Indira Gandhi MMPC-006

National Open University

School of Management Studies Marketing Management

Block

3
DISTRIBUTION AND PROMOTION DECISIONS

UNIT 9
Integrated Marketing Communications 4

UNIT10
Advertising And Sales Promotion 28

UNIT 11
Personal Selling And Managing Sales Personnel 55

UNIT 12
Distribution Management 124

 
   

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 COURSE DESIGN AND PREPARATION TEAM

Prof. K Ravi Sankar Dr. Rustom S. Davar

Director, Davar’s College of Commerce
School of Management Studies, Bombay
IGNOU, New Delhi
Dr. L.M. Johri
Prof. Ravi Shanker Faculty of Management Studies
IIFT, New Delhi University of Delhi

Prof. U.M. Amin Prof. M.C. Kapoor

Ex-Director, Delhi
Jamia Millia Islamia,
New Delhi Dr. J.D. Singh
International Management Institute
Prof Sanjiv Mittal New Delhi
G.G. Singh Indraprastha University
Delhi Prof. R.L. Varshney
Indian Institute of Foreign Trade
Prof. N.V.R. Jyothi Kumar New Delhi
Mizoram University
Aizwal Prof. P.N. Thirunarayana
Indian Institute of Management
Prof. Reshma Nasreen Bangalore
Jamia Hamdard University
New Delhi Prof. S.L. Sen
New Delhi
Dr. Prarthana Kumar
Institute of Public Enterprise Prof. A.P. Arora
Hyderabad, Telangana MDI Gurgaon, Haryana

Dr. Sadaf Siraj Prof. Madhulika Kaushik

Jamia Hamdard University School of Management Studies
New Delhi IGNOU, New Delhi

Dr. Prateek Maheshwari T.V. Vijay Kumar

IIFT, New Delhi Editor & Course Coordinator ,
School of Management Studies,
Dr.BiswajitaParida IGNOU, New Delhi
IIT, New-Delhi

Prof. Rajeev Kumar Shukla

School of Management Studies
IGNOU, New Delhi

Acknowledgement: Relevant parts of this course have been adapted and updated from the course MS 6: Marketing for
Managers. MS 6 course was prepared by the experts (names mentioned above in Italics) and their profile is as it was in that
Material.

MATERIAL PRODUCTION
Mr. Y.N. Sharma Mr. Tilak Raj
Assistant Registrar Assistant Registrar
MPDD, IGNOU, New Delhi MPDD, IGNOU, New Delhi
September, 2021
(c) Indira Gandhi National Open University, 2021
ISBN:
All rights reserved. No part of this work may be reproduced in any form, by mimeograph or any other means, without permission in writing from
the Indira Gandhi National Open University. Further Information on the Indira Gandhi National Open University course may be obtained from
the University’s office at Maidan Garhi, New Delhi – 110068
Printed and published on behalf of the Indira Gandhi National Open University, New Delhi, by the Registrar, MPDD, IGNOU.
Laser typeset by Tessa Media & Computers, C-206, A.F.E-II, Jamia Nagar, New Delhi - 110025

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Block 3 DISTRIBUTION AND PROMOTION DECISIONS

In this third block, we will shift our focus to two other major decisional areas in marketing,
namely, distribution and promotion.

In a multi-lingual multi-cultural developing society like ours, communication poses a major

challenge to the marketer. In this respect, methods, coverage, impact and cost effectiveness are
some of the major decisional areas and have been covered in the first Unit of the block.

The Unit two emphasizes how advertising in modern times prevails and has acquired the
distinction of being most visible and impactful method of marketing communication. While the
importance of considering sales promotions are discussed. .

In Unit three personal selling methods its inception, growth, relevance and its indispensable
nature is discussed. Being the oldest and most reliable method managed by company personnel.
The issues of managing these personnel by way training, motivation, growth and development is
at the core of the unit.

The focus of the last Unit of this block is “Place” i.e. the distribution activities and all its
functions. Distribution is one link in the chain, which starts from suppliers to manufacturers and
finally to the point of sale in reaching the customer.

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UNIT 9 INTEGRATED MARKETING COMMUNICATION

Objectives

After studying this unit you should be able to:

• understand the concept of communication, marketing communication and its role

• acquaint the marketing communication ecosystem
• appreciate how marketing communication works
• identify various integrated marketing communication tools and their applicability
• recognize factors affecting selection of IMC tools

Structure

9.1 Introduction

9.2 Communication and its Process

9.3 Marketing Communication and Promotional Mix Elements

9.4 The Integrated Marketing Communication and its Tools

9.5 The IMC Planning Process and Budgetary Considerations

9.6 Factors Affecting an IMC Strategy

9.7 Emergence of Social Media Revolution on IMC

9.8 Demand Creation Role of IMC

9.9 Stakeholders of Marketing Communication Industry

9.10 Summary

9.11 Key Words

9.12 Self – Assessment Test

9.13 Further Readings

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9.1 INTRODUCTION

• Can you recall the product when you listen to ‘Tandrusti Ki Raksha Karta Hai ……?
Yes, it is Lifebuoy soap.
• We receive SMS messages on our mobile phone or on WhatsApp from banks or
retailers informing us about various offers or schemes. Why do they keep sending
unsolicited messages on a continuous basis? Have you given a thought for the
purpose of sending us these messages?
• When you hear ‘Apki Apni Dukaan’, which online shopping website comes to your
mind? Yes, it’s Amazon.
• Have you noticed a ‘MRF’ sticker on the Indian cricket team Capitan’s bat while
watching a match on television or live? Sure you must have noticed but you did not
felt the need to know why it is there?
• Very often you come across a well dressed salesman greeting when a potential buyer
enter a motorcycle or a car showroom for buying a vehicle. The salesman explains the
highlights of the vehicle, focuses on the key features, demonstrates and finally he
may take for test drive too. Have you or any of your family members experienced
this?

Well, the answer in all the above situations is an affirmative “Yes”, there may be many more
such situations or instances where you must have experienced that a company or brand is trying
to contact you with their products or services so that you may buy and use them. If you carefully
look into the above situations there is one thing in common i.e. all the marketers or firms were
communicating with you using different methods in order to inform or remind or convince you
to buy the products or services offered by them.

In the field of marketing, the communication between a brand and a company with its potential
or existing customers is known as Promotion (or Marketing Communication. As you are aware
that promotion is one of the key elements of marketing mix while the methods so used or
employed for communicating are called elements of promotion mix.

By now, you are acquainted with the elements of marketing mix which are also referred as 4Ps
of marketing viz. Product, Price, Place and Promotion. Promotion being one of the key elements
of 4Ps, promotion and does play a very significant role in the marketing process.

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Promotion mix constitutes of four elements namely Advertising, Publicity, Sales Promotion and
Personal Selling.

Each of these promotional mix elements are well defined techniques and has their own role,
purpose and significance in the entire marketing communication process. Primarily advertising
helps a company or a brand to reach out to the mass market; publicity is useful to create a
positive image of a product or service or even a firm in the minds of its customers. While sales
promotion is the only method which is conceived by the firm that makes use of incentives both
for customers and business partners to encourage purchase or sale of the products or services for
a specific period. In order to promote and sell technical or industrial goods or services, personal
selling is the only and also the most commonly used method of promotion by firm.

Historically, during late eighties it was observed and found that companies started looking at
marketing communication process with a broader perspective. This outlook had led to the
strategic integration of all the elements of promotion mix thus complementing and
supplementing in the overall marketing communication process needs of every business
enterprise. Besides, the strategic integration of other marketing activities (such as event
marketing, sponsorships, BTL activities, digital marketing etc.) are initiated to send consistent
messages to the potential or existing buyers of a company’s products or services. This well
coordinated and integrated communication effort used by a company to create a uniform image
of its products or brands is known as Integrated Marketing Communication (IMC).

The rapidly changing tastes and preferences of consumers at all levels has a direct bearing on
the current business environment which is highly competitive comprising of the regional,
national and global brands being available with a wide range of merchandise and choice to suit
every customer segment. In such a scenario the new or evolving customers are highly demanding
knowing what they want, when they want, how they want and at what price they want with a
strong bargaining power knowing fully aware that there several product or service options
available to them.

In such a market scenario, the role of Integrated Marketing Communication (IMC) and its
techniques become very important and handy to monitor and manage the complex interplay
between the consumers and the wide range of merchandise that is available to choose from. This

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unit helps the reader to understannd the conceept and role of
o IMC, its tools,
t variouus stakeholdeers of
IMC induustry etc. Ho
owever, let us
u first try and
a understaand what com
mmunicationn is all abouut and
how it works in busin
ness.

9.2 C
COMMUNIC
CATION AND
A ITS PR
ROCESS

Smith, Berry
B and Pu
ulford (19977) defined coommunicatioon as dissem
mination of information
i from
the mind of one ind
dividual to another
a for example,
e whhen we talk to others eiither in-persoon or
over moobile phone, when we seend a messagge to our frieend over WhhatsApp, whhen we send an e-
mail to our client or
o when we make a calll to custom
mer care of our
o bank or health insurrance
companny, commun
nication is taking plaace indeed.. Communiication helpps to exchhange
informaation, ideas, views
v or feeelings etc. Anny communiication proceess consists of eight esseential
componnents viz. a) Sender, b) Message,
M c) Channel, d)) Receiver, e)
e Feedback,, f) Environm
ment,
g) Conteext and h) Noise.
N Figuree 1 shows varrious elemennts of a comm
munication process.
p

Figure
F 1: Thhe Communnication Proccess and its Elements
E
Soource: Adapteed from Philip Kotler, Markeeting Managemment-Analysis,, Planning andd Control (1971) and
Ralph M Gaedek ke and Danish M Tootelian, Marketing:
M Priinciples and Appplications (19983)

A seender (also known as source) beggins the com

mmunicationn process by
b preparingg and
sendding the messsage. A message is the stimulus
s creaated for the receiver
r or audience.
a In order
to make
m the message availaable to the receiver, a chhannel is ussed. It is acttually the way
w in

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 which a message travels between source and receiver. The receiver, after getting the
message from the sender, analyzes and interprets it and, responds to it which is called
feedback. A communication process is completed only when the receiver gives feedback to
the sender.

By now you are aware of a communication process; can you relate it to a marketing context?
We all daily receive information and details about products or services through newspapers,
TV, radio, hoardings on main roads, mobile phone, social media etc. In this way, a company
or a brand communicates about the products or services to its potential or existing
consumers. In marketing, this communication between a company and its consumers is
known as marketing communication. It is aimed to inform or remind or persuade the target
consumers so that they buy the company’s products or services.

9.3 MARKETING COMMUNICATION AND PROMOTIONAL MIX ELEMENTS

As explained in the previous section, in any communication process several elements and steps
are involved. In the context of marketing communication, a manufacturer or company or brand
is the source (or sender), while prospective or existing consumers are at the receiver of the
communication. Message is the product information or details which are to be communicated to
the target group in a creative and interesting way. The channel is various media options such as
newspapers, TV, radio, magazines, hoardings etc. which can be used to reach the target
audience. The success of a marketing communication activity depends on a company’s ability to
convey the message effectively in a manner in which the customers should understand and
interpret the intended message. A marketing communication is considered effective if it
achieves its objectives such as increased sales, improved brand recall, increased awareness etc.
This is equivalent to the feedback, as discussed in the process of communication.

Having accepted as one of the important ‘P’s of marketing mix, marketing communication is
synonymous to Promotion and the elements include (Advertising, Publicity, Sales Promotion
and Personal Selling) which are employed by the firm for the purpose of awareness creation,
image building, and for sales all the four methods constitute promotional mix elements. Every
one of us does come across various promotional mix elements on a daily basis. When we read
newspaper in the morning or watch news channel or watch our favorite TV show or watch
music videos on YouTube, or visit a nearby shop or store to buy some product, when we go to a

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 shopping mall for shopping or entertainment, the hoardings on the street, wall paintings,
banners, posters while traveling by road; we come across these elements of promotional mix
viz. Advertising, Publicity, Public Relations (PR), and Sales Promotion messages etc. The
committee on definitions of the American Marketing Association defines these components as
under:

Advertising: Any paid form of non-personal presentation and promotion of ideas, goods or
services by an identified sponsor. In simple words, advertising publicises about the availability
of products or services to target group. It is a paid communication as the money is expended on
crafting the message or buying media space and non-personal method because there is no one to
one interaction between the company and consumers. Further, there is always a person or the
company behind responsible for the advertisement. We come across this element daily in the
form of advertisements in newspapers, magazines, hoardings, TV, radio etc.

Publicity and Public Relations (PR): Non-personal stimulation of demand for a product,
service or business unit by generating commercially significant news about it in published
media or obtaining favorable presentation of it. Unlike advertising, this form of promotion
neither is nor paid for by the sponsor. It involves managing meaningful associations with the
consumers, stakeholders, media, employees, vendors etc. to manage public’s perception about a
brand or company. It involves news releases, press conferences, media kit, social media pages
etc.

Personal Selling: Verbal presentation in a conversation with one or more prospective buyers
for the purpose of making sales. We come across this element when we visit an electronics or
automobile showroom and, a person comes to us saying: ‘Sir / Ma’am, Welcome! How can I
help you?’ or, when a salesperson rings the bell at our home and briefs us about a company’s
products and try to persuade us for trying that product.

Sales Promotion: Are those marketing activities other than personal selling, advertising and
publicity that stimulate consumer purchasing and dealer efficiency by way of coupons, contests,
discounts, gifts and non-routine selling efforts. These are usually short-term activities. Each of
these promotional mix elements is used by a company or brand to achieve a specific objective.
Table 1 summarizes the strengths and limitations of various elements of promotional mix.

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 Elements of Promotion Mix Strengths Limitations

Mass reach, Control over message, Require huge budgets, One way,
Advertising
non-personal, Inexpensive per contact Hard to measure results, Cluttered

Less control over message, Hidden

Mass reach, Inexpensive, Creates
Publicity and PR costs, Difficult to measure results,
goodwill, Highly credible
No direct impact on sales

Immediate feedback possible, Highly

Expensive per contact, Limited
Personal Selling targeted, Interactive, Customizable,
scope
Useful in persuasion

Expensive, Easy to imitate, May

Mass reach, Direct impact on sales,
Sales Promotion have negative effect on brand
Measurable results
image in done regularly

Table 1: Relative Strengths and Limitations of Promotional Mix Elements

(Source: Adapted from Rachman, David J., and Elaine Kotary Romano. Modern Marketing. Dryden Press, 1980)

As discussed, each element of promotional mix has its relative advantages and limitations
and, each element is employed to solve a specific purpose of marketing communication with
the target group. However, with the changes in consumer behavior over time, companies
or brands started looking at marketing communication with a broader perspective.
Furthermore, the emergence of new technology and media options made marketers to shift
their focus towards a more comprehensive promotional approach. This comprehensive, well-
coordinated and integrated communication effort used by a company to create a uniform
image of its products or brands is known as Integrated Marketing Communication (IMC).
The acronym IMC is now become the buzz word and is being replaced by the traditional
Marketing Communication term to convey the purpose and message by firms to the target
market and marketplaces respectively.

Activity 1
Suggest a suitable promotional mix for each of the following products or services.
Assume that budget is not a constraint for marketing these products or services.
Justify your answers.
1. Ayurvedic Toothpaste
2. Lubricating Oil for Industrial Use
3. Electric Bike
4. Laptop

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9.4 INTEGRATED MARKETING COMMUNICATION AND ITS TOOLS

In simple words, Integrated Marketing Communication (IMC) brings together all the tools of
marketing communication to direct consistent messages to a firm’s consumers. It is the strategic
integration of all the elements of promotional mix and other marketing activities (such as event
marketing, sponsorships, BTL activities, digital marketing etc.) to send consistent messages to
the buyers of a company’s products or services.

According to Smith, Berry and Pulford (1999), IMC is: “The strategic analysis, choice,
implementation and control of all elements of marketing communications which efficiently,
economically and effectively influence transactions between an organization and its existing and
potential customers, consumers and clients.”It is strategic because it is affected by the way in
which an organization aims to achieve its long-term goal. An IMC process carefully chooses,
execute and manage various elements to influence customers’ buying behavior”. IMC may also
be defined as a process that involves planning, conception, integration and implementation of a
variety of marketing communication activities to influence the behavior of the target group. Let
us understand it with a simple example.

Assume that a company manufactures gearless scooters and has recently launched a new model
by the brand name ‘Drivo’. You happen to see their full-page advertisement in the morning
newspaper. On your way driving to your office, you notice a big hoarding while waiting at a
traffic signal. Further, while surfing your social media account during lunch at office, you come

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across a pop-up ad of ‘Drivo’. While leaving office for home, you see that a guy is sitting beside
a canopy tent which is installed in the parking of your office building. On close observation you
find the newly launched ‘Drivo’ inside the canopy tent. Finally, at home, while watching cricket
match on TV, you see a 30-sec advertisement of ‘Drivo’ during commercial break.

The above is a hypothetical example to explain how a brand makes all attempts to reach their
potential market segments with messages and being visible by using all the elements of the
promotion mix. This explains clearly what IMC is all about. In this case, the company was using
a combination of various tools (Advertising, Digital Marketing, and BTL activity, Outdoor etc.)
to communicate to their potential consumers in awareness creation about the brand Drivo and to
persuade them to consider purchasing.

Table 2 illustrates major Integrated Marketing Communication (IMC) tools and relevant
elements / examples of each.

IMC Tools Elements / Examples

Media Advertising Newspapers, Magazines, TV, Radio etc.

Mails, E-mails, Telephone, Fax, Catalogs, Brochures, Home

Direct Marketing
Shopping Shows etc.

Internet (or Online), Social Media, Mobile, Website, Search Engine,

Digital Marketing
OTT etc.

Billboards, Posters, Banners, In-Transit Ads, Cinema, Wall Paintings,

OOH (Out of Home)
Glow Sign Boards etc.

In-Store or POS External and Internal Store Signs, Shopping Cart Ads, In-Store Radio
Advertising and TV etc.

Samples, Coupons, Exchange Offers, Refunds / Rebates, Contents,

Sales Promotion Lucky Draws, Quality and Quantity Discounts, Trade Promotions,
Volume Discounts, Referral Codes

Event Marketing Sporting Events, Fairs, Festivals, Sponsoring Causes, BTL Activities,
and Sponsorships Mela etc.

Helps professionally handling a positive public image by the

PR and Publicity
company that helps in maintaining good relations with the public.

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 While Publicity, tries to inform some interesting news to the public.

Personal selling occurs when a sales representative meets with a

Personal Selling
potential client for the purpose of transacting a sale.

Source: Adapted from Lane Keller, Kevin, “Mastering the Marketing Communications Mix: Micro and Macro
Perspectives on Integrated Marketing Communication Programs,” (2001): pp. 819-847.

Each IMC tool has its own strategic and tactical importance in the whole marketing
communication process and promotional efforts pertaining to the firm’s product or service
offering. However, when all these tools (as depicted in Table 2) are used in the right
combination and proportion, then the impact of the communication will be visible and its
effectiveness becomes measurable.

Let us now look at each of the IMC tool and understand their role and importance in brief:

a) Media Advertising is generally best suited for products or services targeted at mass
markets and require huge budgets. It is one-sided communication and hence,
customer feedback is not received. We regularly come across advertisements in TV,
radio, newspapers, magazines etc. which falls under the category of Media
Advertising.

b) With the advent of new emerging communication and mobile technologies

advertising through modern media viz. internet, social media, mobile etc. is gaining
momentum. This falls under the category of Digital Marketing.

c) While you travel by road, then you are bound to come across various hoardings,
banners, wall paintings, advertisements on buses or taxies etc. This is another
important IMC tool and known as OOH (Out-of-Home). OOH is mainly useful for
local or regional brands which intend to promote their offerings and wish to persuade
consumers of that town or region to buy them.

d) Further, you must have seen wall hangings, posters, in-store banners while visiting
shopping mall, departmental stores. This is another element of IMC tools i.e. Point-
of-Sale (POS) Advertising. They are helpful to trigger impulse purchases of the
products or services of different brands which are available at the store for sale.

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 e) As an IMC tool, sales promotion is another important element which is helpful in
generating immediate sale. It is defined as ‘short term incentives given to customers
and channel partners to boost sales’. Promotional messages related to offers such as
Buy 2, Get One Shirt Free, 20% Off on ‘X’ Pizza Brand, Exchange Your Old Watch
with New ‘Y’ Watch etc. are some of the examples of sales promotion activities
initiated by a company or brand to create desire in the customer’s mind so that he /
she buys the product or service.

f) Further, events are great way to socialize and reach to the masses to inform and
persuade the target audience. They may be of various types ranging from charity,
shows, cultural events, games & sports and corporate events or celebrations etc each
of these serves a different goal. Similarly, sponsorship is financial association of a
company with other companies or events. It helps to create cross media ties and, in
forming and endorsing the brand image and values. For example, MPL Sports is the
new kit / apparel sponsor for Indian cricket team.

g) Another IMC tool, personal selling is generally used for selling or promoting
technical, industrial and referral products or in an institutional selling scenario.

In short, each IMC tool plays an important role in overall IMC strategy of a company or brand to
deliver a unified, consistent message to its target audience. And, in today’s business scenario,
IMC is inevitable because no company or brand can survive by using only one or two
promotional tools to send consistent communication to prospective or existing customers

Does IMC Really Help? Keep reading the below paragraph and recall your school /student
days…..............
Have you tried the magnifying glass and sun experiment in your childhood? When we hold a
magnifying glass under the sun, it concentrates the sun's light onto a small area and makes the
sun’s heat much stronger. This may make a flammable object burn. This small experiment
explains the importance of IMC in a very simple way. In a marketing communication scenario,
IMC acts as a magnifying glass which integrates various marketing and promotional tools to
ensure synergy and avoid duplication. Indeed it does help the firm………

An IMC strategy integrates various marketing communication tools to maintain communication

consistency and ensure resource optimization. There are different online and offline

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communication tools which make a communication about a product or service to reach out to
target group in many ways. In order to ensure clarity of a brand’s message about a product /
service, integration of all the tools becomes crucial. The importance of IMC approach is growing
continuously consistently both among the large as well as small firms. It’s being adopted among
the marketers of both consumer as well as B2B products and service businesses. IMC is really
helpful as it makes a firm’s marketing communication program more efficient and effective. An
IMC strategy offers several benefits such as it ensures consistent and clear communication,
optimizes resource utilization, avoids replication, helps to have competitive edge and
consolidates a brand’s image and public perception also.

9.5 THE IMC PLANNING PROCESS AND BUDGETARY CONSIDERATIONS

An IMC process involves six steps as depicted in Figure 2. Any IMC planning process begins
with situational/ contextual analysis. Various tools such as SWOT / TOWS analysis may be used
to analyze the external and internal environmental factors. Once situational analysis is carried
out, it is important to decide on target market or group and identify the reasons for which
customer will purchase a company’s products or services. The next step of the IMC planning
process is setting the marketing communication objectives. These may be increasing brand
awareness, enhancing brand image, changing customer beliefs and attitude, influencing purchase
decisions etc.

Contextual or Situational Analysis

Deciding on Target Market

Setting the Communication Objectives

Deciding the IMC Budget

Strategic Considerations & Implementation

Evaluating the IMC Program

Figure 2: The IMC Planning Process

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 (Source: Adapted from Belch, George E., and Michael A. Belch. "Advertising and promotion: An integrated
marketing communications perspective 6th." New York: McGraw-Hil l (2004))

Once objectives are chosen, deciding on budget is the next crucial step in the IMC planning
process. The promotion budget not only influences the level of promotional activity but also,
the promotional mix used by the firm. A company may either use percentage of sales or
profits, competitive parity for deciding the IMC budget or even identify tasks to be performed
as per the set communication objectives and calculate the budget accordingly. After the
finalization of objectives and budget, it becomes important to develop and implement specific
strategies to accomplish these objectives. This is the fifth step of the IMC planning process.
The final step of the IMC planning process is assessing the IMC program. It enables a
marketer to understand what worked or didn’t work so that the same can be taken into
consideration in future.

9.6 FACTORS AFFECTING AN IMC STRATEGY

Careful selection of IMC tools and more carefully designing a suitable IMC strategy is vital and
depends on a number of factors. While one company or brand may use advertising and publicity
prominently, other may rely on sales promotion and POS advertising or may be combination of
other IMC tools. The choice of a specific or a combination of IMC tools is determined by several
factors such as:

• Product or Service Category

• Target Group Characteristics (Demographic, Geographic etc.)
• Budgetary Constraints
• Stage in Product Life Cycle (PLC)
• Regulatory Considerations etc.

