MODULE MKT 2013 MQF 2.0 VERSION

Principles of Marketing (MKT 2013)

2) OPTIONAL PRODUCT PRICING
• the pricing of optional or accessory products along with a main product
• For example, Refrigerators come with optional ice makers
• Another example is the airline industry will charge for some options like guaranteeing
a window seat or keeping a row of seats next to each other. Yet again, these budget
airlines are key users of this optional pricing approach where the airlines charge you
extra for every additional luggage or extra legroom.

3) CAPTIVE PRODUCT PRICING
• setting price for products that must be used along with a main product, such as blades
for a razor and film for a camera
• Most of the times, the captive product pricing
is higher than the core product. Companies
tend to provide a lower price for the core
product in order to attract the customers. At
the same time, they provide a higher captive
product pricing in order to increase their
profits.
• The best captive product pricing example is
Gilette. Where in the Razor Mach 3 or Mach 4
cost almost equivalent to the captive items.
The razor might be bought once a year but the blades have to be bought every
quarter at the least.

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4) BY-PRODUCT PRICING
• setting a price for by products in order to make the main product’s price more
competitive.
• Many times, a production process results in
the creation of Leftover products. These
leftover products may not be as valuable
as the main product, but they too have
some economic value. Thus, these leftover
products, known as by-products, can be
sold off as independent products in the
market.
• For example, Sugar beet molasses after
sugar refining – can be used as a fodder for
animals, while sugarcane molasses is also used as flavoring and coloring agent in some
foods.

5) PRODUCT BUNDLE PRICING
• combining several products and
offering the bundle at a reduced price
• In a bundle pricing, companies sell a
package or set of goods or services for
a lower price than they would charge if
the customer bought all of them
separately. Common examples include
option packages on new cars, value
meals at restaurants and cable TV
channel plans. Pursuing a bundle
pricing strategy allows you to increase your profit by giving customers a discount.
• For example, hotels sell specially priced packages that include room, meals and
entertainment.

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PRICE ADJUSTMENT STRATEGIES

Companies must adjust their basic prices to account for differences in customers and
situations.
There are seven price adjustment strategies:

1. Discount and allowance pricing,
2. segmented pricing,
3. psychological pricing,
4. promotional pricing, geographical pricing,
5. dynamic pricing and
6. international pricing.

Discount and Allowance Pricing
▪ Most companies adjust their basic price to reward customers for certain responses,
such as the early payment of bills, volume purchases and off-season buying.
▪ Discount and allowance pricing can take many forms: Discounts can be granted as
a cash discount, a price reduction to buyers who pay their bills promptly. Typical
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payment terms look like this: “2/10, net 30”, meaning that payment is due within 30
days, but the buyer can deduct 2 per cent if the bill is paid within 10 days. Also, a
quantity discount can be given, which is a price reduction to buyers who buy large
volumes. A seasonal account is a third form of discount, being a price reduction to
buyers who buy merchandise or services out of season.
▪ Allowances refer to another type of reduction from the list price. For instance, trade-
in allowances are price reductions given for turning in an old item when buying a new
one. Especially in the car industry, trade-in allowances are very common. Promotional
allowances refer to payments or price reductions to reward dealers for participating
in advertising and sales support programmes.

Segmented Pricing

▪ Often, companies adjust their basic prices to allow for differences in customers,
products and locations. In short, adjusting prices to account for different segments.

▪ In segmented pricing, the company thus sells a product or service at different prices
in different segments, even though the price-difference is not based on differences in
costs.

▪ Under customer-segment pricing, different customers pay different prices for the same
product or service. For instance, museums and theatres may charge a lower admission
for students and senior citizens. Under product-form pricing, different versions of the
product are priced differently, although the difference is not due to cost differences.

▪ Under location-based pricing, a firm charges different prices for different locations,
although the cost of offering each location is the same. For instance, in the USA, state
universities charge higher tuition fees for out-of-state students, and theatres vary their
seat prices because of audience preferences for certain locations. Finally, under time-
based pricing, the firm varies its price by the season, the month, the day or even the
hour. This is commonly applied in the hotel business.

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▪ Of course, several conditions must be met for this price adjustment strategy to work.
The market must be segmentable, and segments must show different degrees of
demand. In addition, the cost of segmenting and reaching the single parts of the
market cannot exceed the extra revenue obtained from the price differences
created.

▪ It is most important that segmented prices reflect real differences in customers’
perceived value.

Psychological Pricing

▪ It refers to pricing that considers the psychology of prices, not simply the economics.
Indeed, the price says something about the product.

▪ For instance, many consumers use price to judge quality. A RM100 bottle of perfume
may contain only RM3 worth of scent, but people will be willing to pay the RM100
because the high price indicates that the product is something special.

▪ However, this does not work forever. When consumers can judge the quality of a
product by examining it or by calling on past experience with it, price is less used to
judge quality. But when they cannot judge quality, price becomes an important
signal. Just to give an example: who is the better lawyer? One who charges RM50 per
hour or one who charges RM500? It would need a lot of research and experience to
answer this question objectively. Most of us would simply assume that the higher-
priced lawyer is the better one.

▪ In fact, for most purchases, consumers simply do not have all the skill or information
they need to work out whether they are paying a good price. Often, time, ability or
inclination to research different brands or stores, compare prices and get the best
deals is lacking. Therefore, psychological pricing may be the most powerful one of the
price adjustment strategies.

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Promotional Pricing

▪ Promotion pricing calls for temporarily pricing products below the list price, and
sometimes even below cost, to increase short-run sales. Thus, companies try to create
buying excitement and urgency.

▪ Promotional pricing could take the form of discounts from normal prices to increase
sales and reduce inventories. Also, special-event pricing in certain seasons to draw
more customers could be used. Even low-interest financing longer warranties or free
maintenance are parts of promotional pricing.

▪ However, promotional pricing can have adverse effects. If it is used too frequently and
copied by competitors, price promotions can create customers who wait until brands
go on sale before buying them. Or the brand’s value and credibility can be reduced
in the eyes of customers. The danger is in using price promotions as a quick fix in difficult
times instead of sweating through the difficult process of developing effective longer-
term strategies for building the brand. For that reason, price adjustment strategies such
as promotional pricing must be treated with care.

Geographical Pricing – Price Adjustment Strategies

▪ The next one of the price adjustment strategies is geographical pricing. In
geographical pricing, the company sets prices for customers located in different parts
of the country or world. Should the company risk losing the business of more-distant
customers by charging them higher prices to cover the additional shipping costs? Or
should the same prices be charged regardless of location?

▪ There are five geographical pricing strategies:
1. FOB-origin pricing: goods are placed free on board a carrier, the customer thus
pays the freight from the factory to the destination. Price differences are the
consequence.
2. Uniform-delivered pricing: the company charges the same price plus freight to all
customers, regardless of their location. Thus, there are no geographical price
differences.
3. Zone pricing: the company sets up two or more zones. All customer within a zone
pay the same total price, the more distant the zone, the higher the price.

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4. Base-point pricing: the seller designates some city as a base point and charges all
customers the freight cost from that city to the customer. This can level the
geographical price differences if a central base-point is selected.

5. Freight-absorption pricing: the seller absorbs all or part of the freight charges to get
the desired business. Price differences are thus eliminated.

Dynamic Pricing

▪ Dynamic pricing refers to adjusting prices continually to meet the characteristics and
needs of individual customers and situations. If you look back in history, prices were
normally set by negotiation between buyers and sellers.

