PU2: Business Studies Chapter 11 Solutions

Chapter 11

Marketing

Part - A

1. State any one Marketing Philosophy or concept.

Ans. The production concept

Also

2. The product concept

3. The selling concept

4. The marketing concept

5. The Societal  marketing concept

(any one can be written)

2. Give an example for the marketing of services.

Ans.

3. Give the meaning of Product?

Ans. Product means goods or services or ‘anything of value’, which is offered to the market for sale. For example, Amul offers a number of food products (Amul milk, ghee, butter, cheese, chocolates, etc.).

4. What is Packaging?

Ans. The act of designing and producing the container or wrapper of a product is referred to as packaging.

5. What is Labelling?

Ans. Labelling is the act of designing the label to be put on the package. Labels provide detailed information about the product, its contents, method of use, etc.

6. State any one feature of convenience goods.

Ans. Convenience goods are purchased at convenient locations, with least efforts and time;

Also

(b). Convenience products have a regular and continuous demand, as these generally come under the category of essential products;

(c). These products have small units of purchase and low prices. For example the eggs are sold at rs. 28 per dozen and the customers purchase them in small numbers;

(d). Convenience products have standardised price as most of these products are branded products;

(e). The competition in these products is high as the supply is greater than the demand. The marketers have, therefore, to heavily advertise for these products; and

(f). Sales promotion schemes or short-term incentives such as sales contests, discount offers, etc play an important role in the marketing of such products.

(any one can be written)

7. What is a Brand?

Ans. A brand is a name, term, sign, symbol, design or some combination of them, used to identify the products—goods or services of one seller or group of sellers and to differentiate them from those of the competitors.

For example, some of the common brands are Bata, Lifebuoy, Dunlop, and Parker.

8. Name any one Distribution Channel.

Ans. Direct distribution channels (zero level) – Manufacturer -> Consumer

Also

Indirect  distribution channels (one level, two level or three level) – Manufacturer -> Retailer -> Consumer

9. What do you mean by Zero Level distribution channel?

Ans.  Zero Level distribution channel is the most simple and the shortest mode of distribution, where the goods are made directly available by the manufacturers to customers, without involving any intermediary.

For example, when a manufacturer sells his goods through his own retail outlets (e.g., Mc Donald, Bata)

Manufacturer -> Consumer

10. What is Publicity?

Ans. Publicity is a non-personal and non-paid form of communication done as a promotional tool by marketers to inform and persuade customers about their products.

In publicity, the information is disseminated by an independent source, e.g., the press in the form of news stories and features.

Part - B

11. What is Marketing?

Ans. The term marketing has been described as performance of business activities that direct the flow of goods and services from producers to consumers. Marketing is not merely a post-production activity. It includes many activities that are performed even before goods are actually produced and continue even after the goods have been sold.

12. Define Marketing.

Ans. Marketing is defined as “a social process by which individual groups obtain what they need and want through creating offerings and freely exchanging products and services of value with others”.Phillip Kolter taking a social perspective.

or

Marketing is defined as “the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organisational goals” by American Management Association  taking a management perspective.

(any one can be written)

13. Define Marketing Management.

Ans. Philip Kolter has defined Marketing management as ‘the art and science of choosing target markets and getting, keeping and growing customers through creating, delivering and communicating superior customer values of management’.

14. State any two features of Marketing.

Ans. 1. Needs and Wants: The process of marketing helps individuals and groups in obtaining what they need and want.

2. Creating a Market Offering: It refers to a complete offer for a product or service, having given features like size, quality, taste, etc; at a certain price; available at a given outlet or location and so on.

Also

3. Customer Value: The job of a marketer is to add to the value of the product so that the customers prefer it in relation to the competing products and decide to purchase it.

4. Exchange Mechanism: the process of marketing involves exchange of products and services for money or something considered valuable by the people.

(any two can be written)

15. State any two examples for the things that can be marketed other than product?

Ans. 1. Services: Insurance, Health Care, Business Process Outsourcing, Security, Easy Bill service, Financial Services (Investment),Computer education, Online Trading.

2. Ideas: Polio Vaccination, Helpage, Family Planning, Donation of Blood (Red cross), Donation of money on Flag Day (National Foundation for Communal Harmony).

