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Employee Selection: Process, Tests & Interviews

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What is Selection? (Concept & Definition)

Selection is the process of differentiating between applicants to identify and hire those with the greatest likelihood of success in a job. It is basically a “matching” process—finding the right fit between the person and the job.

Recruitment vs. Selection: What’s the Difference?

Basis Recruitment Selection
Meaning Searching for candidates and stimulating them to apply. Choosing the right candidate from the pool of applicants.
Nature A Positive process (adds people to the pool). A Negative process (rejects/screens out unsuitable people).
Goal Creates a large pool of applicants. Selects the best fit.
Complexity Simple process. Complex, time-consuming process with many hurdles.

The Selection Procedure (Steps)

Selection involves a series of steps, or “hurdles,” that a candidate must clear.

1. Preliminary Interview (Screening)

A courtesy interview to screen out undesirable or unqualified candidates at the very beginning. This saves time for both the company and the applicant.

2. Application Form

A formal record of the candidate’s bio-data, education, work experience, and references.

  • Evaluation: Can be done clinically (psychological analysis) or using a weighted method (scoring system).

  • Usefulness: It introduces the candidate and serves as a basis for the interview.

3. Employment Tests

Tests provide information that isn’t available from an application form. They measure skills, intelligence, and personality.

  • Intelligence Tests: Measure mental ability, memory, and learning speed.

  • Achievement Tests: Measure current skills (e.g., a typing test).

  • Aptitude Tests: Measure potential to learn new skills.

  • Personality Tests: Measure motivation, emotional balance, and interpersonal behavior.

  • Integrity Tests: Measure honesty to predict theft or unethical behavior.

  • Polygraph Tests: Lie detector tests (used mainly in security jobs).

  • Graphology: Handwriting analysis.

Standards for Tests: A good test must be Reliable (consistent results) and Valid (measures what it claims to measure).

4. Employment Interview

An oral examination of candidates. It allows the recruiter to ask questions not covered in tests, judge enthusiasm, and assess appearance.

  • Types of Interviews:

    • Structured: Fixed, job-related questions asked to everyone.

    • Unstructured (Non-directive): Questions asked as they come to mind.

    • Panel Interview: A group of interviewers assesses the candidate together.

    • Stress Interview: The applicant is made uncomfortable to test their ability to handle pressure.

5. Reference Checks

Verifying character and experience references provided by the applicant.

6. Medical Examination

Ensures the candidate is physically fit for the job requirements and protects the organization from unwarranted compensation claims.

7. Job Offer

The final step. A letter of appointment is issued with a reporting date.

Recruitment Applicaton and screening Checking background and References Intervewing Hiring decision Physical examination Orientation

Induction and Placement

Once selected, the employee’s journey isn’t over. Now the real journey starts.

Employee Induction (Orientation)

Induction is the process of guiding and counseling new employees to familiarize them with the job and the organization.

  • General Orientation: Guided tours, introduction to history, mission, and fellow employees.

  • Specific Orientation: Job-specific training and vocational guidance by the supervisor.

  • Objectives: Create a positive attitude, build confidence, and reduce anxiety.

Placement

Placement is assigning a specific rank and responsibility to an employee. It matches the employee’s competence and interest with the job requirements. Most organizations have a probation period to review the employee’s performance before permanent placement.

Requisites & Problems

  • Retention is Key: Many Indian organizations neglect retention after spending lakhs on recruitment. A weak induction program leads to high turnover.

  • Performance Review: Organizations must review progress during probation. Automatic confirmation of unproductive employees is a major problem.

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Recruitment: Definition, Sources & Process

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What is Recruitment? (Meaning & Definition)

Recruitment is the process of discovering manpower sources to meet the staffing needs of an organization and employing effective measures to attract that manpower in adequate numbers. It is a positive process of searching for prospective employees and stimulating them to apply for jobs.

Key Definitions:

  • Edwin B. Flippo: “The process of searching for prospective employees and stimulating them to apply for jobs in the organization.”

  • General Definition: A process to discover sources of manpower to meet the requirement of staffing schedules and to employ effective measures for attracting that manpower.

Nature of Recruitment:

  • It is the first step of appointment.

  • It is a continuous process.

  • It is a positive process (unlike selection, which is negative/elimination).

  • It fulfills both present and future needs.

Sources of Recruitment (Internal vs. External)

Organizations can look for candidates either within their own walls or outside in the job market.