Product or Service Category: Selection of IMC tools mainly depends on the type of product or
service category. Products or services which are technical or industrial (Ex. machinery, gear
boxes, medicines) in nature or require high involvement would necessitate personal selling while
advertising and sales promotion are best suited for convenience, low involvement product
categories (Ex. biscuits, shampoo, hair oil, confectionaries etc.). We watch television or read
newspapers daily. What kind of product or service advertisements have you observed? Can you
recall? You would have seen advertisements of automobile brands (cars, two wheelers), jewelry,

16 
 
hair care products, wellness products, health supplements and educational institutes etc. Have
you ever seen advertisements related to industrial lubrication, industrial machinery etc. in
newspapers, television or heard on radio about such products or services obviously not? It is
because selection of an IMC tool depends on type of product or service.

Target Group Characteristic: Factors such as demographic (age, gender, income, marital
status, education etc.) and geographical characteristics (urban, semi urban, rural etc.) of target
market assume a very significant role in designing the IMC strategy for a brand. For example, for
a product or service category targeted at young consumers, IMC tools such as media advertising,
direct marketing etc. are most suitable. Similarly, when the target market for a product or service
is rural consumers, IMC tools such as wall painting, Below the Line Marketing (BTL) activities
etc. are most relevant due to low literacy levels and exposure.

Budgetary Constraints: The budget outlay and availability of funds with the firm is another
factor which determines selection of IMC tools and strategy. Media advertising requires huge
budgets while PR and publicity are considered to be free of cost. It also affects the reach and
frequency decisions. Multi-National Companies (MNCs), big corporate groups have huge IMC
budgets while small firms, start-ups have limited budgets and hence, IMC tools are chosen very
intelligently taking into considerations the cost benefits analysis and the pros and cons of each of
the selected tool.

Stage of Product Life Cycle (PLC) and Regulatory Considerations: The stage of the PLC of
the brand and its readiness and other allied factors of product or service offerings are essential
and should be considered accordingly. In addition the regulatory considerations also play an
important role in selecting appropriate IMC tools. As the objective of marketing communication
changes with the PLC stage, the IMC tool need to be selected accordingly. For instance, when a
product is in introduction stage, the company’s or brand’s objective is to make consumers aware
about the product, its uses. In such case, media advertising and publicity is considered most
suitable and relevant. A brand may also consider sales promotion to let people try the newly
launched product or service.

Furthermore, government regulations also affect the choice of IMC tools and strategy. For
example, media advertising, direct marketing, out of home (OOH) etc. are prohibited for pharma
products or services in India. Therefore, they use personal selling (referrals from doctors or

17 
 
specialist) to promote the products or services. In the same way, adverting of tobacco and
alcohol is banned in our country. Hence, companies or brands of such products or services use
other means (such as surrogate advertising) to reach out to prospective and existing customers.
For example, Imperial Blue is an Indian alcoholic beverage brand. Since it cannot be promoted
directly due to government regulations, they promote their music CDs under the campaign ‘Men
will be Men’ to remain as a brand in their customers’ mind.

Activity 2

1. Pick up any two consumer brands and any two industrial brands of your choice. Discuss
how each of these brands uses IMC to deliver consistent and integrated messages. Do you
find any difference in the IMC strategy of an industrial product when compared to a
consumer product? If yes or no Explain.

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9.7 EMERGENCE OF SOCIAL MEDIA REVOLUTION ON IMC

Marketing has changed drastically since the last decade and a half due to the emergence of
social media. It has provided new tools to reach out to potential customers by having an in-depth
understanding of their habits, perceptions and preferences. Marketing Analytics, Big Data, IOT,
Social CRM, Automation, Chat bots, User Experience (UX) Marketing etc. have taken marketing
to the next level.

With reduced technology costs and the increased internet penetration, social media marketing
offers many appropriate solutions. The way businesses relate with their customers has changed
radically. The new and evolving consumers of today are bounded by online tools and
technologies. This has made brands to include email, websites, online PR, search engine
marketing, blogs, social networks, and social media advertising etc in their marketing toolbox.

18 
 
Furtherm
more, contentt marketing,, online com
mmunities, mobile
m markketing and viirtual realityy also
play a cruucial role in overall IMC
C strategy.

9.8 R
ROLE OF IM
MC IN DEM
MAND CRE
EATION

Any IMC
C activity plays a signiificant role in
i creating demand for products annd services. It is
importannt for a mark
keting professional and marketers too understandd and apprecciate the dem
mand
creation role of IMC
C. The consuumer response hierarchyy models whhich you are familiar with do
offer meaaningful insights into thhe consumerr responses and
a buying process
p whicch finally leead to
the demaand of a prod
duct or serviice. There arre four key consumer
c ressponse hieraarchy modelss that
demonstrrate consum
mers’ behavioor across thrree stages i.ee. cognitive,, affective and
a conative. The
key hieraarchy modelss are:

a) AIDA Model,

b) Hierarrchy of Effeccts (HoE) Model,

M

c) Innovaation Adoptiion (IA) Moddel and,

d) Inform
mation Proceessing (IP) Model.
M

Figure 3: Several Conssumer Response Hierarchy Models

(Source: Adapted
A from Barry,
B T. E. “The
“ Developmment of the Hierarchy of Efffects: An Historical Perspecctive.”
Curreent Issues and Research
R in Addvertising, Voll. 10, No. 1-2 (1987): pp. 2511-295)

19 
 
‘AIDA model constitute the most basic consumer response hierarchy model. The acronym stands
for Attention Interest Desire and Action respectively. It suggests that a marketing
communication effort should first grab a consumer’s attention, generate his / her interest, create
desire and finally, motivate him / her to take action for purchase.

The model of Hierarchy of Effects (HoE) illustrates a series of sequential steps through which a
consumer undergoes to make an actual purchase. Developed by Lavidge and Steiner (1961),
Hierarchy of Effects is the most recognized consumer response hierarchy model in IMC
literature. Let us understand this by a simple example. Assume that you are an communication
manager of a toothpaste brand Smiley. You want your target audience to purchase Smiley.
According to HoE model, you need to first ensure that target customers are aware of the brand
Smiley, through your integrated marketing communication efforts. It is also obvious that Smiley
is not the only toothpaste brand available in the market. Instead there would be a wide range of
tooth paste brands that customers are aware of such as Shiny, Whity, Senso etc. Therefore, all the
efforts of IMC should aim at targeting and communicating benefits and positive attributes of
your brand so that customer may evaluate your offering against the available options in the
market.

At the next level, the brand should ensure that the customers should get emotionally attached
with the brand and start liking it. Once, the potential customer reaches this stage, the efforts of
IMC for Smiley should now be focused on creating differentiation and highlighting the USP of
the product. At this stage, the brand should ensure that customer prefer Smiley over other
available options in the market. Subsequently, the IMC efforts of brand Smiley should trigger
action i.e. conviction and finally purchase. A level of trust should be built by the brand, by
focusing on quality and usefulness through its IMC strategy. This will help to clear the doubts (if
any) in customers’ mind which will finally lead to the purchase of Smiley.

In a similar way, the two other models i.e. Innovation Adoption Model (IAM) and
Information Processing (IP) Model also describe several steps or stages which a target customer
goes through to act favorably towards a product or service adoption. The IAM model represents
the stages through which a consumer passes and finally adopts an innovation or a new product.
This model works on the Diffusion of Innovations theory. To summarize, all these models offer

20 
 
clarity onn the response that is stim
mulated from
m a consumer at differennt stages of his / her jouurney,
starting from
f unawarreness to the final purchaase of a prodduct or servicce.

9.9 STAKEHOL
LDERS OF IMC INDU
USTRY

Let us now try to understaand and apppreciate thee several staakeholders of

o the markketing
comm
munication industry annd their resppective roless. The eco-system of an
a IMC inddustry
prim
marily involv
ves the mannufacturer (the
( brand), target auddience (potential or exiisting
custoomers), adv
vertising ageency, mediaa house andd regulatoryy (includingg self-regulaation)
bodiies.

Brand

Ad MARCOM
M Media
Agenc
A
E System
Eco House
y

Consu
mer

Figure 4:
4 The IMC Ecco – System (ccreated by Autthor)

A brrand or a co
ompany (for example Reliance
R Jio, Maggi, Levvis etc.) is a key stakehholder
whicch manufactures the prooducts or serrvices and offers
o to marrket for salee and earn profit.
p
Theiir core comp
petence is prroducing andd deliveringg the products or servicees, thereforee they
outsoource the marketing
m com
mmunicationn activities to
t advertisinng agencies. An ad agenncy is
an inndependent service
s organnization respponsible for creating, deeveloping, prroducing, plaacing
and managing marketing
m coommunicatioons activities for its clieent i.e. a maanufacturer (or a
brannd). The adv
vertising ageency offers fair and unnbiased view
ws and visiion on prodduct /
serviice and the prevailingg market conditions
c and offer appropriate IMC soluutions
accoordingly. It brings
b in reqquired professsionalism, expertise
e andd competencce as well. There
T
are various
v typees of ad ageencies catering to a wide and diverssified clientss/firm’s baseed on

21 
 
 the size, nature and specialization of the client firm, The advertising agency may be a full –
service (one-stop solutions), or a specialized agency (offers particular services only), a
creative boutiques (offers creative solutions only) and media buying agencies.

Media houses (or groups) constitute another significant stakeholder of IMC eco-system.
While ad agencies are responsible for developing a creative message for a brand / company
to make customers aware and to convince them to buy the product or service, a media house
provide required channel or vehicle to carry this creative message to the prospective or
existing customers. These channels employed may be various media options such as print,
broadcast, OOH, online, digital or combination of any of these mentioned above. Last but
definitely not the least customers (existing or prospects) are to be considered as one of the
important stakeholder of IMC industry. Customers buy and adopt a company’s product,
brand or a service and try and consume them. A brand’s IMC strategy is prepared only on
the basis of the insights obtained from its target audience with an objective to inform,
remind and persuade them to buy a company’s market offerings.

Activity 3
1. Visit the website or social media page of any two advertising agencies (for example, Ogilvy
India, Lowe Lintas, DDB Mudra etc.) and two media groups (for example, HT Media, The
Times Group, DB Group etc.). Identify what type of services this ad agencies and media
group’s offer, who are their clients, and report the major tasks that they have undertaken in
the recent past 5-10 years.

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22 
 
 Besides, the various stakeholders discussed above, government regulatory bodies and self-
regulatory organizations (represented by arrows in the Figure 4) are equally important to
protect the interest of other stakeholders of the industry, especially the consumer.
Advertising Standards Council of India (ASCI) is one such self-regulatory body consists of
advertisers, advertising agencies, media, PR agencies and market research companies.
ASCI’s goals include monitoring, administering and promoting standards of advertising
practices in India. The activity below will enable you to know more about ASCI.

Activity 4
1. Visit the website or the social media page of Advertising Standard Council of India
(ASCI). Explore the role and responsibilities of ASCI and their contribution to the IMC
ecosystem.

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9.10 SUMMARY

Communicating with target customers is key to the success of every business. It is one of the
important elements of a firm’s marketing mix decisions and known as promotional mix or
marketing communications. It includes advertising, publicity, sales promotion and personal
selling. Furthermore, Integrated Marketing Communication (IMC) refers to a comprehensive
approach of using several communication tools to inform, aware, remind, persuade and influence
a consumer’s attitude and buying behavior. Marketing communications (or Integrated Marketing
Communications) play a key role in creating demand for a products and services. The marketing
communication task should aim at targeting the right consumer segment in creating awareness
and engaging and educating consumers will in turn positively affect the demand for product or
service being offered to the market. The consumer response hierarchy models are important
frameworks which explain consumer responses and behavior to a marketing communication

23 
 
process. Choosing an appropriate IMC strategy depends on various factors and is a crucial
decision for a brand’s success and business sustainability.

9.11 KEY-WORDS

AIDA: Acronym for Attention, Interest, Desire and Action. It identifies stages an individual
undergo during the buying process for a product / service

ASCI: Acronym for Advertising Standards Council of India. It is a self-regulatory voluntary

organization, committed to the cause of self-regulation in advertising, ensuring the protection of
the interest of consumers

ATL Activities: Above the Line Activities. They focus at directing the communication towards
the mass market

BOGOF: Acronym for Buy One Get One Free. A common sales promotion strategy used by
retailers

BTL Activities: Below the Line Activities. They are more focused and directed towards a
specific set of consumers

Digital Marketing: The act of promoting and selling products / services by leveraging online
marketing tools

Hierarchy of Effects: A consumer response model which suggests stages viz. Awareness,
Knowledge, Liking, Preference, Conviction and Purchase for influencing a consumer’s decision

Integrated Marketing Communications (IMC): A 360-degree marketing communication

strategy which combines several tools to provide clarity, consistency and optimum
communication effect

Primary Demand: The overall demand for all the brands in a particular product category

Secondary Demand: The demand for a given brand in a particular product category

Self-Regulation: An organization regulating itself without involvement from an external body

24 
 
Surrogate Advertisement: An advertisement that duplicates the brand image of one product to
promote another product of the same brand.

9.12 SELF–ASSESSMENT TEST

1. Advertising is generally a better promotional tool as compared to sales promotion if you

want to close a sale. (True / False)

2. Building good relations with the firms’ various publics (internal employees, external
customers, other companies, the government and media) by obtaining positive publicity,
building up a good corporate image and handling or heading off unfavorable rumors,
stories and events is called as _________________.
a) PR Activity
b) CRM Activity
c) Sales Promotion Activity
d) Relationship Building Activity

3. Understanding buyer’s behavior is important for the success of an IMC program. (True /
False)

4. The major criticism of Hierarchy of Effects models is that they assume consumers move
through the decision - making stages in a consistent, rational manner. (True / False)

5. Which of the following is generally neglected through the use of advertising?

a) Immediate Feedback
b) Low Cost / Contact
c) Reaching Masses
d) Creating Brand Image
6. Colley’s DAGMAR principles relate to which method of setting advertising budgets.
a) Bottom Up Approach
b) Affordability Method
c) SOV
d) Competitive Parity

7. Consumers normally pass through a buyer-readiness process as they reach a decision to

purchase a product or not. Which of the following stages is not typical of buyer-readiness
process?

25 
 
 a) Preference
b) Awareness
c) Conviction
d) Post Purchase Evaluation

8. Garvit called Maya on the telephone to present information about a meal plan package his
company was offering. Maya responded unfavorably to his description of the offer, so
Garvit modified the message. Which characteristic of personal selling did Garvit benefit
from in this scenario?
a) Ability to Target Specific Markets
b) Ability to Respond to Immediate Feedback
c) Relationship Building
d) None of These

9. A company’s customers, which deals with premium products, are confined to a specific
geography. The company should use:
a) Advertising
b) Personal Selling
c) Sales Promotion
d) Events
10. In case of industrial products, heavy advertising and publicity is most appropriate
promotional tool. (True / False)
------------------------------------------------------------------------------------------------------------
(Answers: 1. False, 2. PR Activity, 3. True, 4. True, 5. Immediate Feedback, 6. Bottom Up Approach,
7. Post Purchase Evaluation, 8. Ability to Respond to Immediate Feedback, 9. Personal Selling, 10.
False)
11. Discuss the role and importance of feedback in the communications process with a
suitable example of your choice.
12. List out the key considerations that a marketer should consider while choosing an
advertising agency in the following situations:
a) launch of a new innovative premium writing instrument (Ink pen)
b) chain of south Indian fast food joints operating in north India

26 
 
 13. Organizations are gradually sensing the necessity of becoming more integrated in their
marketing communications efforts. Discuss by taking an example where you have been a
part of the integration process or may have personally observed the said integration.
14. How consumer sales promotion is different from trade sales promotion? Discuss with
suitable examples.
15. As advertising costs are relatively high, it is not cost efficient. Discuss.

9.13 FURTHER READINGS

• Kotler and Keller, Marketing Management, 15th Edition, Pearson Education India
• Bains and Sinha, Marketing, Asian Edition, Oxford Higher Education
• ShahKruti, Advertising and Integrated Marketing Communications, 1st Edition, 2015,
McGraw Hill
• Moriarty, Mitchell and Wells, Advertising and IMC, 10th Edition, Pearson Education
India

27 
 
UNIT 10 ADVERTISING AND SALES PROMOTION
Objectives

After studying this Unit, you will be able to:

• appreciate the role and types of advertising
• list different kinds of advertising objectives
• learn how an advertising copy is developed
• explain how media planning is done
• describe the parameters used for measuring, advertising effectiveness
• explain the nature and role of sales promotion
• list different types of sales position and the sales promotion schemes
• learn about the growing importance of sales promotion in India.
• understand the process involved in planning sales promotions
• appreciate the need for integration among the different methods of promotion.
Structure
10.1 Introduction
10.2 How Advertising works?
10.3 Types of Advertising
10.4 Role of Advertising
10.5 Advertising Management
10.6 Advertising Budget
10.7 Setting Advertising Objectives-Indian Experience
10.8 Developing Advertising Copy and Message
10.9 Selecting and Scheduling Media
10.10 Measuring Advertising Effectiveness
10.11 Coordinating with Advertising Agency
10.12 Sales Promotion
10.13 Sales Promotion Objectives
10.14 Sales Promotion Methods
10.15 Planning Sales Promotion
10.16 Towards Promotional Strategy

1 

 
10.17 Summary
10.18 Key Words
10.19 Self-assessment Exercises
10.20 Further Readings

10.1 INTRODUCTION
 
In modern times advertising prevails in all walks of human life. It has acquired the distinction of
being the most visible and glamorous and impactful method of marketing communication.
Advertising is defined as any paid form of non-personal presentation and promotion of ideas,
goods or services by an identified sponsor. Some of the major marketing and communication
functions performed by advertising today include to inform, entertain persuade, influence,
remind, reassure and add value to the product or service advertised.

While sales promotion being a key element of promotion mix makes use of short term incentives
to encourage purchase of product or service. Before going to touch upon the role of advertising
and sales promotion and their managerial aspects, let us acquaint ourselves with how advertising
and sales promotion works and their dimensions in overall marketing communication.

10.2 HOW ADVERTISING WORKS?

In order to perform the various marketing and communication functions listed above, according
to Paul E.J. Gerhald, advertising moves through the following stages before accomplishing its
purpose:

• it gets planned and brought into existence

• it is reproduced and delivered and exposed to people
• it is received and assimilated
• it affects ideas, intentions and attitudes
it affects buying and buying process
it responds to time (situation and repeated exposure)
it affects trade effort and supply
2 

 
 it affects product consumption
it changes sales and profits
it changes the market (size, quality mix, intensity
competition, trade relations, consumerism etc.)

10.3 TYPES OF ADVERTISING

 Depending upon the nature of the task involved, type of product represented or the focus
of activity transacted, advertising efforts are grouped into various types. Let us take a few
examples.

 Advertisements for machinery and machine tools form part of industrial advertising, and
the ones for footwear, cornflakes or edible oil etc. the consumer advertising.

 The advertisements aimed at improving the corporate image are forms of corporate
advertising and the ones promoting a company's products, the product advertising.

 Likewise, advertisements promoting the consumption of tea or carpets are called primary
demand creating advertisements whereas those relating to specific brand such as Brooke
Bond's `Tajmahal' or Nescafe', selective brand advertising is appropriate.

 Advertisement aimed at effecting immediate sale of the product advertised is called direct
advertising, and the ones performing tasks like announcing the launch of the new
product, building purchase intentions, creating interest in customers or changing their
attitudes towards the product, are termed the indirect action advertising.

 The advertisements which are sponsored and paid for by the manufacturers are
manufacturer advertising, and such advertisements whose costs are shared by the
manufacturer and wholesalers or retailers are co-operative advertising. Co-operative
advertisements aim at increasing the demand of a specific product of a manufacturer
through a particular wholesaler or retailer.

3 

 
  On the other hand, when a retailer advertises for his shop entirely on his own to attract
traffic to his shop it is retail advertising.

In short, the major types of advertising are: industrial and consumer, product and institutional,
primary demand and brand-demand, direct (sales) demand and indirect (awareness, intentions
and attitudes) action advertising, and manufacturer, co- operative and, retail advertising.

10.4 ROLE OF ADVERTISING

In the pursuit of its purpose, the economic and social effects of advertising have become the
subjects of continuing debate. A quick flavor of the arguments put forward on both the sides can
be had from Table 1. The table presents two viewpoints, one considering advertising as an
information disseminating utility function and the other viewing advertising as a source of
market power.

On balance, advertising has carved an indispensable place for itself in the marketing mix of a
firm. Philip Kotler very aptly refers to the following situations where advertising is likely to
make greater contribution. The situations are:

• when buyer awareness is minimal

• when industry sales are rising rather than remaining stable or declining
• when the product has features normally not observable to the buyer
• when the opportunities for product differentiation are strong
• when primary instead of secondary motives can be tapped.

Are, there some limitations to the role of advertising? The answer obviously is in the.
affirmative. Advertising, in the words of Richard H. Stansfield, cannot do the following:
• sell a bad product twice
• sell an overpriced or otherwise non-competitive product
• sell a poorly distributed product
• sell a seasonal product during non-season /out of season (significantly)
• sell products to persons having no use for them
• work overnight
4 

 
• do the selling job alone.
 

During the late 80’s the usefulness of advertising, which for long been accused as a capitalist
tool and a bane of market economy, was realised by planned and communist economies too.
While Yugoslavia, USSR, Poland and Hungary shed their hostility to advertising quite a few
years ago, China welcomed advertisement propelled marketing and hosted the Third World
Advertising Congress in Beijing during June 1987. The Economic Times in its marketing and
advertising column reported that China's advertising expenditure in 1985 was around $ 200
million.

Table 1: Role of Advertising – Two Views

Advertising - Market Power Advertising Information

Advertising affects consumer Advertising Advertising informs
preferences and tastes, consumers about product
changes product attributes and attributes and does not change
differentiates the product from the way they value those
competitive offerings attributes.
Consumers become brand Consumer Consumers become more
loyal and less price sensitive, Buying price sensitive and buy best
and perceive fewer substitutes Behaviour ‘value’. Only the relationship
for advertised brands. between price and quality
affects elasticity for given
product.
Potential entrants must Barriers to Entry Advertising makes entry
overcome established brand possible for new brands
loyalty and spend relatively because it can communicate
more on advertising product attributes to
consumers
Firms are insulated from Industry Structure and Market Consumer can compare
market competition and Power competitive offerings easily
potential rivals concentration and competitive rivalry is
increases, leaving firms with increased. Efficient firms
more discretionary power remain, and as the inefficient
leave, new entrants appear the
effect on concentration is
ambiguous
5 

 
Firms can charge prices and Market Conduct More informed consumer put
are not as likely to compare on pressures on firms to lower
quality or price, dimensions. prices and improve quality
Innovation may be reduced innovation is facilitated via
new entrants
High prices and excessive Market Performance Industry prices are decreased.
profits accrue to advertisers The effect on profits due to
and give them even more increased competition and
incentive to advertise their increased efficiency is
products. Output is restricted ambiguous.
compared to conditions of
perfect competition
Source: Paul W. Farms and Mark S. Aibion. The impact of Advertising on the Price of Consumer Products
Journal of Marketing (Summer 1980) pp. 17-335.

10.5 ADVERTISING MANAGEMENT

Advertising constitutes one of the four components of a firm's promotion mix which in turn
forms an integral element of the firm's marketing mix. In order to implement the marketing
concept and to achieve the objective of integration among different elements of marketing mix, it
is necessary that the advertising function be systematically planned.

In particular, the link of advertising with the promotion and marketing objectives of the firm on
the one hand, and with factors like product positioning objective, role of sales force, dealer
support plan and the buying habits of consumers, on the other hand, must be clearly established.
This link helps a firm to achieve the desired push-pull strategy objectives, and enables the
product to have a distinct personality. The task involved in advertising is, therefore, complex and
its management requires systematic decision-making. Charles Ramond advocates appropriate
research to precede each stage of an advertising campaign.

6 

 
The suggested types of advertising related research listed by Ramond are given in Table 4

Table 4: Advertising Campaign: Questions and Answers

To Make This Decision One Must Choose A Using

What To Say Theme, Copy Platform Concept tests

Positioning
studies
To Whom Target Audience Market Segmentation
Studies
How to Say it Copy Commercial Copy Research
Execution Commercial Test
How Often Frequency of Studies of
Exposure Repetition
Where Media Plan Media Research
Modes
How Much To Spend Budget Level Sales Analysis,
Marketing Models
Source: Charles Ramond, Advertising Research: The State of the Art (New York: Association of National
Advertisers, 1976), pp. 3-4.

