Ch 1: Stakeholders in

Commercial Organisations
 STAKEHOLDER
The term 'stakeholders' has developed from the word
'stake' which means an interest or expected benefit.

Stakeholders, therefore, means all those individuals, groups and

institutions which have stake (interest) in the activities and
decisions of commercial organisation or a business.

“Stakeholders are individuals or groups who have financial

interest in the activities and decisions of the business”.
 Who are Stakeholders?
A person is said to be a stakeholder when that person has financial
interest in the organisation. The decisions and actions of the
organisation influence the stakeholders directly or indirectly.

These stakeholders may vary greatly from a few individuals to large

institutions such as the Government.
📌 Examples:
Few individuals: A single supplier giving raw
materials to a bakery.
Large institution: The Government that regulates industries,
collects taxes, and gives licenses.
 Impact of Stakeholders:
Positive Impact:
Provide resources (finance, raw materials, labour, etc.)
Support in selling & distributing products

Negative Impact:
Can block/delay operations if ignored
May withdraw support during conflicts

📌 Example:
If workers go on strike → business stops.
If banks cut loans → business suffers.
 Importance of Stakeholders:
Success or failure of business depends on them.
No enterprise can survive without caring for stakeholders.
Business is no longer just for owners → It’s a joint effort of:
Workers
Management
Consumers
Government
Local community
 Importance of Stakeholders:
Terminology: “Business is no longer just for owners”
🔹 Earlier:
Business was run only by owners.
The main aim = Profit.

🔹 Now:
Business is a joint effort of →
Owners + Workers + Management + Government + Local Community.
Aim = Profit + Social Responsibility + Growth for all stakeholders.

📌 Example: Tata Group runs for profit but also provides jobs, pays taxes,
and supports society.
Distinction between Stakeholders and Shareholders:

Basis of Distinction Stakeholders Shareholders

Stakeholders like creditors,

Shareholders own the
employees, govt., etc. have a
Financial Stake financial interest in the
company’s share capital and
bear the risk of loss.
company.
Stakeholders include
shareholders, customers, Shareholders are only one
Scope suppliers, creditors, employees, category of stakeholders.
govt., and others.

Stakeholders exist in all types of Shareholders exist only in a

Type of Organisation organisations. Joint Stock Company.
 Distinction between Stakeholders and Customers :
Meaning of Customers:
Customers are the individuals or groups who buy products or
services of a business.
They do not have a stake in the success of the
firm.

Customers ≠ Stakeholders
Customers are important for revenue, but they are not
stakeholders since they do not share risk or capital in the
business.
Stakeholders is a much wider term than customers.
Role of Customers in Business:
Business exists to satisfy the needs and wants of customers.
“Customer is King” → Business cannot survive without satisfying
customers.
Modern business motto: Delight the customer → giving more
than what they expect.

Conclusion:
Customers are the source of profit (revenue) for a business.
Still, they are not stakeholders, because they don’t have
ownership or stake in the firm.
 Basis of Distinction Stakeholders Customers

Stakeholders like
shareholders and Customers do not have a
Financial stake employees have a financial stake in a
financial stake in a business firm.
business firm.

Stakeholders supply Customers do not supply

Supply of capital financial capital or any capital to the
human capital. organisation.

Stakeholders do not buy Customers buy goods or

Buying goods and
goods or services from services from the
services
the organisation. organisation.
Basis of Distinction Stakeholders Customers

Customers do not take

Stakeholders take risks
Risk taking risks of the
of the organisation.
organisation.
Products are not Products are
manufactured manufactured
Product orientation
according to the tastes according to the tastes
of the stakeholders. of the customers.

Market orientation is not Market orientation is

Market orientation necessary for satisfaction necessary to satisfy
of stakeholders. customers.
 Basis of Distinction Stakeholders Customers

Stakeholders share Customers do not share

profits in the form of the profits of the
Sharing of profits
interest, dividend, commercial
wages and salaries. organisations.

Stakeholders such as Customers do not

Participation in the owners participate participate in the
management in the management of management of the
organisation. organisation.
 Distinction between Shareholders and Customers

Basis of Distinction Shareholders Customers

Shareholders are stakeholders Customers are not stakeholders

1
Stakeholder as they have financial stake in as they do not have financial
the company. stake in the company.
Shareholders invest money in
Customers do not invest money
2
Investment the company by buying its
in the company.
shares.

Shareholders receive dividend Customers do not receive

3
Dividend
from the company. dividend from the company.

Shareholders undertake risk of Customers do not undertake

4
Risk loss on the investment made in risk as they do not invest in the
the company. company.
Distinction between Shareholders and Creditors
Basis of Distinction Shareholders Creditors

Type of Stakeholder They are internal stakeholders. They are external stakeholders.

They invest in the capital of the They only give loan to the
Nature of Investors company. company.

They assume a greater risk of They assume lesser risk of loss

Degree of Risk loss of capital. of loan.

They share in the profits of the They do not share in the profits
Profit Sharing company in the form of of the company and receive
dividend. only interest on loan.
They are not members of the
They are the members of the
Membership company and have voting rights.
company and have no voting
rights.
 Internal and External Stakeholders
Stakeholders may broadly be classified into two categories:
1. Internal Stakeholders
2. External Stakeholders
 Internal Stakeholders:
Stakeholders who are involved in the business enterprise
from within the organisation.
They include:

1.Owners/Shareholders:
They are actual owners of the company.
Invest capital and assume the risks of business.
Participate in the profits and overall management of
the company.
 Internal Stakeholders:
2. Employers:
Provide employment opportunities to others.

3. Employees (Managers and Workers):

Provide mental and physical efforts required for
successful functioning of the enterprise.
They are directly affected by success or failure of the company.
If company succeeds → they get job security, wages, promotion.
If company fails → they lose their jobs and income.
External Stakeholders:
Stakeholders who are involved in the business enterprise from outside the
organisation.

They include:
Creditors: Supply funds and expect repayment with interest.
Suppliers: Provide raw materials and goods.
Dealers: Help in distribution of company’s products.
Competitors: Compete in the market.
Government: Regulates business through laws, taxation, and policies.
Local Community and Society: Affected by business activities like
employment, environment, CSR.
 Primary vs Secondary Stakeholders
1.Primary Stakeholders:
Owners, shareholders, employees, creditors, dealers,
suppliers, competitors.
They have direct, frequent, and close interactions with the enterprise.

2. Secondary Stakeholders:
Government, media, local community, general public.
They have less frequent and indirect interactions with the enterprise.
 Distinction between Internal and External Stakeholders

Basis of Distinction Internal Stakeholder External Stakeholders

They operate from inside They operate from outside

Position
the organisation. the organisation.

They actively participate in They do not participate

the management and actively in the
Role
working of the management and working
organisation. of the organisation.

They consist of suppliers,

They consist of employees
customers, competitors,
Constituents (workers and managers)
government and general
and owners.
public.
 Expectations of Stakeholders:
Every stakeholder group expects something from a business
organisation. The expectations of different stakeholders are stated
below:
1. Expectations of Owners / Employers / Shareholders:

Safety of capital contributed.

Fair and regular return in the form of dividend.
Capital appreciation in the value of shares.
Up-to-date and regular information about financial position.
Participation in policy decisions of the company.
Good public image of the company.
2. Expectations of Employees (Managers and Workers):

Security of job and continuity of service.

Fair remuneration (wages and salaries).
Safe and comfortable working conditions.
Welfare facilities – housing, medical care, pension, gratuity, provident
fund, etc.
Opportunities for education, self-development, promotion and career
growth.
Participation in profits and protection of trade union rights.
Quick and fair redressal of grievances.
3. Expectations of Suppliers
Fair prices for supplies.
Regular and timely payment.
Reasonable terms for delivery and payment.
Regular orders for supply.
Honest financial information about company’s position.
Healthy and cooperative business relationships.

4. Expectations of Creditors
Safety of loans given to the enterprise.
Regular payment of interest.
Return of loan within the specified time period.
Accurate and up-to-date financial information.
Security of loans in the form of mortgage/guarantee if needed.
5. Expectations of Associates / Competitors
Fair trade practices regarding price, quality and service.
Healthy competition and ethical behavior.
Cooperation among competitors for growth
of the industry.
Respect for intellectual property rights.

6. Expectations of Government
Follow laws and regulations of the country.
Pay all taxes honestly and regularly.
Avoid corruption and bribery of public servants.
Proper use of scarce natural resources.
7. Expectations of General Public / Society
Protection of environment from pollution.
Production of socially desirable goods.
Support to weaker sections through employment\
opportunities.
Improvement in standard of living (education,
health, cultural activities).
Contribution to charities and public welfare.
Preservation of social and cultural values.
Respect for human rights, including rights of women and children.
 Stakeholder Analysis:
👉 Stakeholder analysis is the process of identifying different stakeholders of a
business, their expectations, and how these expectations may change over
time.

It helps managers take better decisions that balance the needs of all
stakeholders.
 Steps in Stakeholder Analysis
1. Identifying the Stakeholders
First step is to identify internal stakeholders (owners, managers,\
employees) and external stakeholders (customers, suppliers, business
associates, government, community, general public).
This gives a clear picture of who is connected with the organisation.