1. Internal Sources

Recruiting personnel already on the payroll (present workforce) already working in the company as employee.

  • Methods:

    • Promotions & Transfers: Moving employees to higher or different positions.

    • Job Posting: Advertising the vacancy internally so interested employees can apply.

    • Employee Referrals: Current employees recommend friends or family.

    • Retrenched/Retired Employees: Re-hiring former employees.

Merits:

  • Improves morale and promotes loyalty.

  • The employer already knows the candidate’s track record.

  • Less costly than external recruitment.

Demerits:

  • Leads to “inbreeding” (no new ideas/blood).

  • Internal sources may “dry up.”

  • Seniority-based promotion may overlook capable talent.

2. External Sources

Looking outside the organization for fresh talent.

  • Methods:

    • Campus Recruitment: Hiring young, fresh talent from colleges.

    • Advertisement: Newspapers, TV, Radio to attract attention.

    • Employment Exchanges: Government-run lists of job seekers.

    • Private Search Firms: Consultants (like ABC Consultants) who find talent for a fee.

    • Websites (E-Recruitment): Job sites (Naukri, linkedin) and company career pages.

    • Gate Hiring/Walk-ins: Casual applicants who come to the factory gate or office.

Merits:

  • Brings in “new blood,” new ideas, and experiences.

  • Provides a wider choice of candidates.

  • Essential for rapid expansion.

Role Profiles & Person Specifications

Before recruiting, you need to know who you are looking for.

1. Role Profile: Defines the overall purpose of the role means (what the job requires), reporting relationships, and key result areas. It lists the technical skills and behavioral competencies required. 2. Person Specification: Also known as recruitment specification it describes the type of person needed to perform the job well, this is the essential element on which selection is based. It summarizes the education, training, experience, and qualifications a person must have.

Models for Specifications:

  • Seven-Point Plan (Alec Rodgers):

    Used for recruitment and selection (deciding if a candidate is suitable).

    1. Physical Make-up – Health, appearance, energy level.

    2. Attainments – Education and previous achievements.

    3. General Intelligence – Ability to learn and understand quickly.

    4. Special Aptitudes – Special skills like typing, languages, creativity.

    5. Interests – Hobbies and activities showing personality.

    6. Disposition – Attitude, behaviour, and ability to work with others.

    7. Circumstances – Personal background, family, place of living, etc.

  • Five-Fold Grading System (Munro Fraser):

    Also used to evaluate candidates during interviews.

    1. Physical Qualities – Health, appearance, speaking ability.

    2. Attainments – Education and work experience.

    3. General Intelligence – Thinking ability and problem-solving.

    4. Special Aptitudes – Job-related skills.

    5. Disposition – Personality, confidence, teamwork, leadership.

The 5-Step Recruitment Process

Recruitment is not just “hiring.” It is a systematic journey.

Step 1: Job Design

The most important part. This phase involves designing the job profile and agreeing on the essential skills and competencies between the line manager and HR.

Step 2: Opening Job Position

The HR recruiter decides on the right mix of recruitment sources to find the best candidates.

Step 3: Collecting & Presenting Resumes

Collecting resumes and pre-selecting suitable candidates. This step saves time for the interviewers.

Step 4: Job Interviews

Designed and agreed upon by HR and line management, the interview aims to discover the candidate who meets the requirements and fits the culture best.

Step 5: Job Offer

The final step where the “winner” of the interview process receives a formal offer to join the organization.

What are Modern Recruitment Techniques?

E-Recruitment (Online Recruitment)

Using IT to speed up the process. It ranges from online job ads to back-office applicant tracking.

  • Advantages:

    • Cost Savings: Reduces advertising spend.

    • Speed: Faster application and screening.

    • Reach: Global coverage.

    • Data: Better management information on applicants.

Competency-Based Approach

A modern method where selection is based on competencies (characteristics) rather than just the job description.

  • Focus: Analysis of people, not just jobs.

  • Benefit: Improves accuracy in predicting suitability and potential.

Evaluating Recruitment

The process isn’t over until you check if it worked. Key metrics include:

  1. Return Rate: Number of applications received.

  2. Selection Ratio: Number of suitable candidates vs. applicants.

  3. Retention: How many recruits stayed after 6 months.

  4. Cost: Cost per hire.

  5. Time Lapsed: How long it took to fill the vacancy.

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Human Resource Planning & Job Analysis: Process, Significance, Strategic Integration Meaning, Process & Components

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What is Human Resource Planning (HRP)?

