Question No 1(A) Define Product.

Describe the types of Consumer

Products and Industrial Products?
Product:
In marketing, a product is an object or system made available for consumer use; it is anything
that can be offered to a market to satisfy the desire or need of a customer.

Describe the types of Consumer products and Industrial Products:

Types of Consumer Products:

There are four types of consumer products these are:

1. Convenience
2. Shopping
3. Specialty
4. Unsought

Marketing Convenience Shopping Specialty Unsought

consideration
Customer buying Frequent Less frequent Strong brand Little product
behavior purchase, little purchase, much preference and awareness and
effort (planning, effort (planning loyalty, special knowledge or
comparison), low and comparison purchase effort, little interest
customer of brands on little comparison
involvement price, quality, of brands, low
style etc.) price sensitivity
Price Low price Higher price High price Varies
Distribution Widespread Selective Exclusive Varies
distribution, distribution, distribution in
convenient fewer outlets only one or a few
locations outlets
Promotion Mass promotion Advertising and More carefully Aggressive
personal selling targeted advertising and
promotion personal selling
Examples Toothpaste, Television, Luxury goods Life insurance or
magazines, furniture, (e.g. Rolex pre-planned
laundry detergent clothing watch), designer funeral service
clothing

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Types of Industrial Products:

The three groups of industrial products and services. These are:

1. Materials and Parts

2. Capital items.
3. Supplies and services.

These are described below:

1.Materials and Parts :

Materials and parts include raw materials and manufactured materials and parts. Raw materials
consist of firm product (wheat ,cotton) and natural products (fish , lumber). Manufactured
materials and parts consist of component materials(cement , wires) and component parts (tires ,
casting).

2.Capital Item:

Capital item are industrial products that aid in the buyer's production/operation including
installations and accessory equipment.

3.Supplies and Services:

Supplies includes operating supplies (coal ,paper) and repairs maintenance items(Paint ,
Brooms).

Business Services include maintenance and repair services (Window cleaning ,Computer repair)
business advisory services (Legal ,Advertising).

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Question No 1(B) Discuss the step in the new product
development process?

1.Idea Generation:

The systematic search for new-product ideas.

Major sources of new product ideas include internal and external sources.

Internal idea sources:

 R & S.
 Executives ,Sales People, Engineers ,Manufacturing Staff.

External idea sources:

 Watching and Listening to Customer.
 The company can conduct surveys of focus group.
 Competitors are another good source for new product idea.
 Distributors , Suppliers and Resellers contributes many good new product ideas.
 
2.Idea screening:

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Screening new -product ideas in order to spot good ideas and drop poor ones as soon as possible.

-The purpose of the succeeding stages is to reduce the number of the idea.

-The company wants to go ahead only with those produce ideas that will turn into profitable
products.

3.Concept development and Testing

Product Concept: A detailed version of the new-product idea stated in meaningful consumer
terms.

It is important to distinguish between a product idea , a product concept and a product image.

 Product Idea: Product idea is an idea for a possible product that the company can see
itself offering to the market.
 Product Concept: Product concept is a detailed version of the new product idea stated in
meaningful consumer terms.
 Product Image: Product image is the way consumers perceive an actual or potential
product.

Concept testing: Testing new product concepts with a group of target consumers to evaluate
product concepts.

4.Marketing strategy development:

Design an initial marketing strategy for a new product based on the product concept.

The marketing strategy statement consists of three parts and should be formulated carefully:
 Describes the target market.
 The planned product positioning.
 The sales , market share and planned profit revenues for the first 4 years.

5.Business analysis

A review of the sales, costs and profit projections for the new product to find out whether these
factors satisfy the company’s objectives.

6.Product development

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Here the product development is developed into a physical product in order to ensure that the
product idea can be turned into a workable product.

7.Test Marketing:

It lets the company test the product and its entire marketing program-posting strategy
,advertising, distribution ,pricing and budget levels.
 Standard Test Markets:
1.It is time consuming.
2.It's costly.

