing to your sweet spot.”
If, for instance, the product is the only one of its kind to feature a warranty that consumers particularly value, it should be priced accordingly. Such a strategy goes beyond traditional pricing tactics to recognize the value of a product that can be realized in the marketplace.
Q.21. Give an example of product positioning strategy!
Ans. Over 500 million rupees Cadbury India company has launched a premium range of chocolates, Temptations, in Roast Almond Coffee, Old Jamaica, Honey Apricot, Mint Crunch and Black Forest flavors, in the Indian market. As a part of the product strategy of the company to launch one major brand every year, the new product range aims to offer the consumer an exotic and international chocolate experience. Temptations is being retailed through Cadbury’s existing distribution network, reaching out to 250,000 retailers, with the emphasis on larger retail stores.
Cadbury’s already claims a 70% share in value terms of the Indian chocolates market, pegged at around Rs 50 million (22,000 tonnes per annum in volume terms), of which 5% is the premium segment. Why launch in the midst of an FMCG slowdown? The management of the company feels that one way to beat the slowdown is to keep track of evolving consumer needs and bring out a product to meet those needs.
What market research showed was a definite need for a premium chocolate. The taste profile needed was adult and it needed to be an indulgence product. The research apparently also revealed that the consumer seeks variety from indulgence products and has been buying imported chocolates (such as Ferrero Rocher, Lindt et al).
In the larger metro markets in India, it has been noticed that while our current premium range (Fruit & Nut and Roast Almond) was doing well, our presence in this top-end segment had reduced in favor of imported chocolates, which offered greater variety to the consumer.
Research further revealed two sets of chocolate consumers in India: those who are exposed to international chocolates and are active consumers of the same, and those who would love to have the ‘Differentiated Chocolate Taste’ but find international chocolate prices prohibitive.
Temptations of taste hope to woo this latter target group of consumers. “Demographically speaking, we are targeting the 25-40 year-old, SEC A male and female in the top 10 cities of India,” says the company management. Also, where foreign chocolates tend to melt at 18°C, Temptations claims to have been specially formulated to stay solid in tropical temperatures up to 26°C.
The advertising, handled by contract, revolves around the brand proposition, ‘Too Good to Share’. The TVC shows a mischievous 30-something modern, urban couple playing pranks on each other to avoid sharing their Temptations, which is a shift from the usual ‘chocolate is for sharing’ proposition. Cadbury is also working with ATM kiosk doors, Crosswords bookstores, sampling at premium restaurants in metros, playing advertisements during movies, all aimed at targeting the consumer in privacy.
Q.22. What are the levels of products?
Ans. A product is closely associated with the need and level of satisfaction of the customers. It may be defined as an article introduced in the market, that seeks attention, desire for acquisition and image for use to get satisfaction of a want or need of a customer. Obviously, the hierarchy of products is based on their utility and intensity of customer satisfaction. In developing a useful product, a planner has to look upon its levels. They are core products, tangible products or augmented products.
A core product or service which meets the basic need or service may be defined as the product that provides a core benefit to a customer. Such a product may be a cloth, a food item or a drinking substance, irrespective of its taste, color, attraction, beauty consciousness, etc.
A core product is just a substance that satisfies the basic need of a user and does not allow him any comparison. Thus, a product planner has to make the core product tangible to introduce it in the competitive market allowing the customer to exercise his franchise rationally, considering comparative advantages.
The product augmentation is a set of approaches followed by a company in promoting its product through effective delivery and service, incentives to customers and dealers, warranty to seek customers’ confidence on product and maintaining a product-oriented relationship of customers with the company. This level of products largely draws ‘company-customer’ oriented relationship in the market. The product levels also determine the selling process to a large extent.
The core products play an important role in product planning while the tangible products initiate the sales management process. The augmented products drive the concept of extended sales mechanism for marketing expansion and product diversification.
Q.23. What are the types of pricing models?
Ans. i. The Binomial Model:
There are two main models used in the Australian market for pricing equity options: the binomial model and the Black Scholes model. For most traders these two models will give accurate results. The binomial option-pricing model was first proposed by Cox, Ross and Rubinstein in a paper published in 1979. This solution to pricing as an option is probably the most common model used for equity calls.
The model divides the time to an option’s expiry into a large number of intervals, or steps. At each interval it calculates that the stock price will move either up or down with a given probability and also by an amount calculated with reference to the stock’s volatility, the time to expiry and the risk free interest rate. A binomial distribution of prices for the underlying stock or index is thus produced.
On expiry the option values for each possible stock price are known as they are equal to their intrinsic values. The model then works backwards through each time interval, calculating the value of the option at each step. At the point where a dividend is paid (or other capital adjustment made) the model takes this into account. The final step is at the current time and stock price, where the current theoretical fair value of the option is calculated.
First proposed by Black and Scholes in a paper published in 1973, this analytical solution to pricing a European option on a non-dividend paying asset formed the foundation for much theory in derivatives finance. The Black Scholes formula is a continuous time analogue of the binomial model.
The Black Scholes formula uses the pricing inputs to analytically produce a theoretical fair value for an option. The model has many variations that attempt, with varying levels of accuracy, to incorporate dividends and American style exercise conditions. However, with computing power these days the binomial solution is more widely used.
Q.24. What is meant by brand equity?
Ans. The brand equity may be understood as the highest value paid for the brand names during buyouts and mergers. This concept may be defined as the incremental value of a business above the value of its physical assets due to the market positioning achieved by its brand and the extension potential of the brand. In the market a strong brand will be considered to have high brand equity.
The brand equity will be higher if the brand loyalty, awareness, perceived quality, strong channel relationships and association of trademarks and patents are higher. High brand equity provides many competitive advantages to the company. The company may have low price and high consumer loyalty and also more trade leverage. It would be difficult to measure the brand equity of various brands in the market as the parameter are very subjective and the whole exercise may turn out to be arbitrary.
The integration of all these variables make the brand equity high of the company. The brand equity further leads to brand personality of the company. The company may decide the brand personality strategy after analyzing the strength and weakness of the existing brands in the market. The research on assessing the brand personality may be conducted by using the brand rating method to get quantitative measures.
The methods of photo sorting (trademark) phrase writing and simulation games may be used for assessing the brand personality. The sample consumers for this purpose should be self-directed, principled, externally directed, status oriented action-oriented consumers and non-driven consumers.
The effective strategy for implementing the brand personality measures would to go for aggressive advertising using the consumer reviews and comparative product advantages. However, the consistency in the message should be taken care of properly.
Q.25. What are the features of market concentration?
Ans. Features of the concentration strategy:
i. There exists an intensive company assignation of efforts in a few markets and a more efficient use of resources so as to prevent them from being dispersed.
ii. A higher level of commitment and operation consolidation in each selected market is promoted.
iii. A selection of the few markets that the company considers “key” for international operation development is made. In general, the company turns to more dynamic and internationally stable markets. Those markets sale levels develop an increasing tendency to company participation in the markets selected.
iv. When the international operations risk is concentrated on a few markets, there appears a company’s greater dependency on that small number of markets. The fact that the enterprise is exposed to the different selected markets ups and downs makes it more fragile.
v. It brings about more knowledge about those markets, and a greater learning capacity about commercial practices, consumer’s behaviour and markets competitive environments.
vi. It is advisable for use when the new markets access, administration, sales and distribution costs are very high for the entrepreneur. Concentrating on a few markets makes it possible to generate economies of scale in sales and distribution activities.
vii. It has proved to be very efficient in goods that need to be adapted as regards product variables and market communication, which is why it is not advisable to diversify expansion in numerous countries because adaptation cost would be too high. It is efficient for the marketing of goods that have a repetitive purchasing process and that allow consumer’s loyalty.
viii. It is useful for the products that need a direct or indirect company’s strong control and participation in the different stages of the marketing process (through pre and post-marketing services). In general, it is used in middle stages during the company’s internationalization.