▪ Thus, prices were adjusted to the specific customer or situation. Exactly at that point,
dynamic pricing starts. Instead of using fixed prices, prices are adjusted on a day-by-
day or even hour-by-hour basis, taking many variables into account, such as current
demand, inventories and costs. In addition, consumers can negotiate prices at online
auction sites such as eBay.

International Pricing

▪ The last one of the major price adjustment strategies is international pricing.
Companies that market their products internationally must decide what prices to
charge in the different countries in which they operate.

▪ The price that a company should charge in a country can depend on many factors,
involving economic conditions, competitive situations, laws and regulations, and the
development of the wholesaling and retailing system.

▪ In addition, consumer perceptions and preferences may vary from country to country,
calling for differences in prices. Also, the company might have different marketing
objectives in different markets, which require changes in pricing strategy.

▪ Without doubt, costs play an important role in setting international prices. Higher costs
of selling in another country, which is the additional costs of operations, product
modifications, shipping and insurance, import tariffs and taxes, and even exchange-
rate fluctuations may create a need to charge different markets in the various
markets.

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After having investigated the 7 price adjustment strategies, it is clear that their application
depends on the specific situation the company is in. However, all of the price adjustment
strategies can also do harm and damage if executed in the wrong way. Therefore, careful
preparation, analysis and execution is an absolute prerequisite. Only then, the price
adjustment strategies will lead to a short- and long-term increase in sales and continuous
success.

(Source from https://marketing-insider.eu/price-adjustment-strategies)

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CHAPTER 8 : PLACE (DISTRIBUTION)

LEARNING OBJECTIVES:
1. Define Place (Distribution)
2. Describe the Marketing Channels for consumer goods.
3. Explain the roles and types of Wholesaling
4. Explain the roles and types of Retailing

DEFINITION OF PLACE (CHANNEL OF DISTRIBUTION)

Another element of Marketing Mix is Place. Place is also known as channel, distribution, or
intermediary. It is the mechanism through which goods and/or services are moved from the
manufacturer/ service provider to the user or consumer.
“A channel of distribution comprises a set of institutions which perform all of the activities
utilised to move a product and its title from production to consumption”. (Bucklin - Theory of
Distribution Channel Structure (1966).

MARKETING CHANNELS FOR CONSUMER GOODS

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Channel 1 is called a "direct-marketing" channel, since it has no intermediary levels. In this
case the manufacturer sells directly to customers. An example of a direct marketing channel
would be a factory outlet store. Many holiday companies also market direct to consumers,
bypassing a traditional retail intermediary - the travel agent. Direct selling between producer
and consumer has been a feature of the marketing of Avon Cosmetics and Dell Computers.

The remaining channels are "indirect-marketing channels".

Channel 2 contains one intermediary. In consumer markets, this is typically a retailer. The
consumer electrical goods market in the UK is typical of this arrangement whereby producers
such as Sony, Panasonic, Canon etc. sell their goods directly to large retailers such as Comet,
Dixons and Currys which then sell the goods to the final consumers. Supermarket chains
exercise considerable power over manufacturers because of their enormous buying
capabilities.
E.g. Tesco, Wal-Mart and Econsave.

Channel 3 contains two intermediary levels - a wholesaler and a retailer. A wholesaler
typically buys and stores large quantities of several producers’ goods and then breaks into
the bulk deliveries to supply retailers with smaller quantities. For small retailers with limited order
quantities, the use of wholesalers makes economic sense. This arrangement tends to work
best where the retail channel is fragmented - i.e. not dominated by a small number of large,
powerful retailers who have an incentive to cut out the wholesaler. A good example of this
channel arrangement in the UK is the distribution of drugs.

Channel 4 is a long channel which is sometimes used by companies entering the foreign
market. They may delegate the task of selling the product to an agent /jobber (who does
not take title to the goods). The agent contacts wholesalers or retailers and receive
commission on sales. Overseas sales of books are sometimes generated this way.

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Distribution Strategy

There are three broad options -
intensive, selective and exclusive
distribution:

1) Intensive distribution
aims to provide saturation
coverage of the market by
using all available outlets.
For many products, total
sales are directly linked to
the number of outlets used
(e.g. cigarettes, beer).
Intensive distribution is
usually required where
customers have a range of
acceptable brands to
chose from. In other words, if one brand is not available, a customer will simply choose
another.

2) Selective distribution
involves a producer using a limited number of outlets in a geographical area to sell
products. An advantage of this approach is that the producer can choose the most
appropriate or best-performing outlets and focus effort (e.g. training) on them.
Selective distribution works best when consumers are prepared to "shop around" - in
other words - they have a preference for a particular brand or price and will search
out the outlets that supply.

3) Exclusive distribution
is an extreme form of selective distribution in which only one wholesaler, retailer or
distributor is used in a specific geographical area.

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Types Of Intermediaries

There are four generally recognized broad groups of intermediaries: agents, wholesalers,
distributors, and retailers

1) Agents/Brokers
Agents or brokers are individuals or companies that act as an
extension of the manufacturing company. Their main job is to
represent the producer to the final user in selling a product. Thus,
while they do not own the product directly, they take possession of
the product in the distribution process. They make their profits through
fees or commissions.

2) Wholesalers
Unlike agents, wholesalers take title to the goods and
services that they are intermediaries for. They are
independently owned, and they own the products
that they sell. Wholesalers do not work with small

numbers of product: they buy in bulk, and store the
products in their own warehouses and storage places until it is
time to resell them. Wholesalers rarely sell to the final user; rather, they sell the products to
other intermediaries such as retailers, for a higher price than they paid. Thus, they do not
operate on a commission system, as agents do.

3) Distributors
Distributors function similarly to wholesalers in that
they take ownership of the product, store it, and
sell it off at a profit to retailers or other
intermediaries. However, the key difference is that
distributors ally themselves to complementary
products. For example, distributors of Coca Cola will not
distribute Pepsi products, and vice versa. In this way, they can maintain a closer relationship
with their suppliers than wholesalers do.

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4) Retailers
Retailers come in a variety of shapes and
sizes: from the corner grocery store, to
large chains like Wal-Mart and Target.
Whatever their size, retailers purchase
products from market intermediaries and
sell them directly to the end user for a
profit.

WHOLESALING

DEFINITION
Business that buys goods from manufacturers and that sells goods, usually in large quantities
to retailers, who in turn sell them to the end user. Unlike agents and brokers, wholesaler take
ownership of the products.

Functions Of Wholesalers

1. Bulk buying
▪ Wholesalers buy bulk quantity goods of certain product lines from producers. They
work as buying agents for customers. Besides identifying customers and their needs,
wholesalers also become well informed of market and sources of supply. The
customers know wholesalers as the representative of some limited producers of
certain product lines.

2. Mass Selling
▪ Another function of wholesalers is mass selling. Wholesalers work as sales-force for the
producers. They deliver goods to retailers and industrial users at lower cost than the
cost the producer would need if they directly delivered or supplied. Wholesalers help
in mass selling of goods by supplying to several retailers living scattered in different
places.
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3. Dividing or bulk breaking
▪ Wholesalers buy goods in bulk quantity from producers and resell in small quantity to
retailers or industrial users. In the absence of wholesalers, the producers cannot sell
their products to the retailers in bulk quantity on the one and the retailers cannot buy
in bulk quantity to sell to the final consumers on the other. As a result, marketing gets
paralyzed. So, the wholesalers serve both producers and retailers.