Also

3. Persons: For Election of Candidates for Certain Posts.

4. Place:‘Visit Agra – ‘City of Love’, ‘Udaipur – ‘The City of Lakes’, ‘Mysore – The City of Gardens’, ‘When Orisa celebrates, eleven the God JoinIn’.

5. Experience: Customised experiences as Dinner with a cricketer (say Dhoni); Lunch with a celebrity (say Bill Gates or Aishwarya roy) or experience of Balloon riding, mountaineering, etc.

6. Properties: Intangible rights of ownership of real estate in financial property (Shares, Debentures).

7. Events: Sports events (say Olympics, Cricket series), diwali mela, fashion show, music concert, film festival, elephant race (kerala Tourism).

8. Information: Production packaging and distribution of information by organisations such as universities, research organisations, providing information as market information (marketing research agencies), technology information.

9. Organisations: For boosting their public image organisations such as Hindustan Lever, ranbaxy, Dabur, Proctor and Gamble, communicate with people. for example, Phillips says, 'Let's make Things Better’.

(any two can be written)

16. What is Standardization?

Ans. Standardisation refers to producing goods of predetermined specifications, which helps in achieving uniformity and consistency in the output. Standardisation ensures the buyers that goods conform to the predetermined standards of quality, price and packaging and reduces the need for inspection, testing and evaluation of the products.

17. What is Grading of products?

Ans. Grading of products is the process of classification of products into different groups, on the basis of some of its important characteristics such as quality, size, etc. Grading is particularly necessary for products which are not produced according to predetermined specifications, such as in the case of agricultural products, say wheat, oranges, etc. Grading ensures that goods belong to a particular quality and helps in realising higher prices for high quality output.

 

18. How do you describe Marketing Mix?

Ans. Marketing mix is described as the set of marketing tools that a firm uses to pursue its marketing objectives in a target market.

The marketing mix consists of various elements, which have broadly been classified into four categories, (i) Product, (ii) Price, (iii) Place, and (iv) Promotion. These elements are combined to create an offer.

19. What do you mean by Consumer Goods?

Ans. Goods, which are purchased by the ultimate consumers or users for satisfying their personal needs and desires are referred to as consumer goods.

For example, soap, edible oil, eatables, textiles, toothpaste, fans, etc. which we use for our personal and non-business use are consumer goods.

20. Give two examples for Convenience goods.

Ans. 1. cigarettes,

2. ice creams,

Also

3. medicines,

4. newspaper,

5. stationery items

6. toothpaste.

(any two can be written)

21. Name any two examples for Durable Products.

Ans. 1. refrigerator,

2. radio,

Also

3. bicycle,

4. sewing machine and

5. kitchen gadgets

(any two can be written)

22. How do you describe Shopping Products?

Ans. Shopping products are those consumer goods, in the purchase of which buyers devote considerable time, to compare the quality, price, style, suitability, etc., at several stores, before making the final purchase.

For example clothes, shoes, jewellery, furniture, radio, television, etc.

23. State any two functions of packaging.

Ans. (i). Product Identification:  For example, Colgate in red colour, or Ponds cream jar can be easily identified by its package.

(ii). Product Protection: from spoilage, breakage, leakage, pilferage, damage, climatic effect, etc.

Also

(iii). Facilitating Use of the Product: and make it convenient to open, handle and use. For example, Cosmetics, medicines and tubes of toothpastes.

(iv). Product Promotion: For example, a startling colour scheme, photograph or typeface may be used to attract the attention of the people at the point of purchase.

(any two can be written)

24. State any two objectives of Pricing.

Ans. 1. Profit maximisation: Short run – by charging maximum price for its products. And for Long run – by setting lower per unit price so that it can capture a larger share of the market and earn greater profits through increased sales.

2. Obtaining Market Share Leadership: By keeping the price of its products at lower levels so that greater number of people are attracted to purchase the products;

Also

3. Surviving in a Competitive Market: by discounting its products or running a promotion campaign to liquidate its stock; and

4. Attaining Product Quality Leadership: In this case, normally higher prices are charged to cover high quality and high cost of research and Development.

(any two can be written)

25. State any two distinguishing features of advertising.

Ans. (i). Paid Form: Advertising is a paid form of communication. That is, the sponsor has to bear the cost of communicating with the prospects.