 Controlled Test Markets:

- A controlled panel of stores agree to keep new product
for test marketing.
-controlled test marketing costs less than standard test
marketing and is faster.
 Simulated Test Markets:
-The decide which products they will buy.
-This cost less ,is faster and is out of the view of
competitors.
8.Commercialization:

Introducing a new product into the market.

Question No 2(a) Discuss the internal and external factors

that affect a firm's pricing decisions.
Internal factor affecting price decision:
Include the company's marketing objectives, marketing mix strategy, costs and organizational
considerations.

 Marketing Objectives:
-Before setting a price ,company must decide strategy for the
product.
-Pricing strategy is largely determined by decisions on market
positioning.

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 -Other objectives:
1.Survival. 2.Current profit maximization.
3.Market share leadership.4.Product quality leadership.

 Marketing Mix Strategy:

-Pricing must be carefully coordinated with the other
marketing mix elements.
-Target costing: Pricing that starts with an ideal selling
and then target costs that will insure that the price is met.
 Costs:
-Types of costs: 1.Fixed Costs. 2.Varisble Costs. 3.Total Costs.
-Costs at different production levels influence price setting.
 Organizational Considerations:
-Small companies: top management set the price.
-Large companies: divisional or product line
managers set the price.
-Price negotiation is common in industrial settings.

External factor affecting price decision:

Include the nature of the market and demand, competition, and other environmental elements.

 The market and demand

-Cost set the lower limit of prices ,the market and demand set the upper limit.
-Pricing in different types of markets:
1.Pure Competition:-many buyer and sellers
-Seller can't charge more than the going price
2.Monopolistic Competition:-many buyer and seller.
-Range of price occurs because sellers differentiate their
offers to buyers.
3.Oligopolistic Competition:-Few sellers.
-product can be uniform or non-uniform.
4.Pure Monopoly:-One seller
-Government monopoly, a private regulated monopoly or a private
non-regulated monopoly

 Consumer perceptions of price and value:

In the end the consumer will decide whether a price is right.
 Analyzing the price demand relationship:

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 Each price the company might charge will lead to a different level of demand.
In the normal case ,demand and price are inversely related

 Price elasticity of demand:

A measure of the sensitivity of demand to charge in price.

 Competitors costs, prices and offers:

-low price low -margin strategies inhibit competition.
-high price high-margin strategies attract competition .

 Other external factors:

-Economic condition can have strong impact on the firm's pricing strategies.
- Economic condition affect production costs.
-Government may restrict or limit pricing options.

Question no 2(b) Describe the cost plus pricing/markup

pricing method with a numerical example.
Cost Plus
Cost-plus pricing is also known as markup pricing. It's a pricing method where a fixed
percentage is added on top of the cost to produce one unit of a product (unit cost) -- the resulting
number is the selling price of the product. This pricing strategy ignores consumer demand and
competitor prices. And it's often used by retail stores to price their products.

Cost-Plus Pricing Formula

The cost-plus pricing formula is calculated by adding material, labor, and overhead costs and
multiplying it by (1 + the markup amount). Overhead costs are costs that can't directly be traced
back to material or labor costs, and they're often operational costs involved with creating a
product.
Markup

This is the percentage difference between the unit cost and the selling price of the product.
Markup can be calculated by subtracting the unit cost from the sales price and dividing the
resulting number by unit cost. Then multiply the final result by 100 to get the markup
percentage.
Cost-Plus Pricing Example

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 Let's say we started a retail clothing line and we need to calculate the selling price for the jeans.
Here are the costs to produce one pair of jeans:

 Material costs: $10

 Labor costs: $30
 Overhead costs: $15

The total cost adds up to $55.00. With a markup of 50%, the formula would look like this:

Selling Price = $55.00 (1 + 0.50)

Selling Price = $55.00 (1.50)
Selling Price = $82.50

This gives you a selling price of $82.50 for each pair of jeans.