Q.26. What are the main features of international product?
Ans. The product has a series of tangible and intangible attributes which aim at satisfying consumers’ and users’ wishes and needs, and contributing to the compliance of the entrepreneurial objectives.
As regards product attributes, a division is made among:
i. Basic product, which is the tangible product essential concept, also called product heart;
ii. Extended product, which comprises the different attributes, like brand, packaging, style, quality and aesthetic aspects;
iii. Sublimation products or supporting components, which are the different supporting services that add value to the tangible product like technical service, training and instructions, delivery and installation, and legal warranty, and other post-marketing services.
In a wide sense, services, places, and ideas are also recognized as product. The product is a complex mixture of components, some of which can be directly perceived by the senses (colour, shape, materials, etc.) and others which cannot be directly apprehended by the consumer, but for their mental preconceptions (security, status, etc.) in response to the positioning developed by the enterprise.
This controllable variable interaction with the rest of the international marketing mix variables (communication, price and distribution) makes any modification in one of them affect directly or indirectly the others.
Q.27. Differentiate between differentiation and segmentation!
Ans. It is important to distinguish between these two terms which are commonly confused in practice. When the company looks for differentiation, it develops a series of activities competitor-oriented and this differentiation may be, for example, at tangible attribute level or at service or intangible attributes that have product value level.
When the company segments, it takes the heterogeneous market and partitions it in smaller units (segments), which are the aim for its strategy. This division is made by considering one or more consumers’ features: demographic (sex, age, etc.), socioeconomic (social status, employment, purchasing power, etc.) or behavioural (loyalty and purchase frequency, etc.).
In the case of industrial use products, there may be a different segmentation criteria according to: company size and/or order, industrial sector, as well as other factors like technological development, product use, organization structure, and financial solvency. As a result, segmentation consists in entrepreneurial actions consumer or user oriented.
Q.28. What are the features of market diversification strategy?
Ans. Features of the diversification strategy:
i. Market penetration is less deep than in the concentration strategy.
ii. This strategy gives greater flexibility to the company due to a lesser assignation of resources to each market, which reduces vulnerability in those markets. Thus, it may be efficient to access markets with a high degree of insecurity and instability.
iii. It can be applied when the implementation of distribution activities in each new market or in situations where the company may divert distribution to third intermediaries in the destination market.
iv. There are not high costs of product adaptation to each new market due to cultural, economic, or legal issues.
v. The company does not possess too much information about the variables that govern the function of each market. It has only superficial knowledge.
vi. It is useful for products in which quick delivery is a competitive advantage to gain access to country-markets. Also for those cases in which economies of scale are produced in the productive process, when the number of penetrated markets increases, with very competitive prices at international level.
vii. In general, it can be implemented in internationalization exploratory stages, as well as in more advanced stages when the company is more consolidated in the international markets.
Q.29. What do services include?
Ans. Apart from tangible qualities, the product has a series of totally intangible attributes. All those services that add value to the product and that are centered in consumer-oriented attention are included in this last group (whether in premarketing, marketing or post-marketing).
Main services include:
i. Demonstration and advising.
iii. Reparation and replacement of faulty pieces.
iv. Time and delivery compliance.
v. Training on use instructions.
vi. Installation and starting up (in the case of machinery).
vii. Those related to answering complaints and claims. These services try to satisfy consumers’ needs in a period that goes beyond the purchasing process, providing safety, follow-up and containment to the buyer, assistance in case of difficulties or doubts that may appear after the purchase.
Q.30. What are the steps involved in distribution channel strategy?
Ans. Distribution channel strategy is derived from corporate as well as marketing strategy.
There are certain steps in developing suitable distribution channel strategy:
a. Defining customer service levels
b. Distribution objectives and steps
c. Structure of network required
d. Policy and procedure to be followed
e. Key performance indicators
f. Critical success factors
Customer service levels are defined by the nature of the industry, the products competition and market shares. Affordability has also been found to decide the level of service. The customer service levels should match competition and it is further believed that customer expectations as such have no limits.
Distribution objectives are influenced by customer expectations and the objectives define the extent of time, place and possession utility which any customer can expect from a distribution network. The operating manuals are found to define the policy and implementation guidelines.
Policy guidelines include code of conduct for channel members, system of redressal of complaints, conditional subsidies and the power to handle institutional business. Key performance indicators actually indicate the effectiveness of a distribution channel.
They are several indicators of effectiveness that have been detailed below:
1. Consistent achievement of distribution targets
2. Achievement of market shares
3. Achievement of profitability
4. Zero complaints from customers
5. No stock returns
6. Ability to handle emergencies
7. Balanced sales achievement during a period
8. Market coverage with ready stocks
9. Minimizing losses due to stock outs
10. Minimizing damages to products
Marketing Management Questions And Answers For Mba
Q.31. What are the levels of channels in distribution management?
Ans. There are three channel levels in the context of distribution management viz. zero level, one level and two level. Levels of channels depend on the number of intermediaries within a distribution channel. The greater the number of intermediaries, the more will be the channel level.
Where products are offered directly by the manufacturer to the customers, it is zero level channel. Over here manufacturers ensure that they are themselves equipped to forward their products smoothly to the end user. Dell at one point of time used to have zero level channel of distribution.
They customized their computers as per the requirements of customers and distributed them. One level channel involves one intermediary such that one channel member in between the manufacturer and customer. Two level channels are found mostly in case of FMCGs where there are two intermediaries viz. – wholesaler and retailer.
Q.32. Explain the retail selling process!
Ans. Retail selling process is quite different from the selling at manufacturing organizations or at the dealer organizations. In case of retail selling, the wares are already there in the store and are arranged in such a way that it catches the attention of people.
The process of personal selling starts at the juncture when the customer enters the store. The retail selling process involves guiding customers through the store in case a customer is looking out for help. Simple greetings with a subtle smile on the face is what is required apart from of course maintaining proper body language and dress sense.
The ‘People’ factor at the store should be equally well presented along with the merchandise so that the customers entering the store perceive an integration among the two. Salesmen at the store should be able to read the minds of the customers well and in cases where the customers are looking out for information, the seller should have the capacity to address the queries and complaints of the customers.
Although the salesmen’s job in modern retail outlets have been reduced due to effective visual merchandising, they do play a major ‘role to serve, educate and inform customers in taking right decisions and enabling suitable branding of the store.
Ans. The relation between sales and service department assumes significant proportion in case of products that are technical in nature or require installation and repair services. Often such products require services like technical advice on installation and also there are implications for the service department in the promises made by the sales person. In the case of products like refrigerator, television etc., it is often the recommendations of the service personnel that influence buyer decisions.
In cases where service is important in sales strategy, provisions for formal coordination are built into the structure of the organization. Sales and service should relate by locating sales and service personnel in the same field offices with regional managers of the company responsible for the activities of both the departments.
Q.34. What is the relation between sales and physical distribution?