Human Resource Planning (HRP), also known as Manpower Planning, is the process by which management ensures that it has the right number and the right kind of people, at the right place, at the right time, capable of completing tasks that help the organization achieve its objectives.

It is a strategy for the acquisition, utilization, improvement, and preservation of an enterprise’s human resources.

Key Definitions:

  • Coleman: “The process of determination of manpower requirements and means of meeting those requirements in order to carry out the integrated plan of the organization.”

  • Stainer: “Strategy for the acquisition, utilization, improvement and preservation of an enterprise’s human resources.”

Why is HRP Necessary? (Significance)

HRP is crucial for organizations of all sizes, but it is often more formalized in larger organizations due to their complexity.

  1. Identify Gaps: It identifies areas of surplus (too many) or shortage (too few) of personnel.

  2. Technology Adaptation: To meet the challenges of changing technology, existing employees need training or new skilled people need to be hired.

  3. Skills Matching: Every organization needs specific skills, knowledge, and aptitude. HRP ensures these are available.

  4. Labour Turnover: Employees inevitably leave (turnover). HRP prepares for replacements.

  5. Expansion: Growth programs require a larger, planned workforce.

Why is HRP more common in Large Organizations? Large organizations have complex structures, multiple departments, and vast employee numbers. Without formal planning, managing talent, predicting turnover, and aligning thousands of employees with strategic goals becomes impossible. Small organizations often manage with informal, ad-hoc planning.

The Human Resource Planning Process (7 Steps)

The HRP process is a multi-step, continuous function that links HR management with the overall strategic plan.

Step 1: Investigation (Analysis)

This is the primary stage. The organization analyzes the current manpower scenario using a SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats). It involves:

  • External Review: Looking at macro-economic trends, labour market data, and government reports.

  • Internal Review: Analyzing current operational data, marketing plans, and financial goals to understand future needs.

Step 2: Forecasting (Demand & Supply)

After investigation, the organization forecasts its needs.

  • Demand Forecasting: Estimating the number and type of people required for future jobs.

  • Supply Forecasting: Estimating the availability of current and potential employees.

    • Internal Supply: Analyzing current staff for promotion, transfer, or training.

    • External Supply: Analyzing the labour market for new hires.

Step 3: Inventory (Taking Stock)

This involves taking stock of the current employees. An HR Inventory (or Skills Inventory) details the names, ages, locations, skills, and qualifications of everyone in the organization. This reveals what skills are immediately available to meet the forecasted demand.

Step 4: Audit

The HR Audit systematically examines the inventory data. It looks at trends in:

  • Labour Turnover

  • Age and sex groupings

  • Absenteeism

  • Training costs This helps predict future HR scenarios (e.g., “In 5 years, 20% of our managers will retire”).

Step 5: HR Resource Plan (Career Planning)

Based on the audit, the organization creates plans for Career Planning and Succession Planning. The goal is to align the organization’s objectives with the development potential of its employees.

Step 6: Actioning the Plan

The plan is put into action. It requires:

  • Clear direction (“Know where you are going”).

  • Top management support.

  • Knowledge of available financial and physical resources. The HR plan becomes part of the corporate long-range plan.

Step 7: Utilization & Control

The final stage measures success.

  • Quantitative: Productivity trends, manpower costs.

  • Qualitative: Employee morale, industrial relations, and grievance patterns.

Integration with Strategic Planning

Strategic Human Resource Planning (SHRP) serves as the link between HR management and the overall strategic plan of the organization.

  • The Goal: To ensure that HR strategies (hiring, training, rewarding) support the business strategies (expansion, cost-cutting, innovation).

  • Example: If the business strategy is “Innovation,” the HR strategy must focus on hiring creative talent and rewarding new ideas.

Factors Influencing SHRP:

  1. Political & Economic Climate: Government spending, taxes, and banking stability affect hiring.

  2. Technological Developments: Automation may reduce the need for manual labour but increase the need for IT skills.

  3. Company Strategies: Plans for growth, diversification, or downsizing directly dictate HR needs.

Human Resource Information System (HRIS)

HRIS is a software or online solution for data entry, tracking, and information needs of the HR function. It serves as a central database for decision-making.