2. Mapping Stakeholders’ Relationship

A Stakeholder Relationship Map is prepared.
This map shows how different stakeholders are linked with the organisation.
It also shows their interests and how they may be affected by business activities.
Helps managers understand stakeholder relationships in specific issues and
problems.
3. Understanding Stakeholders’ Coalition
Sometimes, different stakeholder groups combine together:
To support the enterprise, or
To oppose/block it (when their interests are not protected).
Managers must evaluate possible coalitions and stay alert, because such
coalitions may keep shifting.

4. Assessing Stakeholders’ Interest

Every stakeholder has a different interest. Example:
Shareholders want dividends and growth.
Employees want job security and fair pay.
Customers want good products at fair prices.
Managers must identify and understand these interests; otherwise, expectations
cannot be met.
5. Judging Stakeholders’ Power
Stakeholders have different levels of power:
Shareholders → voting power in decisions.
Customers, suppliers, dealers → economic power (they can affect sales,
supply, demand).
Government & regulators → political power (laws, policies, regulations).
Managers must judge whose power is stronger in each situation.

6. Deciding Priorities of Stakeholders

Different stakeholders have different priorities.
Not all stakeholders are equally involved in every issue.
Managers must set priorities carefully, issue by issue, and handle stakeholder
expectations accordingly.
 Summary:
Stakeholders are all groups who have an interest or stake in a business
firm.
Shareholders are one type of stakeholder.
Customers are also considered a type of stakeholder (in the broader
sense).
Internal stakeholders → Shareholders, managers, and workers.
External stakeholders → Creditors, suppliers, government, and society.
Every stakeholder group has certain expectations from the business.
Ch 2: Marketing and Sales
 Market: Meaning
Commonly: A place where buyers and sellers meet to exchange
goods/services.
Real sense: A group of buyers and sellers interested in exchanging
goods/services for money.
Example: People who want and can afford to buy a car → constitute the
car market.
Sellers use new communication methods (fax, phone, SMS, TV, internet) to
reach consumers.
 Market: Definition
Philip Kotler:
"A market is the set of all actual and potential buyers of a product."

Prof. Jevons:
"A market means a body of persons who are in intimate business
relations and carry on extensive transactions in any commodity."
 Meaning of Marketing
“Marketing is the process of understanding customer needs
and then planning, pricing, promoting, and delivering
products or services to satisfy those needs
profitably.”There are two approaches to marketing:

1. Traditional Concept (Product Oriented)

2. Modern Concept (Consumer Oriented)
 Traditional Concept:
Marketing = Process by which goods are made available to
consumers by manufacturers.

It involves transfer of goods/services from

producers to consumers for value (money).

Starts after the goods are produced and ends with their sale.

Focus = Only on the physical distribution of goods and services.

In short: Traditional marketing = "Selling what is produced."

 Modern Concept:
Definition: Marketing means identifying, understanding, and
satisfying the needs and wants of present and potential
customers more efficiently than competitors.
Focus: Consumer needs → Customer satisfaction → Organizational
goals.

💡 According to Philip Kotler:

“The marketing concept is a customer orientation backed by
integrated marketing aimed at generating customer satisfaction as
the key to achieving organizational goals.”
 🧩 Elements of Modern Concept of Marketing
i) Target Market
Customers who are likely to use the product/service.
Products should be designed keeping in view their needs and wants.

ii) Customer Satisfaction

Achieved by providing the right product, at the right price, at the right place,
with efficient after-sales service.

iii) Integrated Marketing

Coordination of marketing activities with other departments to achieve
customer satisfaction.

iv) Profitability
Long-term goal of profitability and growth through customer satisfaction.
 📖 Definitions of Modern Marketing
According to William Stanton
“Marketing is a total system of interacting business activities designed to plan,
price, promote and distribute want satisfying goods and services to the benefit of
present and potential customers.”

According to H.L. Hansen

“Marketing is the process of discovering and translating consumer wants into
products and services and then in turn making it possible for more and more
people to enjoy more and more of these products and services.”
 Characteristics of Marketing
1.Marketing is an Integrated Process:
Marketing is not a single activity but a combination of many activities like planning,
pricing, promotion, and distribution. All these activities work together in
coordination to satisfy human needs.

2. Marketing is Customer-Oriented:
The main focus of marketing is the customer. It begins with identifying the needs of
consumers and ends with satisfying those needs. Customers are the center of all
marketing efforts.

Marketing is a System:
Marketing works like a system. It collects information about customers (input), uses
that information to design products or services, and then delivers those products
to satisfy needs (output).
4. Marketing is Part of Total Environment: Marketing is influenced by social,
cultural, legal, political, and economic factors. It continuously adapts itself
according to changes in the environment.

5. Marketing is Creative: Marketing adds value by making

products more useful. It ensures products are available at
the right time, at the right place, and can be easily transferred from seller to
buyer.

6. Marketing is Goal-Oriented: The purpose of marketing is to achieve

benefits for both buyers and sellers. It creates customer satisfaction for the
buyer and profit for the seller.
7. Marketing is Both Art and Science: Marketing is an art because it requires
creativity, skills, and experience. It is also a science because it
uses theories, data, and knowledge from different fields
like economics, psychology, and sociology.

8. Marketing is Wider than Market: A market only refers to buyers and sellers, but
marketing is a much broader concept. It includes planning, producing, pricing,
promoting, and distributing products and services.

9. Marketing is Pervasive: Marketing is required everywhere, not just in business. It

is also used in education, health, social causes, environmental awareness, and
other fields to spread useful ideas and create value for society.
 Objectives of Marketing

1.Creation of Demand: The first aim of marketing is to create demand for goods
and services. This is done by finding out customer needs and preferences, and then
using advertising, personal selling, and promotion to persuade them to buy.

2. Customer Satisfaction: Modern marketing begins and ends with the customer.
The main focus is to provide satisfaction by giving the right product, at the right
price, and with proper service.

3. Market Share: Every business wants a reasonable share of the total demand. To
achieve this, companies must make their products popular by maintaining good
quality and offering them at fair prices.
4. Profitability and Growth: Marketing aims to achieve long-term profits and
growth. A business can only survive and expand if it satisfies customer needs while
also earning profits.

5. Goodwill: Marketing also aims at building a good reputation for the company. By
offering quality products at reasonable prices and providing efficient after-sales
service, a business earns customer trust and long-term goodwill.

6. Standard of Living: Marketing improves people’s standard of living by providing

a wide variety of products, introducing better quality goods, and creating more job
opportunities.
 Importance of Marketing
1.Generation of Revenue: Marketing is the main source of income for any business.
Effective marketing ensures sales, which help to cover expenses and earn profits.

2. Customer Satisfaction: It helps identify and fulfill customer needs, ensuring

long-term loyalty and trust.

3. Employment Generation: Marketing creates many jobs in advertising,

distribution, sales, packaging, and production because mass selling requires more
workforce.

4. Higher Standard of Living: By offering a wide variety of quality goods at

reasonable prices, marketing improves people’s lifestyles and gives them more
choices.
5. Large Scale Production: Marketing encourages mass selling, which
allows companies to produce on a large scale and reduce costs per unit.

6. Economic Development: It supports transportation, warehousing, banking, and

insurance. By balancing production and consumption, marketing keeps the
economy stable and strong.

7. Foreign Exchange Earner: By promoting exports, marketing helps a country earn

foreign exchange, strengthening its global trade position.

8. Creation of Utilities: Marketing creates time utility (availability at right time),

place utility (availability at right place), and possession utility (easy transfer from
seller to buyer).
Difference Between Marketing and Selling
Selling and Marketing are related but not the same.

Selling focuses on the seller’s needs, while marketing focuses on the

buyer’s needs.

Marketing is broader and long-term; Selling is narrower and short-term.

1. Scope:
Selling: Exchange of goods for money, focused on distribution of goods
already produced.
Marketing: Wider scope – includes selling plus product planning, market
research, advertising, after-sales service, etc.

2. Focus:
Selling: Focuses on the seller’s needs → Increase sales volume.
Marketing: Focuses on customer needs → Create value and satisfaction.

3. Beginning & End:

Selling: Starts after the product is manufactured and ends when sold to the
buyer.
Marketing: Starts before production (research, product design) and
continues after sales (after-sales service).
4. Orientation:
Selling: Internally oriented → Aim is short-term profit through more sales.
Marketing: Externally oriented → Aim is long-term growth through customer
satisfaction.

5. Demand Creation:
Selling: Assumes demand already exists; task is to push products.
Marketing: Creates and maintains demand by identifying and meeting
customer needs.
Selling
Product-oriented.
Begins after production (selling goods already made).
Ends when the product is delivered to the customer.
Main goal → Increase sales volume & convert product into cash.
Focus → Seller’s needs.