Ans. Most organizations believe in the norm that all business operations should be aimed at serving customers at a profit and for that suitable relationship need to exist between sales volume and costs of various kinds including physical distribution costs.
There are certain distribution related activities like packing, freight rate quotations and promptness of delivery that are important in securing sales volume. The costs of such activities are to be kept under control or else sales volume yields less profit.
The benefits of suitable relationship with physical distribution are significant. Proper relation between sales and physical distribution will reduce stock out occurrences and also reduce customer’s inventory requirements along with cementing relations with customers and allow greater concentration on demand creation.
Q.35. Explain the relation between sales and production!
Ans. There needs to be suitable coordination between sales and production activities in an organization. Gone are the days when production started only after orders were solicited. In today’s era, production happens in anticipation of future sales. Coordination is crucial both in the context of planning as well as operations.
Joint consultation is required in planning for the products to be manufactured, the quantity of products to be manufactured, the production schedule, inventories etc. There can be errors committed both by the sales as well as by the production team. The sales department may accept rush orders or there may be an error in the sales estimate that might require reshuffling of production schedules.
Similarly the production department may create output that does not conform to planned quantities because of labor difficulties, shortages in raw materials etc. Moreover it is often found that the two departments may work against the interests of each other and this can make coordination difficult.
It needs to be understood that the concerns of the sales and production team are quite different. While the production team are concerned with matters like product line standardization and simplification, sales executives are concerned with having some product for everybody. The cooperation of the sales department helps the production department.
Sales estimates are required for efficient planning of production schedules and the market knowledge possessed by the sales department are crucial for production executives for making effective utilization of plant resources.
It is the sales executives who keep production executives informed of the changes in market demand for different products and this has been found to increase the chances of attaining optimum levels of production. It is not just that the sales team aids the production department.
The production team provides selling tools in the form of detailed technical information on products and assists sales people with product information. When the promotional materials are designed, the sales people take help of the production team to include certain specific technical details regarding the products to be sold.
Q.36. Discuss the relation between sales and R&D!
Ans. In many large corporation focused on developing innovative products, R&D is constituted as a separate department. Research and development’s job is to offer scientific and engineering efforts to develop new products and improve the aspects of existing products.
This further calls for structuring product line and adjusting product features to fit customer wants and this is something that is of prime concern both for the sales as well as for the production department. Proper harmony must exist thus between these departments and this can be achieved in various ways.
One way can be through the new product department route that has the responsibility of developing new products through coordination of R&D, production and sales and marketing personnel. The second way can be through new product managers. The one-person units can be responsible for developing new products by coordinating with the R&D, production and sales.
The third way can be through new product project management team that is composed of persons home based in other departments brought together to work for new product. The fourth way can be through constitution of product development committee. Coordination needs to take place at the lower levels of the organizational hierarchy.
Q.37. Comment on the relationship between sales and HR!
Ans. There are many companies where sales people are located far away from the corporate office where the HR team exists and this makes management of sales people a difficult job as far as the HR team is concerned. Sales departments have often found to handle all the personnel related problems on their own and the HR team mainly acts in an advisory capacity.
The HR team who are the specialists in job analysis, recruiting, selection, training and motivation are often consulted by sales executives at various junctures. The two departments have often been found to jointly formulate pension policies, vacation policies, sick leaves, health checks etc.
Q.38. Explain the sales management planning process!
Ans. There are six steps of sales management planning process:
a. Analysis- The step basically involves examination of what happened in the past, look at the present situation and spot the trend. Analysis of the internal strengths and weaknesses of a company and the external opportunities and threats are part of this step.
b. Goal setting- The phase involves providing a direction, guidance to the sales force. It enables them to understand the way they should be approaching a project.
c. Sales strategies- The phase witnesses the translation of goals into actions.
d. Tactical plans- In short, they are more specific action plans. Tactical plans clarify the assignment of responsibilities and mention the deadlines for a project.
e. Implementation- Plans are actually executed at this stage
f. Control- The step is all about comparing the actual outcomes with planned results.
There are certain activities that need to well execute so that the soundness of a sales organization is maintained. The effectiveness of a sales organization depends upon how well the concerned executives within the organization forecasts sales and takes appropriate decisions regarding sales territory development.
Q.39. Explain the relation between sales and finance!
Ans. The relationship between the sales executives and the executives of finance and accounts department is crucial as it is the sales team assisting the finance department by furnishing sales estimates for the company budget and develop sales department’s budgets.
The finance department aids the sales department by providing rapid credit checks on prospective accounts and they also keep sales people informed about the customers’ credit standings. It has been often reported that there are some salespeople who are more interested in obtaining orders than in collecting amounts due that results in a tendency to grant credit to below-average risks.
The credit terms should be set to permit their use as selling points. There is requirement for close coordination and communication to strike a balance between individual interests of sales people and the best interests of the company they are serving.
Traditionally, it has been found that the executives of the sales department rely on the accounting department for billing customers, handling payroll computations and providing data for sales analysis etc. but then with the development of holistic management information systems in companies the performance of the above functions have shifted from the accounts department.
Q.40. What is the relation between sales and purchase?
Ans. The sales executives share a crucial relationship with the executives of the purchasing department and they have been found to cooperate each other in three distinct ways. First, the sales department provides purchasing with sales estimates so that adequate stock of raw materials, fabricating parts and other items can be procured in advance for production purposes.
Second, the executives of the purchase department have been found to inform the sales executives regarding material surpluses and shortages. This way sales emphasis can be changed with respect to products made from these materials.
Third, data on sales department needs are furnished suitably so that purchases can be on advantageous terms by the purchase department. Often the executives of the two departments have been found to coordinate their efforts by buying as much as possible from customers and selling as much to suppliers.
Marketing Management Important Questions Answers
Ans. Personal selling is used to meet the five objectives of promotion in the following ways:
1. Building Product Awareness:
A common task of salespeople, especially when selling in business markets, is to educate customers on new product offerings. In fact, salespeople serve a major role at industry trades shows.
Sales Promotion where they discuss products with show attendees but building awareness using personal selling is also important in consumer markets. As we will discuss, the advent of controlled word-of-mouth marketing is leading to personal selling becoming a useful mechanism for introducing consumers to new products.
2. Creating Interest:
The fact that personal selling involves person-to-person communication makes it a natural method for getting customers to experience a product for the first time. In fact, creating interest goes hand-in-hand with building product awareness as sales professionals can often accomplish both objectives during the first encounter with a potential customer.
3. Providing Information:
When salespeople engage customers a large part of the conversation focuses on product information. Marketing organizations provide their sales staff with large amounts of sales support including brochures, research reports, computer programs and many other forms of informational material.
4. Stimulating Demand:
By far, the most important objective of personal selling is to convince customers to make a purchase. In the Selling Process tutorial we will see how salespeople accomplish this when we offer detailed coverage of the selling process used to gain customer orders.
5. Reinforcing the Brand:
Most personal selling is intended to build long-term relationships with customers. A strong relationship can only be built over time and requires regular communication with a customer.
Meeting with customers on a regular basis allows salespeople to repeatedly discuss their company’s products and by doing so helps strengthen customers’ knowledge of what the company has to offer.
Q.42. Discuss the relation between sales and public relations!
Ans. The executives of the sales department have often been found to work closely with the public relations department. Public relation is consulted on various moves taken by the sales department that may have public relations repercussions.
The sales department executives have often required to relay information secured through contacts with various publics to the public relations department so that they can chalk suitable policies to be followed by the sales executives.