Components of HRIS:

  • Management of Employee Information: Personal details, pay history, attendance.

  • Reporting & Analysis: Turnover rates, absenteeism data.

  • Benefits Administration: Insurance, leave tracking.

  • Applicant Tracking: Managing resumes and recruitment.

Why HRIS? It replaces costly, inaccurate, and fragmented manual records. It allows for faster decision-making and better data security.

Rightsizing the Enterprise

Rightsizing is the process of transforming an organization to get the most from limited resources. It often involves reducing support personnel to match the current needs of the business (unlike “Downsizing,” which is often just cost-cutting).

Phases of Rightsizing:

  1. Identify potential candidates for change.

  2. Assess costs and make a plan.

  3. nImplement and appraise the solutions.

 Components of Job Analysis (In Detail)

Job Analysis is a fundamental tool for HRP. It helps find out the abilities or skills required to do a job efficiently. It consists of two key components:

1. Job Description (The “What”)

A written statement detailing the duties, responsibilities, and conditions of the job.

  • Job Title

  • Duties & Responsibilities

  • Working Conditions

  • Machines/Tools Used

  • Supervision Given/Received

2. Job Specification (The “Who”)

A statement of the minimum acceptable human qualities necessary to perform the job.

  • Education & Qualifications

  • Experience Required

  • Skills (Technical, Communication)

  • Physical Requirements

  • Personality Traits

Job Analysis can be classified into two broad categories: Job Description and Job Specification.

What is Job Analysis? (Concepts & Components)

In Human Resource Management, understanding “work” is fundamental. Before you can hire, train, or pay someone, you need to define exactly what they will be doing. This is where Job Analysis comes in.

Job Analysis is a formal and detailed examination of jobs. It is a systematic investigation of the tasks, duties, and responsibilities necessary to do a job. It identifies what people do and what they require to do it satisfactorily.

Key Definitions:

  • Task: A single work activity (e.g., typing a letter).

  • Duty: A sequence of related tasks (e.g., sorting and delivering mail).

  • Position: A collection of tasks performed by one person.

  • Job: A group of similar positions (e.g., All “Technical Assistants” hold the same job, but have different positions).

The Modern View: Traditionally, jobs were seen as rigid and static. Today, jobs are “rigid solutions to an elastic problem.” They are flexible, adaptable, and constantly changing with technology and competition.

Why is Job Analysis Important?

Job Analysis is the foundation for almost every HR function. Its key uses include:

  1. Organization & Manpower Planning: Assessing human needs and defining labor requirements.

  2. Recruitment & Selection: Providing realistic standards for hiring the right person.

  3. Wage & Salary Administration: Determining the worth of a job to set fair compensation.

  4. Job Reengineering: Improving efficiency through:

    • Industrial Engineering: Operational analysis, motion studies.

    • Human Engineering: Matching jobs to human capabilities.

  5. Training & Development: Determining the content of training programs based on job needs.

  6. Performance Appraisal: Establishing clear standards to measure employee contribution.

  7. Health & Safety: Identifying hazardous conditions to prevent accidents.

The 5-Step Job Analysis Process

Conducting a job analysis is a systematic process involving five key steps:

Step 1: Collection of Background Information

Review existing information such as organization charts (to see where the job fits), class specifications, and old job descriptions.

Step 2: Selection of Representative Positions

Analyzing every single job takes too long. Instead, select a few representative positions to analyze in depth.

Step 3: Collection of Job Analysis Data

Gather data on job features, required qualifications, and requirements from employees who actually perform the job.

  • Techniques Used: Observation, Questionnaires, Interviews, Log Records, Critical Incidents, Checklists.

Step 4: Developing a Job Description

Convert the collected data into a Job Description. This is a written statement describing the main features, duties, and responsibilities of the job.

Step 5: Developing a Job Specification

The final step is to convert the Job Description into a Job Specification. This details the personal qualities, traits, skills, and background a person needs to perform the job.

Job Description vs. Job Specification

These are the two immediate “products” of Job Analysis.

1. Job Description (The “What”)

A written statement that describes the job, not the person. It explains duties, responsibilities, and working conditions.

  • Components:

    • Job Identification: Title, department, location, code.

    • Job Summary: A quick snapshot of the job’s content.

    • Duties & Responsibilities: The heart of the description. What needs to be done and how.

    • Relation to Other Jobs: Vertical (who you report to) and horizontal relationships.