(ii). Impersonality: There is no direct face-to-face contact between the prospect and the advertiser. Advertising creates a monologue and not a dialogue.

Also

(iii). Identified Sponsor: Advertising is undertaken by some identified individual or company, who makes the advertising efforts and also bears the cost of it.

(any two can be written)

26. What is Personal Selling?

Ans. Personal selling involves oral presentation of a message in the form of conversation with one or more prospective customers for the purpose of making sales. It is a personal form of communication.

For example, companies appoint salespersons to contact prospective buyers and create awareness about the product and develop product preferences with the aim of making sale

Part - C

27. Discuss briefly any four differences between Selling and Marketing.

Ans. The major differences between selling and marketing are:

(i). Part of the Process vs Wider Term: Selling is only a part of the process of marketing and is concerned with promoting and transferring possession and ownership of goods from the seller to the buyer.

Marketing is a much wider term consisting of a number of activities such as identification of the customer’s needs, developing the products to satisfy these needs, fixing prices and persuading the potential buyers to buy the same.

Thus, selling is merely a part of marketing.

(ii). Transfer of Title vs Satisfying Customer Needs: The main focus of selling is on affecting transfer of title and possession of goods from sellers to consumers or users.

In contrast, marketing activities put greater thrust on achieving maximum satisfaction of the customer’s needs and wants.

(iii). Profit through Maximising Sales vs Customer Satisfaction: All selling activities are directed at maximising sales and, thereby, the profits of the firm. In other words, the emphasis is on profit maximisation through maximisation of sales.

Marketing, on the other hand, is concerned with customer satisfaction and thereby increasing profit in the long run. A marketing organisation, thus, attaches highest importance to customer satisfaction as a route to profit maximisation.

(iv). Start and End of the Activities: Selling activities start after the product has been developed.

Marketing activities start much before the product is produced and continue even after the product has been sold.

Also

(v). Difference in the Emphasis: In selling, the emphasis is on bending the customer according to the product.

In marketing, the attempt is to develop the product and other strategies as per the customer needs.

(vi). Difference in the Strategies: Selling involves efforts like promotion and persuasion. While marketing uses integrated marketing efforts involving strategies in respect of product, promotion, pricing and physical distribution.

(any four can be written)

28. Explain the elements of Marketing Mix.

Ans. Meaning of Marketing Mix – Refer to Q18

Elements of Marketing Mix - The marketing mix consists of various elements, which have broadly been classified into four categories, popularly known as four Ps of marketing.

These are briefly discussed as follows:

1. Product: Product means goods or services or ‘anything of value’, which is offered to the market for sale. For example, Amul offers a number of food products (Amul milk, ghee, butter, cheese, chocolates, etc.).

2. Price: Price may be defined as the amount of money paid by a buyer or received by a seller in consideration of the purchase of a product or service. Generally, if the price of a product is increased, its demand comes down, and vice-versa. Pricing is considered to be an effective competitive weapon. It is also the single most important factor affecting the revenue and profits of a firm.

3. Place: Place or Physical Distribution include activities that make firm’s products available to the target customers. There are two important decisions relating to this aspect- one regarding physical movement of goods and two, regarding the channels of distribution.

4. Promotion: Promotion refers to the use of communication with the twin objective of informing potential customers about a product and persuading them to buy it. There are four major tools, or elements of promotion mix, which are —(i) Advertising, (ii) Personal Selling, (iii) Sales Promotion, and (iv) Publicity. These tools are used in different combinations to achieve the goals of promotion.

29. State any four features of speciality products.

Ans. Meaning of speciality products - Speciality products are those consumer goods which have certain special features because of which people make special efforts in their purchase.

For example, if there is a rare collection of artwork or of antiques, some people may be willing to spend a lot of shopping effort and travel long distances to buy such products.

Features of speciality products are -

(a). The demand for speciality products is limited as relatively small number of people buy these products;

(b). These products are generally costly and their unit price is very high;

(c). These products are available for sale at few places as the number of customers is small and are willing to take extra efforts in the purchase of these products;

(d). An aggressive promotion is required for the sale of speciality products, in order to inform people about their availability, features, etc.;

Also

(e). After sales services are very important for many of the speciality products.

(any four can be written)

30. Briefly explain any four characteristics of industrial products.

Ans. Meaning of Industrial products - Industrial products are those products, which are used as inputs in producing other products. They are meant for non-personal and business use.