Q.43. What are the factors affecting selection of advertising agency?
Ans. Selection of a suitable advertising agency in not an easy task. For instance, there are around 360 recognised advertising agencies currently operating in India. All of these may not be suitable for all products.
According to Prof. J. E. Littlefield and Prof. C.A. Kirkpatrick, “the relationship between the advertiser and the agency is one of wedding for life time. Like a selection of life partner, selection of agency should be done with much exploration and through investigation so that both will not repent at leisure. Each must know the idea, the philosophy, the beliefs and the principles of other. Each must be willing to compromise up to a point because partnership is a matter of give and take to guarantee long standing relations based on tolerance and better understanding”. Therefore, while making choice of the advertising agency the advertiser should keep certain factors into consideration.
The following are main factors which should be kept in mind while selecting an advertising agency:
i. Suitability – The agency should be suitable enough to satisfy the needs of the client. It must be able to create attractive, convincing, interesting, effective and result-oriented sales message.
ii. Agency Infrastructure – The agency should have sound and established infrastructure to suit the advertiser.
iii. Previous Track Record – The agency should have successful performance record. The previous record must be of completing work of clients well in time with full satisfaction.
iv. Image of Agency – Another factor determining selection of agency is its image. The agency should command good public image along with good reputation in the field.
v. Size and Adequacy of Staff – Another factor which must be taken into consideration while selecting an agency is the size and adequacy of the staff in it. The size of the agency should be large enough to handle the work promptly and effectively. The agency must have the team of experts in different fields such as copywriters, artists, photographers, etc.
vi. Rate charged – Rate charged by the agency from its client for its services also determines the choice of agency. The rate charged by the agency should be reasonable to suit the pocket of the clients.
Q.44. What are the advantages and disadvantages of personal selling?
Ans. There are a number of advantages of personal selling, which are mentioned as follows:
a. Allowing flexibility in communication by maintaining a direct contact with customers
b. Tailoring a message about die product or service in an apt manner
c. Taking immediate and direct feedback from customers
d. Targeting specific and general markets and customers
Following are some disadvantages of personal selling:
a. Involves huge costs to reach a large number of audiences
b. Includes a problem of delivering consistent and uniform messages to customers due to variability in sales representatives and their selling styles.
Q.45. Define marketing research!
Ans. Research can be defined as the systematic method of exploring or carrying out detailed investigation to discover new facts or tests and verify old facts relating to different aspects of a particular subject. It is a systematic method of exploring, analysing and conceptualising various facts related to particular subject matter. Basically, the main objective of the research is to find out solutions for various problems faced in different fields.
When the term research is applied to find out solution to various problems of marketing and gather relevant facts it is called Marketing Research. Thus, Marketing Research refers to all the research activities conducted in the field of marketing. The term Marketing Research has been defined in different ways by different experts.
Some of them are:
According to American Marketing Association, Marketing Research is defined as, “The systematic gathering, recording and analysing of data about problem related to marketing of goods and services.”
According to Philip Kotler, Marketing Research is, “The systematic problem analysis, model building and fact finding for the purpose of improved decision making and control in the marketing of goods and services.”
According to Richard D. Crisp, “Marketing Research is the systematic, objective and exhaustive search for and study of the facts relevant to any problem in the field of marketing.”
Marketing Research is thus, the collection, analysis and interpretation of facts and figures related to the marketing. It is the systematic, objective and exhaustive search of various facts relevant to any problem in the field of marketing. On the basis of the information collected, decisions may be taken and control can be exercised. Thus, Marketing Research is the investigation of facts to solve marketing problems.
Q.46. What is sales planning?
Ans. There are various sources of information for sales planning viz. primary data, secondary data, other sources and sales intelligence. When new data is gathered specifically for a project in hand, it is primary data. When data already available is used for some other organizational purpose, the data is secondary data.
MIS or Management Information Systems and DSS or Decision Support systems can be concluded as examples of other sources of sales planning. Internal sales data and product life cycle patterns are some other examples of other sources of information for sales planning.
The information provided by the sales people to an organization based on their on-field experiences is termed sales intelligence. Sales people are expected to provide information for sales planning as they possess vital information about the market that can be used to develop sales forecasts and sales quotas.
Q.47. What are the functions of an advertising agency?
Ans. Advertising agency is an independent body which undertakes the working of planning and preparing advertising campaign for its clients. Being a separate business organisation, it performs a number of functions for its client.
The main functions of an advertising agency are:
1. Selection of Clients:
The first and foremost function of an advertising agency is to contact and select the clients who are willing to advertise their product. Preference should be given to those firms which have sound value, able management and qualitative product.
2. Media Selection:
Another function of advertising agency is to select appropriate media for advertising the clients’ product. In selection of media several factors like – cost, circulation, nature of product, type of customers and needs of the client should be kept in mind.
3. Advertising Planning:
Another important function of advertising agency is to plan advertising programme for its client. For this purpose advertising agency gets detail knowledge about firm’s product, its advertising history, market conditions, channel of distribution, knowledge about competitor’s product and their advertising technique, etc.
4. Creative Function:
The creative function of advertising agency starts when the planning function is over. It includes the preparation of an advertising copy, layout, advertising message, theme of advertising, etc. This function is performed by group of creative people including writers, designers, artists, etc. employed by the advertising agency.
5. Research Function:
Next major function of advertising agency is the research function on behalf of its client. For this purpose the advertising agency gathers and analyses actual information about the product, market, competitor’s strategy and buyers’ habit, etc.
6. Marketing Function:
Advertising agency also performs certain marketing functions such as selecting target customers, designing product packaging and labels, developing channel of distribution, etc. on behalf of clients and advices in this regard.
7. Evaluating Function:
Drafting the advertising copy does not put an end to the agency’s work. It also has to evaluate the benefits of advertising campaign for its clients.
Q.48. What is the importance of packaging?
Ans. Some of the major significance of packaging can be detailed as follows:
i. Packaging can make a product more convenient to use or store, easier to identify or promote or to send out a message.
ii. It can make the important difference to a marketing strategy by meeting customers’ needs better.
Packaging plays a key role in brand promotion and management. Packaging is of great importance in the final choice the consumer will make, because it directly involves convenience, appeal, information and branding.
iii. The paramount concern of packaging is the reach ability of the product without any damage. No matter where and how the products are transported or shipped, they arrive at the customer’s door in working condition without need of repair or adjustment.
iv. Packaging is especially important in certain industry where future sales may be based largely on the quality, integrity and performance of a company’s previous delivery.
v. Packaging plays an important role as a medium in the marketing mix, in promotion campaigns, as a pricing criterion, in defining the character of new products, as a setter of trends and as an instrument to create brand identity and shelf impact in all product groups.
Q.49. What are the methods of coordination adopted by a marketing personnel?
Ans. There are basically two types of coordination viz. – formal and informal. Formal coordination among departments is achieved by one or more of three methods. The first method is to build coordination into the organization through the grouping of all the allied activities under a top ranking executive. Under this form of coordination, marketing executives coordinate the operations of departments under them.
The second method is about achieving coordination through the general administrative officers like the president, executive VP or the general manager. Here such executives have been found to coordinate the operations of all company departments. Often it is not about the departments that perform closely related tasks.
It is because of this that the second method is most widely used by companies having a small number of departments. The third method is about using policy, planning and coordinating committees made up of representatives of concerned departments. This is often considered the most ineffective method of coordination.
