Year: 2020

Retailing is a distribution process, in which all the activities involved in selling the merchandise directly to the final consumer (i.e. the one who intends to use the product) are included. It encompasses sale of goods and services from a point of purchase to the end user, who is going to use that product.

Any business entity which sells goods to the end user and not for business use or for resale, whether it is a manufacturer, wholesaler or retailer, are said to be engaged in the process of retailing, irrespective of the manner in which goods are sold.

Retailer implies any organization, whose maximum part of revenue comes from retailing. In the supply chain, retailers are the final link between the manufacturers and ultimate consumer.

Types of Retailing

1. Store Retailing

Department store is the best form of store retailing, to attract a number of customers. The other types of store retailing includes, speciality store, supermarket, convenience store, catalogue showroom, drug store, super store, discount store, extreme value store. Different competitive and pricing strategy is adopted by different store retailers.

2. Non-store Retailing

It is evident from the name itself, that when the selling of merchandise takes place outside the conventional shops or stores, it is termed as non-store retailing.

It is classfied as under:

• Direct marketing: In this process, consumer direct channels are employed by the company to reach and deliver products to the customers. It includes direct mail marketing, catalog marketing, telemarketing, online shopping etc.
• Direct selling: Otherwise called as multilevel selling and network selling, that involves door to door selling or at home sales parties. Here, in this process the sales person of the company visit the home of the host, who has invited acquaintances, the sales person demonstrate the products and take orders.
• Automatic vending: Vending machines are primarily found in offices, factories, gasoline stations, large retail stores, restaurants etc. which offer a variety of products including impulse goods such as coffee, candy, nnewspaper, soft drinks etc.
• Buying service: The retail organization serves a number of clients collectively, such as employees of an organization, who are authorized to purchase goods from specific retailers that have contracted to give discount, in exchange for membership.

3. Corporate Retailing

It includes retail organizations such as corporate chain store, franchises, retailer and consumer cooperatives and merchandising conglomerates. There are a number of advantages that these organizations can achieve jointly, such as economies of scale, better and qualified employees, wider brand recognition, etc.

With the emergence of new forms of retailing, competition is also increasing between them. It is one of the fast-growing and challenging industry.

Importance of retail marketing cannot be denied for today’s manufacturers. Retail stores play an important role in high-level exposure of businesses and widespread distribution of products. In retail stores, retailers get opportunities to interact with customers (the ultimate consumers of your products).

In addition to this, you can promote products to them and also provide chances to them view and test products before making a purchase decision.

The Importance of Retailing

1. Sales to Ultimate consumers of the products

In a retail transaction, the goods and services are sold to ultimate or final consumers. The products don’t get resold after this transaction. Goods and services sold at this point can be used for various purposes such as for domestic use, household use or for industrial use.

Hence, at this point manufacturer can interact with his consumers through retailer and know about their views.

2. A convenient form of selling quantity-wise

The meaning of word retail is to break down the goods in small pieces and reselling them. The goods are bought by the retailer in large quantities from the middleman or manufacturer and bulk is divided into small quantities and sold to consumers as per their requirements.

To do this, the retailer can repack goods in various quantities and shapes so that it is convenient for consumers to choose and carry them to their homes.

3. Convenient Place and Location

Retailer stores are generally set up at locations which are convenient for consumers to reach. A retail store can be of various forms such as it could be a small shop, small store, or a multiplex. Goods can be sold through internet and mobile apps as per the convenience of consumers.

Moreover, shopping online is becoming a new trend because of the advancement in technology and courier services. Therefore, more and more companies are taking their business online where customers can view products at the comfort of their home and buy them.

4. The lifestyle of the people are shaped by retailing

Retailing is an integral part of modern society. People highly depend on retail stores to lead a comfortable life. In the past time, goods and service were made available through the process of trading.

But in present times trading is replaced by buying and selling goods which makes retail stores an important part of the society.

5. Retail businesses contribute to the economy

In many countries, the retail business is one of the biggest contributors to the Gross Domestic Product (GDP) and its contribution has increased as compared to past and is also increasing by leap and bounds. Retailing is a driving force of the economy and its ambition is to encourage sustained growth.

6. Retail dominates the supply chain

In a supply chain, goods and services flow from the manufacturer or a service provider to final consumers and when there is a huge number of consumers and they are distributed worldwide then the role of retail stores become much more important. Retailers play the role of a connecting link between a manufacturer and final consumers.

Because of their crucial importance in the supply chain the structure of retail stores has improved gradually over the years. In modern times, retailing is categorized by large multiple chains and not by small scale independent retail stores. The increasing importance and formalization of retailing have made it a powerful part of the supply chain.

Moreover, the comparison of retailers is being made with manufacturers which shows the increasing dominance of retailers in the distribution channel. In addition to this, the annual turnover of a few retailers such as Wal-Mart is much more than the annual turnover of companies.

All these points show that retail is the most dominating part of the whole supply chain.

7. Retail is interdisciplinary

Retailing has developed from a number of interrelated disciplines such as economics, geography, management, economics, and marketing. Economics is useful to manage the finances of a store. The good knowledge of geography is important to make the right choice of location to open a store.

Management plays an important role in managing your staff and inventory and similarly, right marketing helps you to penetrate in the market.

8. Retailers provide maximum employment

At the present time, the retail world employs maximum people. As per an estimation, one in nine of the workforces is employed in the retail industry. Moreover, two third of the total workforce in the retail world is women and more than half employees in retailing are part-time employees, which provides flexibility to workers to adapt to the particular needs of any employer

In the past, the salaries paid to employees were very low. Therefore, people worked on a temporary basis in the retail sector. But as the work conditions and salaries paid in the retail sector are improving more and more people are considering retail jobs as a permanent career.

9. Retailing is an important subject area of study

Because of the importance of retailing more and more emphasis is being paid to the area of retailing. Retailing is a separate subject of studies like management and marketing. Researches have been conducted and professionals being hired to make this sector flourish.

In addition to this, academic journals concentrating on retailing are being published worldwide.

10. Retailing offers scope for expansion in other countries

Retail provides a great opportunity to expand in international markets. A retailer who wants to extend their business by selling their goods in other countries opens stores in different countries to increase the number of consumers of their products.

However, it is not easy to expand your business as it requires a lot of paperwork and formalities to be done to be able to get clearance to take your business to other countries.

11. Retailers rule the channel of distribution

Retailers are becoming the rulers of a channel of distribution. In past times, the power was in the hand of suppliers because of a limited number of suppliers in the market. Retailers had no other option than getting goods from the supplier to sell in their stores. But in present times there are many suppliers for a single type of product.

Therefore, a retailer can make a decision for which brand to stock in their stores and consumers buys products stock provided by the retailers. Therefore, retailers play an important role in shaping the demands of consumers.

12. Provides Comfort and facilities for shopping

Shopping has become a pleasant experience because of all the facilities and comfort provided by chain stores, shopping malls, multiplexes, etc. people now don’t think shopping as work but they look forward to it and consider it as a stress releasing and family activity.

The giant retailers provide various facilities such as air conditioning, parking, entertainment, kids play section, lifts, trolleys to carry goods, and food facilities, etc. and retailing through mobile phones ensures doorstep delivery on all orders placed through the website or mobile apps.

13. Provide services to the manufacturer

The retailer is the end part of the supply chain and he is the one who interacts with the customers. Therefore, he has the opportunity to know about the views of customers and their likings and disliking. Retailer gathers this information from his customers and shares it with the manufacturer.

This helps the manufacturer to make the required changes in the quality of the product and improve its services to satisfy their customers. Therefore, a retailer plays an important role in helping the manufacturer to increase his revenue generation.