4. Transportation
▪ As wholesalers buy goods in bulk quantity, they help producers and retailers minimize
transportation cost. They provide fast delivery services to customers by which
investment in overstock and risk is minimized. Wholesalers create place utility of goods
by transporting them from one place to another with fast speed and skill.

5. Warehousing
▪ Wholesalers perform an important job relating to physical distribution by warehousing
and keeping store of goods. Along with this, they also create and increase time utility
of goods by storing them and maintain proper balance between production and
demand.

6. Financing
▪ Financing is the other important function of wholesalers. They provide credit facility to
retailers or they sell goods to retailers on credit. Doing so, they lessen the burden of the
necessity of capital on the retailers. Generally, producers cannot provide credit facility
to retailers.Wholesalers help producers by buying goods before peak season and
making payment in time. In fact, wholesalers make arrangement of finance for the
producers in the process of sales and distribution of goods.

7. Risk bearing
▪ In the process of sales and distribution. wholesalers bear the risk caused by decline in
demand, fluctuation in prices, consumers' interest, change in fashion and other
factors, If wholesalers' services were not available, the producers themselves would
have to store their goods. As a result, they would have to bear all the risks.

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8. Market information
▪ Wholesalers also provide information about market situation, competitors' strategy
and their market position, information about different goods in markets, customers
and their needs and interest etc. They also provide information about new products ,
competitive activities, special sales programs of producers, price, market situation etc.

TYPES OF WHOLESALERS

1) Merchant Wholesalers
▪ Merchant wholesalers are the ones who buy directly from the manufacturer, store the
product and then sell it to the customer. They might sell in any channel and they are
not restricted to selling to retail only or to online only.
▪ If there is any loss between the buying and selling of the product, it must be borne by
the merchant wholesaler.
▪ Example – A vegetable wholesaler buys produce directly from the farm and stocks it
at his own warehouse. He then sells these products to the local retail outlets or even
to end customers.

2) Full-service Wholesalers – Retail Wholesalers

▪ The full-service type of wholesalers is, as the name suggests, giving full service to the
end retailer. These wholesalers mainly operate in the retail market and sell products to
a reseller.

▪ Example – Samsung wants to expand its operation in region A but it does not have a
sales office in that region. So it appoints a distributor in region A. This distributor is solely
responsible for order picking, delivery, training sales associates, promotions and
everything for the Samsung brand. He is now a full-service wholesaler. However, for
service of the product, there is a different service franchise opened in the same region.

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3) Limited Service Wholesalers
▪ A limited service wholesaler is someone who stocks the products of the company and
sells it in a limited channel. He does not have a large turnover or does not cover all
channels of the company.
▪ Example – Company X wants to sell its products online but it knows that if it allows local
distributors to sell online, there will be a huge price war. As a result, Company X
appoints an exclusive online wholesaler. This online wholesaler has only one job – To
purchase the product and stock it and sell it online. So whenever an order comes from
Amazon or eBay, this wholesaler gives the machine to Amazon or eBay. That’s his only
job.

4) Brokers and Agents
▪ Most commonly observed in the real estate industry or in the chemical markets. A
broker assumes no risk. He has the producer or the manufacturer on one side and he
has the buyer on the other side. The work of the broker is to get the deal done and he
gets a commission on the deal.
▪ Example – A small lab has regular requirement of litmus paper. There is a litmus paper
wholesaler in their area who is a broker for several companies and who arranges any
lab material in bulk. The lab approaches the broker and wants to purchase huge
quantity. The broker then talks to multiple manufacturers and finally, a deal is struck
with one manufacturer. The manufacturer pays 2% commission to the broker for his
work and for bringing the enquiry. Similarly, this broker can pick an order of Beakers,
Petri dishes or any other equipment. He will keep arranging meetings with the right
supplier and keep earning commissions.

5) Branches and mini offices
▪ Although branches and mini offices do not come in the various types of wholesalers,
these are common ways for companies to start selling their products in a region they
are targeting. A branch can also be called a type of wholesaling wherein the branch
directly picks the orders from the end customers in bulk and ensures the supply and
reorders from the customer.

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▪ Example – Paper company like B2B or 3M knows that large companies require a lot of
print paper across the month. These companies then establish branch offices which
also act as the sales office. They pick a bulk order of paper and the company might
transport the complete order from their warehouse to the company.

6) Specialized wholesalers
▪ These are wholesalers who do wholesale of specialized items only. Example – A used
car wholesaler who sells directly to customers or to other used car dealers. He is
specialized in used cars and knows the ins and outs of selling a used car to consumers
or refurbishing the used cars.

RETAILING

DEFINITION
A retail marketing includes set of activities where a retailer buys products from a wholesaler
or manufacturer to sells them to ends users (consumers). In simple words, a retailer is an
intermediary which makes products available to consumers using different channels, for
example, brick-and-mortar retail store, shopping malls, shopping website, automatic vending
machines, kiosks etc.

STORE RETAILING
A retail store means a place where the business is operated, usually by the owner; however,
sometimes operated and owned by the manufacturer or by anyone other than a retailer
within which the merchandise is primarily sold to end users

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Types of retail stores

1) Department Stores:
These sell a wide range of merchandise that is arranged by
category into different sections of the physical retail space. Some
department store categories include shoes, clothing, beauty
products, jewelry, housewares, and more. Examples of
department store retailers include Macy's, Nordstrom, and
JCPenney, to name just a few.

2) Grocery Stores and Supermarkets:
These sell all types of food and beverage products,
and sometimes also home products, clothing, and
consumer electronics as well.

3) Warehouse Retailers:
These are large no-frills warehouse-type facilities stocked
with a large variety of products packaged in large
quantities and sold at lower-than-retail prices.

4) Specialty Retailers:
These specialize in a specific category of products.
Toys ‘R’ Us, Victoria's Secret, and Nike are examples
of specialty retailers.

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5) Convenience Retailer:
These are usually part of a retail location which sells
gasoline primarily, but also sells a limited range of
grocery merchandise and auto care products at a
premium "convenience" price from a brick-and-
mortar store.

6) Discount Retailer:
These sell a wide variety of products that are
often privately labeled or generic brands at
below-retail prices. Discount retailers like Family
Dollar, Dollar General, and Big Lots will often
source closeout and discontinued merchandise
at lower-than-wholesale prices and pass the
savings onto their customers.

7) Mobile Retailer:
These use a smartphone platform to process retail
transactions and then ship the products directly to the
customer.

8) Internet Retailer:
These sell from an Internet shopping website and ship the
purchases directly to customers at their homes or
workplaces and without all the expenses of a traditional
brick-and-mortar retailer. They usually sell merchandise for
a lower-than-retail price.

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NON-STORE RETAILING

▪ On the other side, non-store retailing involves selling merchandise outside the boundaries
of a retail facility. The retailing takes place through television, internet, video, automatic
vending machines direct marketing and direct selling.

▪ Any sale happening to the end customer which is not happening through a traditional
retail channel or through a physical retail space is known as Non-store retailing.

▪ Amazon is a perfect example of Non-store retailing. Amazon does not have its own retail
space from where it sells the goods to customers. It directly sells from its website and does
not sell via a retail space. Hence, it is known as a Non-Store Retailer.