Question No 3(a) Explain why companies use marketing

channels and discuss the functions performed by marketing
channel members.
The primary purpose of any marketing channel is to bridge the gap between the producer of a
product and the user of it, whether the parties are located in the same community or in different
countries thousands of miles apart. The channel of marketing is defined as the most efficient and
effective manner in which to place a product into the hands of the customer. The channel is
composed of different institutions that facilitate the transaction and the physical exchange

 Marketing channels also increases the visibility of the products in the market. They can show
the efficient process of the company like service layout. These channels can also make the
company aware of the demands and needs of the customers.

Main functions of channel members

The functions of marketing channel members are:

a. Information – The marketing channels perform the task of collecting and disseminating of
marketing information about customers, competitors as well as potential customers and other
market forces.

b. Promotion – Persuasive communication is disseminated through the channels to the

customers. The channels also often help in the design of these communication messages.

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c. Negotiation – The channel members are the ones who negotiate with other channel members
and customers to facilitate the transfer of ownership.

d. Financing – The marketing channels work towards the acquisition and allocation of funds
required to finance inventories at different levels of the marketing channels.

e. Risk taking – The channel members assume the risk for carrying out the channel work.

f. Physical possession – The channel members also take the responsibility of storage of goods
during the successive stages to the final consumers.

g. Ordering – This function is with regards to the communication of channel members regarding
the intention to purchase.

h. Payment – The channel members also assume responsibility for the buyers honouring their
payments to the sellers through banks and other financial instruments.

i. Title – The channel members facilitate actual transfer of ownership from one organisation or
person to the other.

Question No 3(b) Define vertical marketing system (VMS).

Discuss the types of VMS that reduce the channel conflicts.
Vertical Marketing System
A vertical marketing system (VMS) is one in which the main members of a distribution channel
—producer, wholesaler, and retailer—work together as a unified group in order to meet
consumer needs. 

We look now at three major types of VMSs:

 Corporate VMS.
 Contractual VMS.
 Administrated VMS.

1.Corporate VMS:
A corporate VMS integrates successive stages of production and distribution under single
ownership.

2.Contractual VMS:

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A contractual VMS consists of independent firms at different levels of production and
distribution who join together through contracts to obtain more economics or sales impact than
each could achieve alone.

The franchise organization is the most common type of contractual relationship.

There are three types of franchises.

-The first type is the manufacturer-sponsored retailer franchise system.

For example: Ford and it's network of independent franchised dealers.

- The second type is the manufacturer-sponsored wholesaler franchise system.

For example: Coca-Cola licenses bottlers in various markets who buy Coca-Cola syrup
concentrate and then bottle and sell the finished product to retailers in local market.

- The third type is the service-firm--sponsored retailer franchise system.

For example: Burger king and it's nearly 10,500 franchise restaurants around the world.

3.Administrated VMS:

In an administrated VMS ,leadership is assumed not through common ownership or contractual

ties but through the size and power of one or a few dominant channel members.

Question No 4(a) Define Advertising .Describe the

advertising objectives and message execution styles in
developing an advertising program
Advertising:
Advertising is a marketing tactic involving paying for space to promote a product, service, or
cause. The actual promotional messages are called advertisements, or ads for short.

Advertising objectives can be classified by their primary purpose to inform , persuade or remind.

1.Informative Advertising:

-Communicating customer value suggesting new uses for a product.

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-Building a brand and company image.

-Informing the market of a price change.

-Telling the market about a new product.

2.Persuasive Advertising:

-Building brand preference.

-Persuading customers to purchase now.

-Encouraging switching to a brand.

-Convincing customers to tell others about the brand.

3.Reminder Advertising:

-Maintaining customers relationships.

-Reminding customers where to buy the product.

-Reminding customers that the product may be needed in the near future.

Message Execution styles in developing an advertising program:

Message Execution:

The message can be presented in various execution styles. such as the following:

1.Slice of life:

This style shows one or more "typical" people using the product in a normal setting.