14. Provision of warehousing and storage

Warehousing is a big problem for a manufacturer. A retailer buys goods in advance from the manufacturer and reduces the problems of warehousing and storage for the manufacturer.

In addition to this, the retailer helps in increasing the sales of goods by displaying them nicely in the retail store.

15. Advantage of an expert and specialist

Retailers are experts and have experience in selling products to customers. he has a better understanding of customers and their likes and dislikes because of this regular contact with them. He stores products as per the need of customers and sells them to customers in different sizes and shapes.

In addition to this, with their experience of selling and knowledge about the product they assist customers to choose the right product for them.

16. Creates utilities and value

Retailer increases the value of the product by creating a place, time, and utility in the distribution of goods. Retailers buy products in bulk and break them in small quantities and sell them in small packs. In this way, he creates form utilities.

Goods manufactured in one corner of the world are consumed in other parts of the world. He buys products from manufacturers and sells them in the local market thereby creating place utility.

The retailer buys products in advance and place them in his store and sell them to the consumers whenever the need arises. By creating these three utility value of goods is increased. The retailer makes sure the regular production and consumption of goods.

Even though non store retailing is growing, most of the retailers are still selling from retail store space. Some of these retailers are very small single-store operators, and some are huge superstore discounters. Each location selected resulted from an effort to satisfy the needs of the particular market each was designed to serve. Whether it was the customer’s need for convenience, their desire to do comparison shopping, the extent of the purchasing power in a market area, of the transportation facilities available, many factors together led to the development of different kinds of retail locations. There is an old saying that the value of real estate is determined by three things: location, location, and location.  A wall street journal study looked at the largest store as measured by gross sales of the twenty largest brands. Not surprisingly, in nearly every case, a unique location was a major factor.

Retail stores should be located where market opportunities are best. After a country, region city or trade area, and neighborhood have been identified as satisfactory, a specific site must be chosen that will best serve the desired target market.  Site selection can be the difference between success and failure. A through study of customers and their shopping behavior should be made before a location is chosen.  The finest store in the world will not live up to it potential if it is located where customers cannot or will not travel to shop. The primary role of the retail store or center is to attract the shopper to the location. Alternatively, retailers must take the store to where the people are, either at home or in crowds. Examples of taking the store to where the crowds are include airport location, theme parks and vending machines.

Every retail store strives for its competitive advantage. For some stores, it is price. For others, it is promotional expertise of the special services that are offered.  Despite any differences among the various stores that may competing for the shopper’s penny  location offers a unique asset for all stores because once a site is selected, it  cannot be occupied by another store. This advantage, however, points to the importance of location analysis and site selection. Once a facility is built, purchased, or leased, the ability to relocate may be restricted for a number of years. In short, location and site selection is one of the most important decisions made by a retail owner.

There are many factors, need to be considered in the retail location analysis. The key ones include:

Macro Factors Affecting Retail Location Decisions (Country and Regional Analysis)

There is a need to recognize that country analysis will be an increasingly important aspect of the location strategy as merchants look for growth opportunities.  After the decision is made as to what country or countries are to be considered, a regional analysis will need to be done. Most countries are not completely homogeneous and need to be broken down into regions in order for a retailer to better understand the market characteristics.  Regions may differ in many characteristics such as population demographics and density, climate, cultures, and distribution infrastructure.  The importance of examining countries and regions by their macro characteristics can be illustrated by the importance of today’s distribution infrastructure to the concept of flow-through replenishment. This concept is based on having information on consumer demand that allows the flow of goods to be regulated by actual needs in the retail stores. Consumer demand is acquired at the point of sale terminal when the UPC bar code is scanned for each product sold. Computers maintain continuous records of product flow. Daily or weekly reorders go directly. To manufactures so that exact quantity replacement can be shipped to each individual store or routed to the retailers central distribution center. If this is a part of the firm’s competitive advantage, the country or region must have the transportation, computer, and warehousing infrastructure necessary to support the strategy.

1. Demographic Characteristics

Demography is the study of population characteristics that are used to describe consumers. Retailers can obtain information about the consumer’s age, gender, income, education, family characteristics, occupation, and many other items. These demographic variables may be used to select market segments, which become the target markets for the retailer. Demographics aid retailers in identifying and targeting potential customers in certain geographic locations. Retailers are able to track many consumer trends by analyzing changes in demographics. Demographics provide retailers with information to help locate and describe customers. Linking demographics to behavioral and lifestyle characteristics helps retailers find out exactly who their consumers are. Retailers who target certain specific demographics characteristics should make sure that those characteristics exist in enough abundance to justify locations in new countries or regions.

2. Economic Characteristics

Businesses operate in an economic environment and base many decisions on economic analysis. Economic factors such as a country’s gross domestic product, current interest rates, employment rates, and general economic conditions affect how  retailers in general perform financially. For example, employment rates can affect the quantity and quality of the labor pool available for retailers as well as influence the  ability of customers to buy.  Normally, growth in a country’s gross domestic product indicates growth in retail sales and disposable income. Retailers want to locate in countries or regions that have steadily growing gross national products. As interest rate rise, the cost of carrying inventory on credit rises for retailers and the cost of purchasing durable goods arises for consumers. Countries that have projected significant increases in interest rates should be evaluated very carefully by retailers. Retailers will also be affected by a rise in employment rates; this lowers the supply of available workers to staff and support retail locations.

3. Cultural Characteristics

Cultural characteristics impact how consumers shop and what goods they purchased. The values, standards, and language that a person is exposed to while growing up are indicates of future consumption behavior.  Consumers want to feel comfortable in the environment in which they shop. To accomplish this, retailers must understand the culture and language of their customers. In a bilingual area, a retailer may need to hire employees who are capable of speaking both of the languages spoken by the customers.  Some retailers have found it useful to market to the cultural heritage of their consumers, while other retailers seek to market cross-culturally. Normally larger cultures are made of many distinct subcultures. Retailers need to be aware of the different aspects of culture that will affect the location decision. For example, greeting cards sold in the United States normally have verses on the inside, while greeting cards sold in Europe normally do not.

4. Demand

The demand for a retailer’s goods and services will influence where the retailer will locate its stores. Not only must consumers want to purchase the goods, but they must have the ability or money to do so as well. Demand characteristics are a function of the population and the buying power of the population that the retailer is targeting.  Population and income statistics are available for most countries and regions with developed economics. In developing countries the income data may be little more than an informed guess. These statistics allow the comparisons of population and a basic determination of who will be able to purchase the goods carried in the store. This is of utmost importance for retailers, whether they carry higher-priced goods such as  durables, furniture, jewellery, and electronics or lower-priced goods-such as basic  apparels or toys.

5. Competition

Levels of competitions vary by nation and region. In some areas, retailers will face much stiffer competition than in other areas. Normally, the more industrialized a nation is, the higher the level of competition that exists between its borders. One of the environmental influences on the success or failure of a retail establishment is how the retailer is able to handle the competitive advantages of its competition. A retailer must be knowledgeable concerning both direct and indirect competitors in the marketplace, what goods and services they provide, and their image in the mind of the consumer population. Sometimes a retailer may decide to go head to head with a competitor when the reasons are not entirely clear.