    • Supervision: Span of control (number of people supervised).

    • Working Conditions: Environment (temperature, noise) and potential hazards.

2. Job Specification (The “Who”)

A statement of the minimum acceptable human qualities necessary to perform the job. It guides hiring and testing.

  • Components:

    • Physical Characteristics: Health, strength, vision, coordination.

    • Psychological Characteristics: Manual dexterity, mechanical aptitude, analytical ability, mental concentration.

    • Personal Characteristics: Appearance, manners, leadership, initiative, emotional stability.

    • Responsibilities: Supervision of others, safety responsibility, financial trust.

    • Demographics: Age, sex, education, experience.

🔍 What Aspects of a Job are Analyzed?

A thorough analysis collects information on five core areas:

  1. Duties and Tasks: Frequency, duration, effort, and complexity of tasks.

  2. Environment: Physical conditions, unpleasant odors, temperature extremes, and risks.

  3. Tools and Equipment: Specific machines, tools, or protective clothing used.

  4. Relationships: Supervision given/received and interactions with internal/external people.

  5. Requirements: The Knowledge, Skills, and Abilities (KSAs) required.

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Human Resource Management Significance, Functions, Objectives of HRM, Evolution and Development of HRM

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Introduction to Human Resource Management (HRM)

Management is the art of getting things done through people. While managers deal with finance, operations, and information, the Human Resource (HR) is the only “living” resource.

Human Resource Management (HRM) is the process of acquiring, developing, maintaining, and retaining competent workforce to achieve the goals of an organization effectively and efficiently. It brings people and organizations together so that the goals of each are met.

According to Leon C. Megginson, HR is:

“The total knowledge, skill, creative abilities, talents and aptitudes of an organization’s workforce, as well as the values, attitudes and beliefs of the individuals involved.”

Objectives of HRM

The primary goal of HRM is to ensure the organization has a competent and motivated workforce.

  1. Advisory Role: Advising management on HR policies to ensure a highly motivated and high-performing workforce.

  2. Talent Management: Attracting, hiring, rewarding, maintaining, and developing the human resources of the organization.

  3. Crisis Management: Handling difficult human relations situations to ensure organizational stability.

  4. Communication Link: Acting as a bridge between the workforce and management.

  5. Custodian of Values: Maintaining organizational standards and ethics regarding the treatment of employees.

The objectives of HRM as showing in image given below reflecting the overall perceptive of HRM and its execution.

Functions of HRM

HRM functions are broadly divided into Line and Staff roles.

  • Line Function: Directing the activities of people in their own department. The HR manager exerts line authority within the HR department.

  • Coordinative Function: Ensuring that line managers (like production or sales managers) are implementing HR policies (e.g., sexual harassment policies).

  • Staff (Service) Function: Assisting and advising line managers. This is the main function. Examples include:

    • Recruiting and hiring.

    • Training and developing employees.

    • Administering compensation and benefits.

    • Ensuring compliance with labor laws.

    • Handling grievances and labor relations.

Evolution of HRM (The 6 Stages)

Though HRM seems modern, its roots go back to 1800 BC (Code of Hammurabi). The evolution can be traced through six key stages:

  1. Stage I: Pre-Industrial Era (1400-1700 AD): No formal HR. End of feudalism led to a free employment relationship. Skilled craftsmen and merchants emerged.

  2. Stage II: Industrial Revolution (1700-1900 AD): The rise of the Factory System. Machines replaced human effort. Workers were treated as a “commodity” to be bought cheaply. Focus was on production, not people.

  3. Stage III: Scientific Management & Welfare Work (1900-1935 AD):

    • Scientific Management (F.W. Taylor): Focus on efficiency, time studies, and training. Treated workers somewhat mechanically but stressed proper selection.

    • Welfare Work: Voluntary efforts by employers to improve working conditions (to avoid unions).

    • Industrial Psychology: Applying psychology to increase efficiency and well-being.

  4. Stage IV: Golden Age of Industrial Relations (1935-1970): After the Great Depression and WWII, unions grew powerful. The focus shifted to Collective Bargaining and industrial relations. Governments passed labor laws to protect workers.

  5. Stage V: Control of Labour Tradition (1970-1990): Trade unions began to decline due to political fragmentation and the government taking over welfare functions. The workforce composition changed to younger, educated employees who viewed unions as service agencies rather than a movement.