Types of Non-store Retailing
1) Direct Sales / Direct Retailing

▪ One of the oldest forms of non-store retailing is the
Direct sales type. The best way to describe this would
be Door to Door salesmen who do cold calls to homes
and offices to sell their products.

▪ This type of non-store retailing involves manual
involvement and might involve usage of good selling
techniques and personal selling skills.

▪ Amway, Tupperware and several other multi-level marketing firms actually use direct
selling to good effect. They have chains of distributors and end sellers who sell to the
end customers. Because the end seller generally knows the end buyer very well, the
sale is high and these companies are case studies in the world of direct selling or non-
store retailing.

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2) Direct Marketing
▪ Unlike Direct selling, Direct marketing is on the rise
especially since the adoption of the internet. It
was initially used in the form of direct mail services
where letters and coupons were sent to the end
customer. Later on, once internet started, Email
marketing was very successfully used where
companies spent a huge amount of designing
and sending emails to a large number of customers.
▪ After emails, it went to websites and we could see Amazon, eBay, Alibaba and other
websites grow and sell products by the truckloads. None
of these sellers had a single store. All of it was online. Finally
today, we can see that even small businessmen have their
online store and a website and they sell their products not
only through a physical presence but regularly take part
in non-store retailing via social media or via their own
websites. A form of electronic commerce that enables
consumers to shop from anywhere using web based
applications.

3) Automatic Vending
▪ Automatic vending machines are being used
very smartly in the FMCG segment.
▪ Cold Drink, Newspaper, Beer, Chewing gums,
chocolates and even pizza is nowadays sold
through an automatic vending machine.
▪ These are just straightforward examples of non-
store retailing where you don’t need a store of
200 square feet to sell a pizza or cold drinks.

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CHAPTER 9 : PROMOTION

LEARNING OBJECTIVES:
1. Define promotion and its roles
2. Explain the marketing communication process
3. Describe the promotion mix

DEFINITION OF MARKETING COMMUNICATION MIX (PROMOTION MIX)

▪ Promotions is the marketing process ‘that informs, persuades and reminds buyers on
a product.

▪ A promotion mix is the particular combination of promotional methods that a firm uses
in its promotional campaign to reach a target market.

▪ It is refer to the specific mix of advertising, personal selling, sales promotion and public
relations a company uses to pursue its advertising and marketing objectives.

▪ This chapter will examines the promotional methods of advertising, personal selling,
sales promotion, and public relations.

THE MARKETING COMMUNICATION PROCESS

The communication process
itself consists of nine elements –
sender, receiver, encoding,
decoding, message, media,
response, feedback, and
noise.

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Each of these is discussed one by one.
Sender:
The party or person who is sending the message to the other party or person is the sender. For
example Tata Motors Ltd. is the sender of message.

Encoding:
The conversion of thought into the meaningful symbols is called encoding. For example Tata
has got the advertisement designed by blending video, sound, graphics, jingle etc. to give
the advertisement a deliverable form.

Message:
The group of symbols transmitted by the sender is called a message.

Media:
The channel of communication through which transfers the message from sender to receiver
is called media. Tata has used electronic medium to disseminate the message by booking
air time on selected T.V. channels.

Decoding:
The conversion of symbols into meaning by the receiver is called decoding. In this example it
is interpretation and meaning that consumer associate while going through the
advertisement of Nano and its contents. The jingle ‘Khushiyon Ki Chaabi” may be interpreted
by receivers as harbinger of good time and prosperity.

Receiver:
The sent message received by another person or party is called the receiver. In this case all
people who are prospects of Tata Nano and watch the advertisement are receiver.

Response:
The reaction shown by the receiver before the message is called response. Different receivers
could behave differently; few may go to the Tata Motors showroom and enquire about the
Nano, some others may check the Nano through internet while others may call for a test
drive. It is quite possible some of them do not react at all.

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Feedback:
The portion of the response of the receiver that is sent back to the sender is called feedback.
What viewers of Nano advertisement feel and speak to dealers, to others consumers about
the car, the media reports all goes back to the company as valuable input and helps the
company to improve and connect in a better manner to market.

Noise:
The unplanned distortion during the process of communication due to which the receiver
understands the wrong meaning of the original message is called noise. Noise is disturbance
that naturally occurs in the process resulting in receiver getting different message then that
originally intended by the company. For example, showing village backdrop in Nano
advertisement could distract consumers making them feel Nano as low quality car having no
buyers in cities.

The effective message is that where the process of encoding is matched with the decoding
of messages. Moreover the message sent should consist of words and symbols that are known
to the receiver.

THE PROMOTION MIX

A promotion mix is a set of

different marketing

approaches that marketer

develop to optimize

promotional efforts and

reach a broader

audience. The marketer’s

task is to find the right

promotion mix for a

particular brand.

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The elements of promotion mix as follows:

1) Advertising

▪ Advertising is any paid form of nonpersonal presentation and promotion of ideas, goods
or services by an identified sponsor.

▪ Advertising is any paid form of non-personal communication sent through a mass
medium by an organization about its products or services. media such as television,
radio, the internet, direct mail, outdoor advertising, transit (vehicle) advertising,
newspapers, magazines.

Setting Advertising Objectives
An advertising objective is a specific communication task to be achieved with a specific
target audience during a specified period of time.

Advertising objectives fall into four main categories:

(a) To inform e.g. tell customers about a new product . Informative advertising is the

delivery of advertising messages through mass media with the intent

of informing a target market about the benefits offered by a product

or innovation

(b) To persuade e.g. encourage customers to switch to a different brand. Persuasive

advertising is a component in an overall advertising strategy that

seeks to entice consumers into purchasing specific goods or services,

often by appealing to their emotions and general sensibilities

(c) To remind e.g. remind buyers where to find a product. Brief messages designed

chiefly to keep a product in the mind of the consumer once the

product is already familiar.

(d) To compare The purpose of this objective is to point out a brand’s unique benefits

compared to the competition.

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Types of Advertising

1) Online Advertising
Online advertising or digital advertising as a form in which the message is conveyed via the
internet. For every website ads are a major source of revenue. Advertising online has become
very popular in the last decade and has surpassed the expectations of most of the advertising
experts. 60% revenue of Google is generated from ads and the same goes for Facebook.
Online advertising has become so effective that a particular ad can be targeted to a specific
person of specific age of a specific location on a specific time. In terms of pricing advertising
online is very cheap compared to all other forms of advertising.
The major disadvantage of online advertising is at times people do not click on the ads and
the message does not reach the targeted audience. Also setting up online and requires
technical expertise which may not be possible for everyone. Digital Advertising and Online
Advertising is one of the fastest growing Types of Advertising.

2) SMS advertising
SMS marketing is the major source of mobile advertising. Users are informed about the
product or service in 160 or fewer characters. This was when the internet was not available
on mobile phones. Once mobile phones got access to internet all internet advertising flowed
to mobile and experts suggest that mobile advertising will be the only major advertising
strategy for almost every company in near future.
The reach from mobile advertising is fast personalized and effective and just like online
advertising it comes for a very little cost. The difference between online ads and mobile
advertising is that online ads can be accessed from any device like computer or laptops,
mobile advertising is only via mobile.

3) Television Ads
About a decade ago television was the most popular form of advertising. Events like the super
bowl, international cricket games, Olympics where the top attractions for advertisers to
advertise about their products. To some extent, it still is effective for most advertisers but with
the advent of online streaming of television on mobiles, marketers have now moved from

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television to online as their preferred advertising medium.
Another form of television and infomercial. An infomercial is a specially designed
advertisement for information and awareness of the public. The term information comes from
the combination of words information and commercial. Ads of almost all products are shown
on television. Although it is costly, Television Ads are till date one of the best types of
advertising and have the most fantastic reach for a large audience.