6. Infrastructure

Infrastructure characteristics deal with the basic framework that allows business to operate. Retailers require some form of channel to deliver the goods and services to their door. Depending on what type of transportation is involved, distribution relies heavily on the existing infrastructure of highways, roads, bridges, river ways, and railways. Legal infrastructures such as laws, regulations and court rulings and technical infrastructures such as level of  computerization, communication systems, and electrical power availability also  influence store location decisions.  Distributions play a key role in the location decision especially for countries and regions. There is a significant variance in quantity and quality of infrastructures across countries. A retailer whose operation depends on reliable computerization and communications would not need to even consider a country or a region that did not meet those criteria.  The legal environment is a part of the overall infrastructure a firm must consider. For example, many countries require non-native businesses to have a native partner before establishing retail locations. The legal requirements a retailer operates under in one country will not be the same for another country or  region and may be different from state to state within the United States.

In conclusion, the demographic, demand, competition, cultural, infrastructure and economic characteristics are important in analyzing  a country  or region.

Micro Factors Affecting Retail Location Decisions (Trade Area Analysis)

It is important to define the market area of any potential location. You know that a retail market is any group of individuals who possess the ability,  desire and willingness to buy retail goods or services. The residents of any neighborhood, city, region, country, or group of countries may constitute a retail  market. The retail trade is defined as the geographic area within which the retail customers for a particular kind of store live or work. The customer profile of a segment of the people within the geographic area that the store decides to serve is the target market.

1. Demographic Factors

We have said that perhaps no variables are more important to the retail manager than the demographic dimensions of a market. Whether the retail trade area is the central city, a growing suburb, or a quiet rural area, you must understand the people who live and work there.  Once the basic characteristics are identified and a judgement is made as to how far one of the customers would travel for the goods, the total market has been determined.  Factors, such as current population, potential population, population density, age, income, gender, occupation, race, proportion of home ownership, average home value, and proportion of single versus multifamily dwellings are important considerations.  Where consumers live, their commuting patterns, and whether their numbers are increasing or decreasing are but a few of the dynamic characteristics of the trade area population that the retailer must consider. It may be quite helpful to construct maps that display where certain types of customers reside.

As you learned, market segmentation is the process of grouping individuals according to characteristics that help define their needs. Each of these groups of similar individuals is called a market segment. No matter how many different segments you may find within any given retail market, you may choose to satisfy only one or just a few of them. Each segment that a retailer attempts to satisfy is a target market.

2. Economic Factors

Economic characteristics have a significant impact on country and region selection. The impact on trade area is even greater. The local unemployment rate will effect the local labor pool and the amount of money that consumers have to  purchase products. The most important economic characteristics for the retailerare per capita income and employment rates.

3. Subculture

Subculture have more of an impact on market and trade area selection than on country or region selection. One must normally be at the market or trade level in order to accurately gauge the location and characteristics of a subculture.  An ethnic subculture creates market segments for goods ranging from food and cosmetics to clothing and entertainment. At the same time religion, language, and family structure create both opportunities and problems.

4. Demand

The economy of an area under consideration for location should provide a general indicator of the long —range retail opportunities present within an area.  The number, type, trends, and stability of industries that might affect business in the market area need to considered. Employment rates, total retail sales, segment retail sales, household income, and household expenditures all provide information from which the economic stability of the area can be ascertained. The buying power index (BPI) indicates the relative ability of consumers to make purchases. The BPI for most metropolitan statistical areas (MSAs) in U.S. is published yearly by Sales and Marketing Management in their survey of buying power. The BPI for potential markets can be directly compared to help make a choice of market area.

5. Market Potential

Once the retail trade area has been identified and the relative segmenting variables applied, certain quantitative factors must be considered to decide if the area is suitable. These factors include the retail market potential of a retail trade area and the retail sales potential. Retail market potential is the total dollar sale that can be obtained by all stores selling a particular retail product, product line, or group of services within the retail trade area if everything was maximized.  Therefore, retail sales potential is a part of retail market potential. A retail sales forecast is the specific estimate of sales volume that a retailer expects. Because the retailer is new in the area or because of the entry of a new competitor, the sales forecast may be less than the estimate of retail sales potential.  There are two major determinants of the market potential for a trade area:  the number of potential customers within the area and the amount of money consumers spend for the product or product line in question. For example, a retailer can estimate the market potential by multiplying the number of potential  consumers in the trade area by the average amount they spend for the product.  Generally, market potential figures are based on yearly estimates. Suppose, for example, that 50,000 potential customers reside in the trade area. If it is known that each potential customer spends approximately $79 per year on gifts, the retail  market potential for gift sales in that retail trade area would be $3,900,000.  Population statistics are commonly used in arriving at market potential and are expressed on a per capita, a per household, or a per family basis. The other factor is per capita expenditure.

A retail trade area may have little relationship to these political boundaries. The merchant may be able to get a more detailed breakdown of population by checking with:-

• The local chamber of commerce for any detailed studies it any have made.
• The local newspaper for circulation statistics
• The local post office for the number of box holders on delivery routes
• The local public utilities office for information on the number of residential electric or gas meters
• The city planning office, fire department, and police department for information on the number of residents within a specific retail trade area.

Regardless of the sources used, however, the merchant will probably find it necessary to adjust population information for a retail trade area by using the data collected in combination with individual judgement about the area.  In addition to population information, the retailer must collect data on the number of dollars being spent by consumers for the product or product line in question.

6. Sales Potential

You learned that the retail sales potential for a firm is the estimated dollar sales that a retailer expects to obtain in a particular retail trade area over a given  period. An accurate appraisal of sales is important, because it will dictate the amount of inventory that will be purchased, the number of employees that will be  needed, the dollars that can be spent for expenses, and the amount to debt capital  the business can comfortably afford. To arrive at such a figure, one must consider.

• The competitive strengths in the market
• The amount of business that can be drawn from substitute products
• Management’s own expertise

To assess the competitive strengths in the market, the retailer can start with an assessment of the total market potential. If the retailer assumes that the business will obtain at least average amount of sales being realized by the competitive business in the trade area, an estimate of the sales potential can be made. If there are five business (the new retail establishment makes six), each business might be expected to have one-sixth of the business available in the trade area.  Although this approach may not seem as sound as that used in measuring market potential, it does provide an analysis of competitive strength, and the  figure derived is usually conservative. This approach can be useful in particular situations.

7. Index of Retail Saturation

Competition exists when more than one store compete for the same market segment or target market. In some situations, a firm might like to be only one of its type in a given market area. This is particularly the case for specialty or convenience goods. On other occasions, however, good strong competition will enhance the overall business potential of a given area because it will draw shoppers from a greater distance to compare prices or stores. This is particularly the case with goods for which people often make shopping comparisons. Maps may be developed to show retail locations of competitors by relative size and merchandise mix.

8. Infrastructure

We have talked about how the infrastructure including roads and highways, distribution warehouses, communications facilities, and labour pool must be adequate for a country or region. The same is even more true for trade area analysis. The legal infrastructure can also impact the trade area selected for your store. State and local laws vary concerning advertising, zoning, and sign restrictions for retailers.

Product Strategy

A product strategy draws from the ultimate vision of the product. It states where the product will end up. By setting a product strategy, you can determine the direction of your product efforts.

Similar to making effective use of a map, you first need a destination, and then you can plan your route. Just as a business has a strategic vision of what it wants to be when it grows up, the product has its own strategy and destination.

The product strategy forms the basis for executing a product roadmap and subsequent product releases. The product strategy enables the company to focus on a specific target market and feature set, instead of trying to be everything to everyone.

Creating your product strategy

To create your product strategy, start with identifying the market problems you would like to solve. This includes interviewing your target market, understanding the competitive landscape and identifying how you will differentiate yourself.

Your product strategy will change over time as you learn more about your market, and as (if) you decide to enter different markets. Listening to your market and developing your product strategy is a circular process; as you learn more, you will evolve your product strategy and the problems you solve.