In the case of informal coordination, departmental heads are found to solve interdepartmental problem informally while it still is being thrashed out through formal mechanisms.
Many companies have been found to prefer informal coordination methods and solutions so developed may or may not be formally adopted later by a coordinating body. At certain times, informal solutions are accepted as tentative and are subject to modification after review by the formal coordinating mechanism.
Sales executives have often been found to report that informal coordinating procedures are more important than formal methods more so in cases where frequent communication is required. However there is a caveat in this context and that is informal coordination poses several problems for a company and its executives.
Marketing personnel must be made aware of the need for coordination. Marketing personnel must also be given the opportunity to understand the roles and responsibilities of other marketing jobs apart from establishing a climate that encourages a continuous and free exchange of ideas.
Q.50. What are the objectives of sales promotion?
Ans. Sales promotion is concerned with those activities which bridge the gap between personal selling and advertising. Its basic principle is to bring in new customer to try the product.
The main objectives of sales promotion are:
i. To increase the sales and encourage repeat purchase of the goods.
ii. To attract new customers by offering better incentives.
iii. To help in establishing the new product in existing and new market.
iv. To stabilize a fluctuating sales trend.
Philip Kotler Marketing Management Questions And Answers
Q.51. Define personal selling!
Ans. Personal selling refers to face-to-face selling in which a sales representative tries to convince the customer to purchase a product by explaining or demonstrating its features. Personal selling helps organizations to keep in touch with their customers at a personal level.
It is one of the most effective and expensive methods of marketing communication. In personal selling, a sales representative tries to persuade customers to buy the products by telling them the value, features, and benefits of a product or service.
The size and nature of an organization determines its product lines. Therefore, the role of personal selling is also determined by the size and nature of the organization. Large-scale organizations produce a large quantity of products and need extensive selling as compared to small-scale organizations. In the personal selling method, the emphasis is given on improving the relationship of sales people with existing and prospective customers of the organization.
The organizations also conduct employee reward programs to foster the desirable behavior of their sales teams with their clients and customers. Personal selling helps marketers to receive immediate feedback from customers. In addition, being an expensive tool, it is mostly used in case of high cost products focusing on limited markets.
Q.52. What is the difference between price and pricing?
Ans. Amongst the major elements of marketing mix, pricing holds a key place. A right product at right place with effective communication cannot make a sale possible until and unless it is suitably priced. Unlike, other elements of marketing-mix, price is quantitative in nature. It is the only element that generates revenue for the firm. Other elements like product, place and promotion are cost element. Price is a sharp tool in the hands of the marketer by which he can attract the consumers and meet the competition.
Growth and survival, prosperity and profitability, brand image and firm’s image is influenced to a great extent by pricing decisions. The decision regarding price are influenced by a host of factors such as, production cost, demand and supply, nature and type of competition, government rules and regulations, legal constraints product, channel of distribution, promotion etc.
Price and pricing are different terms. While pricing is the function of translating into quantitative terms the value of product or services by the marketing manager before it is offered for sale, price is the exchange value of any product or service, which can be expressed in the form of money. It is the amount one pays for a good or service or an idea. Pricing is the art of translating into quantitative terms the value of the product to customers. Price must be such that it is highly perceptible to customers as it significantly affects their buying decisions.
The importance of pricing normally varies from one industry to another. For some products, price is a determinant factor in buying while for others it is an influencing factor. Though in modern times, non-price factors play a crucial role in buying decisions, price has in no way occupied a less significant place.
Price refers to the value of a product which a buyer is willing to pay and the seller is willing to accept. In this way, the level of satisfaction both of the buyer and the seller is greatly influenced by the price.
According to D.W. Cravens, G.E. Hills and R.B. Woodruff “Pricing is the process of setting objectives, determining the available flexibility, developing strategies, setting prices and engaging in implementation and control”.
According to W.J. Stanton, M J. Etzel and B.J. Walker “Price is the amount of money and/or other items with utility needed have acquired a product”.
Thus, the term price is relative in terms of variables in the entire marketing programme. It is the sum total of every cost related to the product, plus the profit margin of the seller.
Q.53. What are the objectives of marketing research?
Ans. The basic objective of the marketing research is to facilitate the decision making process.
The other objectives are:
The very bases of planning depend upon marketing research. The formulation and evaluation of planning and its components is done through marketing research.
2. Problem Solving:
The main objective of marketing research is to find solutions to the problems of marketing, related to different aspects like product, place, promotion, pricing, competition, etc.
3. Reducing Cost:
Systematic marketing research helps in avoiding the wrong decisions by the firm. Research helps the firm in smoother operations of the business which reduces the cost. Various costs like selling, advertising, distribution, promotion, etc., can be reduced with the help of marketing research. Research brings market closer to the customer and thus, helps in reducing the costs.
4. Survival and Growth of the Firm:
The survival of the firm depends to a large extent on marketing research. Marketing research helps in identifying the competitors’ strength, estimating potential buying power, firm’s position in the market and accordingly provides suitable information for appropriate decisions. Thus, the firm can survive. The growth of the firm depends upon exploring new markets and introduction of new products, which can be done through marketing research.
5. Introduction of New Product:
Introduction of new product is a difficult task. For successful launch of the product, it is necessary that the markets are studied through marketing research. Marketing research is used to find out suitable avenues and place for the new products. It reveals the various opportunities of new markets and methods to reach the market.
6. Market Orientation:
The objective of the marketing research is to help the firm to produce those goods and services which consumer wants. It sees that the goods reach the market quickly and easily.
Q.54. What are the merits and demerits of branding?
Branding as a product decision is beneficial to both consumers and producers.
i. It helps in identifying the product.
ii. It helps in differentiating the product from rival’s product.
iii. It ensures a good quality product to the customers.
iv. Easy recognition of the product is possible through branding in stores and shops
v. Purchase of a branded product provides psychological satisfaction to the consumers.
i. It provides the product a distinct identity.
ii. Seller gets a competitive advantage over other rival products.
iii. A good brand name helps in introducing a new product in the market.
iv. Brand loyalty amongst the consumers helps the company to cut down its marketing cost.
v. Seller gets a higher price, as the brand has a higher perceived value.
i. Brand development is a costly process and therefore branded products are costly.
ii. Too many branded products, many times confuse the consumers.
iii. Once the brand is established, seller may bring down the quality and standard of the product.
i. Seller is forced to maintain the quality and standard of the branded products otherwise buyers will switch to other brands.
ii. It is necessary for the produce to invest sufficient resources in promoting the brand name.
Q.55. What are the features of marketing research?
Ans. Various Features of Marketing Research are:
(1) Marketing Research is a Continuous Process:
Marketing Research is a continuous process as markets are complex and dynamic; and new problems keep on confronting the managers. The advantage of marketing research will be available to marketer as well as consumer when problem are kept under study in continuous manner.
(2) It has Vast Scope:
The scope of marketing research is very vast. It encompasses various aspects of marketing viz. introduction of new product, exploring new markets, analysing competitors’ position, evaluation of consumer preference, evaluating buyer behaviour, selection of channels, choice of selling techniques, formulating advertising strategy, sales promotion measures, etc. Thus, it can be said that the scope of marketing research is wide and comprehensive.
(3) It is Scientific in Nature:
Marketing research is conducted in a scientific manner. Various marketing problems are studied in a systematic manner. First appropriate data is collected objectively, further the collected data is suitably analysed and finally interpretations are drawn which provides comprehensive picture of the situation and related solutions.