For example raw materials, engines, lubricants, machines, tools, etc.

Characteristics of industrial products are -

1. Number of buyers: As compared to the consumer products, the numbers of buyers of industrial products are limited. For example, sugarcane is purchased by few producers of sugar, but sugar, which is a consumer product, is purchased by crores of people in our country.

2. Channel Levels: Because of the limited number of buyers, the sale of industrial products is generally made with the help of shorter channels of distribution, i.e., direct selling or one level channel.

3. Geographic concentration: Because of location of industries at certain points or regions, industrial markets are highly concentrated, geographically. For instance, the demand for power loom comes from Bombay, Sholapur, Bangalore, etc. where the textile industry is concentrated in our country.

4. Derived Demand: The demand for industrial products is derived from the demand for consumer products. For example, the demand for leather will be derived from demand for shoes and other leather products in the market.

Also

5. Role of technical considerations: Technical considerations assume greater significance in the purchase of industrial products because these products are complex products, bought for use in business operations.

6. Reciprocal buying: Some big companies from basic industries like oil, steel, rubber, and medicines resort to the practice of reciprocal buying. For example, Ashok Leyland may buy tyres and tubes from MRF, which in turn may buy trucks from Leyland, whenever it feels the need for the same.

7. Leasing Out: A growing trend in the industrial product market is to lease out rather than to purchase the products on an outright basis because of the heavy price of these products.

(any four can be written)

31. State any four considerations to be kept in mind while choosing a brand name.

Ans. Meaning of brand name - That part of a brand, which can be spoken, is called a brand name. In other words, brand name is the verbal component of a brand.

Choosing the right brand name is a very difficult yet important decision because once a brand name is chosen and the product is launched in the market, changing the brand name is very difficult. So, getting it right the first time is very essential.

Considerations which should to be kept in mind while choosing a brand name are -

(i). The brand name should be short, easy to pronounce, spell, recognise and remember e.g., Ponds, VIP, rin, Vim, etc.

(ii). A brand should suggest the product’s benefits and qualities. It should be appropriate to the product’s function.

(iii). A brand name should be distinctive.

(iv). The brand name should be adaptable to packing or labelling requirements, to different advertising media and to different languages.

Also

(v). The brand name should be sufficiently versatile to accommodate new products, which are added to the product line.

(vi). It should be capable of being registered and protected legally.

(vii). Chosen name should have staying power i.e., it should not get out of date.

(any four can be written)

32. How does packaging acquire significance in the marketing of goods?

Ans. Meaning of packaging – Refer to Q4

Packaging has acquired great significance in the marketing of goods and services, because of following reasons:

(i). Rising Standards of Health and Sanitation: Because of the increasing standards of living in the country, more and more people have started purchasing packaged goods as the chances of adulteration in such goods are minimised.

(ii). Self Service Outlets: The self-service retail outlets are becoming very popular, particularly in major cities and towns. Because of this, some of the traditional role assigned to personal selling in respect of promotion has gone to packaging.

(iii). Innovational Opportunity: For example, milk can now be stored for 4-5 days without refrigeration in the recently developed packing materials. Similarly, in the area of pharmaceuticals, soft drinks, etc., lots of new innovations have come in respect of packaging. As a result, the scope for the marketing of such products has increased.

(iv). Product Differentiation: Packaging is one of the very important means of creating product differentiation. The colour, size, material etc., of a package makes a real difference in the perception of customers about the quality of the product. For example, by looking at the package of a product, say Paint or Hair Oil, one can make some guess about the quality of the product contained in it.

Thus, packaging plays a very important role in the marketing success or failure of many products, particularly the consumer non-durable products. For example, it was one of the important factors in the success of products like Maggie’s Noodles, Uncle Chips or Crax wafers.

33. Explain any four functions performed by a label.

Ans. Meaning of labels - The label are - the  simple tag attached to the product (such as in case of local unbranded products like sugar, wheat, pulses, etc.) indicating some information about the quality or price, or the complex graphics that are part of the package, like the ones on branded products.

Labels provide detailed information about the product, its contents, method of use, etc.

The various functions performed by a label are as follows:

1. Describe the Product and specify its contents: For example, a popular brand of Prickly Heat Powder, describes how the product provides relief from prickly heat and controls bacterial growth and infection, giving caution forbidding its application on cuts and wounds.