Example of Product strategy

Here is a brief example of a product strategy. Your product strategy will vary, and will probably be longer, but should follow the theme of the five questions above.

• We build quality kitchen hardware for residential kitchen customers.
• Our customers are young North American families who want kitchen hardware that can stand the wear and tear of young children. They are interested in materials that are safe for children and eco-friendly.
• We sell our products through a retail channel.
• Our products are priced per unit, and are considered “high-end” hardware solutions.

Power of the product strategy

The power of a product strategy comes from what you define as well as what you exclude. By identifying a particular target market in your product strategy, you are also excluding other markets. This helps your company to understand which projects fall outside the product strategy and distract from strategic goals.

Merchandise Strategies

Merchandising strategies are a valuable component of any retailer’s success, but a “one size fits all” approach will not work in today’s competitive environment. Strategies should vary by category and sometimes by segment depending on the overall objective for the brand, category, and retailer. Each strategy should be carefully crafted to target a specific objective such as increasing foot traffic, inviting new customers to try your brand, developing loyal committed customers or increasing sales.

Developing and managing merchandising strategies should be a collaborative effort shared between the retailer and the manufacturer. Manufacturers are the true experts in their brand’s categories.  A smart retailer should take full advantage of the brand’s knowledge and expertise to help grow the category and sales.

The category captain role is a key factor in a savvy retailer’s success. This person is a trusted business partner and ally to the retailer. Together, the retailer and manufacturer can help satisfy a greater number of consumers, grow the category, increase consumer takeaway and beat the competition.

Strategies include a variety of components: pricing, promotion, product placement, and support, consumer education, etc. Together, the different components help achieve the retailer’s goal. Here are seven to try.

7 effective category merchandising strategies

1. Profit Generating

Higher gross margin and higher turns. This strategy focuses on the ability of the category to generate profits. Margins can be higher in this area due to the value added, higher-quality products in these categories.

2. Cash Generating

Higher turns, frequently purchased items. This strategy focuses on the ability of the category to generate incremental cash flow.

3. Turf Defending

Used by retailers to draw traditional consumers. This strategy focuses on aggressively positioning the category to appeal to the consumer by highlighting comparable items with key competitors. This strategy also focuses on keeping your existing customers happy and returning. Loyalty cards, aggressive pricing and promotion strategies, consumer education, high-value coupons, etc. are all designed to help maintain a loyal customer base. For example, Organic Chicken Noodle Soup priced aggressively compared to target retailers.

4. Traffic Building

High volume share, frequently purchased items, a high percentage of sales. This strategy focuses on drawing consumer traffic into the store and/or into the target category.

5. Transaction Building

Higher ring/transaction size, impulse purchases. This strategy focuses on increasing the size of the average category transaction.

6. Image Creating

Frequently purchased, highly promoted, impulse, unique and seasonal. This strategy communicates an image to the consumer in one of the following areas: price, service, quality, specialty items or assortment.

7. Excitement Creating:

Impulse, lifestyle-oriented and seasonal items. This strategy communicates a sense of urgency or a limited-time sensitive opportunity to the consumer.

Space management is one of the crucial challenges faced by today’s retail managers. A well-organized shopping place increases productivity of inventory, enhances customers’ shopping experience, reduces operating costs, and increases financial performance of the retail store. It also elevates the chances of customer loyalty.

Space Management

It is the process of managing the floor space adequately to facilitate the customers and to increase the sale. Since store space is a limited resource, it needs to be used wisely.

Space management is very crucial in retail as the sales volume and gross profitability depends on the amount of space used to generate those sales.

Optimum Space Use

While allocating the space to various products, the managers need to consider the following points:

(a) Product Category

• Profit builders: High profit margins-low sales products. Allocate quality space rather than quantity.
• Star performers: Products exceeding sales and profit margins. Allocate large amount of quality space.
• Space wasters: Low sales-low profit margins products. Put them at the top or bottom of shelves.
• Traffic builders: High sales-low profit margins products. These products need to be displayed close to impulse products.

(b) Size, shape, and weight of the product.

(c) Product adjacencies: It means which products can coexist on display?

(d) Product life on the shelf.

Retail Floor Space

Here are the steps to take into consideration for using floor space effectively:

• Measure the total area of space available.
• Divide this area into selling and non-selling areas such as aisle, storage, promotional displays, customer support cell, (trial rooms in case of clothing retail) and billing counters.
• Create a Planogram, a pictorial diagram that depicts how and where to place specific retail products on shelves or displays in order to increase customer purchases.
• Allocate the selling space to each product category. Determine the amount of space for a particular category by considering historical and forecasted sales data. Determine the space for billing counter by referring historical customer volume data. In case of clothing retail, allocate a separate space for trial rooms that is near the product display but away from the billing area.
• Determine the location of the product categories within the space. This helps the customers to locate the required product easily.
• Decide product adjacencies logically. This facilitates multiple product purchase. For example, pasta sauces and spices are kept near raw pasta packets.
• Make use of irregular shaped corner space wisely. Some products such as domestic cleaning devices or garden furniture can stand in a corner.
• Allocate space for promotional displays and schemes facing towards road to notify and attract the customers. Use glass walls or doors wisely for promotion.

Store Layout and Design

Customer buying behavior is an important point of consideration while designing store layout. The objectives of store layout and design are:

• It should attract customers.
• It should help the customers to locate the products effortlessly.
• It should help the customers spend longer time in the store.
• It should motivate customers to make unplanned, impulsive purchases.
• It should influence the customers’ buying behavior.

Store Design

Both internal and external factors matter when it comes to store design.

Interior Design

The store interior is the area where customers actually look for products and make purchases. It directly contributes to influence customer decision making. In includes the following:

• Clear and adequate walking space, separate from product display area.
• Free standing displays: Fixtures, rotary displays, or mannequins installed to attract customers’ attention and bring them to the store.
• End caps: These displays at the end of the aisles can be used to display promotional offers.
• Windows and doors can provide visual messages about merchandise on sale.
• Proper lighting at the product display. For example, jewelry retail needs more acute lighting.
• Relevant signage with readable typefaces and limited text for product categories, for promotional schemes, and at Point of Sale (POS) that guides customers’ decision-making process. It can also include hanging signage for enhancing visibility.
• Sitting area for a few differently abled people or senior citizens.

Exterior Design

This area outside the store is as much important as the interior of the store. It communicates with the customer on who the retailer is and what it stands for. The exterior includes:

• Name of the store, which tells the world that it exists. It can be a plain painted board or as fancy as an aesthetically designed digital board of the outlet.
• The store entrance: Standard or automatic, glass, wood, or metal? Width of the entrance.
• The cleanliness of the area around the store.
• The aesthetics used to draw the customers inside the store.

Push Strategy:

A retail push strategy includes offers that convince trade intermediaries channel members to “push” the underline product through vigorous distribution channels to the ultimate customer via some sales promotion schemes and personal selling efforts.

Under push strategy, the retail company promotes the product through a reseller who in turn promotes it to yet another reseller or the ultimate customer. The push strategy is used to convince retailers or wholesalers to stock a brand, provide a brand shelf space, encourage a brand in their advertisement drives, and/or push a brand to its ultimate customers. The usual tactics used in push strategy are: cash rebates, monetary or non-monetary allowances, buy-back schemes, free trial offer, contests, quizzes, promotional reminders, heavy discounts, and displays.

Pull Strategy:

A retail pull strategy efforts to get customers to pull the product from the manufacturer through its marketing channel. Under this strategy, company focuses its marketing communication efforts directly to customers with the hope that it encourages curiosity and requirement for the product at the end-consumer level.