(4) It Act as a Tool for Managerial Decision Making:
Marketing research is a part of marketing information system. It helps in managing all areas of management in general and marketing in particular. Marketing research provides valuable guidelines for managerial decisions. Management understands the marketing problem through the information provided by the marketing research. It also suggests suitable solutions to the problems.
(5) It is Beneficial to Both the Business Units and Consumers:
Marketing research provides benefits both to the firms and consumers. Business units utilize marketing research as a tool for solving their various problems. This helps them in smooth functioning, which raises their capability to effectively serve the market.
This further increases their profit performance and goodwill in the market. Consumers are benefited as they get the goods and services as per their requirements. This is because the firm producers goods only after extensive research of the market conditions and the needs and wants of the buyer.
Q.56. What are the essentials of a good brand name?
Ans. Following are the essentials of a good brand name:
1. Easy to Pronounce and Remember:
A good brand name should be short, simple and easy to pronounce and remember. This is because customers come from different cultural backgrounds and they may not be able to pronounce certain names and thus may be hesitant to use those products. Illiterate people may have the same problem. Easy to pronounce words can be easily remembered e.g. Woodland, Liberty, Bata, Surya etc.
2. Match with the Product and its Use:
A good brand name should suggest about the product, its uses, quality performance, nature etc. e.g. Nescafe Tea, Vicco Vajardanti.
3. It should be Legally Protected:
A good brand name should be legally protected under the law. It should not be offensive, obscene or negative.
4. It should be Distinctive:
A good brand name should be distinctive, unique and different from the existing brand names. This helps in better differentiation of the product e.g. Sony, Onida, Philips, Karbon etc.
Q.57. Define Promotion!
Ans. After developing and pricing the product the next important task of the marketing manager is to formulate a suitable promotional strategy so as to inform the potential customers about the product and persuade them to buy the product. In common practice selling and promotion are used as synonyms but in real sense they differ a lot.
While the selling is concerned with the transfer of title of goods from seller to purchaser, promotion, on the other hand includes all those activities which stimulate the demand of the customers such as advertising, personal selling, publicity and sales promotion.
Promotion can serve to the organization directly as well as indirectly. It directly facilitates exchange by communicating information about the organization’s goods, ideas and services to its target market. While indirectly it facilitates exchanges by communicating information about the various activities of the company to current and potential customers and society in general. The overall aim of promotional strategy is to communicate a range of messages to the customers or distributors, so that the product can be sold.
According to Philip Kotler, “Promotion encompasses all the tools in the marketing mix whose major role is persuasive communication.”
According to Edward and Kelly, “Promotion is the co-ordination of all sellers initiated efforts to set up channels of information and persuasion to facilitate the sale of a goods or service or accept an idea”.
Promotion can thus be defined as means of communicating a range of information to the customer so as to attract them and to motivate them to buy the product. It directly and indirectly facilitate the exchange of goods through different tools like advertising, sales promotion, personal selling and publicity.
Q.58. What are the features of personal selling?
Ans. The essential features of personal selling are as follows:
(i) Personal Selling Involves Persuasion of Customers:
A salesman must have the ability to convince the people to buy his product. The customer is not to be pressurised, but influenced favourably by the salesman. Thus, salesmanship is the skill of handling people and persuading them to buy a certain product or service.
(ii) Personal Selling Involves Wining of Buyer’s Confidence:
Modern salesmanship aims at educating the customers and providing a solution to his problems. This helps in winning his confidence. Misrepresentation, cheating and dishonesty by the salesman can’t help him to win the buyer’s confidence for ever.
(iii) Personal Selling Involves Providing Information:
Salesmanship is an educative process. It tells people the ways in which they can satisfy their needs. Salesman provides information about products available, their broad features and their uses and utility to the customers.
(iv) Personal Selling Aims at Mutual Benefit:
Salesmanship is a two- way process. It results in benefits not only to the sellers but also to the buyers. It helps in solving the problems of the buyers and satisfying their needs. Customer satisfaction leads to increase the profitable sales volume for the salesman.
Q.59. What are the objectives of promotion:
Ans. i. To inform the customer about the nature and type of the product; its benefits; its price; features and availability.
ii. To persuade the consumer to buy the product by encouraging switching of brand; changing perception; attitude and brief about product.
iii. To remind the consumer about their need and availability of the product to satisfy their need.
iv. To counter competition through better product, better availability and multiple uses of the product and differentiating it from competitor.
v. To build favourable image about the organization through better quality; technology and better service.
Marketing Management Question Bank With Answers
Q.60. What is Labeling?
Ans. Package labeling is any written, electronic, or graphic communications on the packaging or on a separate but associated label. It includes certain information on the label of a product when it is distributed in specific ways. For example, labels of food products sold in retail outlets must contain information about its ingredients and nutritional value.
Symbols Used on Packages and Labels:
Many types of symbols for package labeling are nationally and internationally standardized. For consumer packaging, symbols exist for product certifications, trademarks, proof of purchase, etc. Some requirements and symbols exist to communicate aspects of consumer use and safety. Examples of environmental and recycling symbols include – Recycling symbol, Resin identification code, Bar codes (below), Universal Product Codes, etc.
Q.61. Define marketing environment!
Ans. Organizations cannot exist in a vacuum. Every firm has to operate in the environment which surrounds it. Each organization is a part of larger system consisting of multiple forces which are interrelated and interacting with each other.
This environment provides threats and opportunities to organization, and it is the task of manages to continuously adjust to these changing conditions, only then it can survive and grow in the market. Environment can be described as everything that is external or outside, the organization. It is also the sum-total of numerous forces within which every enterprise has to operate. These forces include both controllable and uncontrollable forces.
According to Philip Kotler “a company’s marketing environment consists of the sectors and forces outside of the marketing that affect marketing management’s ability to develop and maintain successful transactions with its target consumers”.
Thus, an organization’s marketing environment includes all such forces which have an impact on the firms marketing policies, marketing decisions and marketing activities. Since the changes in the environment are very fast, it is of utmost importance that firms maintains strict vigil on its environment through marketing research and that is why environmental study has become the first step in strategic planning of many organization.
62. What are the limitations of product life cycle?
Ans. The following limitations of the concept of PLC may be noted:
(i) It is very difficult to determine the particular stage in which a product is.
(ii) The determination of length of each stage in the life cycle is a complicated process.
(iii) It is not necessary that all stages can be applicable to every product.
(iv) Product life cycle alone cannot be a device for marketing success.
The life cycle model can lead marketers into thinking that products are born with a predetermined life span – which they will sell for a period of time and then inevitably go into decline. But well managed products can live for decades. For example, Procter and Gamble’s Ivory soap was introduced in 1879. By adapting the marketing mix as market conditions changed, P&G kept the brand healthy for over 130 years.
63. What is product life cycle?
Ans. Products, like human beings, have a limited life. They are created to fulfill a need. When a firm is able to fulfill a need better than its rivals, it gains momentum and speed. Such products grow quickly. Both profits and market share would improve quickly, and begin to mature after a while when rivals begin to hit back.
Finally, products see the end of the road, when customers get disenchanted. They stop buying the product and the product ceases to exist. A new product, thus, progresses through a sequence of stages from introduction to growth, maturity and decline. This sequence is known as product life cycle (PLC).
To say that a product has a life cycle—according to Philip Kotler is to assert three things:
a. Products have a limited life,
b. Product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller,
c. Products require different marketing, financing, manufacturing, purchasing, and human resource strategies in each life cycle stage.