2. Identification of the Product or brand: For example, the brand name of any product, say Biscuits or Potato Chips imprinted on its package helps us to identify, from a number of packages, which one is our favourite brand.

Other common identification information provided by the labels include name and address of the manufacturer, net weight when packed, manufacturing date, maximum retail price and Batch number.

3. Grading of Products: Refer to Q17.

4. Helps in Promotion of Products: A carefully designed label can attract attention and give reason to purchase. Labels provide promotional messages, for example, the pack of a popular Amla Hair Oil states, ‘Baalon mein Dum, Life mein Fun’. Labels also play an important role in sales promotional schemes launched by companies. For example the label on the package of a Shaving Cream mentions, ‘40% Extra Free’.

Also

5. Providing information required by Law: For example, packaged food articles must have a list of ingredients declaration regarding vegetarian or non-vegetarian food additives and date of manufacturing or packing on the label. Such information is required on processed foods, drugs and tobacco products. In case of hazardous or poisonous material, appropriate safety-warning need to be put on the label.

(any four can be written)

Thus, labels perform a number of important functions relating to communicating with the potential buyers and promoting the sale of the products.

34. Explain briefly any four objections against advertising. 

Ans. Meaning of advertising – Advertising is an impersonal form of communication, which is paid for by the marketers (sponsors) to promote some goods or service. The most common modes of advertising are ‘newspapers’, ‘magazines’, ‘television’, and ‘radio’.

The objections to advertising may be summarised as -

1. Adds to cost: The opponents of advertising argue that advertising unnecessarily adds to the cost of product, which is ultimately passed on to the buyers in the form of high prices. An advertisement on TV, for a few seconds, for example, costs the marketers several lakhs of rupees. Similarly an advertisement in print media say in a newspaper or a magazine costs the marketers a large amount of money. The money spent adds to the cost, which is an important factor in fixation of the price of a product.

2. Undermines social values: Another Important criticism of advertising is that it undermines social values and promotes materialism. It breeds discontent among people as they come to know about new products and feel dissatisfied with their present state of affairs. Some advertisements show new lifestyles, which don’t find social approval.

3. Confuses the buyers: Another criticism against advertising is that so many products are being advertised which makes similar claims that the buyer gets confused as to which one is true and which one should be relied upon. For example, we may note similar claims of whiteness or stain removing abilities in competing brands of detergent powder or claims of whiteness of tooth or ‘feelings of freshness’ in competing brands of toothpaste that it is sometimes confusing to us as to which one to buy.

4. Encourages sale of inferior Products: Advertising does not distinguish between superior and inferior products and persuade people to purchase even the inferior products.

Also

5. Some advertisements are in bad taste: Another criticism against advertising is that some advertisements are in bad taste. They show things which do not conform to the moral and ethical values.For example, an advertisement showing women dancing when not required or running after a man because he is wearing a particular suit or using a particular perfume are certainly not good. Some advertisements distort the relationship like employer employees and are quite offensive.

(any four can be written)

35. Explain any four functions performed by the public relations department of an organisation.

Ans. Public Relations - Public relations is an important tool in the hands of the marketing department, which can be used to the advantage of the business. It  involves a variety of programmes designed to promote or protect a company’s image and its individual products in the eyes of the public.

Considering its importance, most organisations, business or otherwise nowadays, have a separate department to manage public relations. They may also utilize the services of any outside public relations agency.

This public relations department performs the following functions:

1.Press relations: Information about the organisation needs to be presented in a positive manner in the press. The public relations department is in contact with the media to present true facts and a correct picture about the company. Otherwise news can get distorted if taken from other sources.

2.Product publicity: New products require special effort to publicise them and the company has to sponsor such programmes. The public relations department manages the sponsoring of such events. The company can draw attention to new products by arranging sports and cultural events like news conferences, seminars and exhibitions.

3. Corporate communication:The image of the organisation needs to be promoted through communicating with the public and the employees within the organisation. This is usually done with the help of newsletter, annual reports, brochures, articles and audio-visual materials.

4. Lobbying: The organisation has to deal with government officials and different ministers in charge of corporate affairs, industry, finance with respect to policies relating to business and the economy. The government also seeks to maintain a healthy relationship with associations of commerce and industry and solicits the opinion of major stakeholders while formulating industrial, telecom, taxation policies, etc. The public relations department then has to be really proactive in promoting or decoding regulations that affect them.