This strategy is often employed if distributors/agents are reluctant to sell a product because it receives as many customers as likely to go to retail outlets and request the product, thus pulling it through the retail channel. The objective of the pull strategy is to attract customers to try a new product, lure customers away from competitors’ products, get consumers to weigh on a mature product, hold & reward loyal customers and build long lasting customer relationships.

Usual tricks employed in retail pull strategy are: cash refunds, samples, coupons, and heavy rebate, premiums, promotional reminders, advertising specialties, loyalty schemes, rewards, mementoes, contests, quizzes and point-of-purchase (POP) displays. If the pull strategy is well prepared and implemented, it results in extraordinary retail sales. But it depends on the commitment and dedication of retail staff and management.

Mixed Strategy:

As the very name implies, this strategy is the combination of above mentioned two strategies. Electronic and car dealers often use such type of strategy. Most of the car dealers near festival season advertise or offer cash discount or cash back offers to customers and dealer incentives which is the combination of both the push and pull strategies.

We as customers, often get to read advertisements from various retailers saying, “Quality product for right price!” This leads to following questions such as what is the right price and who sets it? What are the factors and strategies that determine the price for what we buy?

The core capability of the retailers lies in pricing the products or services in a right manner to keep the customers happy, recover investment for production, and to generate revenue.

Retail Pricing

The price at which the product is sold to the end customer is called the retail price of the product. Retail price is the summation of the manufacturing cost and all the costs that retailers incur at the time of charging the customer.

Factors Influencing Retail Prices

Retail prices are affected by internal and external factors.

Internal Factors

Internal factors that influence retail prices include the following:

• Manufacturing Cost: The retail company considers both, fixed and variable costs of manufacturing the product. The fixed costs does not vary depending upon the production volume. For example, property tax. The variable costs include varying costs of raw material and costs depending upon volume of production. For example, labor.
• The Predetermined Objectives: The objective of the retail company varies with time and market situations. If the objective is to increase return on investment, then the company may charge a higher price. If the objective is to increase market share, then it may charge a lower price.
• Image of the Firm: The retail company may consider its own image in the market. For example, companies with large goodwill such as Procter & Gamble can demand a higher price for their products.
• Product Status: The stage at which the product is in its product life cycle determines its price. At the time of introducing the product in the market, the company may charge lower price for it to attract new customers. When the product is accepted and established in the market, the company increases the price.
• Promotional Activity: If the company is spending high cost on advertising and sales promotion, then it keeps product price high in order to recover the cost of investments.

External Factors

External prices that influence retail prices include the following:

• Competition: In case of high competition, the prices may be set low to face the competition effectively, and if there is less competition, the prices may be kept high.
• Buying Power of Consumers: The sensitivity of the customer towards price variation and purchasing power of the customer contribute to setting price.
• Government Policies: Government rules and regulation about manufacturing and announcement of administered prices can increase the price of product.
• Market Conditions: If market is under recession, the consumers buying pattern changes. To modify their buying behavior, the product prices are set less.
• Levels of Channels Involved: The retailer has to consider number of channels involved from manufacturing to retail and their expectations. The deeper the level of channels, the higher would be the product prices.

Demand-Oriented Pricing Strategy

The price charged is high if there is high demand for the product and low if the demand is low. The methods employed while pricing the product on the basis of demand are:

• Price Skimming: Initially the product is charged at a high price that the customer is willing to pay and then it decreases gradually with time.
• Odd Even Pricing: The customers perceive prices like 99.99, 11.49 to be cheaper than 100.
• Penetration Pricing: Price is reduced to compete with other similar products to allow more customer penetration.
• Prestige Pricing: Pricing is done to convey quality of the product.
• Price Bundling: The offer of additional product or service is combined with the main product, together with special price.

Cost-Oriented Pricing Strategy

A method of determining prices that takes a retail company’s profit objectives and production costs into account. These methods include the following:

1. Cost plus Pricing

The company sets prices little above the manufacturing cost. For example, if the cost of a product is Rs. 600 per unit and the marketer expects 10 per cent profit, then the selling price is set to Rs. 660.

2. Mark-up Pricing

The mark-ups are calculated as a percentage of the selling price and not as a percentage of the cost price.

The formula used to determine the selling price is:

Selling Price = Average unit cost/Selling price

3. Break-even Pricing

The retail company determines the level of sales needed to cover all the relevant fixed and variable costs. They break-even when there is neither profit nor loss.

For example, Fixed cost = Rs. 2, 00,000, Variable cost per unit = Rs. 15, and Selling price = Rs. 20.

In this case, the company needs to sell (2,00, 000 / (20-15)) = 40,000 units to break even the fixed cost. Hence, the company may plan to sell at least 40,000 units to be profitable. If it is not possible, then it has to increase the selling price.

The following formula is used to calculate the break-even point:

Contribution = Selling price – Variable cost per unit

4. Target Return Pricing

The retail company sets prices in order to achieve a particular Return On Investment (ROI).

This can be calculated using the following formula −

Target return price = Total costs + (Desired % ROI investment)/Total sales in units

For example, Total investment = Rs. 10,000,

Desired ROI = 20 per cent,

Total cost = Rs.5000, and

Total expected sales = 1,000 units

Then the target return price will be Rs. 7 per unit as shown below:

Target Return Price = (5000 + (20% * 10,000))/ 1000 = Rs. 7

This method ensures that the price exceeds all costs and contributes to profit.

5. Early Cash Recovery Pricing

When market forecasts depict short life, it is essential for the price sensitive product segments such as fashion and technology to recover the investment. Sometimes the company anticipates the entry of a larger company in the market. In these cases, the companies price their products to shorten the risks and maximize short-term profit.

Competition-Oriented Pricing Strategy

When a retail company sets the prices for its product depending on how much the competitor is charging for a similar product, it is competition-oriented pricing.

• Competitor’s Parity: The retail company may set the price as close as the giant competitor in the market.
• Discount Pricing: A product is priced at low cost if it is lacking some feature than the competitor’s product.

Differential Pricing Strategy

The company may charge different prices for the same product or service.

• Customer Segment Pricing: The price is charged differently for customers from different customer segments. For example, customers who purchase online may be charged less as the cost of service is low for the segment of online customers.
• Time Pricing: The retailer charges price depending upon time, season, occasions, etc. For example, many resorts charge more for their vacation packages depending on the time of year.
• Location Pricing: The retailer charges the price depending on where the customer is located. For example, front-row seats of a drama theater are charged high price than rear-row seats.

Marketing activities are influenced by several factors inside and outside a business firm. These factors or forces influencing marketing decision-making are collectively called marketing environment. It comprises all those forces which have an impact on market and marketing efforts of the enterprise. According to Philip Kotler, marketing environment refers to “external factors and forces that affect the company’s ability to develop and maintain successful transactions and relationships with its target customers”.

The marketing programme of a firm is influenced and shaped by a firm’s inwardly need to begin its business planning by looking outwardly at what its customers require, rather than inwardly at what it would prefer to produce. The firm must be aware of what is going on in its marketing environment and appreciate how change in its environment can lead to changing patterns of demand for its products.

It also needs to assess marketing opportunities and threats present in the surroundings. An environment can be defined as everything which surrounds and impinges on a system. Systems of many kinds have environments with which they interact. Marketing can be seen as a system which must respond to environmental change.

Just as the human body may have problems, it fails to adjust to environmental change. Similarly, businesses may fail if they do not adapt to external changes such as new sources of competition or changes in consumers’ preferences.