In short, the basic decision-areas in advertising are:

• setting advertising objectives

• determining advertising budget
• developing advertisement copy and message
• selecting and scheduling media
• measuring advertising effectiveness

10.6 THE PROMOTION BUDGET INCLUDING

THE ADVERTISING BUDGET

The advertising budget influences the level of advertising activity used by the firm. Budgeting for
advertising is yet another area where a lot of subjectivity prevails regarding what is the right amount to
be spent on the advertising activity.

Further discussion from here pertains to promotion budgeting comprising all the elements of promotion

7 

 
mix including adverting. Pending any clear cut relationship between the promotion expenditure and the
achievement of promotion objectives, recourse is made to certain rules of the thumb. These are:

• incremental promotional expenditure yields, incremental sales to a certain extent;

• a minimum level of promotion activity must be exceeded for promotion to have a
meaningful effect. Often such a minimum level of promotion is set by the competitor or
more appropriately by an average of the industry;
• promotion activities when well integrated with other elements of the marketing mix
produce greater than the planned results.
The above discussion should not, however, lead us to understand that no attempts have been
made to shed light on the inherent uncertainty shrouding the cause-effect relationship in this area
of promotion budgeting. In fact, quite a few notable attempts, by the economists in terms of
application of marginal cost and marginal revenue principle (additional promotional expenditure
and additional revenue and profits made), and by marketing researchers through experimentation
and model building approaches have been made. The substance of their findings is that results of
the promotion function should be constantly monitored in order to establish more reliable
parameters of cost-benefit relationships. Further, cost-benefit analysis should form the basis of
the tradeoff before promotion budget is finalised by using any one of the following methods.
These methods include per cent-of-sales methods, fixed-sum per wait, affordable funds,
competitive parity, and objective and task method.

Percent-of-Sales: This method views promotion budget determination by linking the

appropriation to a fixed percentage of sales of the company products. Such sales may relate to
the previous year, an average of sales of the previous few years, projected sale of the next year or
years or an average of the previous few years sales, as well as the projected sales of the next few
years.

This method though simple to use fails to account for the changing promotional costs, and
relating the appropriations made to the product-market needs. Particularly difficulties are faced if
the sales curve of a company is not smooth, hence resulting in lower outlays for the years that
follow the bad sales years. Also the forecasted sales realisations remain uncertain. The ways out
attempted have been the adjustment provision of a fixed percentage to the average expenditure of
8 

 
the: past (i.e., last year plus 15%), or use of this method in combination with the others that are
discussed below.

Fixed-sum per unit: Very much like the per cent-of-sales, under this method the promotion
budget is determined by allocating a fixed amount of money per physical unit of product for
either past of future sales or a combination of the two. The only differentiating point of this
method from the per cent-of-sales method is that the base for budgeting, instead of being rupee
sales, is the number of product units sold or targeted to be sold. This method, thus, has almost the
same strengths and weaknesses as the ones associated with per cent-of-sales method, namely,
simplicity in the determination but arbitrariness in arriving at the percentage or per unit
allocation.

Affordable funds: Continuing to think on the plane that promotion expenditure is one of those
business costs which are desirable or avoidable as per the convenience of the top management,
the funds for promotion are appropriated on discretionary basis under this method. No wonder
then, that companies adopting this method find their promotion appropriations fluctuating from
year to year depending on the top management's thinking for the year.

Competitive parity: Incorporating a measure of competitiveness in planning, this method guides

the budget determination in terms of relativity to what the competitors are likely to allocate.
Being a slightly more market-oriented method than the ones ' discussed so far, when based on the
representative average of the industry promotion expenditure, it becomes a good norm to
moderate the promotion expenditure of a company.

Objective and task method: This is one of the most scientific methods of budget determination.
It approaches the budget exercise by first setting the specific objectives to be achieved. It then
identifies the tasks involved in achieving the said objectives followed by ascertaining the costs
involved in the performance of each task required. The result of the exercise is an estimation of
the amount required for accomplishing the set promotion goals. Typical objectives might be to
increase awareness say by 15% or increase message/theme recall say by 25%.

Indeed, it a good method as far as promotion budgeting for new products is concerned, or when a
new thrust to the image of a company and its products is to be provided.
9 

 
This method presupposes that objectives set are realistic and promotion results can be measured
precisely. These assumptions continue to be the subject of unending debate at the one end, and of
pursuit of research on the other: It is as a result of the continuing research that some models for
promotion budgeting have been developed and are now being refined to be of practical utility to
the marketer.

The practice: In practice most companies make use of more than one method for determining
the promotion budget. The research into the practices of the companies in India in this regard
revealed the above finding. Among the individual methods used "affordable funds" method
emerged as the most popular. There were, however, quite a few companies which had started
using the approach of `objective and task' in setting their promotion budget either exclusively or
in combination with other methods. Most of such companies were dealing in consumer goods.

The practices of the companies using a combination of methods for determining promotion
budget pointed to the efforts they were putting in to gather competitive promotion outlays and its
apportioning to various promotion components.

10.7 SETTING ADVERTISING OBJECTIVES: THE INDIAN

EXPERIENCE
An advertisement is either good or bad in its ability to achieve its objectives. Though advertising
is largely informative and persuasive in nature, yet to do a good job, the objectives of each
advertising campaign need to be clearly spelt out in measurable terms, in order to focus clearly
on the target audience, and on the time period over which these are to be achieved.

Russel H. Colley called for the need to provide explicit link between advertising goals and
advertising results in his pioneering approach nicknamed DAGMAR-Defining Advertising Goals
for Measured Advertising Results. Colley distinguished 52 advertising goals that might be used
in connection with a single advertisement, a year's campaign for a product or a company's entire
advertising philosophy. Some of such goals are:

• announce a special reason for `buying now' (price, premium and so on)
• build familiarity and easy recognition of package or trade mark
10 

 
 • place advertiser in position to select preferred distributors and dealers
• persuade prospect to visit a show room, ask for a demonstration
• build up the morale of company sales force
• correct false impression, misinformation and other obstacles to sales
• implant information or attitude regarding benefits and superior features of brand.

According to DAGMAR, the communication task of the brand is to gain (a) awareness, (b)
comprehension, (c) conviction, (d) image, and (e) action. Advertising goals should, therefore, be
specific to the communication task(s) to be performed. The process of advertising goal-setting
thus, should begin by understanding the dynamics of the consumer behaviour and the market
environment in order to carry out the task of marketing communication effectively.

Further, let us also understand that improving sales is not the only objective of advertising.
Advertising is only one of the factors influencing sales, the other being: (a) different elements of
the marketing mix, (b) the competitive position of the firm, and (c) the purchasing power and the
need of the buyer. Also, the impact of advertising often occurs over the long-run and not
necessarily immediately, since consumers may belong to different stages of the product adoption
process at a point of time. The advertising objectives are to:

• inform and build awareness

• create brand knowledge
• reinforce positive attitudes about the brand
• precipitate buying action
• increase sales
• build up an image
 

To facilitate the realisation of advertising objectives, it is necessary that these are laid down in
specific operational terms and are linked to the time span during which these are to be
accomplished.

Indian Experience: The research on the practices of large sized companies has pointed out that
companies in India pursue a wide spectrum of advertising goals at different time periods and in
11 

 
relation to different products. Even similar companies placed in more or less similar market
situation may pursue different advertising goals depending upon a host of factors like advertising
philosophy, past experience and the level of expertise existing in the company.

An analysis of the advertising goals pursued revealed that these basically focused on: moving the
customer from one stage of the purchasing process to the other, expansion of the market and
creation of favourable image, besides the overall goal of improving sales. The goals set, in
general, lacked specific mention of the per cent of target market to be reached and influenced.

10.8 DEVELOPING ADVERTISING COPY AND MESSAGE

This decision-area relates to creative aspect of advertising. Studies reveal that advertising
effectiveness to a very large extent is dependent on the type of message and copy selected for
communication, and the way it is executed. Well conceived advertising objectives guide in the
development of effective message and copy.

An advertisement copy is the communicative portion of an advertisement. It includes headline,

illustration, body copy (incorporating product and selling appeals) and signature line identifying
the sponsor of the advertisement.

A review of the history of advertising reflects the diversity of opinions among creative teams as
to what makes an effective copy. Over a period of time certain creative styles have got associated
with particular individuals or agencies using them.

Notable among these are the four given below:

David Ogilvy: What you say is more important than how you say it. Ogilvy believes in
developing and retaining a prestige image of the brand. To reinforce the same Ogilvy often
makes use of prestigious individuals and testimonials from celebrities to convey the desired
prestigious image for products.

William Bernbach: How you say is as important as what you say in the copy style of Bernbach,
where the execution part dominates. He preaches copywriters to be simple, swift and as

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penetrating as possible. At the same time the advertisement should have its own character and
stand out from others.

Rooser Reeves: The Unique Selling Proposition (USP). Reeves approach is that each product
should develop its own USP, and use whatever repetition is necessary to communicate the USP.
Reeves' three guidelines for developing USP are:

• the proposition must involve a specific product benefit

• the proposition must be unique-one that competing firms are not using
• the proposition must sell.
The examples of USP during 1980’s include (i) Godrej Pentacool Refrigerator' (ii) Topaz
stainless is the first Indian blade to win ISI approval. Now mark the lack of USP in the
advertisement issued by a Topaz's competitor which read as follows: The perfect blade at the
perfect price only 30 paise.

Leo Burnett: The common touch, Burnett advocates search into the product to locate the
distinctive characteristic that made the manufacturer to make the product. He referred to it as the
‘inherent drama' and wants to build the copy around that. He uses plain ordinary people and
focuses on raising curiosity aimed at the mass market. He emphasises that the advertising copy
should be (a) straightforward without being flatfooted, (b) warm without being mawkish, and (c)
believable.

Advertising Appeals: Creative copy strategy rests heavily on the selection of the appropriate
appeal and its execution through properly worded message. Surveys of advertisements reveal the
use of the following primary appeals which are most commonly used: highlighting unique
product feature, relative competitive advantage, perceived price advantage, popularity or market
superiority, projected savings through product use, self-enhancement, and creation of fears,
anxiety or guilt through use or non-use of the product.

John Maloney provides a structure to incorporate various advertising appeals in the message
formulation exercise. Maloney identifies the four types of rewards that a buyer expects from a
product. There are rational, sensory, social or ego-satisfaction. He thinks that buyers will
experience this reward from result-of-use experience. The four types of rewards combined with
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the three types of experience generate 12 types of advertising messages which are reproduced
below in Table 5

Table: 5 Examples of Twelve Types of Appeals

Types of Potential types of reward

Potentially Rational Sensory Social Ego
Rewarding Satisfaction
Experience with a
Product
Results- 1 Get clothes ' 2 Settles 3 When you Care 4 For the skin
of-use cleaner stomach enough to serve the you deserve to
Experien upset best have
ce completely
Product- 5 The flour that 6 Real gusto in 7A 8 The shoe for
in-use needs no shifting a great light deodorant to the young'
Experienc beer guarantee social executive
e
incidental-to-use 9 The plastic 10 The 11 The furniture that 12 Stereo for
Experience pack portable identifies the home the man with
television that's of modern people
keeps cigarette discriminating.
fresh lighter in taste
weight, easier
to lift
Source: Philip Kotler, Marketing Management, Analysis, Planning and Control, Fifth edition, p 641.
(Check new edition)

Role of Headline and Illustration: Another component that plays a vital-role in the
development of an advertisement copy and formulation of a message is the role of headline and
Illustration. The popular dictum in the advertising world reads "you must draw the reader's eyes
to your advertisement like a magnet. Make them look into your sales message." Some
copywriters believe that the headline alone can achieve the purpose, while others believe that the
illustration serves this purpose, better. To us the ' compromise proposed by C.A. Kirkpatric's
dictum, that "headline plus illustration assumes almost the complete attention of initial
readership" sounds better. David Ogilvy also seems to be holding a similar view when he states
that headlines below the illustration are read by 10 per cent more people than headlines above the
illustration.

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Before proceeding further, let us review some of the professionally acclaimed advertisements
released during 1980’s in India. This is a deliberate attempt to retain these advertisements which
are more than four decades old. Try and make a note what aspect did these focus forty years ago.
These have been adapted from the select columns on Marketing and Advertising in the Economic Times.

1 "Now the country need not look beyond Godrej for minting money" was the headline of an
advertisement which appeared when the coin shortage was at its worst. Godrej had
perfected a coin-making press capable of automatic production of coins from round shaped
blanks at the rate of 200 coins a minute.
2 "Who killed the telephone? Finolex Cables advertisement-generated interest instantly.
Copy said water seepage could affect the efficiency of conventional cables;.Finolex was
now making moisture-resistant jelly-filled telephone cables in India in collaboration with
Essez of USA.
3 A Charms ad was divided into two columns with the following headlines: "The good news
for Charms smokers" and "Now the not-so-good-news." In the first column some
improvements were listed; the price increase was mentioned in the second.
4 "Lipton exports tea to China" was a delicious headline.
5 The Russians say "Da to Emami for Men" was an attention-getter.
6 "Bribe" was a poster-type headline in a small CBS advertisement. Copy: "Rumour has it
that CBS is giving away a free cassette with every six international cassettes you buy over
the next 45 days... sneak into your nearest CBS shop and catch the dealer red handed."
7 "Till now headache tablets stopped at just relieving your pain... the dullness carried on.
Now, you can relieve your headache... and remove the `after-headache' dullness".
8 "Do you suffer from monstrous colds?" "Ordinary medicines can only put the cold to sleep
for a few hours. Ayurvedic has a weapon that knocks it out for good." The illustration of a
man in the grip-of a monster is what attracts you to the advertisement. Promise "Ayurvedic
Trishun strengthens your body's own fighting mechanism so that it actually fights the cold.
If you take Trishun at the first sign of cold, you can effectively avoid it."
9 Motorists all over India are banned from contact with children. This was the headline in
Brakes India Limited Advertisement.

10 "Which jar has your favourite Monaco? None, Genuine Monaco are baked light, crisp and
15 

 
 Flaky that they need protective packing. That's why they come to you in airtight tin or foil
pack-never loose."
In short, an advertisement copy to be effective must establish a clear link with the various stages
or AIDA-the buyer adoption process. It must be capable of arresting attention, inspiring interest,
creating desire, and precipitating action among the target customers. For this purpose, it should
use a judicious mix of aspects like advertisement layout, headline, illustration, and motivating
appeals. We must not forget that a bad advertisement copy is a bad investment, irrespective of
how precisely the objectives were set, and how meticulously the media planning and scheduling
were done. It pays to pretest the advertisement copy before release.

10.9 MEDIA SELECTION AND SCHEDULING

Media planning includes decisions relating to (i) which media should be used, and (ii) when and
how often should advertisements be placed in the selected media. The basic purpose of media
planning is to optimise the communication reach to the relevant audience within the available
budget.

For making efficient and effective media decisions it is necessary that a beginning be made by
collecting appropriate data from internal and external sources. The data to be collected from the
internal sources relate to: advertising objectives, copy strategy, product attributes and the budget
available. The external data relate to media characteristics such as reach, credibility, aid
suitability to company's product/copy strategy; media availability; media cost; and competitors'
media-mix. Before looking into other steps of media selection, let us take a look at the media
scene in India.

Indian Media Scene

Major advertising media available currently in India along with the chief characteristics are
given below:

Press (including all types of newspapers and magazines): wider circulation, limited life, good for
mass communication and reminder message.

Direct Mail: Restricted circulation, flexible usage, private in nature, high impact.
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Outdoor (including hoardings, posters, neon signs): local circulation, durable, reminder media.

Radio: Wide reach, cuts through illiteracy barriers, quick reminder messages possible.

Television: Combines both Audio and Visual, limited reach, high degree of viewers
involvement, suitable for product demonstration.

Cinema: Limited to cinema going population, short life, effective use of audio- visual, also good
for illiterates.

Miscellaneous (such as exhibition/fairs, shandies, etc.) local reach, good product demonstration,
impactful.

However, with the advent and exponential growth of Information and Communication
Technology the Indian media scene has transformed itself offering a range of new generation
adverting and promotional media that has come into existence and are available to the marketers
which are cost effective and impactful in terms of customization /standardization in reaching
the intended target customers /markets across nations.

With the growing rate of literacy, increased electrification of rural areas, vast ownership of radio
receivers, and widening network of television transmission, the Indian media scene has
undergone a tremendous change during the last decade. For example, with the popularity of the
Television media, the attraction of consumer goods for radio and the cinema has declined
somewhat. Similarly, the increased availability of colour magazines and television time,
consumer products needing colour exposure have moved away from the newspapers to the
former. Hence, as consumer product advertisements are moving over to magazines, television
and radio: investment advertisements and advertisements of restaurants and service business
organisations are filling up the vacuum in the newspapers.

Media Selection: After the suitable and available media are shortlisted they are then subjected to
evaluation criteria for their selection. Some of the concepts used in this connection are discussed
here.

Reach: It refers to the number of households or individuals reached by a given medium over a
period of time. In the case of press media this is called readership. Readership is calculated by
17 

 
ascertaining the circulation figures of say a newspaper and then the same is multiplied by the
average numbers of readers per copy. National readership surveys, in addition to several other
specially conducted studies provide the reach data in India, though not regularly. The
possibilities of duplication in readership also exist as two or more than two media may be
reaching the same target audience.

Frequency: It refers to average number of times different target households or individuals are
reached by a medium in a given period of time.

Gross Rating Point: A combined measure of reach and frequency gives gross rating points
(GRPs) for a given medium. For example, if 35 per cent of people are reached four times in a
week by a given medium, the GRP for the medium will work out to 140.

Comparative Costs: For facilitating media selection comparative cost sheets are prepared. In
the cost sheets, media costs are converted into a common denomination. This denomination in
the case of a newspaper is called "Milline Rate" which is arrived at as: (check for revised
rates/tariffs)

In the case of magazines, this denomination is called cost per thousand and is arrived at as:

In the case of TV and radio commercials, such a denomination is popularly known as cost per
thousand viewers or listeners per commercial minute.

In addition to the comparative media (rental) costs, it is desirable that the production cost of
advertisements for different media is also worked out. For example, TV time is expensive; so is
the creation of the script and story, the hiring of actors, and other production costs.

An advertising film to be released through the cinema medium in addition will require enough
number of prints to cover the desired number of cinemas. Similar estimation of costs should be
18 

 
made while participating in an exhibition or using direct mail or releasing an advertisement
through a newspaper. Efforts should be made in the company to develop data whereby cost per
conversion of enquiries to sales, media- wise, could be ascertained_ This will prove to be a good
source for measuring the impact of each media.

Based on the data relating to relative gross rating points, the costs involved, and the advertising
goals of the firm, specific media mix is selected. To add precision to the media selection
processes various operations research models are available now. The major limitation of these
models continues to be the data base which becomes outdated soon, besides certain technical
lacunae in the models. Clarion Advertising Services Limited is one of the few advertising
agencies which enables its clients the benefit of scientific media planning. For this purpose, it
offers them the usage of Clarion-Mote model, CASPA and the Response model.

Advertisement Scheduling: Once the media mix for the firm has been selected, the next task
relates to scheduling of media over a period of time. The goals of media scheduling besides
attaining longer time visibility and timely reminders for reinforcement of the message lie in the
compatibility of advertisement release with the purchase occasion, seasonality peaks, product
launch, relaunch or promotion needs of the firm. So, based on considerations such as the above
factors media scheduling is done by the firm.

The steady appearance of Amul Chocolate advertisement; product launch and promotional
scheduling and sustenance scheduling of Maggie 2-Minute noodles, aggressiveness of the
campaigns of Air Coolers during summer; peaking of Unit Trust of India's advertisements for
sale of Unit in June-July; and of woollen garments during winter months-are a few examples of
the advertisement scheduling by their sponsors.

Exercise 1

Which advertises media would you suggest for advertising the following products and why?

a) Branded Wheat Flour

b) Hair Dye
c) Bicycles

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Exercise 2

Write a short note favouring radio as the advertising medium compared to television.

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10.10 MEASURING ADVERTISING EFFECTIVENESS

Let us begin the discussion on this point by making a reference to a popular saying on
advertising. "I know half the money I spend on advertising is wasted; but I can never find out
which half". Measuring advertising effectiveness is one of those areas of advertising about which
nothing can be said for sure. Advertising communications have a time lag between buyer's
awareness and action. But, if the lag happens to be longer and/or the competitor happens to be
more aggressive the decay or forgetting effect of the advertisement may set in soon. It is, thus,
very difficult to define the appropriate advertising level and which advertisement will produce
how much effect.

Notwithstanding the above, the task of measuring the advertising effectiveness can become
simpler and methodical if the advertising goals are clearly set. You may recall here the
importance of DAGMAR model mentioned earlier on seeing the advertising objectives.

What should be measured? The goals of advertising relate either to affecting some kind of
communication between the sponsor and the audience, or to bring about desired sales. The
advertising effectiveness, therefore, is measured by examining the following:

20 

 
 • communication effectiveness of the advertising campaign and
• sales-effect of advertising efforts.
Generally speaking, some of the aspects that need examination are which of the headlines,
appeals, themes, symbolic contents or illustrations etc. in the advertising copy are effective and
how much. And, which among the broad class of media, which space type and which pattern of
scheduling of advertisements productive and how much. Let us look at some of these aspects
now.

Measuring Communication Effectiveness

You would recall that advertising is a very popular method of marketing communication. Also,
lot of advertising efforts are put into encourage the customer to buy the advertised product
starting from gaining the customer's attention to this product to inculcate a desire in him to
possess the product. The effectiveness of advertising, therefore, depends on why and how the
communications are made.

The communication effectiveness of an advertising campaign can be measured both before and
after its release. The three major methods used for pretesting advertisements are:

• Asking consumers or specialists to rate or rank alternative advertisements in terms of

elements such as attractiveness, liking, and interest of the theme, slogan and illustration
used in the advertisement copy. This method of pretesting is called 'Direct Ratings'
method.
• Checking the extent of recall of both the overall advertisement as well as its content. This,
is done by first making available, to select consumers, a set of advertisements. This type of
pretesting can be done both by providing aid/lead to the consumer to recall, or can be
unaided. The purpose is to ascertain the extent of recall of the alternative advertisements,
and the reasons that make an advertisement stand out. This method is called Portfolio Test
method.
• The third method makes use of equipment and gadgets to measure consumer’s
physiological reactions like pupil dilation, heart beat, etc, on seeing an advertisement.
These tests popularly call as `Laboratory tests help in the measurement of attractiveness of
the advertisement to a consumer.
21 

 
Post-testing of advertisement: Testing of the communication effectiveness after the
advertisements are released is done through measuring the `recognition' and `recall' among the
target audience.
Recognition Tests aim at measuring the degree of memorability of an advertisement. For this
purpose, the use of Daniel Starch methodology is used. The test begins by qualifying the readers
in terms of whether they have seen or read the specific issue of the magazine which carried the
advertisement. The qualifying readers are classified into the following three categories.

Noted: Per cent of readers who have seen the advertisement

Associated: Per cent of readers who have seen and read parts of the advertisement

Read most: Per cent of readers who reported they had read more than 50 per cent of
advertisement reading matter.

The results of the recognition tests help in ascertaining the extent to which a company's
advertisement made a communication impact. When compared to past or alternate campaigns
used, the results throw light both on the trends, as well as the popularity of a company's
advertising campaigns besides contributing to making the advertisements better read.

Recall Tests: As already mentioned under Pretesting, these tests aim at measuring the extent of
recall of what had been seen or read in the advertisement. Gallop and Robinson Impact post-test
is one of the popular test used for recall studies. Under the test, the qualifying readers are shown
the magazine cover and with the help of a deck of cards bearing names of different brands are
asked to state which brand advertisement has been seen by the reader, and he is asked to recall
everything he can remember about each advertisement identified by him.

Probing is done in areas like what did the advertisement look like? What did it say? Did it
increase his interest in buying the product, etc.? In the next steps the same advertisement which
he was thinking of, is shown to the reader. The percentage of all qualified magazine issue readers
who successfully associate the brand or advertiser with specific feature or sale point of the
advertisement is called `Proved Name Registration' (PNR). Like the above tests, various other

22 

 
tests are conducted for measuring the association, awareness, knowledge and attitudes of the
readers.