4) Ads in Theatres
The advertisements in movie theatres before all the movies start or during the intimation are
called movie ads. These are one of the costliest forms of advertising since people cannot skip
it change the channel or move away. Many of the companies have started opting for movie
ads since it ensures that the entire message reaches the audience and unlike online
advertising, the audience cannot interfere till the advertisement is over. Movie ads are
different from placement ads.

5) Product Placement
Product placement is called covert advertising wherein a product is quietly embedded in the
entertainment media. Most of the times there is no mention of the product although the
audience sees the product. Movies are the major places where product placement is done.

They could be a few TV shows where product placement has been used but the effectiveness
is observed more in movies than TV shows.
Will Smith is seen playing with his Converse shoes in the movie I Robot. Several brands of beer
are advertised in How I met your Mother. In popular shows like Family Guy, humorous
advertisements are placed all over the TV show like Red Bull, Sony, Apple, Microsoft, Samsung
and many more.
With so many people subscribing to Netflix and Amazon prime, Product placement is
increasingly being used and is one of the popular Types of Advertising.

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6) Radio
Radio advertisements are the ones that are broadcast it through radio waves and heard on
radios all over the place. These mostly consist of audible advertisements or jingles. While some
consider this to be an ineffective form of advertising there are still many followers listen to the
radio every morning.
Advertisement for almost every product can be found on the radio. Every single feature and
benefit of the product have to be explained on the radio, unlike other sources where the
customer can see the product for inside.

7) Print Advertising
Printing is the slowly decreasing form of advertising. There were days before the evolution of
television when printing was a major source of advertising and considered to be one of the
most effective media. But since the explosion of television usage, print advertisements have
taken a backseat.

8) Magazine advertising
These are also known as periodical advertisements in which a weekly fortnightly or monthly
magazine are used for advertising. Ads are printed in the corners or on the entire page of the
magazine and sometimes even an extra page might be inserted simply for advertising. Ads
are categorized and segregated according to the magazine category for example business
magazines will feature ads from Rolex watches, while entertainment magazines will feature
ads from high branded apparels.

9) Brochures or handouts
Brochures are specific advertising materials used to promote a particular product usually
given at a point of sale are handed out at different locations. Brochure advertisings do not
use any base like magazine advertising and are independent.

10) Newspaper advertising
Newspapers display a huge number of ads in them, right from matrimonial services to job
hunt, to the notifications and circulars from the Governments. Newspapers were the
extremely popular form of advertising in the early 20th century and to some extent it still is. But

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with the advent of the Internet and digital advertising newspapers have moved to tablet pcs
and that is where the advertisements are now being displayed.

11) Outdoor advertising
Outdoor advertising consists of displaying large posters banners or hoardings with the
advertisement. These are displayed on the side of the road, on the glass of large buildings, or
on specifically targeted places that have huge inflow from the public. While earlier printed
ads were used for outdoor advertising recently, they have been replaced by digital boards.
These boards display the advertising without the hassle of getting ads printed.

12) Outdoor Blank Space Advertising
It is a newer form of advertising which ensures a large reach of audience. Occupying the
empty spaces for advertisements is known as space advertising. Examples include the spaces
of metros, buses, cabs, flight seats & movie theatre seats (where advertising is done on the
removable seat covers) etc. Since a huge number of people use these facilities and they
have a long shelf life, they have proved very effective.

2) Public Relations and Publicity

Public relations is defined as “building good relations with the company’s various publics by
obtaining favorable publicity, building up a good corporate image, and handling or
heading off unfavorable rumors, stories, and events”

Publicity is also a way of mass communication. It is not a paid form of mass communication
that involves getting favourable response of buyers by placing commercially significant news
in mass media. Publicity is not paid for by the organisation. Publicity comes from reporters,
columnists, and journalists. It can be considered as a part of public relations. Publicity is a part
of broad public relations efforts and activities.

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Functions of Public Relations
1. Build and maintain a positive image
2. Inform target audiences about positive associations with a product, service, brand, or
organization
3. Maintain good relationships with influencers—the people who strongly influence the
opinions of target audiences
4. Generate goodwill among consumers, the media, and other target audiences by
raising the organization’s profile
5. Stimulate demand for a product, service, idea, or organization
6. Head off critical or unfavorable media coverage

Public Relation Tools

Public Relations Examples
Technique Role and Description

Generate positive news Press release, press kit, and interview
leading to a news article about a new
Media Relations coverage about the product launch; press conference

organization, its products,

services, people, and activities

Influencer/Analyst Maintain strong, beneficial Product review published by a
Relations relationships with individuals renowned blogger; company profile
who are thought leaders for a by an industry analyst; celebrity
market or segment endorsement

Provide information about the Organization’s annual report;
organization, showcase its
Publications and expertise and competitive newsletters; white papers focused on
advantages
Thought Leadership research and development; video

case study about a successful

customer

Events Engage with a community to User conference; presentation of a
present information and an keynote address; day-of-community-
interactive “live” experience service event
with a product, service,
organization or brand

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Public Relations Examples
Technique Role and Description

Sponsorships Raise the profile of an Co-sponsoring an industry conference;
organization by affiliating it with sponsoring a sports team; sponsoring a
specific causes or activities race to benefit a charity

Generate recognition for Winning an industry “product of the
year” award; nominating customer for
Award Programs excellence within the an outstanding achievement award

organization and/or among

customers

Crisis Management Manage perceptions and Oversee customer communication
contain concerns in the face of during a service outage or a product
an emergency situation recall; execute action plan associated
with an environmental disaster

3) Sales Promotion

Sales promotion tend to be thought of as being all promotions apart from advertising,
personal selling, and public relations. For example the BOGOF promotion, or Buy One Get
One Free. Others include couponing, money-off promotions, competitions, free accessories
(such as free blades with a new razor), introductory offers (such as buy digital TV and get free
installation), and so on. Each sales promotion should be carefully costed and compared with
the next best alternative.
Activities or materials that offer consumers a direct incentive to buy a good or service.
Example include coupons, sweepstakes, contests, free samples and rebates. Another variant
of sales promotions is visual merchandising refers to point of sale displays, the promotional
aspects of packaging, an other means of drawing attention to a product.

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Sales Promotion Tools

1. Samples
▪ Samples are one of the most important tools of sales
promotion. Samples are defined as offers to
consumers of a small amount of a product for trial.
Free samples are given to consumers to generate
their interest in the product. Samples help consumers
verify the quality of the product.
▪ Samples are delivered at the doors of consumers.
They are also sent by mail or given to customers in the
retail store itself. Sometimes, samples are attached to
another product.
▪ Although sampling is effective, producing numerous samples of a product is quite
expensive. Moreover, distributing samples to customers also involves expenditure.

2. Coupons
▪ A coupon is a certificate that fetches buyers
a saving when they purchase a specified
product. Coupons are generally issued along
with the product. They entitle the holder to
either a specified saving on a product or a
cash refund.
▪ Coupons are designed to:
i. introduce a new product
ii. to promote the sale of an established product
iii. to sell a product in large sizes
iv. to stimulate customers to switch brands; and
v. to encourage repeat sales.
▪ Coupons are used for consumer convenience goods. They may be distributed door
to door, by mail or they may be inserted in packages. Sometimes, coupons may be
part of magazine or newspaper advertisements.

