PRINCIPLES OF MARKETING II – QUESTIONS AND ANSWERS

1.            (a)Why is promotion necessary to the survival of any marketing organization.

Answer:

What is Promotion?

To generate sales and profits, the benefits of products have to be communicated to customers. In marketing, this is commonly known as "promotion".

promotion is a marketing activity that adds to the basic value proposition behind a product (i.e., getting more for less) for a limited time in order to stimulate consumer purchasing, selling effectiveness, or the effort of the sales force. As this definition indicates, sales promotion may be directed either at end consumers or at selling intermediaries such as retailers or sales crews.

Sales promotion stems from the premise that any brand or service has an established perceived price or value, the "regular" price or some other reference value. Sales promotion is believed to change this accepted price-value relationship by increasing the value and/or lowering the price. Familiar examples of consumer sales promotion tools include contests and sweepstakes, branded give-away merchandise, bonus-size packaging, limited-time discounts, rebates, coupons, free trials, demonstrations, and point-accumulation systems.

(b)     Discuss the four major problems that a marketer must consider in designing the promotional plan for the promotion to be meaningful and effectively convincing.

2.            What are the factors to be considered when selecting a channel of distribution

Answer: The following factors must be considered before selecting the distribution channel.

Nature of product:
Nature of product has influence on the selection of a channel or distribution. In the case of industrial goods like machinery and equipment. The manufacturer sells directly to industrial user, but in the case of tools, sales take place through middlemen.

Nature of market:
Choice of suitable channel of distribution also depends on the nature of market. Location a buying habits of buyers are also analysed.

Distribution expenses:
If the producer makes direct selling, he will have to spend on distribution. So, if the product gets good response from the dealers, a producer prefers to sell through them to reduce his distribution expenses.

Mutual cooperation:
Choice of channel of distribution depends on the mutual cooperation between the manufacturer and the dealers.

Company considerations:
The character of the company also influences the selection of channel. If the management lacks marketing know how, it may prefer to depend on middleman.

Prompt payment:
A producer may not like to sell to retailers or big consumers because they insist to make purchase on credit. He, therefore, prefers to sell to a wholesaler who purchases usually on ready cash.

Popularity of goods:
If the goods are popular among the consumers, the dealers themselves come forward to buy. Then the producer may not like to open his own shops to sell the goods.

Price and profit:
Where the price of the goods is low and the profit margin is small. It is profitable for the producer to sell through the dealers. Here, the producer can maximize his profit by depending on quality production.

Structure of retailing:
Selection of channel also depends on the structure of retail trade in a product. The manufacturer will consider the number of stores selling the product, convenience of shopping to the buyers, service provided by the retailers, availability of retailers and sale volume before selecting a channel of distribution.

Financial resources:
A firm's reputation can affect its channels. A financially strong company needs middlemen less than one, which is financially weak. A business with adequate finances can establish its own sales force and even branch organization. Anonymous

Question: Explain the role of the wholesaler in the distribution process.

Answer:  The Role of the wholesaler in the distribution process is to sell onto retailers.  Wholesaler usually specialize in particular products.

3.            Question: What is Database Marketing?

Answer:  Is the process of building, maintaining, and using customer databases and other databases (Products, suppliers, resellers) for the purpose of contacting, transacting, and building relationships.

4.            Give historical account of the development of Internet marketing and explain the factors responsible for its more rapid expansion.

Answer: When the internet was first introduced in the early 90s, it wasn’t considered to be an advertising medium at all. Instead, the internet was treated as a tool for exchanging emails and digital information, but wasn’t yet considered valuable for reaching customers. However, it wasn’t long before marketing pioneers began to see the potential for internet marketing business as millions of web surfers logging on each day to find valuable and relevant information. Within just a few years, informative and educational marketing, as well as graphically enticing banner ads began to be show up. It wasn’t long before results began to flood in which proved the value of the internet marketplace to even the most skeptical advertisers.

Most importantly, companies which had been spending huge chunks of their marketing budget on offline list building, begin to realize that they could accomplish the same thing via email…and for much less. It wasn’t long before everyone from industry giants such as Microsoft Corp. to small businesses began to build company sites and spend marketing dollars to attract qualified traffic. Next, search engine companies like Yahoo! began to create significant profits from advertising alone.