Measuring Sales Effectiveness,

Sales being the result of both advertising as well as other elements of the marketing mix, it is
very difficult to isolate and relate advertising to sales. However, it can be done to some degree of
accuracy by:

• measuring sales that take place in response to mail order offers in select sales territories
• counting of inquiry coupons received and relating them to the sales effected out of them
• conducting experiments by varying advertising efforts is isolated sales territories and
comparing sales results, or
• establishing historical relationship between advertising expenditure, media used and sales
over a sufficiently long duration.

Based on various researches in the field of measuring advertising effectiveness, some of the
benchmarks which have been established are as follows:

• A full-page advertisement in four-colour generally attracts about 40 per cent more readers
than a full-page black and white advertisement.
• Two-colour advertisement (black and one colour) generally achieve lower levels of
readership than black and white only.
• Advertisements in cover positions get sizeable readership bonus compared with those in
regular pages.
• Illustrations showing the product in use normally obtain higher readership than
static' product illustrations.
• Household appliance advertisements shown in a household setting usually score higher than
advertisements which show the product alone.
• Working women are more likely to read major appliance advertisements than the non-
working women.
• Food advertisements with recipes are usually better read than those without recipes.
• In general, advertisements with illustrations that take up more than half the space are more
effective than those in which the picture occupies less than half of the advertisement.
23 

 
Exercise 3

From the recent magazines or newspaper select one advertisement each of an industrial product
and a consumer product. For both the advertisements (a) describe the target market for each
advertisement, and (b) offer your observations on their effectiveness.

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10.11 COORDINATING WITH ADVERTISING AGENCY

We have seen how complex the advertising function is. We also note from our experience that
whether it be a newspaper, magazine or television, each of these carry an increasing number of
advertisements these days. But a good number of advertisements fail to get our attention and thus
lead to wastage of their sponsors' efforts. On the other hand, the growing competitive orientation
demands that the advertising activity be stepped up. The rising media costs are also compelling
the firms to budget larger advertising outlays. The challenge thus lies in optimising advertising,
outlays, which demands that at least the creative and media planning aspects of advertising be
managed professionally. The growth in advertising and promotion business has resulted in the
emergence of specialists in this field popularly known as advertising agency. An advertising
agency is an independent business organization composed of creative and business people who
develop, prepare, and place advertising in advertising media for sellers seeking to find customers
for their goods and services. Well established advertising agencies in India offer a mix of the
following services: copywriting, media buying, media planning, personnel placement
advertising, marketing research, sales promotion and merchandising, public relations and
advertising research.

Considerations of specialist advice and experience are influencing' larger number of firms to take
the assistance of advertising agency in the management of their advertising function. Research
on marketing practices of Indian companies brought out that nearly seventy per cent of the large
sized companies surveyed hired the services of advertising agencies. The major services for
24 

 
which assistance was solicited included developing advertising campaigns; media selection;
measuring the effectiveness of advertising campaigns; development of point-of-purchase
material; organisation of consumer contests; test marketing; and market research. By offering
their specialised services at very competitive rates advertising agencies have established a place
of significant importance in the advertising and marketing world.

The issue is no longer whether to use an advertising agency or not but how to use it effectively.
Like any other service, these agencies are quite keen to retain and build on relationships with
their clients Satisfactory relationship between the client and advertising agency, among others, is
the function of complete and common understanding of each others' business, and development
of mutually compatible goals and working styles.

Particularly, at the initial stage of relationship, the client has to entrust a lot of time and
information to enable the agency to have a complete understanding of the client's business, its
marketing objectives and product-market situation.

A thorough briefing on the marketing communication objectives followed by detailed discussion

of each major aspect of an advertising campaign for example helps the client in getting a better
deal from an advertising agency. It proves beneficial if the client firm identifies an executive,
who is entrusted with the task of keeping communications open with the agency, and who
coordinates the routines of advertising copy{ preparation, production, media planning,
scheduling, insertion, etc., including getting the approval of senior management on all activities
performed by the advertising agency.

10.12 SALES PROMOTION

Of all the methods of promotion that constitute the promotion mix, sales promotion is the only
method that makes use of incentives to complete the push-pull promotional strategy of
motivating the sales force, the dealer and the consumer in transacting for short term sales of the
firms offering.

25 

 
There is no single universally accepted definition of sales promotion. One can, however, gather
its essence by perusing a few definitions. Let us look at some of the popular definitions of sales
promotion.

According to American Marketing Association, sales promotion refers to

those activities other than personal selling, advertising and publicity, that stimulate consumer
purchasing and dealer effectiveness, such as display shows and exhibitions, demonstrations, and
various other non-recurrent selling efforts not in ordinary routine. This definition suggests that
sales promotion is a catch-all for all those promotion activities which do not fall clearly into
advertising, personal selling or publicity.

Roger A. Strang offers a simpler definition:

Sales promotions are short term incentives to encourage purchase or sale of a product or service.

Yet another definition that seems fairly exhaustive, and hence, will be used in this unit is the one
given by Stanley M. Ulanoff in his Handbook of Sales Promotion. Stanley defines sales
promotion as. all the marketing and promotion activities, other than advertising, personal selling,
and publicity, that motivate and encourage the consumer to purchase by means of such
inducements as premiums, advertising specialties, samples, cents-off coupons, sweepstakes,
contests, games, trading stamps, refunds, rebates, exhibits, displays, slogan writing and
demonstrations. It is employed as well, to motivate retailers', wholesaler; the manufacturer's sales
forces to sell through the use of such incentives as awards or prizes (merchandise, cash and
travel), direct payments and allowances, cooperative advertising, and trade shows.

It offers a direct inducement to act by providing extra worth over and above what is built into the
product as its normal price. These temporary inducements are offered usually at a time and place
the buying decision is made.

Summing up, sales promotion deals with promotion of sales by the offer of incentives which are
essentially non-recurring in nature. It is also known by the names of Extra-Purchase-Value
(EPV) and Below-the-line selling.

26 

 
Product group-wise, the major users of sales promotion are: tea, coffee and beverages, soaps,
toiletries, detergents and washing soaps; toothpaste; textiles; food products and baby foods;
household remedies; and consumer durables like fans, refrigerators, sound systems television and
household appliances.

Among the various types of sales promotion schemes used contests at the consumer; dealer and
sales force levels have made a significant headway.

Why rapid growth?

A perusal of the list of the product groups which emerged as the major users of sales promotion,
and from the market feel, it seems clear that a transformation from the seller's to the buyers'
market is taking place and marketing has become more competitive in these product markets. In
addition to increasing competition, other reasons for rapid growth of sales promotion in India,
as pointed out ninety five large sized cooperating companies in survey are summarised below:

• sales promotion makes an immediate effect on sales

• measurement of the effectiveness of safes promotion is easier as against the other
promotional methods
• channels of distribution are emerging as powerful entities and demand greater use of
incentives to get desired results
• products are becoming standardised and similar, and so need increased support of non-
price factors of which sales promotion is an important one
• impulse buying is on the increase, and so is the rise in the number of marginal, customers.
With virtually no brand loyalty, offer of attractive schemes help. manufacturers to induce
such customers to choose their product.

10.13 SALES PROMOTION OBJECTIVES

As a powerful method of sales promotion with a capability to complement and supplement the
advertising function of marketing, sales promotion helps marketers realise a variety of
objectives. These objectives could relate to the promotion of sales in general, or to a specific

27 

 
activity at a particular level i.e. consumer, dealer or sales force. Some of the commonly
attempted objectives are to:

• increase sales (in general, and focusing on new uses, increased usage, upgrading unit of
purchase, winning sales of fading brands etc.)
• make the sale of slow-moving products faster
• stabilise a fluctuating sales pattern
• identify and attract new customers
• launch a new product quickly
• educate customers regarding product improvements
• reduce the perception of risk associated with the purchase of a product
• motivate dealers to stock and sell more (including complete product line)
• attract dealers to participate in manufacturer's dealer display and sales contests
• obtain more and better shelf space and displays
• bring more customers to dealer stores
• make goods more faster through dealers
• improve manufacturer-dealer relationship
• motivate sales force to take the achievement higher than targets
• attract sales force to give desired emphasis on new accounts, latent accounts, new
products, and difficult territories
• reward salesforce for active market surveillance and for rendering superior customer
service
• put power into the sales-presentation
• counter competitors sales-promotion and, marketing efforts
• provide punch to the company's advertising efforts
• build goodwill.

Companies may use anyone or a combination of the above objectives in varying form to suit the
product-market needs of their product. What is of significance is that the sales promotion
objectives set to be accomplished must be integrated with the promotion and marketing
objectives pursued by the company.
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10.14 SALES PROMOTION METHODS

Many methods of sales promotion are used by marketers. Depending upon the creativity level of
their sponsors, their variety seems very large. We refer here to some of the most commonly used
methods of sales promotion.

As noted above, the accomplishments of the desired promotion and marketing objectives
ultimately depend on the extent of the desired response received from consumers, dealers and
members of the sales force. Hence various sales promotion methods are building around these
three target groups. Further, in terms of the impact desired, the variety of sales promotion
schemes offered are grouped into two categories: One, aimed at producing immediate impact,
and the other delayed impact i.e. carrying on the impact over a period of time. Immediate impact
schemes are those schemes where the consumer, dealer or salesperson gets the incentive on first
contact, purchase or on performing a one-time act. On the other hand, under the delayed impact
schemes, the consumer, dealer or sales force is called upon to comply with the scheme over a
period of time before receiving the full benefit of the scheme. Price discounts, free samples or
large quantity packs are the popular examples of immediate impact schemes, whereas coupons,
trading stamps, and contests are examples of delayed impact category of sales promotion
schemes. Table 1 presents the variety of sales promotion schemes directed at the consumer,
dealer and sales force levels according to their grouping under immediate impact or delayed
impact categories. The meaning and objectives of these schemes are given in Table 2.

Table 1: Sales Promotion

Directed at
Impact Users Non-users Trade/Suppliers Salesforce
*Price –off *Price-off *Discounts *Perquisites &
Allowances
*Qty-off *Sampling *Shelf space
allowance
Immediate *Over-the-counter *Over-the-counter
*Package Premium *Gifts *Gifts
*Banded Premium *Push Money
*Container *Posting of
Premium Salesforce
29 

 
 *In Prdt. Coupons *Media/Door *Merchandise *Sales Contests
*Coupons Deals
Delayed/over *Personality *Return/Refund *Coupons
a period of Premiums Offers *Display *Honours and
Time *Trading Stamps Contests Recognitions
*Self-Liquidators *Customer
*Contests/Lucky *Co-op Service
Draws Allowance Awards
*Sales Contest
Training Sales
Force/
Privileges

* The format of this table is based on Donald W’Cowell’s article on Sales Promotion and the
Marketing of Local Government Recreation and Liesure Service, European Journal of
Marketing, 18.2.

Table 2: Sales Promotions: Meaning and Objectives

Sales Promotion Meaning Objectives

1 Price –off offers Offering product at lower To encourage immediate
than the normal price sales, attract non-users,
induce new product trial,
counter competition,
inventory clearance at the
retail level, inventory
build-up at the trade level.
2 Quality –off offers Offering more quantity of To encourage more/longer
the same product at no extra duration consumption,
cost or with a very nominal higher or excess quantity
increase in the price of the movement from the
larger quantity packs factory, trade up
consumer for higher
quantity packs size.
3 Premium Offer of an article of To encourage purchase,
merchandise as an incentive stimulate loyalty, off-
in order to sell product or season sales promotion,
service. It forms are: induce trial of new
product, ensures reach of
premium to the consumer
.
30 

 
 a)Packaged Premium When the incentive article is
packed (inserted) inside the
package of the product.
b) Banded Premium Where the premium article Sampling new products,
is banded to the package of adding speed to slow
the product say with cello moving products.
tape etc.
c) Over –the-counter (OTC) When the premium article is To counter competition,
Premium neither inserted inside nor improve inventory
banded to the product clearance at the trade
package but is given away level
to the consumer over the
counter along with the
product package
d) Container When the product itself is As a durable reminder at
Premiums placed in an attractive an home
reusable container which
serves as a gift.
e) Self-liquidating Premiums Where the consumer usually To induce consumer to
is asked to pay a specified appropriate premium
amount to liquidate or offset article, reinforce brand
a part or full cost of the image, encourage more
premium article or the consumption enables
scheme administration costs sponsor to offer better
quality premium
f) Personality Premium Where the consumer is To build loyalty and
required to redeem a reward the consumer for
specified proof-of-purchase that to counter
for the premium article. competitive offers
Proof-of-purchase may be
labels, pack tops, bottle
tops, corks, etc.
4 Coupons When the consumer is To encourage product
entitled to redeem a specific trail, build loyalty, trade-
standard certificate for a up regular users, stimulate
product/article free or in re-purchase rate, solicit
part payment. Coupons are inquiries.
used by both the
manufacturer and the

31 

 
 dealers for sales promotion.
Coupons may be distributed
by mail, by media
advertisements, door-to-
door, inside product
package or by dealers on
purchase.
5 Refund offers Offer of a refund of money To induce trial form
to consumer for mailing in a primary users, motivate
proof-of-purchase of a several product purchases,
particular product(s) obtain displays at the
retailers, help retailers tie-
in-with other product,
switch competing brand
users to sponsor’s brand,
loading dealers with
increased stock.
6 Trading stamps Organised by Trading
Stamp companies or large
retailers. Trading stamps are
a king of discount coupons
offered to consumers linked
with the quantum of their
purchase. On enough
accumulation these are
redeemable
7 Consumer and Lucky draws Where individuals are To create brand
invited to compete on the awareness and stimulate
basis of creative skills. The interest in the brand,
latter is based on the chance acquaint consumer with
or luck factor. brand usage and benefits,
build traffic at the store
precipitate brand
purchase, obtain
consumer feedback,
promote advertising
theme of the company.

32 

 
8 Dealer stock Display contests It is a type of point-of- To provide product
purchase advertising which exposure at the point of
uses the show windows of purchase, generate traffic
the dealers for providing at the store, infuse
exposure to the sponsor’s enthusiasm among
products. Dealers dealers.
participating
enthusiastically and
creatively are awarded.
9 Dealer Sales contests Where participating dealers To increase sales, buy
are invited to compete in dealers’ loyalty; motivate
terms of the sales dealers’ staff to sell more.
performance
10 Discounts Other than normal trade and To push more sales to
cash discounts trade, early cash recovery.
11 Trade Allowances These are temporary price
reductions/reimbursement
of expenses incurred by
dealers-in full or in part, its
varied types are as under:
Offer of price reduction on
purchase of specified
a)Trade or Buying allowance quantity of a product To load the trade
b) Buy-back allowance A secondary incentive To encourage trade co-
which offers a certain sum operation and stimulate
of money to trade for each repurchase
additional unit bought over
the above the deal.
c) Count and recount When a specific amount of To move stocks faster,
allowance money is offered reward on sale only.
ascertaining the number of
units sold during a specified
period.
d) Merchandise An allowance to trade for To create enthusiasm in
(display)allowance providing desired sales trade, improve traffic and
promotion and product exposure at the point-of-
displays purchase, gain larger
space/effort of the trade in
the promotion of

33 

 
 sponsor’s product as
against the competitors.
e) Co-operative advertising & Where in a manufacture To gain product and retail
Promotion allowance shares at an agreed rate the identity motivate dealers
advertising and promotional to promote
cost incurred by the dealer manufacturer’s product,
in the promotion of obtain local advertising
manufacturer’s product. and promotion.

12 Dealer gifts Offer of useful articles and To improve dealer

attractive gifts to dealers for relations, make impact on
his personal, family or consumer scheme/contest
office use offered

13 Premium or Push money When an additional To push a specific product

compensation is offered to or product line
trade or sales force for
pushing additionally a
specific product or product
line

14 Merchandise Deals Where in additional quantity To load dealers with

(13 for 12) of the same or the same inventory, expose other
manufacturer’s another products of the sponsor,
product is offered to trade. encouraging dealers to
May be offered jointly by sell more and early to
non-competing realize their incentive.
manufacturers.

15 Point-of-Purchase Those special displays, To attract traffic at retail

(POP) racks, banners, exhibits, that store, remind customers,
are placed in the retail store encourage impulse
to support the sale of a buying, ensure additional
brand. visibility to the
advertising campaign.

34 

 
* The format of this table is based on Donald W’Cowell’s article on Sales Promotion and the
Marketing of Local Government Recreation and Leisure Services, European Journal of
Marketing, 18, 2.

Though ideal for consumer goods, sales promotions are also used for promoting industrial-goods.
The difference in the use lies in the types of schemes offered, and in the frequency of their offer.
Sales promotion schemes offered to industrial customers, besides the usual gifts, price-off
coupons and contests, include product demonstration, training to customer staff, offer of interest-
free installment payment plan, ready and regular availability of repairs and spares, and posting of
trained staff to assist/supervise in the working of the equipment in the client's premises, at the
manufacturer's cost. The sales promotion schemes offered at the level of industrial distributors
are: provision of extended credit, and provision of specialised sales/technical staff at the
manufacturer's cost, besides the usual cooperative advertising and sales promotion, gifts, and
organisation of distributor’s contests. The sales promotion schemes popularly used to motivate
industrial salesforce are: prizes and awards on special achievements, sales contests, new accounts
contests and prompt service awards.

Need for Orderly Management

In spite of the growth in the Sales promotion activity, one of the survey of the company practices
revealed that the managerial efforts put in to manage this function were unsatisfactory. Use of
adhoc approaches, neglect of sales promotion research, and lack of formal systems and
procedures were found to be more prevalent in the case of a good number of companies
surveyed. Consequently, larger number of companies experienced less than expected success of
their schemes. When asked specifically about forty per cent of the companies surveyed, admitted
that one or more of their sales promotion schemes misfired during the last three years due to
causes which could be categorised as:

• faulty administration
• failure to match the scheme to the objective
• lack of proper planning
• poor dealer relations
35 

 
• lack of creativity

10.15 STEPS IN PLANNING SALES PROMOTION PROGRAM

With growing competition at the marketplace and the need to realise full benefits of this unique
method of promotion it is required that the perfunctory approach used in its management is
stopped forthwith and the sales promotion function' is managed professionally. Systematic
planning of this function should initiate the managerial process. The following steps are
suggested for effective planning and management of the sales promotion function.

The first step is to assess and analyse the present situation of the brand in terms of market share,
major competitors, and brand performance of brands users, non-users and lapsed users. This
benchmark should then be related to the market size and the potential estimated. It will now pave
the way for determining the role of sales promotion in effecting the desired change in the market
share of the brand. The outcome of this exercise will be the availability of desired information to
set measurable and attainable goals:

After the goals for sales promotion of the brand are set, the second step deals with the
identification of the alternative schemes, and the selection of the most appropriate sales
promotion scheme(s), capable of accomplishing the goal set, within the available budget.

The third step relates to incorporating creativity into the scheme to be offered. This is, making
the scheme novel, attractive, and challenging from the viewpoint of its target group i.e.
consumer, trade or salesforce.

The fourth step relates to legal validity of the sales promotion scheme to be offered. For
example, before a consumer contest can be offered permission from the licensing authority of a
State, usually, the Collector of the District is required under the Prize Competition Act, 1955.
Competitive Commission of India (CCI) is the chief national competition regulator in India.
It is a statutory body within the Ministry of Corporate Affairs and is responsible for
enforcing The Competition Act, 2002 in order to promote competition and prevent activities that
have an appreciable adverse effect on competition in India.

36 

 
Website: cci.gov.in. You may access the website to get first hand information of various
provisions and guidelines with respect to sales promotion schemes and the legal provisions that
firms should adhere if any.

The fifth step covers primary decisions relating to timing and duration of the schemes to be
offered, location-wise selection of dealers, and conviction of the trade and sales force about the
appropriateness of the scheme. It will be useful to quote here the findings of a recent study of
Kenneth G. Hardy on Key success factors for manufacturer's sales promotions. The major
findings are given in a tabular form below:

Sales Promotion Key Success Factors

Objectives Consumer Promotions Trade Promotions

1 Short-term volume objective *Dual promotions (offer or
*Trade Support
trade promotions simultaneous
*Short promotion period
with consumer promotions)*Offer of high level of
*Sales (trade) support incentives
2 Long –term market share *Sales force support * Dual Promotions
objectives *Trade support
3 Building trade inventory *Avoid competitive promotion *Absence of competitive
objective *Sales force (trade) support promotions
*Offer of high level of *Trade support
incentives to the consumer *Shorter –promotion period
(and to the trade in case of
dual promotions).
4 Increase consumer Trial *Sales force (trade) support *Dual promotions
*Longer promotion period
*Offer of higher level of
incentives
5 Load the consumer objective *Sales force (trade)support
(Situational) *High promotion cost-special
advertising, p.o.p., etc.

Other important decisions relate to scheduling for procurement of scheme related premiums,
production of the brand, advertising, P.O.P. materials and other logistics related aspects

The sixth step covers the development of the evaluation criteria in relation to the sales promotion
goals set. The decision areas include what to measure, when to measure, how to measure and for
how long to measure.
37 

 
Effectiveness of Sales promotions is usually measured in references to sales achieved, cost
effectiveness, redemption rate of coupons and trading stamps, turnover of special packs or
special liquidators, number of entries received to the contest, etc. To do a good job special focus
must be laid on measuring the incremental sales arising out of sales promotions. Before
proceeding to the last two steps involved in management of sales promotions let us take note of
the select findings from the literature survey relating to the effectiveness of sales promotion.
These are:

• Incremental sales are harder to get for high market share brands
• A coupon with a sample can be almost twice as effective as a coupon alone.
• High redemption rates can be very costly
• The earliest redemptions are the incremental sales
• Short purchase cycles mean shorter term effects.

At the sales promotion offer commences, the seventh step relates to monitoring the offer and
collecting the relevant data and experience for future use as well as mid- period corrections.

The eighth and last step relates to evaluating the effectiveness of sales promotions in the context
of their goals. Efforts must also be put into perfect the measurement methodologies, and in
conducting researches on aspects like deal prone consumer, incentive scheme and gift selection
factors, attitudes of trade and consumers towards the use of sales promotion schemes.
Documentation of corporate experiences on sales promotions, the pitfalls in the existing systems
and procedures, and the mishaps that occurred, etc., ultimately help in improving the state of the
art of managing the sales promotion function professionally.

Exercise 3

The sales promotion manager of an established low priced washing powder is planning the sales
promotion programme for the next year. Suggest a suitable programme for his consideration.

………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
38 

 
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………

10.16 TOWARDS PROMOTIONAL STRATEGY

After gaining an understanding of the concepts, issues and decision areas relating to two
important methods of promotion mix name advertising and sales promotion in this unit. Let’s
look at the formulation of promotional strategy. You would recall that promotion constitutes one
of the important elements of the marketing mix of a firm. Each firm has a need to perform its
promotion (marketing communication) function effectively. Further each of the four promotion
methods have already been touched in unit 9 of this course. Promotion has its own unique place
in the marketing communications mix of a firm. The question facing marketers, therefore, is not
which promotion method to use to meet today's complex marketing tasks. Rather the real
question is which promotion method should be emphasised, and the level of intensity one should
use and how it can be integrated with the other promotional methods.

Decisions on determination of promotion mix take us back to the promotion objectives which
must emanate out of the marketing objectives of the firm. A promotional strategy aims at
accomplishing the promotion objectives in the allocated funds and within a specific period of
time.

Promotional objectives, generally speaking, relate to sales and the marketing communication
tasks required to be performed as per the needs of the product and the market scenario.
Expressed in measurable terms these can be put as: increasing sales, improving market share,
creating product awareness and comprehension, developing positive attitude of the public
towards the product, building favourable image of the product, or gaining competitive advantage.

In this contest Leonard M. Lodish suggests`vaguely right’ criteria, the relevant part of which is
as follows:

39 

 
Promotion Decision Area Vaguely Right Criteria for evaluation
Advertising Budget Changes in buyer behavior-long term or short
term – and its resulting profitability.
Media Planning Changes in buyer behavior per dollar
Promotion Changes in buyer behavior and resulting long
Management and short term profits.
Trade Promotion Changes in buyer behavior of the ultimate
Management consumer Sales and profit changes (both short
Consumer Coupons and long term) caused by the coupons.