Marketing
Customer-oriented.
Begins before production (identifying customer wants).
Continues even after sales (after-sales service).
Main goal → Satisfy customer needs & build long-term relationships.
Focus → Buyer’s needs.
 Basis of Distinction Marketing Selling
Identifying and satisfying Exchanging goods for
1
Meaning
wants money

Ensuring growth and Maximising profits

2
Objective stability of the firm – long- through increase in sales
term goals volume – short-term goals

Customer-oriented, let the Production-oriented, let

3
Orientation
seller beware the buyer beware

Wider in scope, includes Narrow in scope, part of

4
Scope
selling marketing

Begins before production, Begins after production

5
Beginning and End
continues even after sales and ends with sale
 Basis of Distinction Marketing Selling

6
Focus Focus on customer’s needs Focus on seller’s needs

Involves creation and Presupposes existence of

7
Demand
maintenance of demand demand

Old and traditional

8
Growth New and modern concept
concept

Integrated approach for Fragmented approach for

9
Approach
achieving long-term goals immediate gain

Converting customer’s
Converting products and
0
Process needs into products and
services into cash
services
 Meaning of Product
Narrow Sense:
A product is a set of tangible and physical attributes (materials, color, design,
size, weight, etc.) assembled in an identifiable form.
Example: A ball pen = plastic + metal + ink + other components.

Broad Sense:
A product is much more than physical attributes.
It is a bundle of benefits that provides satisfaction to the consumer.
Includes tangible + intangible attributes such as brand name, warranty,
packaging, goodwill, etc.
Psychological aspect is important (e.g., buying soap = buying good complexion,
not just chemicals).
 Features of a Product
Tangibility – Can be seen, touched, felt, measured (e.g., car, pen).

Associated Attributes – Includes brand name, warranty, packaging,

reputation, etc.

Life Cycle – Every product passes through introduction, growth, maturity,

and decline stages.

Exchange Value – Product has value and can be exchanged for money or
benefits.

Need Satisfaction – Designed to satisfy some human need or want.

 Meaning of Services
Services are intangible benefits, utilities, and satisfactions offered for
sale.

Examples: Transportation, communication, banking, insurance,

warehousing, advertising, etc.

Also include activities of professionals: doctors, lawyers, engineers,

auditors, consultants, etc.

Key Features:
Intangible (cannot be seen, touched, or stored).
Cannot be separated from the service provider.
Quality cannot always be standardized or uniform.
 Types of Services
1. Commercial Services: Provided by traders, transporters, banks, insurance
companies, warehouses, advertising agencies, hotels, etc.

2. Professional Services: Provided by doctors, lawyers,

engineers, auditors, consultants, and other experts.

3. Personal Services: Tailoring, beauty parlour, laundry,

amusement parks, cinema, theatre, shoe repair, guest houses, etc.

4. Public Utility Services: Post and telegraph, police, fire brigade, military,
schools, water and electricity supply, hospitals, courts, sanitary services, etc.
 Difference between Products and Services
Basis of Distinction Products Services

Tangible, can be seen,

Intangible, cannot be touched,
Tangibility touched, tested, and
cannot be standardized
standardized

Usually durable, can be stored

Perishability Perishable, cannot be stored
for future use

Ownership is transferred to No ownership is transferred

Ownership
the buyer (only experience/benefit)

Can be separated from Cannot be separated from

Inseparability producer (e.g., car from provider (e.g., taxi driver must
manufacturer) be present)
Non-standardized, variable
Standardized, identical units
Homogeneity quality (depends on
possible (e.g., Maruti car)
person/time)
Basis of Distinction Products Services

Technology-based (depends on Person-based (depends on skill

Technology
production process) of provider)

Services themselves are

Consumer durable goods
After-Sale Service consumed instantly, no after-
require after-sale services
sale service

Customer must participate in

Customer does not participate
Participation service delivery (e.g., presence
in manufacturing process
in taxi)

7 Ps → Product, Price, Place,

4 Ps → Product, Price, Place,
Marketing Mix Promotion, People, Physical
Promotion
evidence, Process
 Meaning of Pricing
The term ‘price’ denotes the money value of a product or service.

It is the amount of money a seller asks for a product/service and the amount
buyers are willing to pay

According to Clark: “The price of an article or service is its

market value expressed in terms of money.”

Price reflects the worth of a product/service and the amount of money for which it
can be exchanged.

In practice, price also includes certain services or facilities (e.g., transportation

costs, mode of payment, discounts, allowances).

Pricing is the process of translating the value of a product or service into money.
 Objectives of Pricing
1. Target Rate of Return:

Firms set prices to earn a reasonable return on their investment or net sales.
The goal is to cover production & distribution costs and still earn a profit
margin.
This method is also called cost plus pricing (adding profit over cost).

A company invests ₹50 lakh and wants 30% return (₹15 lakh).
It plans to sell 20,000 units, cost per unit = ₹50.
Total cost = ₹10,00,000 + Return (₹15,00,000) = ₹25,00,000.
Selling Price per unit = ₹25,00,000 ÷ 20,000 = ₹125.
2. Price Stability: The aim is to avoid cyclical price fluctuations and price wars.
The philosophy is “live and let live” → all firms keep prices steady instead of
fighting by reducing them.
Common in oligopoly markets (few big firms dominate).
Price stability creates consumer trust and avoids unnecessary competition.
Sometimes, larger firms set a price trend that others follow.

Example:
Amul milk maintains stable prices over long periods. This gives consumers
confidence that prices won’t fluctuate daily, even though production costs keep
changing.
3. Market Share
Some firms keep prices low to increase their share in the market.
Capturing a large number of customers may be more valuable than immediate
profits.
Firms may reduce prices temporarily to gain entry or expansion in the market.

Example:
When Jio entered the telecom industry, it offered free and cheap data services.
This strategy helped it capture a huge market share, forcing competitors like
Airtel and Vodafone to slash prices.
4. Meet or Prevent Competition:
In highly competitive markets, firms may cut prices to meet rivals’ prices.
Sometimes firms drastically reduce prices to prevent new competitors
from entering.
This strategy helps maintain a company’s position in the market.

Example:
During festival sales, Amazon and Flipkart keep matching or reducing each
other’s prices. This makes it difficult for smaller e-commerce players to
compete.
5. Profit Maximisation
Firms may aim to maximise profits by charging as much as consumers are
willing to pay.
This is usually a short-term goal as high profits attract competitors.
In the long run, businesses may need to balance profit with customer loyalty.

Example:
Airlines raise ticket prices during festivals or holiday seasons. Since demand is
very high, people are willing to pay extra, and airlines maximise profits in that
period.
 Summary:
Marketing = process of satisfying customer needs.
It creates demand, market share & improves living standards.
Marketing is broader than selling.
Product = tangible; Service = intangible, perishable & inseparable.
Pricing = set price based on profit, customers, competition & stability.
 Advertising and Sales Promotion
Imagine you open a new café in your city ☕.
You make the best coffee in town, but nobody knows about it.
Just having a great product is not enough — customers must know, like,
and remember it.
To do this, businesses use promotion tools like Advertising, Sales
Promotion, Publicity, and Personal Selling.
👉 So, promotion is the bridge between the product and the customer.
 What is Advertising?
Advertising is the most common way to promote products and
services.
It is about informing, persuading, and reminding people about
products, services, or ideas.
Large-scale businesses depend on advertising for mass selling.

💡 Example: New movie releases → you see posters, YouTube ads, and TV
trailers. That’s advertising 🎬.
 Definitions of Advertising
📘 American Marketing Association (AMA):
“Advertising is any paid form of non-personal presentation and promotion of
ideas, goods, or services by an identified sponsor.”

📘 Stanton:
“Advertising consists of all the activities involved in presenting to a group, a
non-personal, oral or visual, openly sponsored message regarding a product,
service, or idea.”
 Features of Advertising:
1.It is Impersonal Communication
Advertising does not involve direct face-to-face talk with customers.
Same message is shown to everyone through TV, newspapers, hoardings,
social media, etc.
💡 Example: You see the same Coca-Cola ad on TV that millions of others
also watch at the same time.
2. It is a Paid Form of Communication
For every advertisement, the company has to pay money for media space
or time.
Payment is made to TV channels, newspapers, YouTube, websites, etc.
💡 Example: Apple pays YouTube to show iPhone launch ads before your
videos.

3. It has an Identified Sponsor

The advertiser is always known and clearly shown in the advertisement.
The brand name or company logo appears in the ad.
💡 Example: The “Amul Girl” cartoon always shows the Amul brand.
3. it is a Mass Communication Tool
Advertising reaches a large number of people at the same time.
It helps to create mass awareness quickly.
💡 Example: When a movie releases, trailers on TV, radio, and social media
reach lakhs of people in one day.

4. It Creates Awareness and Persuades

Advertising informs people about new products and tries to convince
them to buy.
It creates curiosity and desire among customers.
💡 Example: A new chocolate ad shows “melts in your mouth” to make
you want to try it.
5. It is Controlled Communication:
Advertiser decides the message, timing, place, and frequency of the
ad.
Full control is in the hands of the company.
💡 Example: Flipkart decides when to release its “Big Billion Day Sale”
ads.
6. It is Commercial in Nature:
The main aim of advertising is to promote sales and increase profit.
Even social ads (like “No Smoking”) are indirectly sponsored to influence
behaviour.
💡 Example: Surf Excel ads not only say “Daag Ache Hain” but also push
customers to buy their detergent.
 From Advertising to Publicity
We learnt that Advertising is a paid way to promote products or services.
But not all promotion is paid or controlled by a company.
Sometimes, people talk about a company in the news, media, or social
media without the company paying for it.
This is called Publicity.
 What is Publicity?
Publicity means spreading information about a company, product, or
service through media coverage or public talk.
It is usually not paid for by the company.
It can be positive (good reviews, awards,
achievements) or negative (criticism, controversies).
Goal: To create a favourable public opinion
about the organisation.