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3. Demonstration
▪ Demonstration is required when
products are complex and of a
technical nature.
▪ Customers are educated as to
how to make proper use of the
product.
▪ Demonstration of products
induces customers to buy. Demonstrations are provided free of cost.

4. Contests
▪ Contests are the promotion events that give
consumers the chance to win something
such as cash, trips or goods. Contests are
conducted to attract new customers. They
introduce new product by asking the
prospects to state the reasons for the
purchase of the product.
▪ The buyer purchases the product and submits the evidence of purchase with entry
form for contest. Entry forms are duly filled by the buyers. A panel of judges selects the
best and buyers are given prizes.

5. Cash refund offer
▪ Cash refund offers are rebates allowed from
the price of the product. It is an offer to refund
part of the purchase price of a product to
consumers who send a proof of purchase to
the manufacturer.
▪ Moreover, if the purchaser is not satisfied with
the product, the whole price or part of it will be
refunded. Cash refunded offer is stated on the
package.

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6. Premium
▪ Premium refers to goods offered either free or at low
cost as an incentive to buy a product. A premium
may be inside the package, outside it or received
through mail. The reusable package itself serves as a
premium.
▪ Premium is generally offered for consumer goods such
as soap, toothpaste, etc. Premium may be of several
kinds — direct premium, reusable container free in mail premium, a self liquidating
premium, trading stamps, etc.
▪ Direct premium can be inside the pack or outside it. A reusable container can be
reused after the product is reused. Free in mail premium means a premium item will
be sent by mail to consumers who present proof of purchase to the manufacturer.
▪ A self liquidating premium is the extra quantity offered at the normal price. Trading
stamps are given by the seller to consumers. These are redeemable at the stamp
redemption centres.

7. ‘Price off’ offer
▪ Goods are sold at reduced prices during slump season.
Reduction in prices stimulates sale of goods.

8. Consumer sweepstakes
▪ A sweepstakes calls for consumers to submit their
names for a draw. Names of consumers are included
in a list of prize winning contest. The lots are drawn
and the winners get prizes.

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9. Buy back allowances
▪ Allowances are granted to buyers on the basis of their
previous purchases. In other words, buy back
allowances are given for new purchases, based on
the quantity of goods bought previously.

4) Personal Selling

Personal Selling is an effective way to manage personal customer relationships. The sales
person acts on behalf of the organization. They tend to be well trained in the approaches
and techniques of personal selling. However sales people are very expensive and should only
be used where there is a genuine return on investment. For example salesmen are often used
to sell cars or home improvements where the margin is high.

It refers to Person to person communication with potential customers in an effort to inform,
persuade, or remind them to purchase an organization’s products or services.

Commonly used in industry where vendors meet with clients to inform them of potential
products or services.. This type of selling, professional selling usually requires a large amount
of information about the product or services and the customer’s needs. It also requires a lot
of follow up after a sale to insure the client is satisfied and will reorder. Example: as you
walk into a furniture store, you are approached by a salesperson to assist you with your
purchase.

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Steps in the Selling Process
There are many steps involved in the process of personal selling: prospecting, pre-approach,
approach, sales presentation, handling objectives, and follow up.

Prospecting
The first step of the personal selling process is called ‘prospecting’. Prospecting refers to
locating potential customers. There are many sources from which potential customers can
be found: observation, social contacts, trade shows, commercially-available databases,
commercially-available mail list and cold calling.

Pre-Approach
The nest step in the personal selling process is called the ‘pre-approach’. The pre-approach
involves preparation for the sales presentation. This preparation involves research about the
potential customers, such as market research. Research is useful in planning the right sales
presentation. During the pre-approach the salesperson may also plan and practice their sales
presentation.

The Approach
The next step in the personal selling process is called the ‘approach’. The approach refers to
the initial contact between the salesperson and the prospective customer. During this stage
the sales person takes a few minutes for “small talk” and get to know the potential customer.
The goal of the approach is to determine the specific needs and wants of the individual
customer, as well as allowing the potential customer to relax and open up.

Sales Presentation
The next step in the personal selling process is called the ‘sales presentation’. The sales
presentation involves the salesperson presenting the product or service, describing its qualities

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and possibly demonstrating features of the product. Ideally the sales presentation will be
individualized to match the needs and desires of the potential customer.

Handling Objectives
In some cases, after receiving the sales presentation, the potential customer will have some
questions or concerns. In order to secure a sale, the salesperson must address these questions
or concerns; this step is referred to as ‘handling objectives.’

Closing the sale
The next step in the personal selling process is referred to as ‘closing the sale’. ‘Closing the
sale’ refers to finalizing the sale and persuading the potential customer to make the purchase.
During the ‘closing the sale’ step, prices and payment options may be negotiated.

Follow up
The final step in the personal selling process is referred to as the ‘follow up.’ The follow up
involves the salesperson contacting the customer after the sale to ensure that the customer
is satisfied. If the customer has any existing issues with the product, the salesperson will address
them. A successful follow up stage of personal selling can be very effective in ensuring repeat
sales, evaluating the effectiveness of the salesperson, and obtaining additional referrals from
the satisfied customer.

5) Direct Marketing

▪ Direct marketing is a form of advertising that reaches its audience directly through multiple
channels including email, direct mail, social media, catalogs, online advertising,
interactive television, etc.

▪ There are two main definitional characteristics which distinguish it from other types of
marketing. The first is that it sends its message directly to consumers, without the use of
intervening commercial communication media. The second characteristic is the core
principle of successful Advertising driving a specific "call to action." This aspect of direct
marketing involves an emphasis on tractable, measurable, positive responses from
consumers (known simply as "response" in the industry) regardless of medium.
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Types of Direct Marketing:

The most common forms of direct marketing are:
▪ Internet marketing
▪ Face-to-face selling
▪ Direct mail
▪ Catalogs
▪ Telemarketing
▪ Direct-response advertising
▪ Kiosk marketing

1) Internet Marketing
▪ The Internet has revolutionized direct marketing for promoting the sale of products
and services to targeted audiences.
▪ Access to the Internet provides users with services in four basic areas:
✓ Information
✓ Entertainment
✓ Shopping
✓ Individual and group communication
▪ Online channels can eliminate geographic considerations. With this capability people
around the world have the same access as the person across the street. Many
businesses that can sell their products and services through downloading, or who can
economically ship those products, have discovered an entirely new way to market.
▪ The Internet makes direct marketing easier, more targeted, more flexible, more
responsive, more affordable, and potentially more profitable than ever. Virtually every
business should seriously consider the Internet as a part of their marketing mix and
determine if it is a viable fit for their direct marketing efforts.

2) Face-to-Face Selling
▪ The most traditional direct marketing involves the in-house sales force personally
contacting potential and established consumers.
▪ Examples of organizations that use face-to-face selling include:
✓ Mary Kay
✓ Avon
✓ Amway

3) Direct Mail
▪ Direct mail is described as sending information about a special offer, product or sale
announcement, service reminder, or some other type of communication to a person
at a particular street or electronic address.
▪ Historically direct mail has existed in the form of printed materials, but CDs, audio
tapes, video tapes, fax mail, email, and voice mail are also used in direct mail
campaigns.
▪ For example, America Online experienced a highly successful campaign through
mailing out CD-ROMs to prospective customers.
▪ Direct mail permits high target-market selectivity; it can be personalized, it is flexible,
and it allows early testing and response measurement to take place.