The extent of emphasis to be placed on the different promotion methods is determined by several
variables. Firstly, it is dependent on the promotional objectives. Secondly, on the characteristics
of the target public their psychology, and the allocated funds. For example, a marketer of
consumer durables in any metropolitan city may use different means like advertising to create
awareness and build comprehension. It would also require publicity which could be through
press release on the contest technology backing his product. Sales promotion through
demonstration, P.O.P. and offer of introductory price to encourage intentions would also be used
and, definitely, personal selling to overcome objections offer conviction and precipitate purchase
action would complete the promotion picture. Further, as revealed by Kenouth G. Nardy, for
achieving the set objectives for example, loading the consumer with larger supplies, and some
can see that it requires all the methods of promotion be approached simultaneously in terms of
objectives to be achieved. Attaining synergistic advantage arising out of the use of different
promotional methods is the hall-mark of an effective promotional strategy.

10.17 SUMMARY
Advertising is an impersonal mass selling and communication method. It makes use of various
types of media to reach the target public in a short-time. Being persuasive in nature, advertising
broadly aims at gaining exposure, creating awareness, changing attitudes of target customers in
favour of sponsor’s products and services, and also at offensive/defensive tool in managing
competition.

Management of effective advertising requires that the process be initiated by setting of

measurable and realistic goals. Matching with a firm’s advertising needs’ advertising budget be
40 

 
determined, message formulated copy developed, and media selected and scheduled.
Identification and knowledge of the economic, demographic, cultural and psychological
characteristics of the target customer should trigger the process of advertising planning. This
should be followed by selection of appropriate appeals, proper illustrations and unique copy
themes in the language which the audience understands and should be transmitted to them
through such media vehicles which have a meaningful reach and desired credibility.

Advertising decisions are complex and capable of getting influenced by various forces. The
decisions, arrived at should, therefore, be evaluated in a regular manner so that remedial
measures and corrective actions could be taken before it is too late. Pretesting of advertising
campaigns before release and post-testing in terms of recall and recognition studies as well as
their impact on sales or the number of inquiry coupons received back are some of the ways
through which advertising efforts can be evaluated. In this context, the use of professionally
manned advertising agency proves by the large advantageous to the company.

Sales promotion, of late, has emerged as one of the more popular methods of promotion in the
case of consumer goods. Stated simply sales promotion deals with offering something extra as an
incentive to motivate an early purchase. Sales promotions can be offered at the level of the
consumer, trade and sales force. Sales promotions aid in achieving both the push-pull elements
of a promotion strategy.

Sales promotion schemes used to attain consumer pull include free samples, price- offs, premium
give aways coupons and contests. Schemes offered for gaining the push cover promotional
allowances, gifts, discounts, cooperative promotions, contests and awards and rewards. To save a
sales promotion programme from getting misfired, it should be planned and managed in a
systematic manner.

Promotion is an important marketing function of each firm. And, rare will be a firm which makes
use of only one promotional method. The commonality in the ultimate goal of all the
promotional methods apart, their limited suitability in influencing only a specific part of the
consumer adoption process calls for the need to use the promotional mix in an integrative

41 

 
manner. Given the complexities in the management of the promotion function and its
vulnerability to failure, it is desired that the function be managed professionally.

10.18 KEY -WORDS

Advertising Campaign: Advertising effort relating to a specific product or service extending
over a specified time period.

Advertising Target: The group of people toward which advertisement is aimed.

Cooperative Advertisement: Joint advertising in which a manufacturer and retailer join hands
and share the costs.

Copy: The verbal or written material of an advertisement including the head line, illustration,
name and address of the advertiser and his signature.

Corporate Advertising (also called Institutional Advertising): Advertising aimed at

promoting the image of a firm as a whole instead of any of its specific product or service.

Layout: The arrangement in which various design elements of an advertisement such as headline
illustration, body copy, and signature appear so that the desired impact is achieved

Media Plan: The plan that specifies the media mix and the date time, and sequence in which
advertisements are scheduled for release.

Read-Most: Those members of the audience who read half or more of the written part in the
advertisement.

Reinforcement: Efforts to keep the existing customers sold and advising them to get the
maximum satisfaction from the product.

Reminder Advertising: Advertising reminding consumers about the availability and benefits of
the specific brand or service.

Unaided Recall: Post-testing of advertisements by asking audience to identify what they have
seen or heard but without giving any clues to aid their memory.

Point-of-Purchase (POP): Promotional material displayed in the retail store to encourage sales.

Pull: Promotional methods directing the end consumer to demand specified products or services.
One popular form is advertising.

Push: Promotional strategy directing the dealers and the sales force to achieve marketing
communication and sales objective.

42 

 
Trade promotion: Sales Promotion activities directed at the wholesaler and retailer levels

Price –off offers: Offering product at lower than the normal price

Over –the-counter (OTC) Premium: When the premium article is neither inserted inside nor
banded to the product package but is given away to the consumer over the counter along with the
product package

Refund offers: Offer of a refund of money to consumer for mailing in a proof-of-purchase of a

particular product(s)

Point-of-Purchase :( POP) those special displays, racks, banners, exhibits, that are placed in
the retail store to support the sale of a brand.

10.19 SELF – ASSESSMENT EXERCISE

A) Check whether the following statements are true or false statement

True False
1. The most frequently stated goal of advertising is to increase sales.

2. Reach is the total audience that an advertising medium covers.

3. It is easier to measure the sales effectiveness of advertising than to

measure accomplishment of communication objectives.
4. Advertising can be used to reduce fluctuations in sales.

5 The extensive media coverage of the Union Carbide’s Bhopal

plant tragedy is not an example of publicity since the coverage
was not indicated by Union Carbide India Ltd.

B) Tick the one most appropriate answer

1. The total audience that an advertising medium covers is called

a) target population
b) frequency
c) reach
d) response

2. While Managing advertising efforts

a) objectives should be very general to facilitate creative techniques
b) objective become self-evident after advertisements are released

43 

 
 c) objectives should be very specific and quantifiable

3. Generally speaking, advertising media selected by advertisers are such that

a) these could have as large a coverage as the funds permit
b) these attain a high level of reach and frequency
c) these reach only the target market

4. Advertising effectiveness during an advertising campaign is usually measured by

a) post-test
b) inquires
c) pretest
d) sales comparison

5. The creative challenge in developing an advertising campaign is to finalize

a) what to say
b) how to say it
c) the headline and the illustration
d) a and b
e) none of the above

6. The milling rate is cost-comparison indicator for

a) magazines
b) radio
c) outdoor
d) newspapers

7. The first objective of any advertisement is to

a) communicate effectively
b) stimulate exchange
c) increase sales
d) enhance customer satisfaction

8. “Siemens Quality – Because anything less costs you more” is an advertising theme which in
terms of basic advertising appeals can be categorized as
a) sensory
b) rational
c) social
d) ego-satisfaction
e) none of the above

Key to Self-assessment Exercises

A) 1 True, 2 True, 3 False, 4 True, 5 False.

B) 1 (c) 2 (c) 3(c) 4 (b) 5(d) 6(d) 7(a) 8(b)

44 

 
10.20 FURTHER READINGS
Philip Kotler - Marketing Management, 11th edition 2008, PHI- New Delhi U.C.Mathur,
Advertising Management .-2OO2, -New Age Publication-Delhi

P.K.Sahu, K.C.Raut, Salesmanship and sales Management, 3rd edition, Vikas Publication, New
Delhi

45 

 
UNIT -11 PERSONAL SELLING AND MANAGING SALES PERSONNEL

Objectives

On completion of this Unit, you should be able to:

• explain the nature and role of personal selling
• list different types of sales positions and their responsibilities
• describe the steps involved in the selling process
• selling role of sales person and the stages involved
• meaning of the selling effort
• to differentiate between `selling' and `managing'
• understand the meaning and role of sales management
• be aware of the process of recruiting, training and motivating the sales personnel
• the allocation of duties of the sales manager.

Structure

11.1 Introduction

11.2 Role of Personal Selling

11.3 Types of Selling Jobs

11.4 The Selling Process

11.5 Selling and Sales Management

11.6 Recruitment arid Selection of Salesman

11.7 Training of Sales Personnel

11.8 Motivating the Sales Personnel

11.9 Controlling the Sales Personnel

11.10 Summary

11.11 Key Words

11.12 Self-Assessment Test

11.13 Further Reading

1 
 
11.1 INTRODUCTION

In contrast to advertising and publicity, which use impersonal methods of communication,

personal selling makes use of direct personal communications to influence the target customers.
Personal selling is a highly distinctive method of promotion, and makes use of oral presentation
in conversation with existing and potential customers, for the purpose of making a sale. It is one
of the oldest methods of business promotion. The contributions made by personal selling in
making the promotion function more effective have earned the distinction of being the most
reliable promotion method. Though, it is the most expensive method of promotion, yet we see an
increasing number of firms making use of it, and a good number of them realize that they cannot,
perhaps, live without it. Increasing competition, growing sophistication of the buyer and his
buying process, are making personal selling more or less indispensable.

As we have seen and understood the importance of personal selling effort by the sales force in
promoting the firms product/service offering to the market. It is far more important to recognise
and nurture these set of personnel in terms of their needs and wants in discharging their
profession responsibilities to best of their ability and competence. Thus managing the firm’s
sales personnel is one of the core activities of the firm. The success of distribution strategy is
primarily governed by the involvement and motivation of these set of sales personnel/staff. Not
only their involvement is critical, but in the first place the organisation has to recruit the right
persons, train them adequately and assign them to various jobs. Of course, we know that the
control and review of performance is also important. Thus personal selling aspects and the
personnel who manage the selling activities of the firm will be discussed in this unit.

11.2 ROLE OF PERSONAL SELLING

Personal selling, as the name implies, is an individual to individual selling. It, therefore, carries
the distinctive advantage of flexibility in terms of tailoring the sales presentation/interaction to
the needs of the buyer. Another unique advantage comes from its two-way communication, and
human interaction thereby providing instant feedback. These two unique advantages make
personal selling the most result-oriented promotion method.

2 
 
Generally speaking, the nature of goods/products marketed, as well as the distribution system
adopted; determine the role of personal selling in a firm. Therefore, personal selling is used
extensively in the case of industrial goods, where the salesperson performs functions such as
assisting the customer in designing the product specifications, product installation, product
commissioning, solving technical problems through providing service after sales and helping
customer to have optimal utilization of the product. In the case of consumer goods, on the other
hand, the role of personal selling gets usually restricted to the dealer/distributor/stockiest level.
The scope of the tasks performed include obtaining periodic orders, ensuring supplies, offering
tips to dealers on product display and attaining desired levels of stock movement. Similarly, the
role played by personal selling is more in a firm which uses door-to-door selling method through
its sales force than in the firm which sells through large stockiest, distributors or sole- selling
agents.

Notwithstanding the varying role of personal selling in the strategies followed by different
companies, the nature of the selling function requires that the following tasks be performed:

• sales generation

• feedback and market information collection

• provision of customer service covering aspects such as delivery of goods, warranty

administration, timely availability of repair and spares etc.

• performance of sales support activities such as monitoring distribution function, credit

collection, improving manufacturer-dealer relations, implementing the promotional
programmes, etc.

In practice, the complexity of the selling task actually performed varies from company to
company even under the above four categories.

Activity 1

The importance of personal selling varies from industry to industry and company to company.
Explain why this variation occurs. Give examples of industries/companies which rely primarily
on personal selling give reasons.

3 
 
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………

 11.3 TYPES OF SELLING JOBS

From the previous discussion we understand that while sales as a function has a common
purpose, that is, to effect sales, the selling situations differs due to interplay of various factors.
These factors are nature of goods sold, type of distribution system used, nature of demand and
the type of sales strategy followed by the firm. These factors require the salesforce to possess
different traits and abilities suitable to the selling situation with which they are associated. To
underscore the differences, Robert N.McCurry in "The Mystique of Super-salesmanship"
classifies individual sales position based on the degree of creativity required into seven
categories. These seven categories are described below:

Merchandise Deliveries: The sales person, whose primary job is to deliver the product usually
against routine orders-popularly called sales and delivery boys.

Inside Order-taker: Working inside a store the primary job of such a sales person is to service
the customer's request or suggest appropriate product to meet customer wants; such type of
salespersons are popularly called retail salesman.

Outside Order-taker: The salespersons engaged in the task of taking orders from the resellers.
They normally do not use hard selling approach for making orders.

Missionary Salesperson: The salesperson whose primary job is to educate, give product
detailing, build goodwill or create primary demand for the product. Strictly speaking, missionary
salespersons are not permitted to take orders. Pharmaceutical companies hiring medical
representatives for promotion of their products among Doctor’s (medical fraternity) is a classic
example.

4 
 
Sales Engineer: The salesperson who acts as a technical consultant to the client and as per the
need helps him to design products or production system for the client. This type of salesperson is
popularly called Technical Salesperson.

Tangible Product Seller: The salesperson whose job is to sell tangible products such as
furniture, appliances, automobiles, etc. The job involves abilities to persuade and convince the
customer.

Intangible Product Seller: Here the salesperson is associated with selling intangible products or
services such as advertising services, insurance, education, banking, and telecom etc., the
common factor being difficulty in immediate demonstration of the perceived benefits of the
product. This selling job requires perhaps the greatest degree of creativity in the salesperson.

We have discussed the different types of selling jobs which are very much in existence but
currently the nomenclature of these selling jobs may vary from firm to firm and also from one
industry to another. Yet the fact remains that the role and responsibilities remains intact.

Defining the Salesperson's Job: The earlier classification of the sales position into seven
categories, on the basis of degree of creativity required in the performance of each job is only
general in nature. Depending upon the organisational need, each company should clearly define
what it expects from a salesperson in terms of the tasks to be performed by him. It should
broadly specify how much of salesperson's time should be spent on developing new accounts
versus servicing existing accounts, large accounts versus small accounts; bulk orders versus
small orders; selling individual products versus selling the product line; selling old products
versus selling new products; etc. Lack of clear definition regarding the selling tasks to be
performed, often results in disproportionate spending of time between the tasks, as well as in
imbalances in the goals achieved. To avoid this type of loss in productivity of the salesforce it is
worth repeating that the job of the salesperson should be defined with sufficient clarity, focus
and specificity, so that he can use it as a guideline to keep himself in the right direction.

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11.4 THE SELLING PROCESS

Up to this point we were discussing the role of personal selling and the degree of creativity
required in a salesperson to perform his task satisfactorily.

Now we will take a look at the selling process followed for completing a sale. Though the steps
in the selling process discussed below will be applicable to most of the selling situation. What
will differ will be the degree of importance given to each step of the process under different
selling situations. The basic steps in the selling process are given in Figure I. A salesperson must
become accomplished at performing the selling steps. These steps are:

Figure I: Steps in the Selling Process

Resource customers on the correctness of their decision. SALE

Check whether the order was filled and delivered when
promised.
POST,FOLLOW-UP
Make certain that the product is properly installed used and
serviced.

Make conscious effort to close. CLOSING

THE SALE
Don't be afraid of being rejected.

Understand reasons for objection Have a HANDLING

positive attitude. Avoid arguments. OBJECTIONS

SALES Arouse Desire

PRESENTATION

APPROACH Make initial contact with prospect

PRE-APPROACH Study the organisation and those involved in

buying

PROSPECTING AND Develop sales leads from various sources "Separate the
QUALIFYING suspects from the prospects"

PREPARATION Know your product, Know your customer, Know, your

competitor, Know your company

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 Source: Ralph M, Gaedeke and Dennis H., Tootelian, Marketing Principles and
Applications, 1983. p. 436 (preparation step added )

Step 1
Preparation: Before starting the selling job, a salesperson should make a valuable investment of
time and resources to know the products he will be selling, know the customers (i.e. customer
types, buying motives and buying process) to whom he will be selling; know the competitors
against whom he will be selling, and finally know the philosophy, policies and range of products
of his company, In short, he should be well equipped with the fundamentals of selling.

Step 2

Prospecting: This step of the selling process deals with locating and preparing a list of
prospective customers. Prospects can be located through (1) identifying the potential of buying
more in the existing customers, (2) recommendations of existing customers, (3) winning back
lost customers, (4) attracting competitor's customers, (5) customers' information request from
advertisement, (6) newspaper announcements, (7) public records, (8) directories like telephone,
trade association etc., (9) other salesmen, (10) references from friends, neighbours and business
associates, and (11) cold canvassing, that is, going from door-to-door.

The located prospects should first he qualified broadly in terms of (i) whether they want the
product and how intense their want is (ii) whether they have the adequate purchasing power, and
(iii) whether and who possesses the power or authorisation to purchase and spend the required
money. The qualifying of prospects is the process of separating the prospects from the suspects.

It is worth-mentioning here that the ability to prospect is the most essential ability of a successful
salesperson. A good salesperson keeps examining, weeding out the already tapped prospects and
updating his lists of prospects, and remains in constant search of new prospects.

Step 3

Pre approach: The qualifying process of separating prospects from suspects further requires that
the salesperson should possess detailed information relating to the prospects in terms of existing
products consumed, their scale of operation, product range, their buying size, frequency, budget

7 
 
and the process, etc. In short, obtain customer orientation. The sources of information for the
purpose include company annual reports, other salespersons, other suppliers to the prospects,
census of manufacturers, professional journals, newspapers and market intelligence, The
availability of the above information in a detailed manner as possible will help the salesperson in
ranking the prospect in terms of their priority to the company. Good salespersons use the above
information in classifying the prospects in A, B and C categories in terms of the immediacy of
the attention to be given to them.

Step 4

Approach: `First impression counts'. As such, this step needs to be carefully planned. This step
has two distinct parts. One, of meeting the customer with a positive set of mind, and the second,
is make an impact on him. For the former, referrals of reliable persons known to prospects,
calling after fixing an appointment, use of door openers, help. For the latter the salesperson
should equip himself with the key benefit to be emphasised, samples or new literature to be
handed over, etc.

Step 5

Sales Presentation: Through advance information relating to the prospect every effort should be
made to match the product offered to the needs/problems faced by the customer. The sales
presentation should generally go according to the AIDA-attention, interest, desire, and action
approach. How can this be done? Use of key benefit or a problem solver, or a unique act of the
salesperson results in gaining attention. When used attentively this part also provides opportunity
to get the main point of the initial statements made by the prospect.

The presentation should proceed in a straightforward manner to help the prospect know that you
understand his problem and that is the reason of your being there. To convince the prospect as
early as possible, the salesperson should offer evidence through demonstration of the product,
use of exhibits, models, sharing Of acts, citing examples of its successful applications/usage,
showing testimonials, etc. The overall approach should be to build credibility and confidence in
the supplying company, its products, and also in its competence to render specialised type of
service to the, complete satisfaction of its customers.

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The flexibility of the sales presentations can range from the `Canned' or previously prepared

presentation, to those allowing the salesperson complete freedom in the 'presentation. Though
both the extremes, and even the hybrid of the two, have their own situational suitability, the
important point to note is that salesmanship, being a showmanship function, must arouse active
participation of the prospect in the presentation process. This can be done by introducing some
action which would keep the prospect captivated. One possible way would be a joint review of
the problem faced by the prospect. Another is helping the prospect imagine the projected benefits
of owning the product.

Step 6

Handling Objections: It is in the last phase of the sales presentation step that the prospects start
expressing doubts, or raising objections whether relating to price, need for more time to think,
satisfied with the existing product/supplier or product quality claims.

These doubts or objections should be welcome and they should be answered with confidence.
There is certainly no doubt that the prospect has to be thoroughly, convinced that the product
would satisfy his need. The ability of the salesperson of mind reading of the prospects enables
him to anticipate the prospect's objections and reactions.

The golden rules for handling objections are: (1) welcome the objection and show respect to the
prospect, and (2) do not argue with the prospect. Even when the objections raised are half-
backed or trivial in nature, the salesperson should handle the situation tactfully. Only in extreme
necessity, should a salesperson ask the prospect to adequately explain his problem faced. Even
under these circumstances courtesy should not be lost sight of, and while the discussion is on, the
salesperson should start recounting the benefits of the product agreed upon, and lead the prospect
to make a favourable decision. It should be remembered that handling objections sharpens the
selling skills of the salespersons.

Step 7

Closing the Sale: Closing is that aspect of the selling process in which the salesperson asks the
prospect to buy the product. There is a critical point during each presentation when the
salesperson should ask for the order. Pending the location of the critical point, as the objections

9 
 
are being met, the salesperson should help reduce the choice of options, summarise the benefits
of buying, and the consequences of not buying, and if need be, make use of the big idea appeal of
buying `now' at that moment.

The salesperson should have the ability of catching the buying signals given by the prospect and
should act on them fast. Some such signals are changing the sitting/standing position and moving
closer to the product; reading the instructions on the product; perusing the testimonials; showing
hesitation in being able to afford; asking for another demonstration, if applicable; checking the
warranty or asking questions relating to warranty terms. These signals show that the time is ripe
to start taking the order.

Step 8

Post-sale Follow-up: The selling process does not come to an end by writing the order. A few
repetitions reassuring the benefits of the product keep the customer sold. Follow-up provides an
opportunity to ensure that the product is being rightly used, and if necessary to re-explain the
method of using, handling, and storing of the product when not in use. This builds favourable
feelings and nurtures strong buyer- seller relationships.

Post-sale follow-up not only reinforces the customer's confidence in the salesperson and his
company but also tends to keep competition out. This also helps generate repeat business and
valuable word-of-mouth publicity. The follow-up is a good source of feedback too.

Let us conclude this section by stating that although the eight steps of the selling process are
essential in spirit, these may not always be followed. This could be partly the (1) the selling
situation involved (e.g., in the case of insider order-taker or retail salesperson) the first three
steps of the selling process are generally not applicable as the customer walks into the store for
buying a product, (2) the expertise of the salesperson (such that he can ignore or assume some
information), or (3) the seller's market of the product where customers generally queue up for the
product.

Let us also look at the findings of a study by Robertson and Chase on the subject. They point out
that:

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 1. The more closely matched the physical, social and personal characteristics of the
customer and salesperson, the more likely is the sale.

2. The more believable and trustworthy the customer perceives a salesperson to be, the more
likely is the sale.

3. The more persuadable a customer is, the more likely is a sale.

4. The more a salesperson can make prospective buyers view themselves favourably, the
more likely a sale is.

Exercise 2

What general procedure should be followed when qualifying prospects? How can the key
prospects for water cooler for institutions be identified and qualified?

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11.5 SALES FUNCTION AND MANAGING SALES PERSONNEL

Selling is done by the sales force either directly to customers, such as in case of industrial
salesmen or to retailers, as in case of salesmen merely supplying shopkeepers and inducing them
to stock the goods.

In both cases, the effort of the salesmen contributes to the overall sales turnover of an
organisation. The advertising effort and the sales effort are to a certain extent interrelated. The
main function of advertising is generally before the actual selling occurs. The customer looks at

11 
 
advertisements and is thus induced to go to the shop or wait for the salesman and make his
purchase. The salesman's job is to hand over the merchandise against exchange of money and
provide satisfaction to the customer. Besides, he also some times has to provide after-sales
service. In terms of selling, the role of a salesman can be sub-divided into several stages. These
are:

1) Prospecting, i.e. trying to find out likely customers who are called Prospects.

2) Pre-approach, i.e. trying to find out more about the customers, before actually meeting
them.

3) The Approach, i.e. when the-salesman actually communicates with the prospect with a
view to sell the product.

4) The actual selling where he Answers Objections and Closes the sale.

5) In addition to this, he may also provide services such as giving technical Assistance,
arranging credit facilities and expediting deliveries.

6) Collecting Information useful for the organization.

A salesman following these steps will have a higher chance of being successful with his
customers. In sharp contrast to selling activity, a sales supervisor performs the function of
managing the sales staff. This is a very important aspect. It is at times thought that good
salesmen can make good sales managers. This is not true because a good salesman is very keen
on selling or the `doing' part of his job. When he becomes a sales supervisor, and as he goes up
higher and higher and becomes a sales manager, his job changes in emphasis to that of
`
managing', which consists of (1) planning and goal setting, (2) organizing, (3) motivating, and
(4) controlling his subordinates. Thus the job has changed from `doing' to "getting things done
through people". Of course, it is true that many sales managers continue to perform the selling
function and provide necessary support.

Activity 1

What do you understand by selling and managing?

Selling consists of:

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Managing consists of:

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Now let us try to understand the field of sales management. There is a lot of confusion in the
expression Sales Manager and Marketing Manager. They are at time used synonymously. You
have learnt the meaning of marketing and therefore know that the marketing manager is
concerned with the four P's in marketing. The sales manager's function is limited. It is limited to
one of the P's in marketing, namely, promotion.

The American Marketing Association has defined Sales Management as follows:

"The planning, direction and control of the personal selling activities of a business unit,
including recruiting, selection, training, equipping, assigning routing, supervising,
remunerating and motivating as these tasks apply to the sales force."