Scanning the Environment:

Marketing activities do not take place in a vacuum, isolated from all external forces. In fact all marketing operations are conducted in a highly complex, dynamic and changing environment. According to Philip Kotler, “A company’s marketing environment consists of the factors and forces outside marketing that affect management’s ability to build and maintain successful relationships with target customers”.

The marketing environment offers both opportunities and threats. Successful companies know the vital importance of constantly watching and adapting to the changing environment. A company’s marketers take the major responsibility for identifying significant changes in the environment.

More than any other groups in the company, marketers must be the trend trackers and opportunity seekers. Although every manager in an organisation needs to observe the outside environment, marketers have two special aptitudes. They have disciplined methods – marketing intelligence and marketing research – for collection of information about the marketing environment.

They also spend time in the customer and competitor environment. By conducting systematic environmental scanning, marketers are able to revise and adapt marketing strategies to meet new challenges and opportunities in the market place.

Marketing as a function is basically all about matching the offerings of the organisation to the outside world, in particular, the market-place. Not surprisingly, many functions within marketing, such as selling, product development and market research, concern themselves with issues, problems and opportunities outside the organisation, and focus on responding to outside events and circumstances. Kotler identifies in this external role the need for marketers to develop an ‘outside- in’ perspective, an ability to work on external cues and stimuli to the profit of the whole organisation.

Environment scanning is a constant, important activity of successful companies. This process includes gathering, filtering and analyzing information related to the marketing environment. It also includes monitoring the changes taking place in the environment and forecasting future status of each factor.

Such analysis helps to spot opportunities and threats in the environment, and pinpoints the ones that are specifically relevant to the company. The company’s marketing people have the responsibility for scanning and identifying significant changes or trends in the marketing environment.

As we know that marketing research and marketing intelligence system are the methods used by companies for environment scanning and gathering vital information about changes. Customers’ behaviour and competitors’ activities are also important factors to be watched in the environment. Successful companies know the vital importance of constantly scanning and adapting to the changing environment. The environment continues to change at a rapid pace.

Importance of Environment Analysis:

The following are the benefits of environment analysis:

1. It helps in marketing analysis.
2. It can assess the impact of opportunities and threats on the business.
3. It facilitates the company to increase general awareness of environmental changes.
4. It is possible to develop effective marketing strategies on the basis of analysis.
5. It helps to capitalize the opportunities rather than losing out to competitors.
6. It facilitates to understand the elements of the environment.
7. It helps to develop best strategies, in the light of analyzing “what is going around the company”.

Need for Environment analysis:

Environmental analysis attempts to give an extensive insight as to the current market conditions as well as of impact of external factors that are uncontrollable by the marketers. These variables play an important role in convincing potential customers regarding changes in market trends, market conditions etc.

Facilitating the corporation’s strategic response to the changes taking place in environmental factors is the ultimate purpose of environment analysis. The firm has to come up with alternative programmes and strategies in line with environmental realities. This is possible only with proper environment analysis.

It helps strategic response by highlighting opportunities, the pursuit of which will help the firm to attain its objectives. It helps to assess the attractiveness and probability position of these opportunities, and helps to prepare a shortlist of those which are relevant to the firm and which can be pursued by it

Spotting the opportunities and threats is the central purpose here. It is in the environment that the firm finds its opportunities; it is in the environment that it finds the treats it has to encounter, and, it is by tapping the opportunities present and countering the threats embedded therein that the firm achieves its growth objective. The starting point is thus to spot the opportunities and threats.

Concept of Micro and Macro Environment:

A marketing oriented company looks outside its premises to take advantage of the emerging opportunities, and to monitor and minimize the potential threats face by it in its businesses. The environment consists of various forces that affect the company’s ability to deliver products and services to its customers.

The marketing environment is made up of:

1. Micro-environment and
2. Macro-environment.

We discuss them in detail:

1. Micro-environment:

The micro-environment of the company consists of various forces in its immediate environment that affect its ability to operate effectively in its chosen markets.

This includes the following:

(a) The company

(b) Company’s Suppliers

(c) Marketing Intermediaries

(d) Customers

(e) Competitors

(f) Public

A brief explanations are given below:

The Company:

In designing marketing plans, marketing management takes other company groups into account – Finance, Research and Development, Purchasing, Manufacturing, Accounting, Top Management etc. Marketing manager must also work closely with other company departments. Finance in concerned with funds and using funds to carry out the marketing plans.

The R&D Department focuses on designing safe and attractive product. Purchasing Department is concerned with supplies of materials whereas manufacturing is responsible for producing the desired quality and quantity of products. Accounts department has to measure revenues and costs to help marketing know-how. Together, all of these departments have impact on the marketing plans and action.

Internal Environment (Within the Co.):

The marketing management, in formulating plans, takes the other groups into account:

1. Top Management
2. Finance
3. R&D
4. Manufacturing
5. Purchasing
6. Sales Promotion
7. Advertisement etc.

Environmental forces are dynamic and any change in them brings uncertainties, threats and opportunities for the marketers. Changes in the environmental forces can be monitored through environmental scanning, that is, observation of secondary sources such as business, trade and Government, and environmental analysis, that is, interpretation of the information gathered through environmental scanning.

Marketers try to predict what may happen in the future with the help of tools like marketing research and marketing information or marketing intelligence system, and continue to modify their marketing efforts and build future marketing strategies. The company should think about the consumer and work in harmony to provide customer value and satisfaction.

Company’s Suppliers:

Suppliers provide the resources needed by the company to product its goods and services. They are important links in the company’s overall customer “value delivery system”. Supplier developments can seriously affect marketing. Marketing managers must watch supply availability – supply shortages or delays, labour strikes and other events can cost sales in the short run and damage customer satisfaction in the long run. Marketing Managers also monitor the price trends of their key inputs. Rising supply costs may force price increases that can harm the company’s sales volume.

In business-to-business marketing, one company’s supplier is likely to be another company’s customer and it is important to understand how suppliers, manufacturers and intermediaries work together to create value. Buyers and sellers are increasingly co-operating in their dealings with each other, rather than bargaining each transaction in a confrontational manner in order to make supply chain management most effective and value-added products are sold to the target markets.

Marketing Intermediaries:

Intermediaries or distribution channel members often provide a valuable link between an organisation and its customers. Large-scale manufacturing firms usually find it difficult to deal with each one of their final customers individually in the target markets. So they chose intermediaries to sell their products.

Marketing intermediaries include resellers, physical distribution firms, marketing service agencies, and financial intermediaries. They help the company to promote, sell, and distribute its goods to final buyers. Resellers are distribution channel firms that help the company to find customers for goods. These include whole-sellers and retailers who buy and resell merchandise. Selecting and working with resellers is not easy. These organisations frequently have enough power to dictate terms or even shut the manufacturer out of large markets.

Physical distribution:

Firms help the company to stock and move goods from their points of origin to their destinations. Working with warehouse and transportation firms, a company must determine the best ways to store and ship goods, and safety marketing services agencies are the marketing research firms, advertising agencies, media firms, and marketing consulting firms that help the company target and promote its products to the right markets.

When the company decides to use one of these agencies, it must choose carefully because those firms vary in creativity, quality, service and price. Financial intermediaries include banks, credit companies, insurance companies, and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods. Most firms and customers depend on financial intermediaries to finance their transactions.

Customers:

Consumer markets consists of individuals and households that they buy goods and services for personal consumption. Business markets buy goods and services for further processing or for use in their production process, whereas reseller markets buy goods and services to resell at a profit.