  6. Stage VI: Professional Tradition (1990 – Present): HRM became a professional discipline requiring specialized education (MBA/HR). The focus shifted from “personnel management” to Strategic HRM—aligning HR with business goals.

Difference Between Personnel Management & HRM

The shift from Personnel Management (PM) to Human Resource Management (HRM) represents a change in philosophy.

FeaturePersonnel Management (PM)Human Resource Management (HRM)
FocusEmployee maintenance and administration.Employee development and asset management.
NatureRoutine, administrative function.Strategic, continuous function.
PhilosophyManaging people as a tool/cost.Managing people as a valuable resource/asset.
FunctionIndependent function.Integrated with corporate strategy.
OrientationRules and regulations oriented.Performance and culture oriented.

Policies, Principles & Strategy

Personnel Policies: These are guides to thinking and action. They provide a roadmap for managers (e.g., “We promote from within first”). Policies ensure uniformity, better control, and confidence among employees.

HR Principles: These are fundamental truths or laws (e.g., principle of fair remuneration). They are universally applicable and guide the formulation of policies.

Strategic HRM: This is the modern approach. It links HRM with strategic goals to improve business performance. It views employees as a source of competitive advantage.

  • Traditional HR: Reacts to problems.

  • Strategic HR: Proactively designs policies to help the company win.

How HRM Contributes to Success

HRM is the “life-giving element” of an organization. Without it, resources like money and machinery are useless.

  1. Growth Instrument: It ensures competence and effective management, crucial for survival.

  2. Liaison: It balances the needs of employees with the goals of the employer.

  3. Professional Field: It moves focus from simple management to development, handling skill-building and capacity utilization to meet modern challenges.

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Sales Promotion & Advertising : Meaning, Tools, Objectives Media, Creation & Agencies

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What is Sales Promotion? (Meaning & Definition)

Sales Promotion refers to short-term incentives designed to encourage the purchase or sale of a product or service. It includes all marketing activities—other than personal selling, advertising, and publicity—that stimulate consumer purchasing and dealer effectiveness.

While advertising offers a reason to buy, sales promotion offers an incentive to buy now.

Key Definitions:

  • Philip Kotler: “Sales Promotion encompasses all the tools in the marketing mix whose major role is persuasive communication.”

  • American Marketing Association: “Those marketing activities, other than personal selling, advertising and publicity that stimulate consumer purchasing and dealer effectiveness, such as displays, shows and exhibitions, demonstrations and various non-recurrent selling efforts not in the ordinary routine.”

Objectives of Sales Promotion

Sales promotion is used to achieve five major objectives:

  1. Building Product Awareness: It exposes customers to products for the first time (e.g., free samples) and helps capture customer information for future marketing.

  2. Creating Interest: An appealing promotion can significantly increase customer traffic to retail outlets or websites. Allowing customers to experience a product for free creates interest.

  3. Providing Information: Offering free trials or online services helps move the customer to action by providing necessary product information.

  4. Stimulating Demand: Lowering the cost of ownership (e.g., discounts) stimulates sales by convincing customers to make a purchase.

  5. Reinforcing the Brand: Rewards for “preferred” customers (like loyalty points) encourage additional purchases and strengthen the brand relationship.

What are Main Tools of Sales Promotion?

Sales promotion methods are broadly divided into two categories:

1. Consumer Promotion Methods

These are designed to encourage the final consumer to buy the product.

  • Free Samples: Distributing small amounts of the product for free to induce trial.

  • Discount Coupons: Certificates that give buyers a saving when they purchase a specific product.

  • Free Gifts: Offering a free item with the purchase of a product (e.g., “Buy a TV, get a pendrive free”).

  • Price Reduction: Selling products at a reduced price for a limited time (e.g., “50% Off”).

  • Contests & Competitions: Giving consumers a chance to win something (cash, trips) by luck or extra effort.

  • Demonstrations: Showing how a product works at retail stores or door-to-door to prove its value.

  • Money Back Guarantee: Promising to return the customer’s money if the product doesn’t meet standards, building trust.

  • After-Sale Service: Offering free maintenance or repairs for a certain period.

2. Dealer (Trade) Promotion Methods

These are designed to encourage dealers and distributors to stock and sell more of the manufacturer’s product.

  • Advertisement Allowance: Money or materials (posters, signboards) given to dealers to help them advertise the product.