Example for students:

“If a newspaper publishes an article praising a school’s achievement, that is
publicity. The school did not pay for it.”
 Advertising vs Publicity
Basis Advertising Publicity

Sponsor Done by identified sponsor Sponsor may not be identified

Payment Paid for Not paid

Nature Always impersonal Personal or impersonal

Sponsor controls size &

Control No control
frequency

Versatility Less versatile More versatile

Create demand for Create favourable public

Objective
product/service opinion

Commercial Value Always commercial May or may not be commercial

 Objectives of Advertising
Main Objective: The ultimate objective of advertising is to sell a
product, service, or idea.

But selling is not the only goal—advertising also aims to influence

buyer behaviour and create awareness.

Specific Objectives:
1. Introduce New Products: Create awareness and interest among
prospective customers.
2. Enter New Markets: Attract new groups of customers.
3. Fight Competition: Remind customers to buy your product instead of a
competitor’s.
 Objectives of Advertising
4. Build Brand Loyalty: Create brand preference and repeat buying
behaviour.

5. Support Personal Selling: Make customers aware, so salespeople’s job

becomes easier.

6. Enhance Goodwill: Improve the image of the company by promising

good quality at fair prices.
 Objectives of Advertising
7. Improve Dealer Relations: Encourage dealers to stock and sell more of
your products.

8. Reach Remote Customers: Advertise to people in areas where direct

selling is difficult.

9. Warn Against Imitations: Protect customers from fake or spurious

products.
 Importance of Advertising:
Advertising is an important tool of modern business.
It is not just a way to sell products, but a powerful medium to
disseminate information. Through advertising, producers, traders,
businessmen, and consumers all benefit.

For businesses, it helps in creating demand and increasing sales.

For consumers, it provides knowledge of products and better choices.
For society, it generates employment and promotes economic
development.

Thus, advertising plays a key role in connecting producers and

consumers, while also supporting the growth of the entire economy.
 📌 Importance of Advertising to Producers & Traders
1. Meeting Competition
Advertising helps businesses face rivals in the market.
It reminds customers of the brand and attracts them despite
competitors’ efforts.
📌 Example: Coca-Cola and Pepsi constantly advertise to keep their
brand alive in consumers’ minds.

2. Steady Demand
Regular advertising maintains a continuous demand for products.
It reduces seasonal fluctuations in sales.
📌 Example: Ice cream companies like Amul advertise even in winter
to encourage steady demand.
 📌 Importance of Advertising to Producers & Traders
3. Production of New Product:
Advertising is the best way to introduce new products to the market.
It informs people about features, price, and availability.
📌 Example: Apple advertises new iPhones each year to create buzz
and attract buyers worldwide.

4. Economic Solution
Mass advertising creates a large market for products.
This allows producers to go for mass production, reducing per-unit
cost.
📌 Example: Patanjali advertised ayurvedic products aggressively,
created huge demand, and reduced costs through bulk production.
5. Goodwill: Continuous and truthful advertising builds trust & goodwill
for the brand.
Customers begin to prefer the brand over others.
📌 Example: TATA’s consistent advertising highlights honesty and
quality, which has built long-term goodwill.

6. More Profits: With advertising, sales increase, costs reduce, and profits
rise.
It ensures higher return on investment.
📌 Example: Nike spends heavily on advertising campaigns, but it
earns much higher profits due to massive global sales.
7. Dealer Relations
Advertising creates demand pull → customers ask for the product.
This makes dealers eager to stock and sell that brand.
📌 Example: Samsung’s heavy advertising makes customers demand
its mobiles, so dealers prefer to keep them in stock.
 📌 Importance of Advertising to Customers
1. Knowledge of Products: Advertising informs customers about new
products, features, and prices.
It saves time in searching and comparing.
📌 Example: Flipkart’s festive sale ads inform buyers about discounts
on mobiles, TVs, and home appliances.

2. Better Quality at Reasonable Price: Due to competition created by

advertising, companies try to offer good quality at fair prices.
📌 Example: Smartphone brands (Vivo, Oppo, Realme) advertise
features + prices to attract buyers, which benefits customers with
competitive pricing.
 📌 Importance of Advertising to Customers
3. Convenience in Purchase
Customers do not need to search for product details in the market.
Advertising already provides information about features, prices, and
availability.
This makes buying decisions quick and easy.

4. Education of Consumers
Some ads spread awareness about safety, health, and proper usage of
products.
📌 Example: Colgate ads teach consumers the importance of brushing
twice a day for oral health.
 📌 Importance of Advertising to Customers
5. Increase in Standard of Living
Advertising introduces modern products that
encourage people to adopt a better lifestyle.
📌 Example: Ads for modular kitchens or smart home devices
motivate families to improve their living standards.

6. Protection against Exploitation

When multiple brands advertise openly, consumers can compare and
choose, avoiding exploitation by monopolies.
📌 Example: Ola and Uber ads provide alternatives to traditional taxi
services, reducing overcharging.
 📌 Importance of Advertising to Society
1. Employment Generation
Advertising creates jobs in printing, media, transport, sales, and
marketing.
📌 Example: TV channels, YouTube, and newspapers employ lakhs of
people due to ad revenue.

2. Higher Standard of Living

Advertising introduces people to new and better products.
It motivates them to improve lifestyle and comfort.
📌 Example: Ads for modern appliances like washing machines or
smart TVs encourage families to adopt a higher standard of living.
3. Sustains the Press and Media
Newspapers, TV channels, and online platforms survive mainly on
advertising revenue.
📌 Example: Most newspapers cost only a few rupees because ads
cover their main expenses.

4. Stimulates Research & Development

To stand out in advertising, companies create new designs, better
quality, and innovations.
📌 Example: Samsung and Apple invest heavily in R&D to advertise
new smartphone features every year.
5. Incentive to Progress
Advertising motivates producers to improve quality and consumers to
try better products.
📌 Example: Car companies keep launching safer and fuel-efficient
models, promoted through ads.

6. Promotes Art & Culture

Advertising uses creativity, music, design, and visuals, promoting art
and culture in society.
📌 Example: Indian festival ads (like Diwali ads by Cadbury) often
showcase family values, traditions, and cultural aesthetics.
 Advertising Is Effective Under Following Conditions:
When consumers’ awareness of the product or service is at a minimum

When the product is new and incorporates hidden technological

advances.

When significant opportunities for differentiating the product exist.

When primary buying motives are present.

When the market is expanding.

 Demerits of Advertising
1. Leads to Higher Prices
Advertising costs a lot (TV ads, hoardings, celebrity endorsements).
These expenses are added to the product’s price, making it costlier for
customers.
💡 Example: A normal soap might cost ₹20, but a heavily advertised one
with celebrity endorsement sells for ₹40.

2. Encourages Wasteful Consumption

Advertising often creates artificial wants, making people buy things they
don’t really need.
It promotes “show-off” culture instead of genuine need-based buying.
💡 Example: Buying a new smartphone every year just because ads say it’s
“latest”, even if the old one works fine.
 Demerits of Advertising
3. Can Mislead Consumers
Sometimes ads exaggerate product quality or hide defects.
This misleads customers and makes them spend money on products that
don’t match promises.
💡 Example: Fairness cream ads showing overnight transformation —🌞
which is unrealistic.

4. Undermines Social Values: Some ads promote luxury, show-off,

materialism, or even unhealthy habits.
They may ignore cultural and moral values.
💡 Example: Ads showing that only branded clothes = respect in society,
which builds wrong values.
 Demerits of Advertising
5. Wastage of National Resources
Huge money is spent on glamorous advertising campaigns
instead of investing in production, research, or public welfare.
This is seen as wasteful for the economy.
💡 Example: Crores spent on celebrity ads for soft drinks instead of
improving product quality.

6. Creates Monopoly in Market

Big companies with money power dominate advertising
making it hard for small businesses to compete.
This reduces healthy competition.
💡 Example: Pepsi and Coca-Cola spend massive amounts on ads, leaving
little space for smaller local cola brands.
 Demerits of Advertising
5. Wastage of National Resources
Huge money is spent on glamorous advertising campaigns
instead of investing in production, research, or public welfare.
This is seen as wasteful for the economy.
💡 Example: Crores spent on celebrity ads for soft drinks instead of
improving product quality.

6. Creates Monopoly in Market

Big companies with money power dominate advertising
making it hard for small businesses to compete.
This reduces healthy competition.
💡 Example: Pepsi and Coca-Cola spend massive amounts on ads, leaving
little space for smaller local cola brands.
 Code of Conduct for Advertisers
Compliance with Law & Morality
Advertising should follow the law of the country.
Must not offend morality, decency, or religious feelings of people.