Also

5. Counselling: The public relations department advises the management on general issues which affect the public and the position the company would like to take on a particular issue. The company can build goodwill by contributing money and time to certain causes like environment, wildlife, children’s rights, education, etc. Such cause-related activities help in promoting public relations and building goodwill.

Part - D

36. Explain any eight functions of Marketing.

Ans. Meaning of marketing – Refer to Q11

Definition of marketing – Refer to Q12

Functions of marketing -

1. Gathering and analysing Market information: It is necessary to identify the needs of the customers and take various decisions for the successful marketing of the products and services. This is important for making an analysis of the available opportunities and threats as well as strengths and weaknesses of the organisation and help in deciding what opportunities can best be pursued by it.

For example, which areas of potential growth should a particular organisation enter, or in which area should it expand is done with the help of careful market analysis.

2. Marketing Planning: Another important activity or area of work of a marketer is to develop appropriate marketing plans so that the marketing objectives of the organisation can be achieved.

For example a marketer of colour TV, having 10 percent of the current market share in the country, aims at enhancing his market share to 20 per cent, in the next three years. He will have to develop a complete marketing plan covering various important aspects including the plan for increasing the level of production, promotion of the products, etc. and specify the action programmes to achieve these objectives.

3. Product Designing and Development: The design of the product contributes to making the product attractive to the target customers. A good design can improve performance of a product and also give it a competitive advantage in the market.

For example, when we plan to buy any product, say a motorbike, we not only see its features like cost, mileage, etc. but also the design aspects like its shape, style, etc.

4. Standardisation and grading: Standardisation – Refer to Q16

Grading – Refer to Q 17.

37. What is Branding? Explain briefly its advantages to marketers and customers.

Ans. Meaning of branding - The process of giving a name or a sign or a symbol etc., to a product, which helps in identifying and distinguishing the products from the competitors’ products. is called branding.

Advantages of branding to marketers -

(i). Enables Marking Product Differentiation: Branding helps a firm in distinguishing its product from that of its competitors. This enables the firm to secure and control the market for its products.

(ii). Helps in Advertising and Display Programmes: A brand aids a firm in its advertising and display programmes. Without a brand name, the advertiser can only create awareness for the generic product and can never be sure of the sale for his product.

(iii). Differential Pricing: Branding enables a firm to charge different prices for its products than that charged by its competitors. This is possible because if customers like a brand and become habitual of it, they do not mind paying a little higher for it.

(iv). Ease in Introduction of New Product: If a new product is introduced under a known brand, it enjoys the reflected glory of the brand and is likely to get off to an excellent start. Thus, many companies with established brand names decide to introduce new products in the same name. For example, Samsung extended the brand name of its Television to Washing Machines and other durable products, like Microwave ovens.

Advantages of branding to customers -

(i). Helps in Product Identification: Branding helps the customers in identifying the products and thus facilitates repeat purchase .

For example, if a person is satisfied with a particular brand of a product, say tea leaves or detergent soap, he need not make a close inspection every time, he has to buy that product.

(ii). Ensures Quality: Branding ensures a particular level of quality of the product. Thus, whenever there is any deviation in the quality, the customers can have recourse to the manufacturer or the marketer. This builds up confidence of the customers and helps in increasing his level of satisfaction.

(iii). Status Symbol: Some brands become status symbols because of their quality. The consumers of those brands of products feel proud of using them and adds to the level of satisfaction of the customers.

38 What is Pricing? Explain the factors affecting price determination.

Ans. Meaning of pricing – Pricing is the process by which the amount of money to be paid by a customer to obtain a particular product or service is determined by a marketer.

Pricing occupies an important place in the marketing of goods and services by a firm. It is often used as a regulator of the demand of a product. Also it is considered to be an effective competitive weapon. It is also the single most important factor affecting the revenue and profits of a firm. Thus, most marketing firms give high importance to the fixation of price for their products and services.

The factors affecting price determination are:

1. Product cost: This includes the cost of producing, distributing and selling the product. The cost sets the minimum level or the floor price at which the product may be sold.Generally all marketing firms strive to cover all their costs, at least in the long run. In addition, they aim at earning a margin of profit over and above the costs.