  • Quantity Discount: Offering price breaks to dealers who buy in large quantities.

  • Incentives to Salesmen: Prizes or bonuses for dealer sales staff who meet specific targets.

  • Credit Policy: Allowing dealers to buy goods on credit for a certain period.

  • Meetings & Seminars: Organizing events to discuss problems and solutions with dealers.

  • Training: Teaching the dealer’s sales force how to sell the product effectively.

What are Importance of Sales Promotion?

For Manufacturers:

  • Creates demand for new products.

  • Increases sales volume, leading to large-scale production and lower costs.

  • Helps face competition successfully.

For Middlemen (Dealers):

  • Increases their sales and profits.

  • Increases their goodwill.

  • Supplements the work of their own salesmen.

For Consumers:

  • Provides knowledge of new products.

  • Offers goods at reduced prices.

  • Improves standard of living through trials of new items.

What is Advertising?

Advertising is any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor. It is a powerful communication tool intended to inform, persuade, and remind the target audience.

Key Definitions:

  • American Marketing Association: “Any paid form of non-personal presentation and promotion of ideas, goods or services by business firms identified in the advertising message intended to lead to a sale immediately or eventually.”

  • William J. Stanton: “Advertising consists of all the activities involved in presenting to a group a non-personal oral or visual, openly sponsored message regarding a product, service or idea.”

What are Objectives of Advertising?

  1. To Inform: Telling the market about a new product, explaining how it works, suggesting new uses, or informing about price changes.

  2. To Persuade: Building brand preference, encouraging customers to switch to your brand, and persuading them to purchase now.

  3. To Remind: Keeping the product in the customer’s mind during off-seasons and reminding them where to buy it.

Products have both tangible and intangible characteristics. Advertising plays a part in communicating these to the customer, Role of advertising in communicating about the produc

Media of Advertising

The “medium” is the vehicle used to carry the message to the audience.

  1. Press Advertising:

    • Newspapers: Wide circulation, flexible, and timely. Can be local, state, or national.

    • Magazines: Better quality reproduction, longer life, and targeted audiences.

  2. Outdoor (Mural) Advertising: Posters, hoardings, and electric signs. Used to remind consumers of the product while they are out of their homes.

  3. Direct Mail Advertising: Sending a personal message in writing through the post directly to selected persons.

  4. Other Media:

    • Radio & TV: Popular for mass appeal. TV combines audio and visual effects for high impact.

    • Cinema: Slides or films played in theaters.

    • Digital/Internet: Social media, websites, and apps (fastest growing medium).

    • Fairs & Exhibitions: Displaying goods to a large number of visitors.

The above picture gives you a crystal-clear picture of advertising as a communication process. The product manufacturers and service providers encode the concrete message of advertisement along with specific features.

How to Create an Advertisement?

Creating a winning ad requires thinking like an “advertising guru.” Key factors include:

  • Title & Tagline: A unique product name and an eye-catching slogan (e.g., “Just Do It”) that grabs attention.

  • Remarkable Design: Layout, pictures, and special effects must be appealing.

  • USP (Unique Selling Point): Highlight the specific features that make your product a “killer competitor.”

  • Emotional Connection: Understand consumer psychology—sell “dreams,” comfort, and safety, not just a product.

  • Target Audience (KYC): Know who you are talking to. Use language and cultural references (Cross-Cultural Intelligence) that resonate with them.

  • Brand Ambassador: Using celebrities (like film stars or athletes) can increase appeal.

Comparative Advertisement

This involves comparing your product directly or indirectly with a competitor.

  • Pros: Helpful for customer decision-making, offers variety, and effective for new ventures challenging established brands.

  • Cons: Must be legal, accurate, and objective. Vague comparisons can damage your brand. “Sell your products, don’t just sell yourself.”

The Advertising Agency

An Advertising Agency is a service business dedicated to creating, planning, and handling advertising for its clients.

Key Tasks of an Agency:

  1. Account Management: Liaising with the client to understand their goals and budget.

  2. Creative Production: Designing the ad (layout, copy, special effects).

  3. Media Planning: Deciding where to run the ad (TV, Print, Digital) to reach the target customer most effectively.

  4. Research: Studying the market and customer to ensure the ad hits the mark.

Agencies can be Full-Service (doing everything), Creative Boutiques (focusing only on design), or Media Buying Agencies (focusing on purchasing ad space).