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▪ A highly selective and accurate mailing list often determines the success of direct mail
efforts to enhance response rates and control costs.

4) Catalogs
▪ Product catalogs are another version of direct mail where the catalogs are the
communication tool.
▪ The most common use of this approach involves featuring a variety of products that
target the needs of a specific audience who have shown a propensity to order from
catalogs.

5) Telemarketing
▪ The process of contacting people on a qualified list to sell services over the phone has
grown in popularity to the point that the average household receives 19 telemarketing
calls each year. Successful telemarketing campaigns depend on a good calling list,
an effective script and contact structure, and well-trained people that are
compensated and rewarded for making calls that result in sales.
▪ The telecommunications industry, for example, has used telemarketing extensively to
attempt to increase their market share.
▪ This includes:
✓ AT&T
✓ MCI WorldCom
✓ Sprint

6) Direct-Response Advertising
▪ Direct-response advertising is communicating with potential buyers through television,
radio, magazines, and newspapers.
▪ The prospective consumer watches, hears, or reads about the product or service and
initiates a call to a toll-free number to place their order.
▪ Television, for example, offers a wide range of exposure, from a 30-second
commercial to a 60-minute infomercial.
▪ For example: Go Shop, CJ Wow Shop

7) Kiosk Marketing
▪ Customer order machines, versus vending machines that actually provide products,
are another form of direct marketing.
▪ Examples are: your bank’s automatic teller machines (ATMs) placed in convenient
and high traffic areas are another example of kiosk marketing.

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CHAPTER 10 : ADDITIONAL ELEMENTS OF THE MARKETING MIX

LEARNING OBJECTIVES:
1. Define the extended marketing mix.
2. Describe the elements of extended marketing mix (people, process, and physical
evidence) for service organization.

DEFINE THE EXTENDED MARKETING MIX

▪ In the above figure, the product marketing mix are the first four P’s and the next 3 P’s are
added to make the Extended Marketing mix.

▪ This extended marketing mix is also known as the service marketing mix. The services
marketing mix is an extension of the 4Ps framework.

▪ The essential elements of product, promotion, price and place remain but three additional
elements – people, physical evidence and process are included to the 7Ps mix.

▪ The need for the extension is due to the high degree of direct contact between service
providers and its customers, the highly visible nature of the service process, and the
simultaneity of the production and consumption.

▪ Although it is possible to discuss people, physical evidence and process within the 4P
framework (for example, people can be considered part of the product offering), this
extension allows for a more thorough analysis of the marketing elements necessary for
successful services marketing.
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The 4P’s mainly constituted the following 4 elements

▪ Product
▪ Price
▪ Place
▪ Promotions

The extended Marketing mix was brought forward by adding the following 3 elements.

▪ Process
▪ Physical evidence
▪ people.

THE ELEMENTS OF EXTENDED MARKETING MIX

The extended Marketing mix was brought forward by adding the following 3 elements.
Process
Physical evidence
people.

1) People
▪ In the 7P’s, people refer to the staff

of the organization.
▪ People are an essential ingredient

in service provision; recruiting and
training the right staff is required to
create a competitive advantage.
▪ Customers make judgments about
service provision and delivery based on the people representing your organisation.
▪ This is because people are one of the few elements of the service that customers can see
and interact with. Staff require appropriate interpersonal skills, aptitude, and service
knowledge in order to deliver a quality service.
▪ There are staff that will directly deal with customers – either in a sales role or in a customer

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service role. Think about a restaurant as an example, where the quality of service and
interaction is important to the overall experience.
▪ Consequently, customer service training for staff has become a top priority for many
organizations today.

(Source from https://www.learnmarketing.net/)

2) Process

▪ This element of the marketing mix looks at the
systems used to deliver the service.

▪ Imagine you walk into Burger King and order
a Whopper Meal and you get it delivered
within 2 minutes. What was the process that
allowed you to obtain an efficient service
delivery?

▪ Banks that send out Credit Cards
automatically when their customers old one
has expired again require an efficient
process to identify expiry dates and renewal.
An efficient service that replaces old credit
cards will foster consumer loyalty and
confidence in the company.

▪ All services need to be underpinned by clearly defined and efficient processes. This will
avoid confusion and promote a consistent service.

▪ In other words, processes mean that everybody knows what to do and how to do it.
▪ In marketing, process refers to the steps that the consumer needs to go through to acquire

the product.
▪ A good example here is going to a hotel – where the process includes: booking the hotel,

front desk interaction and check in, getting keys, using credit, transfer of luggage, finding
the room and so on.

(Source from https://www.learnmarketing.net/)

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3) Physical evidence
▪ Physical evidence is about where the

service is being delivered from.
▪ It is particularly relevant to retailers

operating out of shops.
▪ This element of the marketing mix will

distinguish a company from its competitors.
▪ Physical evidence can be used to charge a

premium price for a service and establish a
positive experience.
▪ For example all hotels provide a bed to
sleep on but one of the things affecting the price charged, is the condition of the room
(physical evidence) holding the bed. Customers will make judgments about the
organisation based on the physical evidence.
▪ For example if you walk into a restaurant you expect a clean and friendly environment, if
the restaurant is smelly or dirty, customers are likely to walk out. This is before they have
even received the service.
▪ Physical evidence includes any components of the firm that communicates information
about the quality of its offering.
▪ Pieces of physical evidence include signage, business cards, brochures, equipment,
building and retail design, staff uniform, website, advertising, and so on.
▪ For example, many hair salons have well designed waiting areas, often with magazines
and plush sofas for patrons to read and relax while they await their turn. Similarly,
restaurants invest heavily in their interior design and decorations to offer a tangible and
unique experience to their guests.

(Source from https://www.marketing91.com/)

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CHAPTER 11 : ETHICS IN MARKETING

LEARNING OBJECTIVES:
1. Define marketing ethics
2. Explain the importance of ethics in marketing
3. Discuss the common ethical issues associated with products, pricing, promotion, and
place within the marketing mix
4. Recommend solutions to overcome those common ethical issues in marketing mix.

DEFINITION OF MARKETING ETHICS

“Marketing ethics are the moral principles and values that need to be followed during any
kind of marketing communication. They are the general set of guidelines which can help
companies to decide on their new marketing strategies. But then it depends on one’s own
judgement of ‘right’ and ‘wrong’”. (MBA Skool Team, 2018)

Good ethics are a cornerstone of sustainable marketing. In the long-run, unethical marketing
harms customers and society. Because not all managers have moral sensitivity, companies
need to develop corporate marketing ethics policies- broad guidelines that everyone in the
organization must follow. These policies should cover distributor relations, advertising
standards, customers service, pricing, product development and general ethical standards.

Principles of Ethical Marketing
1. Companies can in good conscience do whatever the market and legal systems allow.

Marketers must comply with regulations and standards established by governmental
and professional organizations.
2. Put responsibility not on the system but in the hands of individual companies and
managers. That is mean company must have a social conscience. Companies and
managers should apply high standards of ethics and morality when making corporate
decisions, regardless of “what the system allows”. Marketing professionals abide by

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the highest standard of personal ethics.
3. Each company and marketing manager must work out a philosophy of socially

responsible and ethical behavior. Under the society marketing concept, each
manager must look beyond what is legal and allowed and develop standards based
on personal integrity, corporate conscience, and long-run consumer welfare. All
marketing communications share the common standard of truth.