From this definition we can define the functions of a sales manager as:

1) Selection of the sales force.

2) Training the sales force.
3) Motivating the sales force.
4) Controlling the sales force.
These are depicted in Figure I. These will now be dealt in details

13 
 
Activity 2

Interview a salesman and a sales manager from within your organisation or from any other
organisation and prepare a list of their activities. Identify some of the activities that are common
to both. Discuss the reasons for such common activities with the salesman and the sales manager:

Activities of Salesman Activities of a Sales Manager

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Re-list common activities

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Identify reasons for common activities

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11.6 RECRUITMENT AND SELECTION OF SALESMEN

The sales manager's job is basically to provide leadership to the sales force. However, if he does
not have the right persons, it will be difficult for him to get desired results. Therefore, the
first step, or the first function of the sales manager, is to be concerned about recruiting and
selecting the right type of salesmen.

A good salesman creates a good image of the company, as the customer evaluates even the
company from the way in which the salesman has behaved. It can thus be said that the salesman
who is working under you, represents your face and that of your organisation. To the people he
meets casually as well as your customers he handles, he is YOU and YOUR COMPANY.
Therefore, how he conducts himself and how he speaks reflects on you and your company. In
addition, proper selection would result in better employer-employee relations as the salesman
would be happy in his job. There will be a smaller turnover, meaning that the salesmen will not
leave out of disgust or inefficiency. The organisation will have a more effective salesforce, and
will enjoy good customer relations.

The Selection Procedure

Adequate selection requires a proper step by step approach. You must first know the type of
persons you want. Then it becomes necessary to find out from where you can get them. Then
alone can arise the question of actually going about getting the man, testing him and making
your final decision. The steps in the selection procedure are given in Figure II.

Let us now go through these steps. In actual practice, often organisations are not very clear as to
the type of person they require. They just decide that we need `salesmen'. We have to be more
specific. In order to do this, it is necessary to analyse the job for which the salesman is going to

15 
 
be selected. In good companies, there are job descriptions available which give details of the
particular job. Even this is not enough, because we want to know the type of man who will be
able to fill that job. This is described as man specification and gives the qualities required of the
person who can do this job properly.

The job analysis would indicate, for example; the following namely:

1) the difficulties involved in performing the duties (e.g. in case of high priced products, the
selling job becomes difficult),
2) the basic duties and responsibilities,
3) the conditions of work, and
4) the personal characteristics required to handle the job.

The qualities required in the salesman may include any one or more of the following, namely:

1) general qualities,
2) specific qualities, and
3) technical qualities.

At times, technical qualities are required. If this is not required, one should not try and get a
man with a technical background and pay unnecessarily more money. Besides, he may not prove
to be a good salesman. Thus we must specify what are the general qualities required in addition
to the technical ones, if any.

Many researchers have been conducted to find the general qualities which make a good
salesman. Given below are some of the general qualities which are required of a good
salesman.

1) Honesty and Reliability: The salesman must be one who can be trusted, as he has to
handle even money, besides merchandise. He must be prompt and on the job every day.
He must be one who can be relied on not only by you but also by his customers and his
fellow employees.
2) A Self-starter: A salesman is often on his own, particularly the travelling salesman. He
must therefore be able to work without constant supervision.

16 
 
 3) Orderliness: He should have a neat and pleasing appearance and must be one who keeps
things clean and in good working condition.
4) Friendliness: Perhaps friendliness is one of the most important qualities. He must be
sociable and must get along well with people, as otherwise he will not be able to sell at
all.
5) Self-control: He should be able to handle difficult people and not lose his temper or
become upset.
6) Good Handwriting: He should be able to write legibly, as salesmen often have to write
orders and complete report forms.

The above are a few qualities. In addition, many more are given by different people like
courtesy, industriousness, initiative, judgment, persuasiveness, and resourcefulness and so on.

We now come to the preparation of an Application Blank listing questions required to be

answered by the applicant. From the man specification, we have realised the qualities we are
looking for in the salesman. Appropriate questions have to be now drafted so that the answer to
these questions will indicate the suitability of the applicant who will thereafter be considered.

Now we are ready to get people to apply for the job, as we are clear regarding what we want and
the application blank is ready. Now the question of locating the appropriate person arises.
Following are some of the sources from which recruitment can be made, namely:

1) Internal, i.e. from inside your own staff as well as through recommendations from
existing salesmen or customers.
2) External, like (a) advertisements, (b) employment exchanges, (c) educational
institutions, (d) from competitor's staff and (e) placement services.

Advertisement is the commonest source from which recruits are obtained. However, the
advertisement should be sufficiently detailed so that you are not deluged with a large number of
undesirable or inappropriate applicants.

It is common knowledge in India that, even when the advertisement states specifically that
"Chartered Accountants need only apply", in practice even B.Com's apply because they feel that

17 
 
they know accountancy. Therefore, if such a qualification was not mentioned, you can well
imagine how many more unsuitable applications would have been received.

Now that we have got a number of applications, we must go through them and weed out those
which are obviously undesirable or inappropriate for our requirements. Then comes the
important step with which you, as a manager, would very likely be concerned, namely, the
personal interview when you come face to face with the applicant and have to determine his
suitability for the job. You may indulge in one or a number of interviews as you may deem
appropriate.

The greatest advantage of the interview is that you can now see what he looks like and check if
he has any undesirable expressions. We have mentioned that certain qualities are required. By
asking appropriate questions, you can judge whether he has those qualities from his answers
during the interview.

Some organisations indulge in psychological and personality tests. It should be mentioned here
that it is difficult to devise proper psychological test that can predict a good salesman with high
degree of accuracy. Hence it is not given great importance.

Now that we have almost arrived at a final decision, we must check the references given by him
regarding his character, educational background and previous experience. This is an important
step and should not be neglected.

The medical or physical examination is not always necessary and should not be indulged in
unless it is needed for certain qualities essential for the job. For example, if we want a salesman
who can distinguish colours, a medical test showing whether he is colour blind or not would
certainly be appropriate. Similarly, if he has to travel consistently, his health condition becomes
relevant.

Now the time have arrived when the final decision has to be made about his suitability.
Everything done so far has to be reviewed. We must find out whether he is a willing worker. He
should not be a "rolling stone", which can be found out immediately if he has had many previous
jobs. Even when he has previous jobs, the trend of the jobs-progressive or not will show you his
desirability for recruitment. Thus a final decision has to be taken now.

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Activity 3

Examine the salesman recruitment and selection process in a large and a small company.
Compare how the selection processes differ from each other. Examine the reasons for such
difference.

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11.7 TRAINING OF SALES PERSONNEL

Now that we have made the selection, we must provide for adequate training so that the applicant
really becomes suitable for the job. Gone are the days when people thought that "salesmen were
born and not made". Research has clearly indicated that the person can be trained to become a
good salesman.

Research has clearly indicated that the following are some of the factors which exist in case of a
good salesman, i.e. a salesman properly trained as against one who was not so trained:

1) He makes a more enthusiastic presentation.

2) He has the ability to clinch the order.
3) He has greater product knowledge.
4) He pays closer attention to ensure that services are rendered to the customers.
5) He has superior territory organisation.
6) He answers objections better.
7) He can obtain more customer interviews.
8) He keeps abreast of competition and competitor activities

The objectives of training are to give the following types of information to the salesmen, namely:

19 
 
1. Knowledge of the company, its background and history. This will give him a perspective
as to how he fits into the organization structure of the company.
2. Knowledge of the Company's products and more particularly the `selling points' or
advantages that he can emphasize with a view to close the sale.
3. Knowledge of customers, i.e. details about the types of customers and how they should be
handled.
4. Knowledge of sales and other procedure which is prescribed, such as how to get orders,
what forms to fill up, the sales reports required, etc.
5. Training in the art of selling or salesmanship.

The last point is extremely important. Salesmanship is desirable for everybody because it is the
art of persuasion.                                                                  

Now that we discussed the benefits and goals of training, we should consider the three basic
types of training which have to be given. In the beginning, break-in/induction training is given,
which gives him the basic knowledge or material as already indicated. However, this is not
sufficient in practice. The Salesman must thereafter be given coaching actually in the field and
put in charge of a senior salesman who is also a good trainer. In addition, from time to time
stimulation or motivational training is given at sales conferences and other places, so that the
salesman is all the time being updated and motivated.

Having decided what knowledge or information has to be given and where it is to be given. It
now becomes necessary to determine how this has to be done. This is what is meant by training
methods.

Now that you have given your own answer, let us mention that there are basically three types of
training methods, namely:

1) the `telling' method

2) the 'showing'' method
3) the `discussion' method

The Telling Method is the oldest form of communicating information sharing and is often
described as lectures. These can be quite boring and the salesman may feel that he is not a

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student in a classroom. However, this is a method which is extremely good in communicating
information quickly. The other methods take a little time, although they may be more effective in
terms of results.

In the Showing Method, the trainer actually shows or demonstrates the technique. This is the
actual `doing'-more or less like `role playing' and is a very effective method. He may take the
salesman to a customer and actually sell. The salesman watches him carefully and thereafter
there is a discussion on what happened and how he would have behaved in the particular
situation.

Finally, the Discussion Method involves the participant in the training process. It permits the
trainee to ask questions. He can thus clarify any doubts which might exist in his mind. Even
appropriate case studies can be provided for discussion and training the salesmen

With the emergence of new technologies, processes and systems in place you find extremely
technical products in the market. To sell such new generation technical products it becomes
necessary to possess sound technical knowledge and expertise by the salesman to sell and offer
services to the customers becomes vital. This paves way for new training methods to be offered
to the sales force in the light of fast changing tastes and preferences of the customers in the light
of these new technologies and processes. Today, you can see firms offering online training for
their sales team making it more interactive and flexible both for the employer and employees.
You may identify and make a study on such training methods to keep updated and informed.

Activity 4

Examine the various dimensions of salesman training in your organization. Just in case your
organization does not have selling activities, you may visit another organization and study how
they train the newly recruited salesman. Are there any deficiencies in the training approaches
that you have examined? Can you suggest some modifications?

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11.8 MOTIVATING THE SALES PERSONNEL

The aspect of motivating consists of getting the best effort from the salesman while he is
performing his job. If he is a good salesman and likes to sell, he will automatically be motivated.
Thus motivation is a function of the salesman himself and the organisation as well as the
environment in which he is operating.

In the early days, the disciplinary aspect fear was used to motivate people. Later-on, the
economic factor came into existence and stress was laid on appropriate methods of remunerating
the sales force. Finally, apart from the `hope of reward' replacing the fear of the sack',
psychological incentives are also sought to be used.

Incentives

Incentives are factors which provide motivation, in a positive direction to the person concerned.
These may be of two types, namely:

1) Financial and
2) Non-financial or Psychic.

We will now deal with these two types of incentives separately.

Financial incentives are incorporated in the compensation plan. There are several methods used
for remunerating salesmen. The following are some of the methods used for remunerating or
compensating the sales force namely:

22 
 
 1) A straight salary.
2) Straight commission on sales.
3) Salary and commission on sales.
4) Salary plus commission on sales above a certain amount.
5) Salary plus commission on varying totals or different types of goods.
6) Salary plus a share in the profits.

It will thus be noticed that there are many methods of remunerating salesmen from which a

In case of a straight salary, the salesman is paid the amount irrespective of his performance.
Thus the remuneration is not geared to his productivity. However, some organisations are of the
view that if you select and train a salesman properly and provide adequate salary, it will motivate
him as he knows that he can get increments as motivational factors. As against this, the opposite
view is that a straight salary makes the salesmen complacent.

If he is given commission on sales, there is a direct link of the remuneration with his sales
performance. It is true that the commission method is more motivating. However, it can be
undesirable, where through no fault of his own; the salesman cannot earn enough commission to
support himself and his family. Therefore, the third method is the most popular one where a
basic salary is given to provide him with the basic necessities of life. If the salesman wants to
enjoy life, he must earn his commission. This provides the maximum motivation from the
compensation structure. Thus motivation should be built into the system itself.

It should however be remembered that the compensation plan should be appropriate. It should be
`simple' and not complicated, so that the salesman understands and appreciates it. It should be
`personal' so that it would motivate the particular salesman. The plan should be `moderate' and
within the reach of the salesman. If he finds that he cannot earn the commission, he will stop
trying to increase his sales. The compensation should provide a 'continuous incentive'.

Apart from remuneration as an incentive, there are other methods of motivating salesmen. There
are certain `needs’ requiring satisfactions in the human being. These are not merely
physiological. There is a need to belong or be loved. This can be provided in the work situation

23 
 
by the supervisor under whom the salesman works. There is the question of esteem. A pat on the
back at the right time can go a long way to motivate the salesman. Finally, there is self-
actualisation, i.e. a person wants to do better and get promoted further. Thus there are certain
needs which can be satisfied through an adequate incentive plan of a non-financial nature. These
are called psychic wages.

1) Make the salesman like you, be fond of you and want to work for you as the supervisor.
2) Praise him when praise is due: A good rule of human relations is "to praise in public
and scold in private". However, idle flattery will soon be found out by the intelligent
salesman.
3) Respect his personal ego: He should not be belittled. As already indicated, do not
criticize him in the presence of others.
4) Allow him to participate, i.e. to discuss with you and help you in the shaping of
decisions, particularly those which affect him. For example, when setting the sales target,
the salesman can be consulted before a quota is fixed for that particular salesman. This is
what is meant by `participation'- the modem leadership technique.
5) Set a good example: This is perhaps the most important. The subordinate generally
watches his superior and often tries to `copy' him.
6) Give him emotional security, by showing him that he is working for a good company, a
good boss and a good product.
7) Finally, show him how he would benefit and not how the company benefits from his
performance.

Thus, for effective motivation, you must inform him as to what is expected from him. Tell him
what the company gives him, use the carrot technique to get his cooperation and above all set a
good example.

Activity 5

As a salesman, indentify which method did your employer followed in remunerating for your
services? List out and specify any other incentives that the company offered to you.

24 
 
_____________________________________________________________________________

___________________________________________________________________________

______________________________________________________________________________

___________________________________________________________________________

____________________________________________________________________________

___________________________________________________________________________

11.9 CONTROLLING THE SALES PERSONNEL

Now we come to the final aspect of the Sales Management function, namely that of controlling.
Management consists of (1) Planning, (2) Organising, (3) Motivating, and (4) Controlling. Goals
and objectives are provided in the planning stage and the controlling stage is used to `evaluate'
how well those objectives have been reached. It is necessary to have some form of control over
the sales force. It is true that if salesmen are selected properly and trained appropriately very
little control will be required. However, some form of evaluation is considered necessary in
management.

The best method of control is naturally Personal Contact. This is however not possible from, let
us say, the sales manager's level right down to the salesman's level. A supervisor has personal
contact over the salesman directly under him. However, as an organisation grows, some other
form of control has to be adopted. Correspondence is one method where the distance can be
obviated. However, the most popular method of controlling salesmen is through Salesmen's
Reports.

Salesmen's Reports

Let us discuss a little more in depth the question of evaluating the salesman's performance from
the salesmen's reports. The Report is generally drafted well and often in a printed form, which
the salesman can complete quickly.

As already indicated, the salesman resents report writing type of activity and therefore the report
must be drafted very carefully. The following are some of the salient features:

25 
 
 1) The report should be brief.
2) As far as possible a printed form should be used where a check mark (./) would answer
most of the questions and very little of writing is required.
3) Information should be so arranged that it can be summarised and used at the home/head
office. Please remember that you should not ask questions where the answers are not
going to be used by the organisation.
4) Carbon copy must be provided for the salesman.

There are many types of reports used in practice. The tendency is to have many reports and the
advice is to have as few as possible. The following are some of the types of the reports used,
namely:

1) Expense Account Report.

2) Report of Daily Calls, covering the entire day and giving details for each call separately.
3) Report on Prospective Customers, to indicate how much missionary work is being done.
4) Report on Customer's Complaints.
5) Reports on Demonstrations.
6) Reports on Working Plans.
7) Report of Customer's Inventories.

You can thus well imagine that there are a host of reports from which a selection can be made.
Today, the reporting system has changed drastically in view of Information and communication
Technology, being in place to connect and report to the manager or the Head office about the
whereabouts and the daily activities of the salesman to all the concerned.

Allocation of Territories

Now supposing you have about a hundred salesmen to cover the whole of India, you naturally
have to divide India into one hundred parts and allocate one part to each salesman... we are sure
you must have realised that you cannot just take the map of India and cut it into one hundred
equal parts and allocate them to the salesmen. If you do this some of your salesmen may get
mountains or desert, where no prospects exist. The following are some of the factors which
determine in the allocation of the territory:

26 
 
 1) Prospect density, i.e. the number of likely customers in the area concerned.
2) Extent of ground to be covered.
3) Possible volume of sales.
4) Frequency of visits required.
5) Intensity of selling required, i.e. the time taken up by each interview.
6) Convenience of getting from one place to another includes modes of transport provided
or available.
7) The rate at which the shopkeeper buys and resells.
8) Whether the product is easy or difficult to sell. Considering all these factors and the
number of salesmen available, it then becomes possible to allocate the territories
intelligently.

It should be remembered that salesmen are anxious to get as large a territory as possible.
Experience has however indicated that a smaller territory is better, as the salesman takes less
time in travelling from one prospect to another and provides greater depth of effort. It is better to
have this intensive rather than the extensive cultivation of a territory.

Activity 6

Collect all the reporting formats used by a salesman working for a marketing organisation.
Analyse them and record the various types of information provided by the salesman. Comment
on the usefulness of such information for the company as well as for the salesman himself.

........................................................................................................................................................................
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........................................................................................................................................................................
........................................................................................................................................................................
........................................................................................................................................................................
........................................................................................................................................................................
....................................................................................................................................................................... 
 
 

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11.10 SUMMARY

In this unit we discussed the nature, role, types and the planning process involved in personal
selling function. Personal selling is a direct person-to-person selling and promotion method. The
specific role and goals of personal selling vary from firm to firm depending upon nature of goods
marketed, distribution system used, and the sales strategy adopted by a firm. The changing
market environment calls upon the sales force to transform itself in order to perform a more
creative role.

Based on the degree of creativity required, McCurry classifies the sales positions into seven
types-merchandise deliverer, inside order-taker, outside order-take, missionary sales person,
sales engineer, tangible product seller and intangible product seller. To accomplish the job of
making a sale satisfactorily, a salesperson should follow the basic elements of the selling
process. These are: preparation, prospecting, pre-approach, approach, sales presentation,
handling objections, closing the sale and post-sale follow up. An understanding of each element
helps a salesperson in developing skills necessary for successful selling.

You have understood the importance of the selling effort and the functions of the sales man of
the company. Basically, the sales manager has to get the targeted sales, i.e., sales as decided by
the marketing manager or the top level of the organisation. He has to do this through the sales
force at his disposal. He must therefore select very carefully.

Once you have recruited somebody, it is not necessary that he would have the proper ability.
Adequate training must therefore be provided so that he understands more about your company,
your products and your policies as well as philosophy.

Thereafter, the question of motivation becomes important. We have appreciated how financial
incentives can be provided to the salesman. Finally, some extent of controlling the sales
personnel is essential.

Now let us briefly recapitulate what we have covered. We have realised that we are on a very
important aspect of managing the human resource. People are difficult to handle and yet, if you
provide the correct environment they will be able to manage and motivate themselves. It is

28 
 
therefore essential to provide a proper system for motivation rather than have a detailed
controlling procedure in managing the firm’s sale personnel.

11.11 KEY WORDS

Canned Presentation: A structured sales presentation made of an inflexible nature.

Cold Canvassing: Door to door conviction and sale of products.

Lead: Name of an individual or organisation who might be a prospect.

Prospect: A lead who can both benefit from the use of the product and afford to buy it.

Prospecting: The step during which probable customers are found for the product or service.

Industrial Salesman: Salesman, who deals with the industrial market, i.e. deals with
organisations who buy goods and services to produce other products or services which are
thereafter sold again to others.

Job Description: This describes the job in detail, indicating what the salesman will have to do
including the difficulties that he may have to face in selling the company's products.

Man Specification: This provides the qualities which are required of the salesman who can best
fill the job as described in the job description.

Personal Selling: Oral presentation by a salesman in a conversation with one or more

prospective purchasers with a view to effect the sale.

Pre-approach: This is the stage just before the salesman actually approaches the customer, in
which stage he tries to find out as much as he can about the prospect so that his job at the time of
approach would become easy.

Presentation and Demonstration: This is the stage where the salesman tries to affect a sale by
actually showing the product and demonstrating it in use.

Prospecting: This is the stage where the salesman collects information of possible customers
known as prospects.

29 
 
Sales Quota: A sales goal or quota set for a product line, or representative or even a company
division for defining and stimulating sales effort by such individual or unit.

Sales Territory: This is the geographical area which is assigned to a particular salesman for his
operation with a view to sell or carry out his selling activities in that area.

11.12 SELF ASSESSMENT TEST

30 
 
 You may answer the following questions for self-assessment in a separate exercise book. You
can, as usual, refresh your memory before starting to answer the questions.

Questions:

1) "Sales Management is primarily a matter of selecting and training men, then evaluating
their performance."
Do you consider this recent statement adequate or helpful in identifying sales
management's responsibilities? Give your comments in detail.
2) Mention briefly the sources from which you can get sales personnel as new recruits.
3) Mention the types of training you would provide for salesmen of a company selling
medicines.
4) Explain the several methods available for remunerating the salesmen and give your
opinion as to the most desirable system.
5) Explain the need for non-financial motivation for salesmen and mention some of the
methods through which this can be achieved.
6) Mention briefly the factors that have to be considered in order to objectively determine
the sales territories for allocation to salesmen.
7) Explain the concept and role of personal selling. With suitable examples discuss the
different types of selling jobs that you are familiar with.
8) Discuss the steps involved in the selling process and highlight the importance of the
degree of creativity that is required to in each of these steps for success.

11.13 FURTHER READINGS

Philip Kotler e Marketing Management, 11th edition 2008, PHI- New Delhi

P.K.Sahu, K.C.Raut, Salesmanship and sales Management, 3rd edition, Vikas Publication, New
Delhi

31 
 
UNIT 12 DISTRIBUTION MANAGEMENT

Objectives
After completing this unit you should be able to:

• understand the concept of distribution management

• appreciate its importance in the marketing mix

• discuss the different channels of distribution

• understand the role, importance and types of intermediaries.

• realise the issues in efficient distribution in contemporary times.

• ascertain the factors that determine choice of channel selection

• understand the distribution strategies adopted by the firm

• role of channel system as an important link between the manufacturer and the ultimate
customer

Structure

12.1 Introduction to Distribution

12.2 Definition of Distribution Management

12.3 Need for Distribution Management

12.4 Channels of Distribution

12.5 Types of distribution channels

12.5.1 Direct Channel

12.5.2 Indirect Channel

12.6 Intermediaries

12.6.1 Wholesalers

12.6.2 Retailers
1 

 
12.7 Factors determining choice of channels of distribution:

12.7.1 Product Related Factors

12.7.2 Company Characteristics

12.7.3 Competitive Factors

12.7.4 Market Forces

12.8 Distribution Strategies

12.9 Channel System

12.10 Channel Conflict

12.10.1 Causes of Marketing Channel Conflict

12.10.2 Management of channel conflict

12.11 Distribution Management Challenges

12.12 Elements of Distribution Management:

12.12.1 Traditional Elements

12.12.2 Emerging Elements

12.13 Summary

12.14 Self-Assessment Test

12.15 Further Readings

12.1 INTRODUCTION TO DISTRIBUTION

In the earlier units we have discussed and familiarised you with important terms like needs,
wants, customer, markets, competition, sales, marketing and a host of relevant terms pertaining
to marketing function. We have also touched upon how businesses and firms reach out to their
target market segments through well blended and well defined marketing mix elements and
strategy formulation for the business. Besides, we did talk about the elements of marketing mix

2 

 
for products comprising of i.e. product, price, place and promotion (generally referred as 4P’s of
marketing mix). While the elements of services marketing does include the same four elements
i.e. product, price, place and promotion and an additional three more elements namely, physical
evidence, process and people (generally referred as 7P’s of service marketing).Which will be
discussed at length in Unit-13 of this course.

