Archive for September, 2009

Branding

Branding: is giving a name, term, sign, symbol or design or a combination of them, intended it identify the goods or services of one seller and to differentiate them from those of competitors.

  • Brand Name: The part of a brand which can be vocalised eg. Honda, Avon etc.

  • Brand Mark: The part of a brand which can be recognized but is not utterable such as symbol, design, or distinctive colouring or lettering eg. McDonald’s.

  • Trade Mark: A brand or part of a brand that is given legal protection because it is capable of exclusive rights to use the brand name and/or brand mark.

  • Copy Right: The exclusive legal right to reproduce, publish and sell matter and from of a literary, musical or artistic work.

Branding gives several advantages to the seller. First, seller’s brand name and trademark provide legal protection to unique product features, which would otherwise be copied by competitors.

Second, branding gives the seller the opportunity to attract a loyal and profitable set of customers. Brand loyalty given sellers some protection from competition and greater control in planning their marketing mix.

Third, good brands help build corporate image. By carrying the company’s name, the help advertise the quality and size of the company.

In deciding to brand a product, the manufacturer has several options with respect to brand sponsorship. The product may be launched as manufacturer brand (sometimes called brand name) or it may be launched as a licensed name brand. Or the manufacturer may supply the product to middleman who put on a distributor brand (also called retailer, store or private brand).

Manufacturer who brand their products face further choices. Three brand name strategies can be distinguished:

  1. Individual Brand Names: This policy is followed by Hindustan Levers Ltd. (HLL) Surf, Wheel etc.

  2. A Blanket family name for all products: This policy is followed by Philips Audio System.

  3. Company trade name combined with individual product name: This policy is followed by Maruti Udyog Ltd. (Maruti 800, Maruti Wagon-R, Maruti Esteem etc.)

An increasing number of department stores, middleman etc. are launching store names. Retailshelf space is scarce and many manufacturers, especially the newer and smaller ones, can not introduce products into distribution under their own brand name. Middleman take special care to maintain the quality of their brands, their building consumer’s confidence. Store brands are often priced lower than comparable manufacturer’s brands thus appealing to budget-concious shoppers especially in times of inflation, middleman give more prominent display to their own brands and make sure they are better stocked.

Among the desirable quantities fro a brand name are:

    1. it should be easy to pronounced.

    2. It should be easy to remember.

    3. It should from positive image about the product.

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PACKAGING & LABELING

Packaging is an activity of designing and producing the container or wrapper for a product. The container or wrapper is called the package. The package might include upto three levels of material. The primary package is the product’s immediate container. Thus the bottle of Old Spice After Shave Lotion is the product’s primary package. The secondary package refers to material that protects the primary package and is discarded when the product is about to be used. The cardboard box containing the bottle of after shave lotion is a secondary package and provides additional protection and promotion opportunity. The shipping package refers to packaging necessary for storage, identification or transportation. Thus a corrugated box containing six dozen of Old Spice After Shave Lotion is a shipping package.

Labeling: is part of packaging and consists of printed information that describes the product, appearing on or with the package.


Labels perform several functions. The Label identifies the product or brand, for instance, the name “Sunsilk” stamped on a bottle of Shampoo. The label describes the product who made it, where it was made, when it was made, what it contains, how it is to be used and how to use it safely. Finally, the label might promote a product through attractive graphics.

Several factors have contributed to the growing popularity of packaging as a marketing tool. An increasing number of products are sold on a self service basis at supermarkets. The package must perform many of the sales tasks. It must attract attention, describe the product features, give consumer confidence, and make a favourable overall impression. Companies are recognizing the power of well designed packages to contribute to instant recognition of buyer immediately recognizes the familiar yellow packaging of Kodak film.


Rising consumer affluence means consumers are willing to pay a little more for the covenience and dependability of better packages.

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Factors Affecting Price Sensitivity

Unique – Value Effect: Buyers are less sensitive when the product is more unique.

Substitute- Awareness Effect: Buyers are less price sensitive when they are less aware of the substitutes.

Difficult-Comparison Effect: Buyers are less price sensitive when they cannot easily compare the quality of substitutes

Total Expenditure Effect: Buyers are less price sensitive of the product is not very expensive with respect to their income.

End-Benefit Effect: Buyers are less price sensitive the less the expenditure is to the total cost of the product.

Shared Cost Effect: Buyers are less price sensitive part of the cost is borne by another party.

Price Quality Effect: Buyers are less price sensitive when the product is assumed to have more quality, prestige or exclusiveness.