(Marketing Schools, 2020)

THE IMPORTANCE OF ETHICS IN MARKETING

1) Customer Loyalty
It helps the company to win the trust and loyalty of its customers on the long-term basis
as it is the basic human nature and tendency to go for the brand that is genuine in its
nature, its products and services offered are authentic, and they sell the exact products
and services that are shown during the marketing campaigns and artworks.

2) Long-term gains
Understanding the Importance of Marketing Ethics is not only the long-term goal and
objective of the company but there are various long-term gains attached to following
the same such as customer loyalty, high credibility in the market and in the minds of the
customers, increased market share, enhanced brand value, higher sales, and elevated
revenues amongst others with the company able to accomplish its both short term and
long term objectives in a successful manner.

2) Builds credibility
When the company follows the intricacies and the nuances of the marketing ethics on a
consistent and continuous basis in all it marketing and promotional campaigns, it slowly
and gradually builds its distinctive niche in the market as a genuine and authentic brand
that also results in the factor of credibility building for the company within the industry
amongst its peers, contemporaries, investors, and other stakeholders plus in the minds of
the customers as well.

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3) Leadership
When the company grasps and understands the intricacies of the Importance of
Marketing Ethics and formulates it as one of its crucial objectives, it attains the status of a
leader in the market with the competitive brand trying to benchmark its practices and
strategies owing to the company laying and following the rare path of marketing ethics
that results in the various benefits such as loyal base of customers, higher sales, and
increased market share, working as a source of inspiration for one and all in the market.

4) Satisfies basic human needs and wants
Following the Importance of Marketing Ethics makes the company fulfill and satisfy the
basic human needs and wants of trust, faith, and integrity as these are the basic factors
that the customers look forward from the brands whilst indulging in the purchase of the
products and services offered by the firm. And when the company is able to satisfy the
basic needs and wants of the customers, it will enjoy the long-term benefits such as
customer loyalty, trust in the brand, faith in its offerings, and the word of mouth publicity
that will earn various referrals to the company.

5) Displays rich culture
When the company follows the path marketing ethics, it only enjoys the various benefits
from the external environment of the business but even the internal environment
comprising of the staff and employees is well defined and systematically aligned as it
displays and boasts of the rich and authentic culture. The internal staff is highly motivated
and continuously strives to help the management attains the overall business objectives
as it provides the required impetus to their professional career graph as well. Plus they
take immense pride in working and their association with the company and express the
same to their social circuit that showcases the rich and genuine culture of the firm in the
market

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6) Attracts talent
It helps the company to attract the talented professionals who wish to get associated
with the company as internal employees, vendors or consultants as getting attached
and associated to the firm that understands and follows the Importance of Marketing
Ethics will surely provide the boost to their professional trajectory as well. Plus it helps the
company to attain its aims and objectives in a short period of time and in a successful
manner.

7) Attains financial goals
In order to grow and the expand its business operations, the management of the
company always needs investors and financial partners who provide the required funds
and investments that will facilitate to launch the new line of products in the market, tap
new market locations, and try out innovative marketing and promotion techniques.
Hence, to attain the financial goals, it is vital for the company to understand and follow
the Importance of Marketing Ethics as it gives the firm a tag of the brand that is genuine
in its business operations and offerings

8) Enhanced brand value
The overall market fraternity, competitors, and the customers look up to the company as
the one that follows the marketing ethics in the most dedicated manner, sells what it
displays in its advertisement campaigns, exceed the expectations of the customers, sell
products and services that are high on the realms and objectives of quality, and sets a
new benchmark in the market for the competition to match and follow. All these factors
result in the enhanced brand value of the firm making it the most trustworthy and reliable
brand in the market.

(Bhasin, 2018)

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ETHICAL ISSUES IN MARKETING

1) Ethical Issues in Product

Harmful Products
Harm can be defined as a physical or psychological injury, or damage. So this statementmeans
product that may create injury or damage to the consumer. Some producers did not realize that
their products are unsafe to be used by the consumers, because they are only looking for profit
without thinking of the customers’ safety.

For example in Malaysia, The Health Ministry is advising
the public to stop using and buying three cosmetic
products that have been found to contain scheduled
poison, namely mercury, which can be harmful to
health. The products are Glow Skin White-Brightening
Cream, Glow Skin White-Sun Care and Rzac Beauty
Creme 2. “Mercury is prohibited in cosmetics products
because it can be harmful to health. It can be
absorbed into the body and cause damage to the
kidneys and nervous system. “The substance can also disrupt brain development of young or
unborn children and causes rashes, irritation and other changes to the skin,” As such, sellers and
distributors of these cosmetic products are required to immediately stop sales and distribution of
these products. Consumers are encouraged to check the notification status of a cosmetic
product at the National Pharmaceutical Regulatory Agency (NPRA)’s offical website
www.npra.gov.my or through the “NPRA Product Status” application that can be downloaded
at Google Play Store. (Malay Mail, 2020)

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Planned Obsolescence

▪ Planned obsolescence is a business strategy
in which the obsolescence (the process of
becoming obsolete) of a product is
planned and built into it from its
conception, by the manufacturer. This
negative business strategy is never far from
the minds of companies, which believe
they need to evolve by continuing to
produce and ensure annual manufacturing
of the same product with minor changes to
retain their customer base. (Elsevier B.V., 2021)

▪ Examples of planned obsolescence include: Limiting the life of a light bulb, as per the
Phoebus cartel. Coming out with a new model for a car every year with minor changes.
Short-lasting nylon stockings.

▪ 4 Types Of Planned Obsolescence
There are four main ways in which a company can achieve planned obsolescence:

1. contrived durability,
2. software updates,
3. perceived obsolescence,
4. and prevention of repair.

Companies can use all of the above or a combination of all four. The ultimate goal is to
make you buy products again and again, and that is directly against what we value at
Durability Matters.

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Counterfeit Merchandise
▪ Counterfeits are goods intended to trick consumers who

rely on brand names and logos when deciding what to
buy.
▪ Consumers seek out certain brands because of the
product quality or other features they have learned to
expect from those brands.
▪ Counterfeiters deceive consumers by placing familiar
brand names or logos on fake goods that are not
produced by the brand owner.
▪ These goods may appear safe and legitimate but are manufactured and sold illegally.
When you buy counterfeits, you are not actually getting the product you wanted to buy.

What do counterfeits look like?
▪ Counterfeiters often try to disguise their fake goods with familiar brand names and logos

and trusted certification marks. Some counterfeiters produce copies of genuine products
and copy familiar packaging, box art, or design features.
▪ A growing online trend is the fraudulent use of certification marks, which indicate that goods
meet certain standards, including safety and quality.
▪ Some counterfeiters use fake certification marks on otherwise unbranded goods, while
others use certification marks on counterfeit brand products without authorization from the
appropriate certifying organizations, or the brand owners.
▪ Rayban, Rolex, Supreme and Louis Vuitton are the most
copied brands worldwide, with Nike being the most
counterfeited brand globally according to
the Organization for Economic Co-operation and
Development (OECD). Counterfeit clothes, shoes, jewelry
and handbags from designer brands are made in varying
quality; sometimes the intent is only to fool the gullible
buyer who only looks at the label and does not know what
the real thing looks like, while others put some serious effort
into mimicking fashion details.

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