Prohibited Advertisements
Ads that:
i. Deride race, caste, color, creed, or nationality (except for dramatization
to combat prejudice).
ii. Go against the principles of the Constitution of India.
iii. Incite crime, disorder, violence, or breach of law.
iv. Exploit national emblems, leaders, or personalities.
v. Affect friendly relations with foreign states.
vi. Are against national interests.
vii. Promote cigarettes and tobacco products.
viii. Are of religious or political nature.

ix. Relate to:

Moneylenders
Chit funds & private saving schemes
Matrimonial agencies
Unlicensed employment services
Fortune-tellers/soothsayers/hypnotism on TV
x. Promote betting tips, horse racing, gambling, or games of chance.
xi. Mislead public about ingredients or effects.
xii. Misuse scientific/statistical data or jargon to create false impression.
xiii. Lack proper evidence for claims.
 The Director General of Doordarshan (who controls TV advertisements on
Doordarshan) must follow the Code of Ethics for Advertising in India when
deciding which ads can be shown. This Code lays down rules about what kind
of ads are allowed or prohibited.

Also, the Government of India has the power to change or update this Code
anytime according to new situations, laws, or social needs.
 Meaning of Advertising Agency
An Advertising agency is a specialized organization that helps companies
promote their products, services, or ideas.

It is an expert in planning, creating, and releasing advertisements through

appropriate media like TV, newspapers, radio, or digital platforms.

The agency charges a fee or commission for its services.

👉 If a company runs its own agency → it is called

an In-house Agency.

👉 Most firms prefer to hire independent advertising agencies.

Example:
Hindustan Unilever hires Ogilvy & Mather as its advertising agency.
Coca-Cola works with McCann Erickson for its global campaigns.
 Organisation of an Advertising Agency
At the top: Chief Executive – the overall head.
1. Account Manager
Handles Client Services (link between advertiser and agency).
Example: A company like Pepsi talks to the account manager to explain what
kind of ad campaign they want.

2. Creative Director
Responsible for the creative team:
Copywriters → write slogans, jingles, scripts.
Example: Nike’s “Just Do It” slogan.
Production → create ads (video shoots, graphic design).
Art → designs visuals, logos, layouts.
Traffic → ensures smooth workflow and deadlines.
 Organisation of an Advertising Agency
3. Media Manager
Decides where and when ads should appear:
Media Planning (Print, Electronic, Other Media) → plans whether ad goes
on TV, newspapers, or social media.
Media Buyer → buys ad space (TV slots, newspaper space, Instagram
ads).
Example: Deciding whether to run a shampoo ad during a cricket match
on TV or on YouTube ads.

4. Support Services
Provide extra services like public relations, events, etc.
5. Administrative Manager
Marketing Research → studies consumer behavior.
Example: Surveys to know if teenagers like Pepsi more than Coke.
Sales Promotion → designs schemes like discounts, free samples.
Human Resources → manages employees.
Finance & Accounts → keeps financial records, payments, billing.
 Function of Advertising Agency
1. Planning
The agency prepares the advertising plan based on the client’s objectives.
It decides what to advertise, when, how, and through which media.
Example: Deciding whether to launch a new shampoo
with a TV ad during IPL or with Instagram reels.

2. Creation and Execution

The agency creates the actual advertisement: writing copy, designing
visuals, producing videos, preparing illustrations, selecting photographs.
Then, the ad is released in different media.
Example: Making a TV commercial for Coca-Cola featuring celebrities, and
printing posters for shops.
3. Coordination
The agency coordinates with sales teams, distributors, and retailers so that
the advertising message and sales activities go together.
Example: When Cadbury Dairy Milk runs a “Buy 1 Get 1” offer, the ad
campaign is coordinated with shopkeepers so customers actually find the
offer in stores.

4. Accounting
The agency maintains proper accounts in cooperation with the client.
It manages payments, billing, and financial administration of ad campaigns.
Example: If Nestlé runs a ₹2 crore TV ad campaign, the agency prepares the
cost sheet and manages payments to TV channels.
5. Media Planning: The agency selects the most suitable media (TV,
radio, print, online) to reach the right audience at the right time.
Example: Choosing YouTube ads to target teenagers for a new gaming app instead
of newspaper ads.

6. Research: The agency conducts research to understand the market, audience,

competitors, and effectiveness of ads.
Decisions are based on facts, figures, and surveys.
Example: Surveying women before launching a new fairness
cream to know their preferences.

7. Internal Control: The agency manages its employees, finances, and resources
effectively.
It ensures proper control over behind-the-scenes work like HR, PR, and fund
management.
Example: An ad agency managing multiple teams (creative, media, client service)
and ensuring deadlines and budgets are maintained.
 Social Advertising Media
Social advertising means using advertising to promote:
1.Socially relevant issues (public interest advertising), or
2.Social relationships/networks (using social media platforms).

Two Contexts of Social Advertising:

1.Former Context (Public Interest Advertising)
Campaigns are created in public interest to create awareness and bring social
change.
Aim: Educate people about issues and motivate them to change their lifestyle for a
better future.
Examples:
Blood donation drives
Anti-smoking campaigns
Swachh Bharat Abhiyan (Clean India Movement)
“Pulse Polio” campaign
1. Latter Context (Social Media-based Advertising)
Advertising uses social media platforms to spread messages or target ads.
Social networking sites like Facebook, Instagram, YouTube, Twitter, LinkedIn
help advertisers reach their target audience directly.
Ads may be customized based on interests, demographics, or social circles.

Examples:
Facebook showing an ad for Nike shoes because your friends also follow
Nike.
Instagram promoting Zomato offers near your location.
YouTube showing awareness ads before a video starts.
Media Used for Social Advertising
1. Print: Newspapers, magazines
2. Broadcast: Radio, television, films
3. Outdoor: Hoardings, posters, banners
4. Online: Social networking sites, blogs, apps
5. Recently, social media advertising has become the most popular
form.

👉 In short:
Social advertising is either about social issues (public welfare
campaigns) OR using social networks (Facebook, YouTube, etc.)
for product promotion.
 Meaning of Sales Promotion
Sales promotion refers to all marketing activities other than advertising, personal selling, and
publicity that stimulate customer buying and dealer effectiveness.
👉 It is short-term, non-recurring and aims to increase immediate sales.

Examples of Sales Promotion Tools

Free samples → e.g., free shampoo sachet with a magazine.
Premium on sale → e.g., Buy 1 Get 1 Free offer.
Coupons → e.g., Domino’s ₹100 off coupon.
Gifts → e.g., Free toy with a Happy Meal at McDonald’s.
Contests → e.g., Pepsi “Scratch and Win” contest.

Purpose
Encourage on-the-spot buying.
Create short-term demand for products.
Support advertising & personal selling.
Ultimately increase sales and profits.
Distinction between Sales Promotion and Advertising

Point Sales Promotion Advertising

Short-term marketing activities Paid, impersonal promotion of

1. Meaning to stimulate consumer buying & products/services by an
dealer effectiveness. identified sponsor.

Long-term (brand image

2. Time Horizon Short-term (immediate effect).
building).

Build image of producer &

3. Aim Increase immediate sales.
product.
Point Sales Promotion Advertising

Narrow → samples, coupons,

Wide → TV, newspapers,
4. Scope contests, premium offers,
magazines, posters, radio, films.
displays, exhibitions.

5. Regularity Temporary, non-recurring. Continuous, recurring.

Pushes product towards buyers,

Informs, persuades, reminds
6. Emphasis supplement to advertising &
customers about product.
selling.

👉 Simple Example to Remember:

Sales Promotion = “Buy 2, Get 1 Free” (Immediate sales boost).
Advertising = “Brand ad on TV” (Builds long-term brand image).
 Role of Sales Promotion
Provides Information
Sales promotion informs customers about the features, price, and uses of a product.
Example: Free sample of a new shampoo helps buyers know how it works.

Stimulates Demand
It encourages customers to try and buy new products.
Example: “Buy 1 Get 1 Free” creates curiosity and increases demand.

Creates Product Identity

Through promotions, a brand stands out from competitors.
Example: Coca-Cola offering special festival packs makes customers remember the
brand.
 Role of Sales Promotion
Meets Competition
In tough competition, promotions help a company protect or grow its sales.
Example: If Pepsi gives a 10% discount, Coca-Cola may also give offers to maintain sales.

Satisfies Customers
Customers love more value for their money, so promotions make them happy.
Example: Extra 20% quantity in the same price pack.

Permits Control
Sales promotion activities (like coupons, samples, discounts) are usually short-term and
measurable. This makes it easy for companies to control, monitor, and evaluate their success.

Management can check how many coupons were used, how many samples were
distributed, or how much sales increased during the promotion.
If a particular scheme is not working, it can be stopped quickly.
 Sales Promotion Programmes
Sales promotion refers to short-term incentives given to customers or dealers to boost sales.

1. Consumer Sales Promotion Programmes

👉 These are directed towards the final customers. The aim is to attract new customers,
retain existing ones, or counter competitors.