Government markets are made up of government agencies that buy goods and services to produce public services or transfer the goods and services to others who need them. Finally, international markets consist of the buyers in other countries, including consumers, producers, resellers and governments. Each market type has special characteristics that call for careful study by the seller.

Competitors:

No single competitive marketing strategy is best for all companies. The company’s marketing system is surrounded and affected by a host of competitors. Each firm should consider its own size and industry position compared to those of its competitors. These competitors have to be identified, monitored and outmanouvered to gain and maintain customer loyalty.

Industry and competition constitute a major component of the micro-environment. Development of marketing plans and strategy is based on knowledge about competitors’ activities. Competitive advantage also depends on understanding the status, strength and weakness of competitors in the market.

Large firms with dominant positions in an industry can use certain strategies that smaller firms cannot afford. But being large is not enough. There are winning strategies for large firms, but there are also losing ones. And small firms can develop strategies that give them better rate of return than large firms enjoy.

Public:

General public do take interest in the business undertaking. The company has a duty to satisfy the people at large along with competitors and the consumers. A public is defined as “any group that has an actual or potential interest in or impact on a company’s ability to achieve its objectives.

Public relations is certainly a broad marketing operation which must be fully taken care of Goodwill, favourable reactions, donations and hidden potential fixture buyers are a few of the responses which a company expects from the public. Kotler in this regard has viewed that “companies must put their primary energy into effectively managing their relationships with their customers, distributors, and the suppliers, their overall success will be affected by how other publics in the society view their activity. Companies would be wise to spend time monitoring all their publics understanding their needs and opinions and dealing with them constructively”.

Every company is surrounded by seven types of public, as shown below:

1. Financial—banks, stock-brokers, financial institutions.
2. Media—Newspaper, magazines, TV.
3. Government—Government departments.
4. Citizen—Consumer Organisations; environment groups.
5. Local—neighbourhood residents, community groups.
6. General—General Public, public opinions.
7. Internal—Workers, officers, Board of Directors.

Macro Environment:

The macro-environment consists of broader forces that not only affect the company and the industry, but also other factors in the micro-environment.

The components of a macro-environment are:

(a) Demographic Environment

(b) Economic Environment

(c) Physical Environment

(d) Technological Environment

(e) Political Environment

(f) Legal Environment

(g) Social and Cultural Environment

1. Demographic Environment:

Demography is the study of population characteristics that are used to describe consumers. Demographics tell marketers who are the current and potential customers, where are they, how many are likely to buy and what the market is selling. Demography is the study of human populations in terms of size, density, location, age, sex, race, occupation and other statistics.

Marketers are keenly interested in studying the demography ethnic mix, educational level and standard of living of different cities, regions and nations because changes in demographic characteristics have a bearing on the way people live, spend their money and consume.

For example, one of the demographic characteristic is the size of family. With the number of small families increasing in India, the demand for smaller houses and household items has increased significantly. Similarly, the number of children in a family has reduced significantly over the years. So, per child spending in a family has increased significantly.

According to the World Health Organisation, young people in the age group of 10-24 years comprise 33% of the population and 42% of our population consists of age group, 0-24 years. Teen-agers in the age group below 19 years comprise 23%. The senior citizen age group above 65 years comprise only 8% of total population. About 58% of the working population is engaged in agricultural activities, with highest, that is 78% in Bihar and Chattisgarh and lowest 22% in Kerala.

Since human population consists of different kinds of people with different tastes and preferences, they cannot be satisfied with any one of the products. Moreover they need to be divided in homogeneous groups with similar wants and demands. For this we need to understand the demographic variables which are traditionally used by marketers, to segment the markets.

Income:

Income determines purchasing power and status. Higher the income, higher is the purchasing power. Though education and occupation shapes one’s tastes and preferences, income provides the means to acquire that.

Life-style:

It is the pattern of living expressed through their activities, interests and opinion. Life-style is affected by other factors of demography as well. Life-style affects a lot on the purchase decision and brand preferences.

Sex:

Gender has always remained a very important factor for distinction. There are many companies which produce products and services separately for male and female.

Education:

Education implies the status. Education also determines the income and occupation. With increase in education, the information is wider with the customers and hence their purchase decision process is also different. So the marketers group people on the basis of education.

Social Class:

It is defined as the hierarchical division of the society into relatively distinct and homogeneous groups whose members have similar attitudes, values and lifestyle.

Occupation:

This is very strongly associated with income and education. The type of work one does and the tastes of individuals influence one’s values, life-style etc. Media preferences, hobbies and shopping patterns are also influenced by occupational class.

Age:

Demographic variables help in distinguishing buyers, that is, people having homogenous needs according to their specific wants, preferences and usages. For instance, teenagers usually have similar needs. Therefore, marketers develop products to target specific age groups.

The youth are being targeted through advertisements and promotional campaigns, stores are being designed with ‘youthful’ features, youth events are being sponsored, and even new technology is developed with their tastes in mind.

The age groups that attract the attention of marketers can be classified as:

(i) Infants:

The population of India is growing at an alarming rate. The rate of infant deaths has declined considerably due to the advancement in medicine. Although infants are consumers of products, their parents are the decision makers. The size of a family is decreasing and the average income of family is increasing.

(ii) School going teens:

In this segment, there is a great demand for school uniforms, bags, shoes, books, stationary, confectioneries, food, albums, bicycles and other similar products.

(iii) Young Adults:

Marketers target the young adults in the age group 18-30 years with products like motorbikes, music systems, clothes, sports cars etc. Two-wheeler manufacturers in India target this segment of people. In the last five years, various companies like, Bajaj, Hero-Honda, Kinetic, TVS etc. have introduced a large number of models to attract young adults.

(iv) Adults (35-45):

Consumers, in this age group, are more health conscious and look for stability and financial independence. The industries that are benefited by them are: Pharmaceuticals, personal products, fitness products, gym equipment’s, cars, home appliances, consumer durables, banks, insurance companies, etc. Marketers push products specifically designed for this age group.

(v) Senior Citizens:

This consumer group boosts the demand for health care services, select skin care products, financial planning etc.

(vi) Women:

Women constitute nearly 50% of India’s population. They are actively taking up professions. This shift in their role has generated a greater demand for childcare and convenience products that save time in cooking, cleaning and shopping.

Marketers are trying to come up with products that are easier to handle, less heavy, convenient to use etc. The change in the role of women is paving the way for a change in the role of men. Advertisements portray men cleaning, cooking and caring for their children, which was unthinkable in the past.

1. Economic Environment:

Economic environment is the most significant component of the marketing environment. It affects the success of a business organisation as well as its survival. The economic policy of the Government, needless to say, has a very great impact on business. Some categories of business are favourably affected by the Government policy, some adversely affected while some others remain unaffected. The economic system is a very important determinant of the scope of private business and is therefore a very important external constraint on business.

The economical environmental forces can be studied under the following categories:

(i) General Economic Conditions:

General Economic Conditions in a country are influenced by various factors. They are:

1. Agricultural trends
2. Industrial output trends
3. Per capita income trends
4. Pattern of income distribution
5. Pattern of savings and expenditures
6. Price levels
7. Employment trends
8. Impact of Government policy
9. Economic systems.

(ii) Industrial Conditions:

Economic environment of a country is influenced by the prevalent industrial conditions as well as industrial policies of a country.

A marketer needs to pay attention to the following aspects:

1. Market growth
2. Demand patterns of the industry
3. Its stage in product life cycle.

(iii) Supply sources for production:

Supply sources required for production determines inputs which are available required for production.

They are:

1. Land
2. Labour
3. Capital
4. Machinery and equipment etc.

Economic environment describes the overall economic situation in a country and helps in analysis GNP per capita rate of economic growth, inflation rate, unemployment problems etc.