Inventory Effect: Buyers are less price sensitive when they cannot store the product.

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PRICING STRATEGIES

Price is the only element in the marketing mix that produce revenue; the other elements produce cost. Price is the amount of money that customers have to pay for the product. There are six step procedure for price setting

  1. Selecting the pricing objectives b) determining demand c) estimating costs d) analyzing competitors price and offers e) selecting a pricing method f) selecting the final price

A) Selecting the pricing Objectives: A company can pursue any six major objectives through its pricing

i) Survival- Companies pursue survival as their major objective if plagued with overcapacity, intense competition, or consumer wants. To keep the plant going and inventories turning over, they will often cut prices. Profits are less important than cut prices. Profits are less important than survival. However, survival is only a short run objectives.

ii) Maximum current Profit- Many companies try to set the price that will maximize current profits. They estimate the cost and demand associated with alternative prices and choose the price that produces maximum current profit, cash flow or rate of return on investment.

iii) maximum current Revenue- some companies will set a price to maximize sales revenue. Revenue maximization requires only estimating the demand function.

Many managers believe that revenue maximization will lead to long-run profit maximization and market share growth.

iv) Maximum Sales Growth: Some companies want to maximize unit sales. They believe that a higher sales volume will lead to lower unit costs and higher long run profit. They set the lowest price, assuming the market is price sensitive. This is called market penetration pricing.

v) Maximum Market skimming: Many Companies favour setting high prices to skim to the market. If estimates the highest price it can charge given the comparative benefits of its new product versus the available substitutes. Each time sales slow down, it lowers the price to draw in the next price sensitive layer of customers.

vi) Product-Quality Leadership:- A company might aim to be the product-quality leader in the market.

vii) Determining Demand: Each price that the company might charge will lead to a different level of demand and will therefore, have a different impact of its marketing objectives. In normal case, demand and price are inversely related , that is, the higher the price, the lower the demand.

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Types of Costs

Estimating Cost a company will like to charge a price that covers its cost of producing, distributing and selling the product, including a fair return for its efforts and risk.

A company’s cost takes two forms, fixed and variable. Fixed cost are the costs that do not vary with production of sales revenue. Examples of fixed costs includes monthly rent, interest etc.

Variable costs vary directly with the level of production. These costs tend to be constant per unit produced. They are called variable because their with the number of unit produced.

Total cost consists of the sum of the fixed and variable costs for a given level of production. Management will like to charge a price that will be at least cover the total production costs at a given level of production.

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Analysing competitors price and offers

Competitors prices and possible price reactors help the firm establish where its prices might be set. The company needs to learn the price and quality of each competitors offer.

Once the company is aware of competitors prices and offers, it can use them as an orienting point for its own pricing. If the firm’s offer is similar to a major competitor’s offer, then the firm will have to price close to the competitors or lose sales. If the firm’s offer is inferior, the firm will not be able to charge more than the competitor. If the firm offer is superior, the firm can charge more than the competitor.

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Marketing: Selecting the pricing method

A company can select any of the following pricing method:

  1. Mark-up Pricing

  2. Target-return Pricing

  3. Perceived value pricing

  4. Going rate Pricing

  5. Select-bid Pricing

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Marketing: Mark-up Pricing

The most elementary pricing method is to add a standard mark-up to the cost of the product.

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Marketing: Target Return Pricing

The firm determines the price that would yield its target rate of return on investment (ROI). Suppose a manufacturer has invested one million in the business and wants t set price to earn a 20 percent ROI i.e 2,00,000. he hopes to sell 50,000 pieces and the unit cost Rs. 16/-. The target return price is given by the formula

Target return price = Unit Cost + Desired return X Capital Invested

Unit Sales

= 16 0.20 X 10,00,000 =Rs. 20/-

50,000

Hence the manufactures will set a price of Rs. 20/-.

The manufacturer can also use break-even analysis, the break-even volume is given by

Break-even Volume = Fixed Costs

Price-Variable Cost

Suppose the fixed cost is Rs, 300000 and variable cost is Rs. 10/- and the produces wants to charge price of Rs. 20/-, then the break-even volume is given by

300000 = 30,000 Pieces

20-10

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Marketing: Perceived value Pricing

An increasing number of companies are basing their price on the product’s perceived value. They see the buyer’s perception of value, not the sellers cost, as the key to pricing. They use the non-price variables in the marketing mix to build up perceived value in the buyers mind, price is set to capture the perceived value.

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