Techniques with examples:

Free Samples: Small sachets of shampoo given at malls to encourage trial.
Contests: Lucky draw coupons at Big Bazaar where customers can win prizes.
Discount Sale: End-of-season sales at Lifestyle or Zara.
Coupons: Domino’s pizza coupons for ₹100 off on the next order.
Demonstrations: Mixer grinder demo at Reliance Digital.
Price Reductions: “Buy 1 Get 1 Free” on chocolates during Diwali.
 Sales Promotion Programmes
2. Dealer Sales Promotion Programmes
👉 These are aimed at dealers/retailers to encourage them to stock and promote a product.
Techniques with examples:

Dealer Premiums: A company like Nestlé offering special incentives to shopkeepers for
pushing Maggi packets.
Dealer Contests: Samsung rewarding dealers with foreign trips for achieving sales targets.
Advertising Material: Coca-Cola provides display boards, posters, or fridge branding to
local shops.
Store Demonstrations: Amul giving ice-cream counters to dealers to attract customers.
Special Displays: Maruti Suzuki setting up a special car display at an Auto Expo.
 Techniques of Sales Promotion
1.Free Samples:
Free samples of low-priced and repeat items are given to selected people to popularise
the product. It helps customers test before buying.
Why used: Useful for introducing new products and promoting fast-moving goods.
Examples:
Hindustan Lever distributing Vim Dishwash sachets.
Pharmaceutical companies giving doctors free medicine samples.
Nescafé giving coffee sachets at malls.

2. Coupons: A certificate entitling the holder to a discount or gift on the purchase of a

product. Coupons are introduced to increase sales or launch products.
Why used: To attract new customers or increase sales of established products.
Examples:
Ponds: “Bring any toilet soap wrapper & get ₹5 off on Ponds Face Wash.”
Reliance Fresh distributing shopping coupons during festivals.
3. Premium or Bonus Offers: A free/bonus item given along with the main product at
no extra cost (also called combination offer).
Why used: Helps increase sales quickly and clear stock.
Examples:
Lux Soap: “Buy 3 soaps, get 1 free.”
Horlicks packet with a free spoon inside.

4. Price-off or Refund Offers

Direct reduction in price on purchase of a large/pack item, or refund of money after
proof of purchase.
Why used: To promote bulk buying and attract price-sensitive customers.
Examples:
“Save ₹20” on Family Pack biscuits.
Cashback on Surf Excel after sending wrapper.
5. Trading Stamps: Customers receive stamps or points for purchases, which can be collected
and redeemed later.
Why used: Builds customer loyalty and repeat purchases.
Examples:
Supermarkets offering loyalty cards with redeemable points.
Payback points at Big Bazaar.
Credit card reward points for shopping.

6. Prize Contests: Buyers participate in contests like slogans, puzzles, or lucky draws. Winners
receive attractive prizes.
Why used: Creates excitement and builds brand recall.
Examples:
Economic Times Brand Equity Quiz Contest.
Pepsi’s “Guess and Win” cricket contest.
Online contests on Instagram where brands give prizes.
7. Free Offers: A free gift is given on purchase of a costly item.
Why used: Encourages purchase of durable/expensive products.
Examples:
Buy a fridge, get a mixer grinder free.
Asian Sky Shop: Free product with bulk purchase.
Mobile phones with free earbuds.

8. Fairs & Exhibitions: Trade shows, fairs, exhibitions organised to introduce new products and
allow direct consumer contact.
Why used: Builds awareness and provides demonstration.
Examples:
Auto Expo in Delhi showcasing new cars.
World Book Fair in Delhi by publishers.
Food festivals where new brands give free tasting.
9. Merchandising Aids: Materials provided to retailers to promote products (posters, display
racks, glow signs, training, etc.).
Why used: Makes the product more visible and attractive in shops.
Examples:
Coca-Cola giving branded fridges & glow boards to shops.
ITC giving Sunfeast display shelves to grocery stores.
Amul ice-cream freezers at retailers.

10. Clearance Sale: Sale at reduced prices to clear accumulated stock.

Why used: To dispose old stock and attract price-sensitive customers.
Examples:
End-of-season sales in malls (Pantaloons, Lifestyle).
Amazon’s “Year-End Clearance Sale.”
Khadi Gramodyog discounts on Gandhi Jayanti.
11. Exchange Offers : Old product is exchanged for a new one at reduced price.
Why used: Attracts customers to upgrade products.
Examples:
LML offering exchange on old scooters.
BPL allowing exchange of old fridge for a new one.
Flipkart “Exchange Offer” on mobile phones.
 Summary:
Advertising is a non-personal, mass method of promoting sales.
Its main objectives are to create, sustain, and stimulate demand.
It plays a vital role in: Facing competition, Stabilising demand,Increasing
sales,Building goodwill, Introducing new products, etc.
Advertising has also been criticised because it may increase product
prices, encourage wasteful consumption, misguide consumers, create
monopoly, waste resources, and undermine social values.
Advertising is useful as it provides information, stimulates demand,
creates product identity, helps meet competition, and facilitates market
control.
Sales promotion methods include free samples, prize contests, premium
or bonus offers, exchange offers, etc.
Chapter:4 Consumer Protection
Now Ravi felt cheated. He lost his
money, didn’t get the right
product, and had no idea what to
do.
👉 This is what we call Consumer
Exploitation – when the consumer
does not get fair value for their
money.
👉 And this is why we need
Consumer Protection – to save
people like Ravi from being
cheated, overcharged, or misled.
 Need for Consumer Protection
1.Business is a part of society
Businesses use society’s resources like raw materials, manpower,
machinery, and money.
So, they must give back to society by selling the right quality products at
reasonable prices.

2. Moral duty of business

Every business has a responsibility to protect the interests of consumers.
Misleading or cheating customers is morally wrong.
3.Main aim of business: The goal of every business is to satisfy the
needs and expectations of consumers.
Only happy and satisfied consumers will come back again and again,
which ensures long-term profit for the business.

4. Government’s role: The Government of India wants to

protect the public’s welfare.
It encourages fair trade practices and makes strict rules to stop unfair
business practices.

5. Consumers are more aware today: People are now learning about their
rights through newspapers, radio, TV, and the internet.
With more awareness, consumers demand fair treatment.
👉 In short: Consumer protection is needed because businesses use
society’s resources, they have a moral and legal duty, and consumers are
becoming more alert and conscious of their rights.
 Meaning of Consumer Exploitation
Consumer exploitation means harming the interests of consumers in
different ways.
It happens when:
Consumers don’t get full value for the money they spend.
Traders or manufacturers cheat by being dishonest.

Example:
Selling poor-quality products at high prices.
Using wrong weights and measures.
Giving false information through advertisements.
 Types of Consumer Exploitation
1.Overcharging: Charging more than the fair price.
Example: Selling goods above the Maximum Retail Price (MRP).

2. Under-weighing: Giving less weight or quantity than what the consumer paid for.
Example: A packet marked “1 kg” contains only 900 grams.

3. Adulteration: Mixing cheap or harmful substances in products.

Example: Mixing stones in grains or water in milk.

4. Misleading Advertising: Giving false claims about a product.

Example: An ad says, “Use this cream and become fair in one week,” but it’s untrue.

5. Not Informing Consumers Properly: Hiding side effects, expiry dates, or dangers of
using a product.
 Importance of Consumer Awareness
Consumer exploitation happens mostly because consumers are
ignorant of their rights.
Aware consumers can stop unfair practices.
Awareness campaigns help people fight against cheating.
Example: Government campaign “Jago Grahak Jago” is very popular
in India.

👉 Consumer awareness is the first step to protection.

 Methods of Consumer Protection
1. Business Self-Regulation
Businessmen themselves should act honestly and with discipline. They must follow fair
practices and adopt high ethical standards. Trade associations can
also stop their members from using unfair trade practices.

2. Consumer Self-Help
Every consumer should stay alert and aware of his rights. Self-help is the best help. A
consumer must check prices, expiry dates, and bills, and should not allow dishonest
businessmen to cheat him.

3. Consumers’ Associations
Consumers can form voluntary associations or groups. These associations educate
people, make them aware of their rights, and also take collective action against unfair
trade practices.
 Methods of Consumer Protection
4. Government Regulations
The government protects consumers through laws, rules, and
regulations. It also takes action through courts and other authorities
whenever businesses exploit consumers.
 Consumer Protection Act, 2019
Earlier, Consumer Protection Act, 1986 was made, but it did not
cover online shopping.
The new Consumer Protection Act, 2019 includes:
Any person who buys goods or avails services for consideration.
Offline and online transactions.
Services through e-commerce, direct selling, multilevel marketing,
etc.
 Consumer Protection Act, 2019
Objectives of the Act:
1.Protect the interests of consumers.
2.Provide quick and easy remedies against exploitation.
3.Cover modern issues like online shopping and digital transactions.
👉 This Act gives consumers more power and safety in today’s changing
market.
 Salient Features of Consumer Protection
Act, 2019
1. Social Welfare Law
This Act is a very important social welfare legislation. It is called the
“Magna Carta of Indian Consumers” because it directly protects
consumers in the market and helps in solving their complaints.