64. How are products classified?
(i) Durable Goods – Durable goods are tangible goods that normally survive many uses such as refrigerators, TVs.
(ii) Non-Durable Goods – Non-durable Goods are tangible goods normally consumed in one or a few uses, such as soft drinks or soaps. Since these goods are frequently purchased, they need to be heavily distributed and advertised to build a preference over competition.
(iii) Services – Services are intangible, inseparable, variable and perishable products, for example, a haircut, legal advice etc.
(b) Consumer Goods:
This classification is done on the basis of shopping habits.
(i) Convenience goods are purchased frequently, immediately and with a minimum effort, for example, soft drinks, tissue rolls, soaps etc.
(ii) Shopping goods are the goods that the consumer characteristically compares on bases like suitability, quality, price, style etc., for example, clothes, kitchen appliances etc.
(iii) Speciality goods have unique characteristics or brand identification for which a sufficient number of buyers are willing to make a special purchasing effort, for example, Cars, men’s suitings etc.
(iv) Unsought goods are those goods that the consumer does not know about or does not normally think of buying, for example, Encyclopedias, smoke detectors etc.
(c) Industrial Goods:
Classification is done on the basis of their relative cost and how they enter the production process.
(i) Materials and parts are the goods that become a part of the manufacturer’s product completely, for example, raw materials like wheat, cotton, jute, petroleum etc., and manufactured materials are parts like iron, yarn, tyres, small motors etc.
(ii) Capital items are long-lasting goods that facilitate in developing or managing the finished product, for example, factories, offices, generators, drill presses.
(iii) Supplies and business services are short-term goods and services that facilitate in developing or managing the finished product, for example, paint, nails, brooms, coal, writing paper, repair services etc.
65. What are the limitations of marketing research?
Ans. The marketing research is not without its share of limitations:
1. Marketing Research cannot provide complete answer to the problems because there are many intervening variables which are difficult to control.
2. Some marketing problems do not lend themselves to valid research conclusions due to limitations of tools and techniques involved. There are many intangible and subjective variables operating which are difficult to be measured.
3. In a fast changing environment, the data collected become obsolete soon and the research findings based on them will become little use.
4. It only provides a base for predicting future events; it cannot guarantee with any certainty their happening.
5. Marketing research involves more time, effort and high cost. But it is very often said that marketing research is cheaper than costly marketing mistakes.
66. Explain the role of marketing!
Ans. Marketing was considered as a societal, economic process through which products and services were exchanged between buyers and sellers and included activities that preceded the existence of money and a market economy. While the underlying meaning of marketing has remained the same, development of institutional and centralised structures in the global market has upgraded the role of marketing today.
The role of marketing can be further explained considering its role in a firm and in an economy as discussed below:
1. Role in a Firm:
Marketing ensures consistent level of revenue generation by strategically determining target markets and customers. It attempts to determine the nature and requirements of customers and accordingly, enables a business to plan for production scheduling, purchase of raw materials, inventory management, financing sources, distribution, warehousing and delivery of products/services to the final or end- consumer.
2. Role in an Economy:
With a customer in mind, marketing attempts to improve the standard of living of people. Marketing encourages several institutional systems, government or private sector, to adopt new technologies, innovation, foster creativity and information dissemination systems. It also helps restore the resources of an economy by maintaining healthy competition among citizens and stakeholders without creating wastes. An economy that emphasises less on marketing can be addressed as a weaker or an underdeveloped economy.
67. What is relationship marketing?
Ans. Relationship Marketing is defined as “an organizations efforts to develop a long term, cost effective link with individual customer for mutual benefit.” Rather than focusing on a shorter sale, the sales representative tries to establish a long term bond, and rather than just selling, the sales department works with marketing to use techniques like data base marketing, message differentiation to different target markets and tracking of promotional effects to improve the relationship.
Relationship Marketing is simply a method of selling products and services by building up a relationship with customers. It begin with the clear understanding of who your customers are, what are their values, what they want to buy, how they prefer to interact with you and how they expect to serve them.
The ultimate outcome of relationship, marketing is building a strong marketing network. A marketing network consists of the company and its supporting stake holders-customers, employees, suppliers, distributors, retailers, ad agencies and others with whom it has built mutually profitable business relationships. Today most of the relationship marketing research is being done in services marketing.
Relationship marketing was first defined as a form of marketing developed from direct response marketing campaigns which emphasizes customer retention and satisfaction, rather than a dominant focus on sales transactions.
68. What is the importance of relationship marketing?
Ans. Importance of Relationship Marketing can be summarized as follows:
(i) Customer relationships are the lifeblood of every good company. Relationships between a company and their customers, distributors, employees, referral sources, are vital to continued, sustained growth and stability.
(ii) Loyal relationships with these valued individuals make for a strong bottom line. With well- planned relationship marketing efforts, like a greeting card campaign using system that can impact retention and will impact the bottom line.
(iii) According to customer relationship management experts, companies can increase revenue by 50% if they retain only 5% more of their customers. Business owners tend to be driven, both financially and philosophically, to make cold calls, pursue new contacts, and acquire new customers.
(iv) Regardless of how effective the customer retention efforts are, some relationships will inevitably break down. For various reasons, certain customers will suspend their relationship with business.
(v) Repairing a broken relationship is more efficient than trying to build one from scratch. But many companies make the mistake of attempting to re-acquire lost customers in the same way that they acquire new ones.
Today, most marketers are seeking more than just a one-time exchange or transaction with customers. The focus of market driven companies is on developing and sustaining relationship with their customers.
This has led to a new emphasis on relationship marketing, which involves creating, maintaining and enhancing long-term relationship with individual customers as well as other stake holders for mutual benefit.
69. What is the importance of CRM?
Ans. Importance of CRM can be summarized as follows:
(i) CRM is basically a methodology and software that helps an enterprise to manage customer relationships in an efficient way.
(ii) CRM includes all business processes like sales, marketing and service that serve the customer in everyday business activities. What happens in CRM is that an enterprise builds a customer database that describes the customer in detail so that management, sales persons, customer service people and customers can access information, match customer needs with product plans and give excellent customer service.
For this, it is essential to gain the trust of customers through more personalized services. CRM basically helps in gaining the trust of customers through more efficient customer service.
(iii) CRM understands and manages the needs of an organization’s current and potential customers. Identifying and meeting customer needs is the main objective of customer relationship management. CRM works to achieve excellent customer service. This is fundamental of CRM implementation.
(iv) Effective CRM delivers this personalized service that customer expect with its quick response what comes from an efficient customer database system. CRM makes integration of every area of business that touches the customer.
For Example – Marketing, sales, customer service, etc. are possible mainly through its integration of the people, process and technology of the organization.
Building loyalty with customers is gained as a result of CRM implementation as it enhances value to both customer and company. CRM also serves to bring about process, organization and technical change. It enables a company to manage its business activities in a more efficient manner around customer behaviour.
70. What is the scope of CRM?
Ans. Scope of Customer Relationship Management:
1. Customer Relationship Management is an upright concept or strategy to solidify relations with customers and at the same time reducing cost and enhancing productivity and profitability in business.
2. An ideal CRM system is a centralized collection all data sources under an organization and provides an atomistic real time vision of customer information.
3. A CRM system is vast and significant, but it be can implemented for small business, as well as large enterprises also as the main goal is to assist the customers efficiently.