If you notice carefully at the elements of marketing mix of both products and services “Place” is
common to both. This suggests that “Place” play a pivotal role to sell the right product/service to
the right customer at right price at and at right time thus assumes significance to every marketer.
Therefore the focus of this unit will be on “Place” wherein all distribution activities and
functions focus on this aspect of the marketing mix. It is one link in the chain, which starts from
suppliers to manufacturers and finally to the point of sale.
Very often we come across that during festive season or on any other happy occasion we tend to
buy gifts for friends and relatives as we all believe in the joy of giving something to someone
near and dear on such joyful celebrations. Assume that your friends or relatives stay in another
city then what do you do? How do you send the gift to them? Yes, you do have a solution to
either send them by courier or by online delivery. Thus, a delivery company is a type of
distribution process. In the same way firms create a distribution system that enhances the reach
of the firm’s offerings to the end customer at the right place and right time which is at the core of
distribution.

12.2 DEFINITION OF DISTRIBUTION MANAGEMENT

The function of distribution is in providing three utilities namely place, time and possession. For
example, if you need a notebook, you will go to the nearest stationery shop and purchase a
“Classmate” notebook. This nearest stationery shop offers you “Place” utility. You could get the
notebook close by your residence. If you need to buy a gel pen at 9.00 pm then also you can go
and purchase it at that time. So you get “time” utility. Having purchased the notebook and pen
and you can take it back home. You get “possession” utility. In all these instances, ITC, a leading
Indian Multinational company sells “Classmate” notebook and Cello Pens India, which sells
“Cello Pointec Gel Pens”, has ensured that you can avail of all the three utilities very
conveniently without any difficulty.
3 

 
Let’s look at a couple of definitions of distribution as per the American Marketing Association,
“distribution refers to the act of marketing and carrying products to consumers. It is also used to
describe the extent of market coverage for a given product. In the 4 Ps, distribution is represented
by the word place or placement”. According to Mossman & Norton “distribution is the operation
which creates time, place and form utility through the movement of goods and persons from one
place to another”.
To sum up, distribution management can be defined as a combination of all activities which
facilitates movement and co-ordination of supply and demand in creation of time, place and
possession utility in goods. It is the art and science of determining requirements, obtaining them,
distributing them and finally maintaining them in an operationally prepared condition. Therefore,
the broad range of activities concerned with the efficient movement of finished products from the
end of the production line to the consumer and also the movement of raw materials from the
source of supply to the beginning of the production line, fall under the domain of Distribution
Management (Fig 12.1)

Source of Production Consumer

Raw Material Line

Distribution Management

Figure 12.1 Domain of Distribution Management

Through distribution activities a company ensures that a sequential flow of products and goods
from the source of raw material through the production/operation is made available to the final
customer. This involves a sequential flow of procedures, systems and activities which are
designed and linked to facilitate and monitor the movement of goods and service from the source
to the consumer.

12.3 NEED FOR DISTRIBUTION MANAGEMENT

In the previous section, we saw that “Classmate” Notebook was made available at the local
stationery shop through distribution management. It is manufactured by ITC, which has its

4 

 
headquarters in Kolkata. To reach out to its customers, ITC has an unmatched distribution
network. Its products are available in 4.3 million retail shop/outlets/stores in India. ITC
constantly tries to make the products reach to the retailers as quickly as possible. ITC's
Paperboards and Specialty Papers Division has four manufacturing units, eight regional sales
offices and over sixty dealers in India. At the backend ITC sources good quality raw materials
from 17 states in India through its e-choupal network.

A good distribution system performs the following functions for the company;
• It helps in tracking the growth and decline in demand of the company’s products/
services.
• It enables to design and implement a joint marketing strategy with the distributor and
retailers, like customising sales arguments, pricing and discount structures based on the
local situation/conditions.
• The firm can give marketing support, product sales training, after sales support, etc., with
the help of a good distribution network.

The objectives that need to be kept in mind viz., a viz., distribution are;
 

i. The major objective of distribution is getting the right goods to the right place at the right
time at the least possible cost.
ii. To fully make use of the available human and material resources to the maximum
possible extent without wastage.
iii. To enhance the rapid growth and development of country and organization

12.4 CHANNELS OF DISTRIBUTION

Distribution channels are the methods by which companies deliver products and services to
customers and end users. Some businesses sell directly to their customers, while others might use
a retailer or wholesaler to serve as an intermediary. Companies may also use agents or brokers to
facilitate the movement of products to distributors that sell those wares to the customer. At the
beginning of this unit we had discussed the examples of “Classmate” notebooks. The company
has chosen an extensive network of dealers and retailers to reach you. When the business is on a
5 

 
small scale like a local sweet shop, the customers can directly go and purchase from the shop. In
such cases, the business and the customers are in close proximity. Suppose this sweet shop
expands, and starts making other products, it would require a larger customer base. These
customers might not be in close range of the exact shop. Their product might be sold through
someone to customers who are residing far off. This “someone” becomes an intermediary.
Haldiram is one such sweet company which has gone on such a large scale and expanded its
business that now it has various ways/channels to reach the customer more conveniently.

Philip Kotler defines channel of distribution as “a set of independent organisations involved in

the process of making a product or service available for use or consumption”.

Distribution channel has been defined by Hill, “Distribution channel consists of one or more
companies or individuals who participate in the flow of goods and services from the
manufacturer to the final user or consumer” (Hill, 2010.)

The role of distribution channels through an example

a) When there is no channel of distribution:

When a customer wants to buy soap, rice and toothpaste etc there is no channel of distribution.
Meaning thereby the product has to be delivered to the end customer, directly by the producers
of the above mentioned products. Imagine the difficulty in reaching all the customers that a
manufacturer will face. Secondly farmer growing rice may not have the resources to reach out to
its customers and deliver it in a mutually satisfying transaction.

Producer of Soap

Producer of Rice Customer

6 
Producer of Toothpaste
 
 Fig 12.2. No intermediary in the distribution process

b) When there is a channel of distribution involving a retailer: In the above case, even
if one intermediary (retailer), is involved, the process becomes simplified not only for the
customer but also for the producer. The product can now be available to a larger number
of customers, with less effort on the producer’s side.

Retailer
Producer (Soap, Rice, Customer
Toothpaste)

Fig 12.3 One intermediary in the distribution process

Activity 1
a) List down any six products of the top two FMCG companies in India. Keep in mind that
these companies have rural as well as urban presence..

b) Note down the places/ platforms from where you can purchase the products that you have
listed.

c) Which places/ platforms give you the maximum convenience and why?

………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
…………………………………………………………………………………………………….
…………………………………………………………………………………………………….

7 

 
12.5 TYPES OF DISTRIBUTION CHANNELS

Broadly speaking the distribution channels can be classified as follows:

a) Direct Channels
b) Indirect Channels

12.5.1 Direct Channel – When the producer or the manufacturer directly sells the goods
to the customers without involving any middlemen, it is known as direct channel
or zero-level channel. It is the simplest and the shortest mode of distribution.
Selling through post services, internet or door to door selling etc. are some of the
examples of this channel. Nykaa, Homeshop 18 etc. are cases of direct channel .

(a) Door to door selling: Very small companies or start-ups sell their products via
this method. You might have seen vendors selling “papad”, clothes etc. This
method of selling directly to customers is more common and visible in semi urban
and rural areas and also in big capital cities across India.

(b) Internet selling: Currently, this has become the most common phenomenon
among most of the marketers across sectors to tap tech savvy customers. In cases
where the target audience is approachable through internet, it is far easier for
companies than other methods. Generally it caters to those potential buyers who
are interested enough in the firm’s merchandise only approach the company. For
example, “HealthifyMe” is selling different types of salads for health conscious
people.

(c) Mail order selling: As the name suggests that the products are generally sold
through mails as they might not be readily available in local markets. In such
cases, the goods need to be durable, and of standardised qualities. The delivery
costs should also be considerably low. Mostly books and magazines are sold
through this method. E.g., Reader’s Digest.

(d) Company owned retail outlets: Instead of using other retailers to sell its products
to customers, company establishes its own company exclusive retail outlets to
cater to customer as one stop shop for all the its merchandise under one roof
examples are Raymond’s Shoppe, Calico Mills, Dell computers etc.

8 

 
 (e) Telemarketing: The products are promoted for selling through call centres over
outbound calls. Sometimes the company can receive calls on a helpline number
regarding their products demonstrated on television. These are inbound calls. For
example Home shop 18 etc.

12.5.2 Indirect Channel – When a manufacturer or a producer uses the services of one
or more middlemen to distribute goods, it is known as indirect channel. This is the
most commonly used channel. As businesses expand it is not feasible for
companies to reach all markets directly. The different levels of indirect channels
are;

a) One Level channel: This channel involves the use of one middleman i.e. retailer
who in turn sells them to the ultimate customers. It is usually adopted for speciality
goods. For example – Tata sells its cars through company approved retailers.

Manufacturer→ Retailer→ Consumer

b) Two Level channel: Under this channel, wholesaler and retailer act as a link
between the manufacturer and the customer. This is the most commonly used
channel for distributing goods like soap, rice, wheat, clothes etc.

Manufacturer→ Wholesaler→ Retailer→ Customer

c) Three Level channe: This level comprises of three middlemen i.e. agent,
wholesaler and the retailer. The manufacturers supply the goods to their agents who
in turn supply them to wholesalers and retailers. This level is usually used when a
manufacturer or farmers (growing dry fruits, saffron, etc.,) deals in limited products
and yet wants to cover a wide market.

Manufacturer → Agent → Wholesaler → Retailer → Consumer

12.6 INTERMEDIARIES
As mentioned in the earlier section intermediaries can be an agent, a group of people or an
organization that facilitates the flow of goods from the producer to the final consumer. They can
be broadly classified as a) Agent middlemen and b) Merchant middlemen

9 

 
1. Agent Middlemen: If you intend to sell or purchase property may be a flat or a house,
generally you contact real estate agents who help you in selling or purchasing the desired
property. Similarly when you want to purchase company stocks or shares from the market, you
seek the help of brokers. Even online brokerage houses fall under this category. These are called
agent middlemen. They do not take ownership of what they are selling. They earn money by
charging a facilitation fee.

2. Merchant Middlemen: Merchants are a set of intermediaries like wholesalers and retailers,
buy and re-sell their goods. They not only take the ownership of inventory, but they also bear the
expense of storing and distributing the product. They charge a certain “mark-up” amount to the
actual cost of the product. For example, they might have purchased a toothbrush at Rs. 20 and
might sell you the toothbrush at Rs.25. This five rupee difference is called the mark-up which the
middlemen earn in the transaction for all the tasks that he undertakes from buying to storing to
distributing the product.

12.6.1 Wholesalers
The American Marketing Association has defined the wholesaler as “a business unit which buys
and resells the merchandise to the retailers and the merchants or to the industrial,
institutional and commercial users but does not sell insignificant amounts to the ultimate
consumers.”

Wholesalers are those merchants who act as intermediaries between the primary producers,
manufacturers or importers, on one side, and retailers or industrial consumers on the other. They
buy goods and commodities in large quantities with a view to selling them to retailers in smaller
quantities. They assemble/collect merchandise from many sources, warehouse/store and regroup
the goods for convenient buying by retailers. Thus wholesalers make it possible for the
manufacturer to sell to a large number of retailers to whom the merchandise cannot be easily sold
directly from the factory. In the light of the business activities they perform they play a dual role
as a buyer and as well as seller.

10 

 
The wholesaler performs the following important functions of marketing:
i. Assembling-The wholesaler collects varieties of product from different manufacturers
and keeps them in stock for sale to the retailers at the time when they need them.
ii. Dispersion-The products assembled and stocked by the wholesalers are supplied to the
retailers who may be widely scattered.
iii. Warehousing-The goods purchased by the wholesalers from the manufacturers and
producers have to be stocked in warehouses pending their sale to the retailers. The
arrangement for such storage is the responsibility of the wholesalers.
iv. Transportation-The wholesaler has to move the goods from the various factories to his
own warehouse and from there to the retail stores. He may do so either by employing his
own vans or by hiring public carriers or a combination of both.
v. Financing-The wholesaler in most cases provides goods on credit to the retailers based
on the credit worthiness of the retailer.
vi. Risk-assuming-The wholesaler by virtue of their business model do assume the risk
arising out of the changes in prices and demand as also loss due to spoilage or destruction
of goods in his warehouse.
vii. Grading and Packaging-The wholesaler has to sort out different grades of products
according to quality and other considerations and pack the goods into smaller lots for
retailers.
Services provided to the manufacturers by wholesalers include the following:
i. The manufacturers get the benefit of bulk orders from wholesalers. He does not have to
take the trouble or incur the expenses of procuring large number of small orders.
ii. Wholesalers remain in close touch with the retailers and keep themselves informed about
the changes in the direction and pattern of demand and thus help the manufacturers in
planning their production function.
iii. The wholesaler places bulk orders with the manufacturer and thus enables him to
concentrate on production.
iv. The wholesaler to a great extent relieves the manufacturer of the trouble of performing
most marketing functions.

11 

 
Services provided by wholesalers to the retailers include:
i. The retailer need not stock goods in unduly large proportions and can replenish his
supplies from the wholesalers as and when necessary.
ii. The wholesalers provide goods to the retailers on credit and the retailers need not block
their funds in idle inventories.
iii. The wholesalers generally specialise in a few lines of allied goods and try to obtain their
supplies from the best and the cheapest source. The advantages of such specialisation are
passed on to the retailers in the form of lower prices or may in the form of discount and
rebate.
iv. The wholesaler assumes most of the risks involved in marketing functions such as price
fluctuations and spoilage or pilferage of goods.
v. Wholesalers keep the retailer informed of the new types of products that are being
introduced in the market. This gives the retailers an opportunity to extend their business.

Types of Wholesalers
 

Depending on the nature of the product/goods, type of industry and the type of market it caters
to, different types of wholesalers can be found. In highly fragmented industries as with
unbranded clothes or farm produce, there could even be different levels of wholesalers.
Wholesalers could also specialize in one function. For instance a wholesaler could specialize in
warehousing. Such a wholesaler maintains a big warehouse and specializes in the storage
function and depends on others for other functions such as transportation, financing insurance
etc.

Dibb et al. (2006) classify wholesalers into two broad classes- (i) merchant wholesalers and (ii)
agents and brokers.

(i) Merchant Wholesalers:

 

Merchant wholesalers buy goods from manufacturers and sell them to retailers or industrial
buyers. Such wholesalers therefore take up the tide to the goods. This is an important function
that has to be performed for the flow of goods from the manufacturer to the ultimate customer.
12 

 
Merchant wholesalers can be classified as either full-service wholesalers or limited-service
wholesalers. Some of the types of merchant wholesalers that are seen around the world are:
(a) General merchandise wholesalers,
(b) Limited line wholesalers,
(c) Cash-and-carry wholesalers,
(d) Truck wholesalers, and
(e) Drop shippers.

(a) General Merchandise Wholesaler:

General merchandise wholesalers deal with a large variety of items without much depth in each
category. A wholesaler could, for instance, deal in grocery items, selling products from a few
manufacturers to retailers. Such a merchandiser provides all the services including warehousing,
transportation, and financing to the manufacturer.
Such large general merchandisers typically dominate a geographic region, supplying
merchandise to most of the retail outlets in a particular region. A general merchandiser typically
deals with multiple brands, though some of them may deal with just one large manufacturer for a
particular line of merchandise.

(b) Limited Line Merchandisers:

A limited line merchandiser typically specializes in just one product category and can either be
an exclusive wholesaler representing a particular firm or a multi brand merchandiser. Limited
line merchandisers deal with products such as pharmaceuticals, hardware, paint, cement, and
steel. Some limited line merchandisers serve a niche market (for example, laboratory equipment
to be sold to medical laboratories and educational institutions etc.).
In certain markets where manufacturers are small and fragmented, limited line merchandisers
can be powerful. The industry must rely on the wholesalers to sell to their customers. Such
wholesalers typically have in-depth knowledge about the market and its players. These limited
line merchandisers are very useful for small niche manufacturers who serve a small but
important market.

(c) Cash-and-Carry Wholesalers:

Cash-and-carry wholesalers are a new wholesale category in India, but have existed for quite a
long while in other countries. The Wal-Mart group’s is an example to make an entry into India
through a cash-and-carry wholesaling format. In cash-and-carry wholesaling, retailers could buy

13 

 
goods in bulk (often carton loads) at a reduced price, to be resold at a higher price in their retail
outlets. Cash-and-carry set-ups are typically large warehouses with little display and fewer staff.
Goods are only sold in bulk and without any credit lines.

Cash-and-carry wholesalers are therefore classified as limited service merchant wholesalers.

Small retailers who can rely on cash-and-carry retailers benefit, as they get access to goods
without any waiting time and at a low priced. Cash-and-carry wholesalers only deal with high
turnover items such as groceries and stationery items. With the entry of large wholesale groups
into India in the future, more such cash-and-carry wholesalers can be expected. Metro cash and
carry is another wholesaler who has a strong presence in the Indian wholesale business.

(d) Truck Wholesalers:

Many small wholesalers in the Indian FMCG sector which serve small independently-owned
retailers are actually truck/mini van wholesalers (sometimes called truck jobbers). These
truck/mini van wholesalers typically transport small quantities of typically perishable
commodities (such as bread, biscuits, snack items etc.) to retail outlets where the retailer could
inspect and purchase goods from the truck.
Such truck/ minivan wholesalers are typically small operators and could carry a variety of multi-
brand items. They often do not provide credit lines and are typically owned by other large
wholesalers. These wholesalers provide critical transportation and stocking services to the
distribution channel. They are also involved in managing the inventory of small retailers.

(e) Drop Shippers:

These intermediaries are sometimes called desk jobbers. They do not take physical possession of
the goods. They collect orders from retailers or industrial buyers and arrange for these to be
transported to the customers from the manufacturer. The ownership of the goods will pass on to
drop shippers from the time the contract is signed with the manufacturer, until the goods are
received in proper condition by the buyer.

Such wholesalers are typically seen in commodity markets, where transaction volumes are
typically very large, such as markets for oil, coal, and iron ore. Drop shippers provide value by

14 

 
linking several fragmented customers to suppliers who are often based in a totally different
continent.

(ii) Agents and Brokers:

 

Agents and brokers typically provide sales support for the manufacturers by offering the services
of a sales force network and related infrastructure. Agents and brokers thus enable manufacturers
to expand their markets without the overhead associated with establishing a sales force. Agents
could represent just one manufacturer or a group of manufacturers who have complementary
products. Clearing and forwarding (C&F) agents are quite common in Indian markets as they
provide a means to avoid multiple sales tax regimes.

Different types of wholesalers therefore facilitate the transactions between different players in
the market. They provide value by performing several activities that are important to the smooth
flow of goods and services from the manufacturer to the end consumer.
In certain industries, the nature of demand and supply provide opportunities for wholesalers to
grow in stature and become the most powerful entity in the market.

12.6.2 Retailers
A retailer is defined as "a middleman who sells mainly to the ultimate consumer. He may sell
to institutions but most of his sales are made to industrial or household consumers. He usually
sells in small lots".
The retailer is the last link and the most important intermediary in the chain of distribution. Mass
production in the present day set-up is geared to the requirements of the ultimate consumer.
Retailers are directly and intimately in touch with the ultimate consumers and thus occupy a
strategic position in the whole chain of distribution. The basic feature of retail trading is the
purchase of goods from wholesalers and selling it in small lots to consumers. Thus retailing
includes all activities directly related to the sale of goods to the ultimate consumers. The retail
shop is one of the oldest and most widely used business establishments in any country. Retail
business originated through the use of peddlers engaged in house to house sales. This was
followed by opening up of small retail shops usually owned by sole proprietors or small

15 

 
partnership firms, which are frequented by customers for obtaining their requirements. In course
of time, large retail stores like department stores, co operative stores, super bazaar etc became
popular in developing countries.

In addition, people living in far off places are served by mail order houses who solicit business by
catalogues, advertisement in popular magazines or correspondence. The latest development is
retailing through automatic vending machines. Most standard items in standard packs including
food items are available in most developed countries through automatic vending machines located
at convenient places like railway stations. Air ports, commercial places etc. Milk-vending machines
are now being used by Mother Dairy in India.

Following are some of the functions of retailers:

i. Estimation of the probable demand of the consumers for the various types of goods dealt
by him.
ii. Assembling of various types of goods from different wholesalers
iii. Sale of the various products to the consumers as and when needed by them
iv. Physical movement of goods from the wholesaler's godowns to their own establishment
in case such a service is not provided by any wholesaler(s)
v. Warehousing/storage of goods to maintain uninterrupted supply of goods to the
consumers
vi. Standardisation, grading and packing of goods in consumer packs, if necessary
vii. Assumption of risk of loss of goods by fire, theft, deterioration, etc., so long as they are
not disposed of to the consumers
viii. Extension of credit to some selected regular customers
ix. Providing information about consumer tastes and preferences to wholesalers/
manufacturers.
Services rendered by the Retailers to consumers:
i. By holding ready stocks of various commodities required by the consumers, retailers
relieve the customers of the need for stocking a wide variety of goods which could be
extremely inconvenient and cumbersome.

16 

 
 ii. By keeping a good assortment of the various varieties of a particular product, say soaps,
toothpastes, etc. retailers provide a wide variety of choice to their customers.
iii. By proper display of new products, the retailers keep the consumers informed about the
availability of new products and the variety of different goods.
iv. Retailers very often guide their customers about the relative merits of the various brands
of a particular product and thus help them in the selection of goods.
v. Retailers may provide special facilities to their customers, for example, free home
delivery, extension of credit, after-sales service, etc.

Coordination between wholesalers and retailer:

Effective coordination between wholesalers and retailers would lead to a reduction in the
overall operating expenses involved in the distribution function as follows:
• Economical Buying-wholesalers know what, when and how much the retailers
will buy.
• Economical warehousing and delivery-as the wholesaler knows the nature,
amount and frequency of retailer's orders, he can plan his operation in the most
economical manner.
• Economy in selling because the effort involved in selling is substantially reduced.
• Economy in office and administrative expenses-the work involved can be better
planned and organised.
• Reduced wholesale expenses permit the wholesalers to quote lower prices to
retailers and this in turn permits a reduction in retail prices which ultimately
benefit the consumers

Type of Retailers
There is a wide variety of retail trading establishments. They vary from hawkers and peddlers to
big departmental stores. Hawkers and peddlers move from door-to-door in residential localities
to sell their goods. Pavement shops usually arrange their wares at busy street corners or
pavements of busy streets. Some traders sell their wares at weekly markets which are very
common in rural India, and are not uncommon in urban centers. For example, in every state
capital and in other major locations of every city weekly markets is a common sight. Then there

17 

 
are fixed shop retailers who operate from shops in busy markets or even in residential areas.
These stores may be either general stores dealing in a wide variety of goods needed by
consumers in their day to day requirement or may be shops dealing in a particular item, as for
example, cloth, shoes, building materials, electrical goods, confectionary, etc. Stores dealing in a
particular line may further specialise, as for example, children's wear in clothing. Then there may
be bigger stores like departmental stores and multiple shops. As all of us are familiar with small
scale retail establishments and their modus operandi, we will confine our discussion to a limited
variety of large-scale establishments.

a) Department Stores
Thus department stores are characterized by their wide product mixes. That is, they carry many
different types of merchandise, which may include clothing, appliances and other items. The
display of this merchandise is done separately within the store. The depth of the product mix
depends on the store, but department stores’ primary uniqueness is the ability to provide a wide
range of products within a single store. For example, if you visit Big Bazaar, you can shop for
clothes, vegetables, utensils, consumer durables, and groceries etc., all in one store/shop.
Thus a department store is a large-scale retail establishment comprising a number of
departments, each department specialising in a separate line of products. All these departments
are under one roof and one unified control. The consumer can find all what he needs in one store
rather than move around from shop to shop. These stores are located in almost all major cities
including major towns so that they are easily accessible to customers.

Traditionally, department stores grew up in developed countries mainly to cater to the

requirements of well-to-do people who required articles of high quality and looked forward for
comfortable shopping. But they have also become popular in urban centres in many developing
countries. The launch of departmental stores in India can be traced back to 19th century the first
being Spencer & Co Ltd. established in the year 1895 in Madras Presidency, and in 1897 it was
Akbar ally’s, in Mumbai, but in mid 1990’s followed some more departmental stores in urban
areas, especially in Metropolitan Cities.

18 

 
 Advantages
1. Department stores make shopping convenient to consumers by providing them a
whole range of goods under one roof.
2. Their central location attracts a large number of customers leading to a large
turnover. Thus they can afford to make large profits even with smaller margins.
3. Bulk-buying by department stores enables them to obtain heavy discounts from
manufacturers and thus buy at a cheaper rate. There are savings in freight charges as
well.
4. Department stores can afford to have effective advertising through press, radio and
television and thus they are able to attract more and more customers.
5. Being large business units, department stores can afford to employ skilled and expert
staff for all their operations and thus they are able to achieve a high degree of
efficiency in their working.