Then came the great internet marketing business bust around the year of 2000, which marked the beginning of the end for interruptive marketing such as flashing banner ads. What was happening? As interactive features were added to web pages, consumers were given the option of turning off marketing messages at will…and they did. Then entered the age of education based invitational marketing*, which crystallized with the creation of web 2.0 technology. Suddenly, billions of “voices” began to rise all over the world, as the internet marketplace became as much a global community as it was an advertising medium. This led to a relational based marketing** approach which has led to one of the most lucrative opportunities for solo entrepreneurs and small start ups alike to make a small fortune working from their spare bedroom.

Spending on Internet advertising in 1996 totaled $301 million in the U.S. While significant compared to the zero dollars spent in 1994, the figure paled in comparison to the $175 billion spent on traditional advertising as a whole that year. As the number of Internet surfers continued to rise, however, interest in the Internet as a mass-media vehicle increased. Online advertising grew to an industry worth nearly $1 billion in 1997. The Internet became increasingly popular in the late 1990s, and the viability of the Internet as a marketing medium emerged as more than mere speculation. Millions of surfers logged on to the Web each day, and many businesses were determined to reach this new audience. Web sites emerged for companies in nearly every industry, ranging from household cleaning products and cosmetics to electronics and automobiles. At the same time, many firms realized that simply creating a Web site wasn't enough to create a solid Internet presence; they also needed to drive traffic either to their sites or to their specific advertisements.

For example, drug company Bristol-Myers Squibb Co. launched an Internet marketing campaign designed to build brand awareness for Excedrin. For 30 days during the 1997 tax season, the firm proclaimed Excedrin to be the "tax headache medicine" on a variety of financial Web sites. To entice surfers to click on the advertisement, Bristol-Myers offered a free sample of Excedrin to anyone who entered their name and address. According to Business Week writer Linda Himelstein, "The response was as good as any elixir. In just one month, Bristol-Myers added 30,000 new names to its customer list—some 1,000 per day and triple the company's best-case scenario. What's more, the cost of obtaining those names was only half that of traditional marketing methods."

Hoping for similar results, many traditional firms began incorporating the Internet into their existing marketing plans. Even technology industry giants like IBM Corp. and Microsoft Corp. began dumping millions of dollars into Internet marketing efforts. Many smaller firms, including Internet upstarts, turned to highly trafficked sites like Internet portal Yahoo!, paying for advertisements such as banner bars. In fact, Yahoo! was one of the few Internet-based firms actually able to earn a profit from online advertising. By developing technology that allowed it to track a visitor's online activity and control what banner bars and button ads that visitor saw, Yahoo! was able to target its messages in a manner never before seen by the marketing industry. Yahoo! could also monitor the number of hits each advertisement received as a means of evaluating an ad's effectiveness. This innovative technology, coupled with the site's intense traffic levels, attracted  upstarts hoping to reach as many Internet users as possible.

5.            Identify and explain the stages involved in the Advertising Campaign

Answer: Stages in Advertising Campaign are five;

i.             Set Advertising Objectives

ii.           Set the Advertising Budget

iii.         Determine the Key Advertising messages

iv.          Decide which Advertising media to use

v.            Evaluate the Results of the Advertising Campaign

6.            Discuss the pricing constraints and suggest how best a marketer can overcome them while setting a price

Answers:

Prices Constraints are:

(i)           A given price, while acceptable in one sector of the market, may be too high or low elsewhere

(ii)         The price may be viewed by sections of the market as exploitative and the company consequently seen as untrustworthy

(iii)       Price differentials across the product line may be illogical

(iv)        The price may destabilise a previously stable market

(v)          The price may damage or inhibit brand loyalty

(vi)        The strategy may well lead to an increase in buyers price sensitivity

7.            Discuss the four major problems that a marketer must consider in designing the promotional plan for the promotion to be meaningful and effectively convincing.

Answer:

In formulating the message, the marketer must consider solving four problems:

i.             Message content in terms of what to say -

The communicator must figure out what to say to the target audience to produce the desired response.

ii.           Message structure in terms of how to say it logically -

Message effectiveness depends on its structure as well as its content.

iii.         Format in terms of how to express it symbolically

The communicator must develop strong format for the message.  In print advert, the communicator has to decide on the headline copy.

iv.          Message source in terms of who should say it

Messages delivered by attractive sources achieve higher attention and recall.  Advertisers often use celebrities and spokes people.

v.