1. Physical Environment:

The physical environment or natural environment involves the natural resources that are needed as inputs by marketers or those that are affected by marketing activities. Environmental concerns have grown steadily in recent years. Marketers should be aware of trends like shortages of raw materials, increased pollution, and increased governmental intervention in natural resources management. Companies will have to understand their environmental responsibility and commit themselves to the ‘green movement’.

Potential shortages of certain raw materials, for examples, oil, coal, minerals, unstable cost of energy, increased levels of pollution; changing role of Government in environment protection are a few of the dangers the world is facing on physical environment forces. Other aspects of the natural environment which may increasingly affect marketing include the availability and cost of raw materials, energy and other resources, particularly if those resources and energy come from non-renewable sources.

1. Technological Environment:

The technological environment is the most dramatic force now facing our destiny. Technological discoveries and developments create opportunities and threats in the market. The marketer should watch the trends in technology. The biggest impact that the society has been undergoing in the last few years is the technological advancement, product changes and its effects on consumers.

Technology has brought innumerable changes in human lives, be it in the field of science, medicine, entertainment, communication, and travel or office equipment. Name any field, and one can see changes in product or efficiency and faster services.

One of the most dramatic forces shaping people’s lives in technology. Technology has released such wonders as penicillin, open-heart surgery and birth control pill. It has released such horrors as the hydrogen bomb, nerve gas, and the sub-machine gun. Every new technology is a force for “creative destruction”. Transistors hurt the vacuum tube industry, xerography hurt the carbon paper business, autos hurt the railroads, and television hurt the newspapers.

Instead of moving into the new technologies, many old industries fought or ignored them and their business declined. Yet it is the essence of market capitalism to be dynamic and tolerate the creative destructiveness of technology as the price of progress.

Technology essentially refers to our level of knowledge about ‘how things are done’. That is understanding this aspect of the marketing environment is much more than simply being familiar with the latest hi-tech innovations. Technology affects not only the type of products available but also the ways in which people organize their lives and the ways in which goods and services can be marketed.

Computer-aided design (CAD) and computer-aided manufacturer (CAM) have shortened the time required for new products to reach the market and increased the variety of products that can be produced cost effectively. The benefits of CAD/CAM are clearly evident in the car industry. Mass production is in standardized models. Computer systems have also contributed substantially to the growth of various forms of direct marketing such as direct mail, direct response marketing etc.

1. Political Environment:

The political environment consists of factors related to the management of public affairs and their impact on the business of an organisation. Political environment has a close relationship with the economic system and the economic policy. Some Governments specify certain standards for the products including packaging.

Some other Governments prohibit the marketing of certain products. In most nations, promotional activities are subject to various types of controls. India is a democratic country having a stable political system where the Government plays an active role as a planner, promoter and regulator of economic activity.

Businessmen, therefore, are conscious of the political environment that their organisation face. Most Governmental decisions related to business are based on political considerations in line with the political philosophy following by the ruling party at the Centre and the State level.

Substantial number of laws have been enacted to regulate business and marketing to protect companies from each other, to protect consumers from unfair trade practices, to protect the larger interests of society against unbridled business behaviour. Changing Government agency enforcement and growth of public interest groups also bring in threats and challenges.

1. Legal Environment:

Marketing decisions are strongly affected by laws pertaining to competition, price-setting, distribution arrangement, advertising etc. It is necessary for a marketer to understand the legal environment of the country and the jurisdiction of its courts.

The following laws affected business in India:

1. Indian Contract Act 1872
2. Factories Act 1948
3. Minimum Wages Act 1948
4. Essential Commodities Act 1955
5. Securities Contracts Regulation Act 1956 (SEBI Act)
6. The Companies Act 1956
7. Trade and Merchandise Act 1958
8. Monopolies and Restrictive Trade Practice Act 1969
9. The water (Prevention and Control of Pollution) Act 1974
10. The Air (Prevention and Control of Pollution) Act 1981
11. Sick Industrial Companies (Special Provisions) Act 1985
12. Environment Protection Act 1986
13. Consumer Protection Act 1986
14. Securities and Exchange Board of India Act 1992
15. Different Taxation Laws.
16. Social and Cultural Environment:

Socio-cultural forces refer to the attitudes, beliefs, norms, values, lifestyles of individuals in a society. These forces can change the market dynamics and marketers can face both opportunities and threats from them. Some of the important factors and influences operating in the social environment are the buying and consumption habits of people, their languages, beliefs and values, customs and traditions, tastes and preferences, education and all factors that affect the business.

Understanding consumer needs is central to any marketing activity and those needs will often be heavily influenced by social and cultural factors. These cover a range of values, beliefs, attitudes and customs which characterize societies or social groups. Changes in lifestyle of people affect the marketing environment.

As health problems in people have increased because of significant changes in their lifestyle, they have become concerned about their food. They prefer to eat low fat, low or no cholesterol food. This is specially true for people above 40 years. To a great extent, social forces determine what customers buy, how they buy, where they buy, when they buy, and how they use the products.

In India, social environment is continuously changing. One of the most profound social changes in recent years is the large number of women entering the job market. They have also created or greatly expended the demand for a wide range of products and services necessitated by their absence from the home. There is a lot of change in quality-of-lifestyles and people are willing to have many durable consumer goods like TV., fridge, washing machines etc. even when they cannot afford them because of their availability on hire-purchase or instalment basis.

Culture influences every aspect of marketing. Marketing decisions are based on recognition of needs and wants of the customer, a function of customer perceptions. These help in understanding of lifestyles and behaviour patterns as they have grown in the society’s culture in which the individual has been groomed. Thus a person’s perspective is generated, groomed and conditioned by culture.

Marketing environment can also be classified as:

(i) Controllable Forces and

(ii) Uncontrollable Forces.

(i) Controllable forces:

Controllable forces consist of marketing policies and marketing strategies. Marketing policies are framed by the firm depending on its marketing philosophy. The top management is responsible for framing broad policies. Marketing strategies are developed by middle level management.

Internal forces are inherent to the firm and can be controlled by the management. Marketing mix elements are the tools often used to harmonies the internal variables with that of external variables. The controllable factors are well within the grip of the firm and comparably easy to adjust them to suit the changes.

These factors are combined into what we have referred to earlier as Marketing Mix. For instance, if the price appears to be on the higher side a decision to reduce it for a short term or even a long term is possible and could be implemented as quickly as possible. Off-season prices or discounts are examples in this connection.

(ii) Uncontrollable forces:

Various elements called uncontrollable variables affect an organisation and its marketing efforts. It is now recognized by all that even a well conceived marketing plan may fail if adversely influenced by uncontrollable factors. The offering of the firm and the impact of the uncontrollable environment interact to determine the firm’s level of success or failure in reaching its objectives.

The external forces are divided into micro-environment and macro-environment. The micro-environment consists of the suppliers, marketing intermediaries, customers etc. while the macro-environment consists of the demography, socio- cultural, political, economical, technical, legal environments etc.

Examples of Threats are:

1. Electronic type-writer with memory replaces manual type-writer.
2. Twin blade shaving system replaces razor shaving system.
3. Fuel efficient small cars against old model cars.
4. Entry of MNCs into Indian market increased competition.

Examples of opportunities are:

1. Marketing opportunities to produce cheap small cars.
2. Marketing opportunities to introduce fully automatic washing machines in the areas where husbands and wife’s are working.
3. Marketing opportunities to start business in low cholesterol food items.
4. Dismantling of price controls and introduction of market-driven price policy.