Disadvantages;
1. The running costs for such establishments are relatively high, as they are centrally
located.
2. The customers may not get personalised attention.
3. Experience has shown that operating costs of department stores tend to become very high
because of the necessity to run some departments at a loss to attract customers and heavy
emphasis in service. As a result, more often than not, their goods are marked at higher
prices.
4. Central location also involves higher rents and thus higher overheads. Central location
may not be convenient to persons living in far off places which mean that they will make
their purchases of articles of everyday use from nearby shops. However, in recent years,
department stores have branched themselves out to suburban areas as well to reach the
customers nearer their location.

b) Multiple Shops or Chain stores

Conventionally, the other term for chain stores is multiple shops which control a number of
stores under one common ownership and management. These multiple shops are located in
19 

 
various cities and in various localities of bigger cities. Multiple shops refer to a group of retail
stores dealing in similar types of goods. The basic idea behind the establishment of the multiple
shops is to approach the customer in his vicinity unlike department stores which seek to attract
customers to a central location. These shops could be operated by manufacturers or by
wholesalers with the basic objective of eliminating retailers. Bata Shoes and Usha Sewing
Machines are the two classic examples of products for which multiple shops have been opened by
manufacturers in India. Today, almost most of the businesses or brands do operate chain stores
for expanding and penetrating the business.

While a chain store is a retail company having more than one branch in one city/ town. Since
there are many retail points of one chain, the retailer gets the advantage of bulk purchasing.
Therefore, they can substantially lower the prices as compared to retailers who have only one
shop or unit. Furthermore, chains were able to attract many customers because of their
convenient locations, made possible by their financial resources and expertise in selecting
locations. For example 7-Eleven, Easy Day, etc.

Advantages

1. Multiple shops are able to offer lower prices due to the economics of bulk buying.
2. As sales are on cash basis, losses on bad debts are eliminated and accounting is also
made simpler.
3. Rapid turnover and common advertising and promotion strategy for all shops/retail
outlets make their operations more economical.
4. Any shortage of goods faced by one branch can be easily made up by transfer from
some other branch in the same city.
5. Since advertising material and interior layout of each shop is Similar, each shop
serves to advertise the other shops. This leads to further economy in advertising and
a quicker turnover.

20 

 
Disadvantages

1. Multiple shops/chain stores offer less variety of choice in comparison to department

stores or even ordinary retail stores offer.
2. These shops do not normally offer home delivery service or credit sales and thus lose
a good number of customers..
3. Each unit is controlled by the head office and thus branch managers cannot adjust
their sales policy to local conditions and emerging opportunities.
4. Limitations of bureaucratic organisation usually creep in so that the shop personnel
tend to lose initiative.

c) Supermarkets
Supermarkets are large, self-service stores with central checkout facilities. They carry a wide
range of food items and often non-food products. Supermarkets’ entire approach to the
distribution of food and household cleaning and maintenance products is to offer large
assortments of these goods at each store at a minimal price. For example, Reliance Fresh Stores,
Spencer’s fall under this category.

Advantages;
1. The product assortment is large. A customer can get most of their daily need products at
one place.
2. The products are relatively economical.
Disadvantages;
1. Since these are self- service stores, all types of customers may not feel comfortable in
shopping.
2. Invidualised attention cannot be given to customers.

d) Discount Retailers
Discount retailers, like Wal-Mart are characterized by their emphasis on price as their main sales
appeal. The assortments in merchandise have a wide range, but most popular items in terms of
size, colour and packaging are stored on a priority basis. The stores are large, have adequate

21 

 
space for browsing, are open for longer hours, have self-service and facilities like free parking,
etc. Online retailers such as ebay.com, Flipkart have aggregated products and offered them at
deep discounts.

Advantages;
1. As the name suggests, the major advantage is in terms of much reduced retail prices.
2. All popular items are available, with adequate space for browsing.

Disadvantage;
1. Only popular items are stocked. Products which are less in demand might not be
available.

e) Warehouse Retailers
Warehouse retailers provide a bare-bones shopping experience at very low prices. Warehouse
retailers streamline all operational aspects of their business and pass on the efficiency savings to
customers. For example, Costco generally uses a cost-plus pricing structure and provides goods
in wholesale quantities. In India we do not have this format of retailers, although Best Buy can
be a close substitute.
Advantages;
1. Products are available in bulk and bulk purchases are encouraged.
2. Cost effective.
Disadvantage;
1. These stores are not commonly available as they require huge spaces.
2. They are generally on the outskirts of towns and cities, so people have to travel long
distances.

f) Franchises:
The franchise approach brings together national chains and local ownership. An owner purchases
a franchise which gives him the right to use the firm’s business model and brand for a set period
of time. Often, the franchise agreement includes well-defined code of conduct for the owner,

22 

 
training to the staff, and on-going support by the company to the franchiser. The owner, or
franchisee, builds and manages the local business. For example McDonald’s, KFC etc.
Advantages;
1. It helps in wider availability of stores.
2. Since a code of conduct has to be followed, these stores provide standardized and good
services.
Disadvantage;
1. They operate for a set period and in case of disputes with the owner, the shops may have
to close operations.

g) Malls and Shopping centre:

Malls and shopping center are successful because they provide customers with a wide assortment
of products across many stores. If you want to buy a suit or a dress, a mall provides many
alternatives in one location. In big malls in Northern India, like Great India Place, or Select City
Walk, etc you will find many department stores like Spencer’s, Big Bazaar, etc. Strip malls are
a common string of stores along major traffic routes like national highways, while isolated
locations are freestanding sites not necessarily in heavy traffic areas. Stores in remote locations
must use promotion or some other facet of their marketing mix to appeal shoppers.
Advantages;
1. The customers can avail greater variety.
2. People can shop even while travelling as some malls are located on highways, major
traffic routes and outskirts of the main city.
Disadvantages;
1. It cannot be accessed by all the customers. Some less educated customers might not feel
comfortable in shopping in these high profile areas.
h) Online Retailing:
Online retailing is indisputably a dominant force in the retail industry. Companies like Amazon,
Myntra, etc., complete all or most of their sales online. Many established retailers have also
started their online portal to sell their products. For example Pantaloons have their own retail
outlets in major cities. They have an online platform pantaloons.com, to reach out to those
customers who do not have access to their retail outlets.
23 

 
Advantage;
1. The growth in online retailing has been primarily that it provides convenience of
shopping from home/office etc.
2. There is wider reach, as customers in distant places can also access the site for shopping/
browsing.

Disadvantage;
1. It requires an active internet connection.
2. Computer literacy and a certain level of education is a required for shopping online.

i) Non-store Retailing:
Beyond those mentioned in the categories above, there’s a wide range of traditional and
innovative retailing approaches. Vending machines and point-of-sale kiosks have long been a
popular retail device. Today they are becoming more targeted, such as companies selling easily
forgotten items such as small electronics devices and makeup items to travelers in airports.

Each of these retailing approaches can be customized to meet the needs of the target buyer or
combined to span a range of needs.

Advantage;
1. These stores are conveniently located.
2. It is good for travelers, in case they have forgotten to pack any gadget or want to
purchase gifts.
Disadvantage;
1. These are mainly for urban customers.

To sum up, wholesalers and retailers provide a variety of functions. There are different types of
retailers and wholesalers. Almost all of them provide the functions summarized through a flow
chart in the following figure;
Fig 12.4 Marketing Flows in a distribution

24 

 
12.7 FACTORS DETERMINING CHOICE OF CHANNELS OF DISTRIBUTION

The choice of channel decision is important for two reasons. The costs involved in the use of a
channel enter the price that the consumer has to pay. The channel decision also has a bearing on
other marketing decisions like price of the product and its availability, product line etc. Through
proper market feedback, an appropriate selection of channels can reduce fluctuations in
production. A rational decision regarding choice of channels of distribution should ensure (a)
maximum geographical coverage of the market, (b) maximum promotional efforts and (c)
minimum cost. Thus, choice of distribution channel depends on a variety of factors these can be
product related, company related, market related or competitor related factors. Each of the
factors has been explained in the following sub sections.

12.7.1 Product Related Factors ensure:

a) Nature of Product – In case of industrial goods like heavy machinery, radiator, power
generator etc. short channels like zero level channel or first level channel should be
preferred because they are usually technical, expensive, made to order and purchased by
few buyers. Consumer goods like televisions (LEDs), refrigerator can be distributed
through long channels as they are less expensive, not technical and frequently purchased.

25 

 
 b) Perishable and Non-Perishable Products – Perishable products like fruits or vegetables
are circulated through short channels while non-perishable products like soaps, oils,
sugar, salt etc. require longer channels.
c) Value of Product – In case of products having low unit value such as groceries, long
channels are preferred while those with high unit value such as diamond jewellery short
channels are used.
d) Product Complexity – Short channels are preferred for technically complex goods like
industrial or engineering products like machinery, generators like torches while non-
complex or simple ones can be distributed through long channels.

12.7.2 Company Characteristics:

a) Financial Strength – The companies having huge funds at their disposal go for direct
distribution. Those without such funds go for indirect channels.
b) Control – Short channels are used if management wants greater control on the channel
members otherwise a company can opt for longer channels.

12.7.3 Competitive Factors

Policies and channels selected by the competitors also affect the choice of channels. An
enterprise has to decide whether to adopt the same channel as that of its competitor or select
a different one. For example, if Nokia has selected a particular channel say Big Bazaars for
sale of their hand sets, other firms like Samsung and LG have also selected comparable
channels.

12.7.4 Market Factors

a) Size of Market – If the number of customers is small like in case of industrial goods, short
channels are preferred while if the number of customers is high as in case of convenience
goods, long channels are used.
b) Geographical Concentration – Generally, long channels are used if the consumers are
widely spread while if they are located in a small place, short channels can be used.
c) Quantity Purchased – Long channels are used in case the size of order is small while in
case of large orders, direct channel may be used.
26 

 
 Fig 12.5 Channel options in consumer goods market

MANUFACTURER OF CONSUMER GOODS 

1 2 3 4 5  6 

SALE 

SALE 
AGENT

SALE 

    SALE 
AGENT 

SHORT 

LONG CHANNELS 
CHANN OWN SHOP OR  WHOLESALER 
ELS  MAIL ORDER 

   SALE 
WHOLESALER 

     SALE 

INDIRECT 
BIGGER 
DIRECT 

REATAILERS 
RETAILER 

WHOLESALER  RETAILER 
INDIRECT 

INDIRECT 

INDIRECT 
RETAILER 

INDIRECT 
MANUFACTURER OF INDUSTRIAL GOODS 
CONSUMERS 

SALE 
SALE 
SALE 

AGENTS 

LONG CHANNELS 
AGENTS 
CHANNELS 

INDIRECT SALE 

  INDIRECT 
SHORT 

INDUSTRIAL 
DISTRIBUTORS 

INDUSTRIAL 
INDIRECT 
DIRECT 

DISTRIBUTORS 

BUYERS 

Fig 12.6 Channel options in industrial goods market

12.8 DISTRIBUTION STRATEGIES

In the above sections, we have seen the different types of intermediaries and their functions, as
well as the factors that affect the choice of intermediaries. A business entity chooses whether to
be present at all the possible places where a customer can potentially buy a product or to make its

27 

 
products available at selected places only. Depending upon the need the overall marketing
strategy, the distribution strategy is developed. The different strategies are as follows;

a) Intensive or Mass Distribution Strategies

As the name suggests that mass means distribute in large volumes and in bulk. Bulk in this
context refers to wholesale and when the firm decides to sell its products in a huge quantity.
Also, mass distribution means the company does not provide specific retailers or shops where
they sell the product. For example, different snacks and drinks outlets. You can see in different
locations and across locations.

b) Selective Strategies
In this case, companies decided to sell their products in very limited stores. When special
services are needed, e.g., certain cosmetics to be sold only through chemists, we have selective
distribution. The number of outlets at each level of distribution is limited in a given geographic
area. If the product has long useful life and consumer brand preference can be established,
selective distribution will be more profitable.

c) Exclusive Strategies
If the buyers are demanding and expect considerable product service, the company opts for
exclusive distribution. Exclusive distribution creates a sole agency or sole distributorship in a
given market. Such a system is very useful for consumer speciality goods and industrial
products. For example, Rolls Royce has very few showrooms all over India. To maintain the
exclusivity, the following four legal aspects have to be kept in mind;
i. Exclusive dealing contracts
ii. Tying Contracts
iii. Closed sales territory
iv. Franchise selling

Activity 2
a) List down all the places/outlets where you can purchase the following items;
1. Pond’s cold cream/lotion
2. Centre Fruit chewing gum

28 

 
 3. Amul Butter (100gm)
4. Apple MacBook
5. Redmi mobile phones
6. Mercedez-Benz Cars

c) What are the reasons for some of the above products are available in some places and not
in other places? Explain
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
…………………………………………………...........................................................
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
…………………………………………………………………………………………….
…………………………………………………………………………………………….

12.9 CHANNEL SYSTEMS

The channel systems are generally built around local situational opportunities, and requirements.
The channel system is a connecting link between the manufacturer, and the ultimate customer of
the products or services offered by the company. Therefore, the company has to very carefully
consider its product mix, and marketing mix, as well as the expectations from the channel
partners. The company also considers the kind of involvement it wants in the distribution
process, how much control it wants to exercise on its channel members, as well as the cost
incurred in the designing of the channel. Keeping in mind all the factors, there are three kinds of
options available for the firm to decide upon. These are as follows;

a) Vertical Marketing System:

A distribution channel structure in which producers, wholesalers and retailers act as a unified
system. They formally agree to cooperate with each other. The responsibility of functioning
of each channel member in owned by one member. This arrangement is done through

29 

 
 contractual agreement. One channel member owns the other, has contracts with them so that
they all co-operate. The member who has authority over all the others members can be the
manufacturer, wholesaler or the retailer. They work in cohesion, and there will be no
conflicts whatsoever between channel members. This type of channel came into existence to
avoid disagreements and conflicts among channel member. As independent members try to
force their influence to meet their objectives, there is always a possibility of conflict and
powerful channel member influencing the other. Once the channel operates as a one system
and is managed by one member, there is much clarity and coordination among channel
members to achieve the channel objectives. For example, Ikea, Starbucks, etc. The
economies are achieved through size, bargaining power and elimination of duplicated
services. To sum up a vertical marketing system is the type of cooperation between the
members of a distribution channel. It includes a producer, wholesaler, and retailer
collaborating to deliver customers the necessary product and aims at achieving better
efficiency and economies of scale.

b) Horizontal Marketing System:

A channel arrangement in which two or more companies at one level join together to follow a
new marketing opportunity where they can combine their resources and use, them optimally.
These companies are generally unrelated. This technique is adopted by companies which
want to minimize the risk of capital losses, or want to utilize idle manpower, or when they
lack technical knowhow, or lack adequate marketing expertise. For example, Johnson and
Johnson have joined hands with google, with an objective of having a robotic-assisted
surgical platform. Horizontal arrangements can be between two manufacturers, two,
wholesalers, or even two retailers.

c) Hybrid Marketing Systems:

Multi-channel distribution system in which a single firm sets up two or more marketing
channels to reach one or more customer segments. As the name suggests the company can
have a mix of vertical marketing system and horizontal marketing system, depending upon
the area or the customer base it wants to reach.

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12.10 CHANNEL CONFLICT

Even when a company has set up an effective distribution system, some friction may arise
between the channel members or between the company and channel members. This happens
generally due to conflicting business interest. There are generally three types of channel conflict;

a) Vertical Channel conflict: It is the conflict between different levels in the same channel.
For example, conflict between distributor and retailer.

b) Horizontal channel conflict: It occurs between members at the same level of the
distribution channel. For example, two retailers may have a conflict if they target the
same customers by giving price cuts.

c) Multi-channel conflict: When the company selects, two or more channels to sell its
product in the same market. A company may sell its product to wholesalers and some
important retailers simultaneously in one market. Here the wholesaler may feel that the
company is not giving him sufficient attention and is bypassing him.

12.10.1 Causes of Marketing Channel Conflict:

i. Role Ambiguity: The uncertain act of an intermediary in a multi-channel arrangement
may lead to disturbance in the channel of distribution and cause conflict among the
intermediaries.
ii. Incompatible Goals: When the manufacturer and the intermediaries do not share the
same objectives, both work in different directions to meet their ends, then, these results in
channel conflict.
iii. Marketing or Strategic Mis-Alignment: Sometimes, two-channel partners promote the
manufacturer’s product in a different manner, which created two different images of the
same product in the consumers’ mindset, which creates conflicting brand perception.
iv. Difference in Market Perception: The manufacturer understands of the potential market
and penetration into a specific region or territory may vary from the perception of the
intermediaries, which can create conflict and reduce the intermediary’s interest in
capturing that particular market.

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 v. Change Resistant: When the channel leader plans to modify the distribution channel, the
intermediaries may or may not accept this change. Thus, it may result in a condition of
discord or non-cooperation.
vi. Improper Geographic or Demographic Distribution: If the sales territory has a narrow
consumer base, and the channel leader allows many selling partners, they tend to lose
interest.

12.10.2 Managing channel conflict:

The conflict between channel members can be resolved in the following ways;

a) Mediation, Arbitration and Diplomacy: To resolve a dispute, the manufacturer can adopt
a strategy of intervention where a third person intervenes to create harmony. The other
option is arbitration, where an arbitrator listens to the argument of the parties involved in
a conflict and declares a decision. Alternatively, the parties can resort to diplomacy
where the representatives of both the parties discuss and find an amicable solution.
b) Co-optation: The manufacturer should hire an expert who has already gained experience
in managing the channel conflicts in other organizations, as a member of the grievance
redressal committee or board of directors, for addressing such conflicts.
c) Dealer Councils and Trade Associations: To handle the horizontal or vertical conflicts,
the manufacturer forms a dealer council where the dealers can unanimously put up their
problems and grievances in front of the channel leader. To bring in unity among the
channel partners or intermediaries, they can be added as members in trade association
which safeguards their interests.
d) Superior Goals: Establishing a supreme goal of the organization and aligning it with the
individual goals or objectives of the channel partners may reduce the channel conflicts.
e) Regular Communication: The channel leader should take regular feedback from the
channel partners through formal and informal meetings to know about market trends and
dynamics. In addition, the channel partner’s issues and conflicts can be addressed through
frequent interactions.
f) Legal Procedure: When the conflict is critical and uncontrollable by the channel leader,
the aggrieved party can seek legal action, by filing a lawsuit against the accused party.
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 g) Fair Pricing: Most of the channel conflicts are a result of the price war, and therefore,
these can be resolved by ensuring that products have the same price in all the territories
and a fair margin is given to the channel partners.

12.11 DISTRIBUTION MANAGEMENT CHALLENGES

Distribution challenges can arise from a variety of disruptions.

i. Natural disruptions include severe weather events, raw material shortages (e.g., bad crop
years), pest damages, and epidemics or pandemics. Human disruptions include riots,
protests, wars and strikes.

ii. Transportation disruptions include transport vehicle disrepair, maintenance downtimes

and accidents, as well as delayed flights and restrictive or new transportation regulations
such as those regularly seen in trucking.

iii. Economic challenges include recessions, depressions, sudden drops or increases in

consumer or market demands, new or changes in fees or compliance costs, changes in
currency exchange values and payment issues.

iv. Product disruptions include product recalls, packaging issues and quality control issues.
Buyer disruptions include order changes, shipment address changes and product returns.

12.12 ELEMENTS OF DISTRIBUTION MANAGEMENT

These include the integral components in the distribution system. As the distribution has
evolved over a period of time, new elements have also come into the system. The intervention of
technology has been a great facilitator as well as disrupter in the existing flow of distribution
systems. The various components and elements have been classified as traditional and emerging
elements in the following sub sections;

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12.12.1 Traditional Elements:

i. Supply Chain- A supply chain is defined as the entire process of making and selling
commercial goods, including every stage from the supply of materials and the
manufacture of the goods through to their distribution and final sale. This term was
coined by Keith Oliver in 1982. APICS, the global association for supply chain
management professionals, defines supply chain management as: “the design, planning,
execution, control, and monitoring of supply chain activities with the objective of
creating net value, building a competitive infrastructure, leveraging worldwide logistics,
synchronizing supply with demand, and measuring performance globally.”

ii. Logistics- It is the business of transporting, supplying and delivering goods. Michigan
State University’s professors (2020) define logistics as activities which include
transportation, warehousing, packaging and more – that move and position inventory and
acknowledge its role in terms of synchronizing the supply chain.

iii. Purchase order and invoicing system -The creation of a purchase order is the first step in
a business transaction, it is issued by the buyer and authorizes a seller to provide a
product or service at a specified price. The invoice is a bill issued by the seller when that
product has been delivered or the service has been completed.

12.12.2 Emerging elements:

i. Block Chain- Block chain can enable more transparent and accurate end-to-end tracking
in the supply chain: Organizations can digitize physical assets and create a decentralized
immutable record of all transactions, making it possible to track assets from production to
delivery or use by end user.

ii. VRM- Vendor relationship management (VRM) is a category of business activity made
possible by software tools that aim to provide customers with both independence from
vendors and better means for engaging with vendors. These same tools can also apply to
individuals' relations with other institutions and organizations.

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 iii. CRM- CRM stands for Customer Relationship Management. It's a technology tool used
to manage interactions with customers and potential customers. A CRM system helps
organisations build customer relationships and streamline processes so they can increase
sales, improve customer service, and increase profitability.

iv. IMS- An inventory management system (or inventory system) is the process by which
you track your goods throughout your entire supply chain, from purchasing to production
to end sales. It governs how you approach inventory management for your business.

v. WMS- A warehouse management system (WMS) is a software solution that offers

visibility into a business' entire inventory and manages supply chain fulfilment operations
from the distribution centre to the store shelf.

vi. TMS- A transportation management system (TMS) is a logistics platform that uses
technology to help businesses plan, execute, and optimize the physical movement of
goods, both incoming and outgoing, and making sure the shipment is compliant, proper
documentation is available.

12.13 SUMMARY

Distribution is an important component of the marketing mix. For an effective implementation

of the marketing activities, distribution plays an important role. The channel intermediaries,
namely the wholesalers, retailers, jobbers, C &F agents etc, facilitate the smooth movement of
goods and services from the manufacturers to the ultimate consumers.

As the marketing landscape has changed over the years, the roles and responsibilities of
intermediaries has also changed. Some traditional channels have graduated to modern retail
concepts like hypermarkets, chain stores etc. Internet technology has been a great disrupter as
well as enabler in better distribution.

Supply Chain management has evolved as a fully fledged discipline so also Customer
Relationship Management, Transport Management are the evolving disciplines in these
changing times.
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12.14 SELF-ASSESSMENT TEST

1. How does distribution add value to the marketing efforts? Take the case of any FMCG
company and explain the distribution network in urban as well as rural areas.

2. Describe the importance of wholesalers in the distribution process. Explain with the help of
suitable examples from the textile industry.

3. “The retailing landscape has changed drastically with the advent of digital age”. Elucidate
citing relevant examples.

4. What are the challenges and opportunities faced by distributors in developing countries? How
is the distribution system in India different from any developed nation like the USA?

5. Describe the concept of channel systems. Different channel systems can exist within the same
company leading to Channel conflict. Explain the causes of channel conflict and suggest ways
of resolution of such conflicts with suitable examples.

6. What kind of distribution channel (direct or indirect) would you recommend for each of these
products and why?

a) Health Drink
b) A new, exclusive, premium priced range of sanitary fittings (such as wash basins, bath
tubs, etc.).
c) Textile machinery
d) Branded spices
e) Industrial lubricant.

7. A new toy manufacturing company is planning to launch its toys in the market and wishes
to appoint retail outlets in all the major towns. What should be the criteria for selecting
appropriate outlets? Specify the distinct attributes or features that the company should look
for in the retail outlets.

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12.15 FURTHER READINGS

1. Richard R Still, Edward W Cundiff, Norman A P Govoni, Sales and Distribution

Management, 6 th edition, Pearson, 2017.

2. Krishna K Havaldar and Vasant M Cavale, Sales and Distribution Management, Tata
McGraw Hill, 2nd Edition, 2011.

3. Ramendra Singh: sales and distribution management: a practice-based approach, Vikas

Publication, 2016.

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