2. Comprehensive Provisions and Effective Safeguards

The Act has very wide provisions. It gives strong safeguards to protect
consumers from different types of exploitation and unfair trade
practices. Compared to other laws, it provides more effective
protection.
3. Special Consumer Courts
The Act has created special consumer courts only for the
enforcement of consumer rights, which makes the system
more focused and efficient.

4. Three-Tier Grievance Redressal Machinery

The Act provides for a three-level redressal system—District Forums at the
base, State Commissions at the middle, and the National Commission at the
top. This makes grievance redressal more organised and systematic.

5. Simple and Inexpensive

The process under this Act is very simple and low cost. A consumer can file a
complaint easily without hiring a lawyer, just by writing a simple application.
6. Covers Goods and Services
The Act covers both goods and services given for consideration by any
person or organisation, whether in the private, public, or cooperative sector. It
also includes modern transactions such as online shopping, housing, and
telecom.

7. Time Frame
The Act fixes time limits for the disposal of cases so that
complaints are solved quickly and consumers get speedy justice.

8. Class Action
The Act allows one consumer to file a complaint on behalf of a group of
consumers who are facing the same problem, for example, if a company sells
defective helmets or adulterated medicines to thousands of people.
8. Check on Unfair Trade Practices: The Act allows consumers to file
complaints against unfair practices like adulteration, false advertising, short
weighing, or overcharging.

9. Check on Overcharging: Consumers can complain when sellers charge more

than the price fixed by law or written on the package (MRP).

10. Consumer Protection Councils

These councils are formed at central, state, and district levels. They do not have
legal power but promote consumer rights and spread awareness.

11. Establishment of CCPA

The 2019 Act created the Central Consumer Protection Authority (CCPA) to
regulate, protect, and enforce the rights of consumers. It also prevents unfair
trade practices and false advertisements.
 Rights of the Consumer
1. Right to Safety: Consumers have the right to be protected from goods
and services that are harmful to life and health.
👉 Example: If a gas cylinder leaks and explodes, or if a medicine has
harmful side effects, consumers can take action against the seller.

2. Right to be Informed: Consumers must be given full information

about a product—quality, quantity, ingredients, price, expiry date, and
risks.
👉 Example: A cold drink bottle must clearly mention
its expiry date. If not, it violates this right.
3. Right to be Assured (Right to Choose)
Consumers should get access to a variety of goods at fair prices. They should
not be forced to buy only one brand or product.
👉 Example: A shopkeeper cannot say “Buy only this detergent, I won’t show you
others.”

4. Right to be Heard
Every consumer has the right to express complaints and be listened to in proper
forums.
👉 Example: If a mobile service provider deducts extra balance, the consumer
can complain and the company must hear him.
5. Right to Seek Redressal
If a product or service is defective, the consumer can claim compensation or
replacement.
👉 Example: If a washing machine stops working within a week, the consumer can
demand repair, replacement, or refund.

6. Right to Consumer Awareness

Consumers have the right to know their rights and duties through education and
campaigns.
👉 Example: The famous campaign “Jago Grahak Jago” spreads awareness about
consumer rights in India.
 Basic Concept Under The Consumer Protection Act
1.Who is a Consumer?
A consumer is a person who buys goods or uses services
by paying money (consideration).
👉 Two main parts:
1. Consumer of Goods
A person who buys goods for personal use, not for resale or commercial
purpose.
Even if you buy goods with someone else’s approval (like family member),
you are still a consumer.
Example: Riya buys a washing machine for her home use → She is a
consumer. But if she buys 10 washing machines to sell in her shop → She is
not a consumer.
 Basic Concept Under The Consumer Protection Act
Consumer of Services
A person who hires or uses services by paying money.
It also includes a beneficiary (someone who benefits from services with
approval of the payer).
Example: Arjun pays for a train ticket for himself and his brother.
His brother is also a consumer because he used the service
with Arjun’s approval.

📌 Note:
Consumer includes both offline and online transactions.
It also includes e-commerce, teleshopping, direct selling, multi-level marketing.
Example: Ordering food from Zomato, booking tickets online, or buying clothes
on Amazon → All make you a consumer.
 Basic Concept Under The Consumer Protection Act
2. What is a Complaint?
A complaint means a written allegation made by a consumer when he faces loss,
damage, or cheating because of a trader or service provider.

👉 In simple words:
When something goes wrong with the product or service, and the consumer
reports it (usually in writing), it is called a complaint.
Situations Where a Consumer Can File a Complaint

A complaint can be made if the trader uses unfair or restrictive trade practices,
such as false advertisements, hoarding, or black marketing. For example, if a
cream claims to make you fair in 7 days but gives no such result, it is a case of
unfair practice.

It can also be filed when the goods bought are defective.

Suppose you purchase a ceiling fan and it stops working
after just two days, you can complain.

Similarly, if the services taken are deficient, like paying for a high-speed internet
plan but receiving very poor speed, you have the right to complain.
Another situation is overcharging, where the seller charges more than the fixed
price, the printed MRP, or the price displayed. A very common example is when a
cinema hall charges ₹30 for a water bottle whose MRP is ₹20.

Finally, a complaint can also be made against hazardous goods, i.e., products that
are dangerous to life and safety if proper information is not provided. For
instance, selling toys made with harmful chemicals or medicines without expiry
dates puts consumers’ lives at risk.
 Basic Concept Under The Consumer Protection Act
3. Class Complaint: A class complaint is a complaint that is filed not by just one
consumer, but by a group of consumers together. This happens when many people
face the same problem with the same goods or services. Instead of filing separate
cases, they can join and file one common complaint.

Example is when a builder promises to deliver flats to 100 families but fails to do
so. Instead of each family going to court separately, they can file a class complaint
together.
4. Complainant ( Person who can file a complaint):
The following persons can file a complaint:
1.A consumer himself.
2.Any voluntary consumer association.
3.The Central Government or any State Government.
4.The Central Authority (CCPA).
5.One or more consumers having the same interest.
6.In case of a consumer’s death – his legal heir or representative.
7.In case of a minor – his parents or legal guardian.

5. Limitation Period for Filing Complaints

A complaint must be filed within 2 years from the date when the cause of
action arose.
After 2 years, the complaint can be entertained only if the consumer court
feels there was a valid reason for delay.
6. Information to be Included in a Complaint:
A complaint should include:
1.Name, description, and address of the complainant and opposite party.
2.Facts relating to the complaint.
3.Copies of documents supporting the case (like bills, warranty
card, etc.).
4. Relief sought by the complainant (refund, replacement, compensation).
💡 Note: No fee is required for filing a complaint.

7. Meaning of Defect
Defect means any fault, imperfection, or shortcoming in the quality, quantity,
purity, or standard of goods.
It may be because the product does not meet the legal standards, contract
terms, or the claims made by the trader.
Example: A packet of rice marked as 5 kg but actually weighs 4.5 kg (quantity defect).
A brand-new TV that doesn’t start (quality defect).
8. Restrictive Trade Practice: Means a trade practice that manipulates the price or
conditions of delivery or affects the flow of goods and services in the market, in
such a way that it imposes unfair costs or restrictions on the consumers.
👉 In simple words:
It is when sellers control price, supply, or conditions of sale in such a way that
consumers have to suffer.

Examples of Restrictive Trade Practices

1. Delaying supply of goods to create artificial shortage, so that prices rise.
2.Tie-in Sales: Forcing consumers to buy one product as a condition to buying
another. Example: “You can buy this washing machine only if you also buy our
detergent.”
3.Price Fixing / Controlling: When sellers manipulate price in such a way that
consumers are forced to pay more.
Unfair Trade Practice: Unfair Trade Practice means any trade practice that cheats,
misleads, or deceives consumers while selling goods or providing services.
👉 It includes making false statements, giving wrong
guarantees, false advertisements, fake offers, or selling unsafe goods.:

Forms of Unfair Trade Practices:

i) A seller/service provider does unfair trade practice if he makes false or

misleading statements orally, in writing, or by advertisement.

(a) False Representation about Goods

Claiming goods are of a particular standard, quality, quantity, grade, composition,
style, or model when they are not.
👉 Example: A local phone shown as “latest iPhone model.”
(b) False Representation about Services: Claiming services are of a particular
standard, quality, or grade when they are not.
👉 Example: Coaching institute promising “international-level teaching” without
proof.

(c) Selling Old as New: Selling rebuilt, second-hand, renovated, or reconditioned

goods as brand new.
👉 Example: Old car engine sold as “brand new engine.”

(d) False Sponsorship or Approval (Goods/Services): Claiming goods/services have

sponsorship, approval, performance, benefits, or characteristics which they don’t
have.
👉 Example: Local water filter shown as “Approved by WHO.”
(e) False Sponsorship or Approval (Seller)
Claiming that seller has sponsorship, approval, or affiliation with a reputed
organization which he doesn’t have.
👉 Example: Shopkeeper displaying fake “Samsung Authorized Dealer” board.

(f) Misleading Representation of Need/Usefulness

Making false statements about the need or usefulness of goods/services.
👉 Example: Tonic ad saying “Every child must take this for growth.”