For example: A silk soy milk.

2.Life style:

This style shows how a product fits in with a particular lifestyle.

For example: an ad for Athleta active wear shows a women in a complex yoga pose and states "If
your body is your temple, build it one piece at a time".

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3.Fantasy:

This style creates a fantasy around the product or its use.

For Example: A travelers insurance ad features a gentlemen carrying a giant red umbrella.

4.Mood or Image:

This style builds a mood or image around the product or service such as beauty, love, intrigue or
serenity.

5.Musical:

This style shows people or cartoon characters singing about the product.

For example: FreeCreditReport.com tells its story exclusively through a set of popular singing
commercials such as "Dream-girl" and ''Pirate".

6.Personality Symbol:

This style creates a character that represent the product.

7.Technical Expertise:

This style shows the company's expertise in making product.

8.Scientific Evidence:

This style presents survey or scientific evidence that the brand is better or better liked than one or
more other brands.

9.Testimonial Evidence or Endorsement:

This style features a highly believable or likable source endorsing the product.

Question No 4(b) Define sales promotion. Discuss the

consumer promotion tools and trade promotions tools.
Sales Promotion:

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Sales promotion includes several communications activities that attempt to provide added value
or incentives to consumers, wholesalers, retailers, or other organizational customers to stimulate
immediate sales.

Consumer promotions:
Consumer promotions include a wide range of tools from samples, coupons, refunds, premiums,
and point-of-purchase displays to contests, sweepstakes, and event sponsorships.

-Samples are offers of a trial amount of product. Sampling is the most effective but most
expensive way to introduce a new product or create new excitement for an existing one.
-Coupons are certificates that give buyers a saving when they purchase a specified product.

-Price Packs offer consumers saving off the regular price of a product.

-Premiums are goods offered either free or at low cost as an incentive to buy a product ,ranging
from toys included with kid's products to phone cards and DVDs.

-Advertising specialties, also called promotional products are useful articles imprinted with an
advertiser’s name, logo, or message that are given as gifts to consumers.

Trade Promotions:

Trade Promotion is a marketing technique aimed at increasing demand for products in retail
stores based on special pricing, display fixtures, demonstrations, value-added bonuses, no-
obligation gifts, and more.

Manufacturers use a number of trade promotion tools. A higher proportion of promotion budget
is devoted to trade promotion tools (49.9%) than to consumer promotion (27.9%) with media
advertising capturing the remaining (25.2%)

 Discounts: Other than normal trade & cash discounts.

 Catalogues: The catalogues carry essential information on the products by the company.

 Trade Allowances: These are temporary price reductions/ reimbursement of expenses

incurred by dealers in full or in part, its varied types are as under.

 Trade or buying allowance: Offer of price reduction on purchase of specified quantity of

a product.

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 Merchandise (display) allowance: An allowance to trade for providing desired sales
promotion & product displays.

 Co-operative advertising & promotion allowance: Wherein a manufacture shares at an

agreed rate the advertising & promotional cost incurred by the dealer in the promotion of
manufacture’s product.

 Trade fairs & Exhibitions: It is one of the oldest practices in sales promotion. ‘Seeing is
believes’ is a concept behind large scale exhibitions. Trade fair is mostly trendy &
effective sales promotion tool in case of high cost industrial products.

 Dealer Gifts: Offer of useful articles and attractive gifts to dealers for his personal, family
or office use.

 Premium or push Money: When an additional compensation is offered to trade or sales

force for pushing auditioning a specific product or product line.

 Coupons: Coupons are certificates that offer price reductions to consumers. Coupons
serve as an inducement to the channel for maintaining the stock of the items.  

 Merchandise deals: Wherein additional quantity of the same or the same manufactures
another product is offered to trade. May be offer jointly by non-competing manufactures

 Point-of- purchase: Those special display, racks, banners, exhibits that are placed in the
retail store to support the sale of product.

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