2. The Utility and Demand: While the product costs set the lower limits of the price, the utility provided by the product and the intensity of demand of the buyer sets the upper limit of price, which a buyer would be prepared to pay.

3. Extent of competition in the Market: Between the lower limit and the upper limit, the price for a product or service settles down depending on the nature and the degree of competition. The price will tend to reach the upper limit in case there is lesser degree of competition while under conditions of free competition, the price will tend to be set at the lowest level.

4. Government and Legal regulations: In order to protect the interest of the public against unfair practices in the field of price fixing, the Government can intervene and regulate the price of commodities. Government can declare a product as an essential product and regulate its price. For example, drugs, medicines, etc.

5. Pricing Objectives: Pricing objectives are another important factor affecting the fixation of the price of a product or a service. Apart from profit maximisation, the pricing objectives of a firm include obtaining market share leadership, surviving in a competitive market and attaining product quality leadership.

6. Marketing Methods Used: Price fixation process is also affected by other elements of marketing such as distribution system, quality of salesmen employed, quality and amount of advertising, sales promotion efforts, the type of packaging, product differentiation, credit facility and customer services provided.

For example, if a company provides free home delivery, it has some flexibility in fixing prices.

39. Explain the advantages and limitations of advertising.

Ans. Meaning of advertising – Refer to Q34 first part

Advantages of advertising -

(i). Mass Reach: Advertising is a medium through which a large number of people can be reached over a vast geographical area.

For example, an advertisement message placed in a national daily reaches lakhs of its subscribers.

(ii). Enhancing Customer Satisfaction and Confidence: Advertising creates confidence amongst prospective buyers as they feel more comfortable and assured about the product quality and hence feel more satisfied.

(iii). Expressiveness: With the developments in art, computer designs, and graphics, advertising has developed into one of the most forceful mediums of communication. With the special effects that can be created, even simple products and messages can look very attractive.

(iv). Economy: Advertising is a very economical mode of communication if a large number of people are to be reached. Because of its wide reach, the overall cost of advertising gets spread over numerous communication links established. As a result the per-unit cost of reach comes low.

Limitations of advertising -

(i). Less Forceful: Advertising is an impersonal form of communication. It is less forceful than the personal selling as there is no compulsion on the prospects to pay attention to the message.

(ii). Lack of Feedback: The evaluation of the effectiveness of advertising messages is very difficult as there is no immediate and accurate feedback mechanism of the message that is delivered.

(iii). Inflexibility: Advertising is less flexible as the message is standardised and is not tailor made to the requirements of the different customer groups.

(iv). Low Effectiveness: As the volume of advertising is getting more and more expanded it is becoming difficult to make advertising messages heard by the target prospects. This is affecting the effectiveness of advertising.

40. State any eight differences between Advertising and Personal selling.

Ans.  

S.No	Advertising	Personal Selling
1	Advertising is an impersonal form of communication.	Personal selling is a personal form of communication.
2	Advertising involves transmission of standardised messages, i.e., the same message is sent to all the customers in a market segment.	In personal selling, the sales talk is adjusted keeping view of customer's background and needs.
3.	Advertising is inflexible as the message can’ t be adjusted to the needs of the buyer.	Personal selling is highly flexible. as the message can be adjusted.
4.	It reaches masses, i.e., a large number of people can be approached.	Only a limited number of people can be contacted because of time and cost considerations.
5.	In advertising the cost per person reached is very low.	The cost per person is quite high in the case of personal selling.
6.	Advertising can cover the market in a short time.	Personal selling efforts take a lot of time to cover the entire market.
7.	Advertising makes use of mass media such television, radio, newspaper, and magazines.	Personal selling makes use of sales staff, which has limited reach.
8.	Advertising lacks direct feedback. Marketing research efforts are needed to judge customers’ reactions to advertising.	Personal selling provides direct and immediate feedback. Sales persons come to know about the customers’ reactions immediately.
9.	Advertising is more useful in creating and building interest of the consumers in the firm's products.	Personal selling plays an important role at the awareness stage of decision making.
10.	Advertising is more useful in marketing to the ultimate consumers who are large in numbers.	Personal selling is more helpful in selling products to the industrial buyers or to intermediaries such as dealers and retailers who are relatively few in numbers.