(g) False Warranty or Guarantee

Giving false/misleading warranty about performance, efficiency, or life of goods,
without proper test.
👉 Example: Battery sold with “2-year guarantee” but fails in 3 months.
(h) Fake Promises of Replacement/Repair: Promising to replace, maintain, or
repair an article/service till guaranteed result, but not fulfilling it.
👉 Example: AC dealer saying “Free service until cooling is perfect” but later
refusing.

(i) Misleading about Price: Misleading public about price of goods/services.

Example: Showing “50% off” when actual market price is same.

(j) False or Misleading Facts Disparaging Goods/Services of Others: Making

statements to lower the image of other goods/services without proof.
👉 Example: Detergent ad saying “Other brands damage clothes, only ours is
safe.”
(ii) False Bargain Price Advertisements
Publishing ads (newspaper/TV/boards) showing goods/services at “bargain
price,” but actually not selling at that price or not selling in reasonable
quantity.
👉 Example: Ad says “Smartphone at ₹4999 only,” but only 2–3 pieces
available, rest at high price.
(iii) Misuse of Gifts, Prizes, Lotteries
(a) Offering gifts/prizes but not providing them as promised, or hiding actual
charges.
👉 Example: “Free gift with purchase,” but gift price already included in
product.
(b) Running contests, lotteries, or games of chance just to promote sales.
👉 Example: “Buy shampoo, win a foreign trip” but trip is never given.
(c) Withholding information from participants about results of schemes.
👉 Example: Lucky draw ends but company never announces winners.
(iv) Sale of Unsafe Goods
Selling goods that are dangerous to use, or not complying with safety
standards.
👉 Example: Selling helmets without ISI mark, expired
medicines, or toys with harmful chemicals.

(v) Hoarding or Destroying Goods

Refusing to sell or withholding supply of goods/services to create artificial
shortage and increase prices.
👉 Example: Traders hoarding onions during shortage to sell later at
double price.
(vi) Manufacturing Spurious Goods
Making and selling duplicate, fake, or spurious goods.
Using deceptive practices in services.
👉 Example: Fake medicines, duplicate cosmetics, fake branded clothes.

vii) Not Issuing Bill or Cash Memo

Not giving proper bill/receipt for goods or services.
👉 Example: A shopkeeper selling costly mobile phones but refusing to
give GST bill.
(viii) Refusal to Take Back Defective Goods
Seller refuses to take back defective goods or deficient services and
denies refund/replacement within 30 days.
👉 Example: TV stops working in a week but dealer refuses
replacement/refund.

(ix) Misuse of Consumer’s Personal Information

Disclosing a consumer’s personal details given in confidence, without
legal permission.
👉 Example: Bank sharing your mobile number/email
with third-party sellers for promotions.
 Remedies Available to Consumers
If consumer’s rights are violated, they can approach consumer courts (District,
State, National). The remedies that can be given are:

1. Removal of Defect in Goods

The seller may be ordered to remove the defect from goods.
👉 Example: Car company repairing manufacturing defect in engine.

2. Replacement of Goods
The seller may have to replace defective goods with new ones.
👉 Example: Replacing a faulty refrigerator with a new one.

3. Refund of Price Paid

The consumer may get back the money paid for the goods/services.
👉 Example: Refund for a cancelled airline ticket where service was not provided.
4. Compensation for Loss or Injury: If the consumer suffers financial loss or injury
due to defective goods/services, compensation can be claimed.
👉 Example: Compensation for injury caused by an exploding gas cylinder.

5. Removal of Deficiency in Services: The service provider may be ordered to

correct the deficiency.
👉 Example: Internet provider must restore network speed as promised.

6. Discontinuance of Unfair/Restrictive Practices: The business

may be ordered to stop such practices.
👉 Example: Stopping misleading advertisements.

7. Not to Offer Hazardous Goods for Sale

Order may be passed to stop selling goods harmful to health and safety.
👉 Example: Ban on sale of spurious medicines.
8. Withdrawal of Hazardous Goods from Market
Hazardous goods already in market can be ordered to be withdrawn.
👉 Example: Toys with harmful chemicals removed from shelves.

9. Corrective Advertisement
The trader may be asked to publish corrective ads to neutralise misleading ones.
👉 Example: A fairness cream company forced to run ads correcting false claims.

10. Payment of Adequate Costs

The opposite party may be directed to pay the costs of litigation to the consumer.
👉 Example: Company pays consumer’s legal expenses.
 Central Consumer Protection Authority (CCPA)
📌 What is CCPA?
The Consumer Protection Act, 2019 created the Central Consumer
Protection Authority (CCPA).

It is a regulatory authority that works only to safeguard consumer

interests.

Its role is to:

a. Protect and enforce consumer rights
b. Prevent unfair trade practices
c. Control false and misleading advertisements
 Central Consumer Protection Authority (CCPA)
👩‍⚖️ Composition
CCPA consists of a Chief Commissioner and other Commissioners.
They are appointed by the Central Government to carry out the
functions of this Act.

⚡ Main Powers and Functions of CCPA

1. Protect Consumer Rights: Ensure that consumer rights are not violated.
👉 Example: If a bank adds hidden charges in accounts, CCPA can
intervene.
2. Prevent Unfair Trade Practices
Stop practices such as black marketing, hoarding, or price manipulation.
👉 Example: Traders hoarding onions to sell later at double price.

3. Ban False or Misleading Advertisements

Prohibit ads that mislead or deceive consumers.
👉 Example: A cream promising “fair skin in 7 days.”

4. Take Action Against People Behind False Ads

Not only companies, but also celebrities and advertisers can be held
responsible.
👉 Example: A celebrity promoting a fake medical product.
 🔑 Special Powers of CCPA
Suo Motu Action – Can act on its own, even without a complaint.
Preventive Action – Can stop unfair practices before they spread.
Recall of Products – Unsafe or defective products can be withdrawn
from the market.
👉 Example: Unsafe medicines recalled.
Reimbursement Orders – Consumers can get their money back.
Cancel Licenses – Licenses of repeat offenders can be cancelled.
Class Action Suits – Can file a case on behalf of many consumers
together.
👉 Example: A telecom company cheating thousands of users.
 Redressal Machinery
The Consumer Protection Act, 2019 provides a three-tier system for
resolving consumer complaints:

1. District Commission – at local/district level

2. State Commission – at state level
3. National Commission – at national level
 District Commission
1. Composition
Has a President and at least 2, maximum prescribed members.
Members are appointed in consultation with the Central Government.
Has powers like a Civil Court → can summon witnesses, examine evidence, etc.

2. Jurisdiction (Value of Cases)

Can handle complaints where the value of goods/services does not exceed ₹1
crore.

3. Who Can File a Complaint?

A consumer
Any recognised consumer association
Multiple consumers (class complaint)
 District Commission
4. Procedure
Complaint is referred to the opposite party (seller, manufacturer, etc.).
Samples of goods can be sent for lab testing if required.

5. Powers/Orders
If goods are defective or unfair trade is proven, District Commission can order:
Removal of defect
Replacement of goods
Refund of price
Payment of compensation for loss/injury
6. Appeal
If a consumer or opposite party is not satisfied, they can appeal to the State
Commission within 45 days.
 State Commission
1. Composition
Has a President and at least 4 members (maximum as prescribed).
Members are appointed in consultation with the Central Government.

2. Jurisdiction (Value of Cases)

Handles complaints where the value of goods or services + compensation is
more than ₹1 crore but not exceeding ₹10 crore.

3. Who Can File a Complaint?

A consumer
Consumer association
Government authorities
Multiple consumers (class complaint)
Appeals against District Commission orders
 State Commission
4. Procedure
Complaint is sent to the opposite party.
Samples of goods can be tested in laboratories if necessary.

5. Powers/Orders
If goods are defective or unfair trade is proven, District Commission can order:
Removal of defect
Replacement of goods
Refund of price
Payment of compensation for loss/injury

6. Appeal
If a consumer or opposite party is not satisfied, they can appeal to the State
Commission within 45 days.
 National Commission
1. Composition
Headed by a President.
Has at least 4 members (maximum as prescribed).
Members are appointed by the Central Government.

2. Jurisdiction (Value of Cases)

Handles complaints where the value of goods or services + compensation
exceeds ₹10 crore.
Also hears appeals against orders of State Commissions.
 National Commission
3. Powers
Has the same powers as a Civil Court for dealing with cases (summoning,
evidence, witnesses, etc.).

Can order:
Recall of defective or unsafe products
Replacement or removal of deficiency in service
Manufacturer to comply with safety provisions
Compensation for loss or injury

4. Appeal
If any person is not satisfied with the order of the National Commission, they can
appeal to the Supreme Court within 30 days.
Basis District Commission State Commission National Commission

President + at least 2 President + at least 4

members (max as members (max as President + at least 4
Composition of
prescribed, in prescribed, in members (max as
Members
consultation with Central consultation with Central prescribed)
Govt.) Govt.)

Above ₹1 crore but less

Compensation Claimed Up to ₹1 crore Exceeding ₹10 crore
than ₹10 crore

Appeal Against the In State Commission within In National Commission In Supreme Court
Order 45 days within 30 days within 30 days