4. Wangling this kind of relationship with customers is not easy to manage and it depends on how the systematically and flexibly a CRM system is implemented or integrated. But once it’s accomplished it serves the best way in dealing with customers.
5. In turn customers feels gratitude of self-satisfaction and loyalty which results in better bonding with supplier and hence increasing the business.
6. A CRM system is not only used to deal with the existing customers but is also useful in acquiring new customers.
7. Customer Relationship Management strategies have given a new outlook to all the suppliers and customers to keep the business going under an estimable relationship by fulfilling mutual needs of buying and selling.
71. What are the features of CRM?
Ans. Customer Relationship Management is a strategy which is customized by an organization to manage and administrate its customers and vendors in an efficient manner for achieving excellence in business.
It is primarily entangled with following features:
a. Customers need
b. Customers response
c. Customer satisfaction
d. Customer loyalty
e. Customer retention
f. Customer complaints
g. Customer service
72. What is Customer Relationship Management (CRM)?
Ans. Customers are the most valuable resource and heart of the business. Customer Relationship Management (CRM) is a term which is not only used by business organizations today to maintain such good relationships with their present and old customers but the terminology is now being used by almost any type of organization to create a beneficial environment for them and all in today’s era of competition. Customer Relationship Management places the customer at the center of the organizations’ universe.
Some of the definitions of CRM are:
CRM is a process or methodology used to learn more about customers’ needs and behaviours in order to develop stronger relationships with them.
CRM is a business approach that integrates people, processes, and technology to maximize the relations of an organization with all types of customers. CRM helps in understanding the customer better, which enable organizations to effectively customize their products and service offerings according to the customer needs in order to retain customers and increase customer’s loyalty and satisfaction.
Customer Relationship Management (CRM) is a path to identify, acquire and retain customers who are the organization’s greatest assets.
“Customer Relationship Management is the establishment, development, maintenance and optimization of long-term mutually valuable relationships between consumers and organizations”.
73. What are the benefits of CRM?
Ans. There are large numbers of benefits of customer relationship management. It allows organizations not only to retain customers, but enables more effective marketing, creates intelligent opportunities for cross selling and opens up the possibility of rapid introduction of new brands and products.
To be able to deliver these benefits, organizations must be able to customize their product offering, optimize price, integrate products and services and deliver the service as promised and demanded by the customer base. Keeping the customer happy is obviously one way of ensuring that they stay with organization.
Some of the benefits obtained from an effective, integrated customer relationship management approach include:
a. Reduced costs, because the right things are being done.
b. Increased customer satisfaction, because customers are getting exactly what they want.
c. Ensuring that the focus of the organization is external.
d. Growth in numbers of customers.
e. Maximization of opportunities.
f. Increased access to a source of market and competitor information.
g. Highlighting poor operational processes.
h. Long-term profitability and sustainability.
74. What are the disadvantages of consumer cooperatives?
Ans. Consumer Cooperatives are not successful because:
i. Lack of consumers’ interest
ii. Lack of finance
iii. Absence of experts in managing the organisation.
iv. Impersonal and discourteous attitude towards consumers by the employees.
v. Bureaucratic management.
75. What are the types corporate retailing?
Ans. Corporate Retailing is a new type of retailing which has come into existence due to severe criticism against wholesalers and various kinds of middlemen.
There are two types of corporate retailing viz.:
1. Retailers’ cooperatives, and
2. Consumers’ cooperatives.
1. Retailers’ Cooperatives:
The chief characteristic of these cooperative societies is group buying rather than group selling. They make bulk purchases and therefore they get the merchandise at a lower cost. In India, this system is not prevalent, probably because the retailers are spread out. Moreover, in the case of food items, the government agencies play a dominant role and the retailers are virtually absent. Even if they try to form societies, they are controlled.
2. Consumers’ Cooperatives:
A Consumers’ cooperative is a retail business owned and operated by ultimate consumers who purchase and distribute goods and services to the members only. The consumers form cooperative groups for the purpose of opening retail stores through which their own needs and the needs of those who choose to patronise their outlets may be supplied.
There are certain principles of these consumer cooperatives like Open membership to anyone, Democratic Control as each member has only one vote irrespective of the number of shares held. Members are allowed purchase bonus on the basis of their purchases from the society. All sales are made at existing market rates that too only on cash basis.
76. What is a super market? What are its features and advantages?
Ans. Super Market is a large self-service outlet that largely concentrates on selling food related products with relatively less assortments with a focus on a specific product category. The main categories which are retailed are food, groceries, small utensils, cosmetics, stationery items, gift items, for example, Reliance fresh, More, Food Bazaar etc.
Features of Super Markets:
(i) They are located near residential places.
(ii) They use heavy advertisements and mass display of merchandise.
(iii) No credit facilities are offered.
(iv) Normally do not employ salesmen and hence are self-service stores.
Advantages of Super Markets:
(i) Perfect freedom is enjoyed by the customers. No pressure selling is possible.
(ii) Shopping time is considerably reduced.
(iii) Enjoys economies of large scale operation.
(i) The large and extensive areas required for super-markets are not easily and cheaply available.
(ii) The products which require explanation for proper use cannot be dealt through the super markets.
(iii) Customer services are practically absent.
77. What are the advantages of consumer cooperatives?
i. Because of service motive the cost of operating is kept to the minimum.
ii. Better quality goods are sold.
iii. Elimination of all costly equipment and ornamentation of the store.
iv. Need not always be located in busy places.
v. No credit is allowed, hence no problem of bad debts.
vi. It is a check on monopoly and wasteful competition. During product scarcity, equitable distribution takes place, so black marketing is checked.
78. What are the advantages and disadvantages of chain store system?
Ans. There are certain advantages and disadvantages of chain store system:
(i) Lower selling price, due to economies of bulk-buying, operations, etc.
(ii) Economies in advertising – Common advertisements covering all the units are feasible and this reduces expenditure.
(i) Inflexible in practise – Multiple shops deal in standardised products only. It creates inflexibility in providing wide variety of products.
(ii) Various customer services like home delivery, credit facility, product on demand etc. are unavailable in chain stores.
79. What are the benefits of online marketing to Indian retailers?
Ans. (i) Lower costs – Marketers need not maintain a store and incur costs of rent, insurance and utilities. They can produce digital catalogues for much less costs than cost of printing and maintaining paper catalogues.
(ii) Flexibility – Companies can quickly add products to their existing list and change prices and description at will.
(iii) Sizing Audiences – Marketers can know how many people visited their online sites and how many stopped at what particular steps on the site. This information can help the marketers improve their offers and advertisements.
(iv) Relationship Building – Online marketers can talk with their customers and learn much from them. They can also upload useful information such as reports and newsletters onto their system, on which the customers can comment.
(v) Affordability – Both small and large firms can afford Online Marketing. There is no real limit on the advertising space.
(vi) Speed – Information access and retrieval are instant and quicker as compared to mail and fax.
80. What are Chain Stores?
Ans. A chain store system consists of four or more stores which carry the same kind of merchandise, are centrally owned and managed and are usually supplied to from one or more central warehouses. It is a very common scenario as usually all big retail companies open multiple stores.
They have the following features:
(i) A retail chain consists of multiple retail outlets owned and operated under the same ownership.
(ii) It usually offers the same variety of merchandise across different stores.
(iii) Store operations and retail practices are standardised across stores.
(iv) It usually has a centralised purchasing and distribution system.