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Marketing Research Methods, Process & Analysis

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What is Marketing Research?

Marketing Research is the formal process of generating information to help marketing managers make better decisions.

Unlike a Marketing Information System (MIS), which manages the flow of data, Marketing Research is conducted to address a specific problem or opportunity. It is used to identify consumer needs, define market segments, measure the effectiveness of promotions, and develop new products.

According to the American Marketing Association (AMA):

“Marketing Research is the function which links the consumer, customer, and public to the marketer through information.”

The 3 Rs of Marketing Research

David G. Bakken suggests that research helps in three key areas:

  1. Recruiting new customers.

  2. Retaining current customers.

  3. Regaining lost customers.

🔄 The 6-Step Marketing Research Process

Conducting research is a systematic journey. While every project is different, most follow this 6-step framework.

Getty Images

Step 1: Define the Problem & Set Objectives

This is the most critical step. A problem well-defined is half solved.

  • Problem Definition: Uncovering the nature and boundaries of the situation (e.g., “Why has our market share in men’s jeans slipped by 10%?”).

  • Research Objectives: Defining exactly what information is needed to solve the problem (e.g., “Who are our customers?”, “How are we perceived compared to competitors?”).

Step 2: Design the Research Project

This involves specifying the methods for gathering and analyzing data. To ensure accuracy, the research must be Valid (measures what it’s supposed to measure) and Reliable (gives similar results if repeated).

There are three main categories of research design:

  1. Exploratory Research: Used when the problem is vague. It aims to discover the general nature of the problem. (Sources: Secondary data, expert interviews).

  2. Descriptive Research: Used when the problem is clearly defined. It describes market characteristics or functions (e.g., “How many people visit McDonald’s weekly?”).

  3. Causal (Experimental) Research: Used to prove a cause-and-effect relationship (e.g., “Will changing the package color increase sales?”). It involves experiments in a lab or the field.

Step 3: Data Collection Approach

Researchers must decide where to get the data.

  • Secondary Data: Information that already exists (e.g., company records, published reports, internet). It is cheaper and faster but may be outdated.

  • Primary Data: New information collected specifically for the current project.

Methods for Collecting Primary Data:

  • Observation: Watching how people behave (e.g., in a store).

  • Survey: Asking people questions (most common method).

  • Experiment: Testing variables to see the effect.

Step 4: Sampling Plan

You cannot survey everyone. You must select a Sample (a limited number of units) to represent the whole Population (Universe).

Key Decisions:

  1. Sampling Unit: Who is to be surveyed?

  2. Sample Size: How many people? (Larger samples are more reliable but expensive).

  3. Sampling Procedure: How do we choose them?

Types of Sampling:

  • Probability Sampling (Random): Every member has a known and equal chance of being selected. (e.g., Simple Random Sample, Stratified Sample). This is the most accurate.

  • Non-Probability Sampling: Based on the researcher’s judgment or convenience. (e.g., Convenience Sample, Quota Sample). It is easier and cheaper but less reliable.

There are two broad types of sampling techniques: random probability samples and non-probability samples.

Step 5: Analyze the Information

Raw data is useless on its own. The researcher must tabulate and analyze it to find meaningful insights.

  • Tools: Frequency counts, percentages, averages (mean/median/mode), standard deviation, and advanced statistical tools (regression analysis).

  • Goal: To interpret the data and accept or reject the hypothesis.

Step 6: Present the Findings

The final step is to present the results to the decision-makers in a formal report.

  • Executive Summary: A brief overview for senior managers who may not read the full report.

  • Clear Language: Avoid complex statistical jargon. Explain the findings simply so managers can use them to make decisions.

covers the 6-step research processMarketing Research Process

Qualitative vs. Quantitative Research

FeatureQualitative ResearchQuantitative Research
Main TechniquesFocus groups, In-depth interviewsSurveys, Scientific sampling
Questions Asked“Why?”, “In what way?” (Open-ended)“How much?”, “How many?” (Closed-ended)
Sample SizeFewer interviews, longer durationMany interviews, shorter duration
GoalTo gain insight, develop a hypothesisTo test a hypothesis, get numerical data
Nature of FindingsExplore language, refine conceptsNumerical data, projections

Differences between Qualitative and Quantitative Research,table sowing this

Summary: Why is Marketing Research Important?

  1. It reduces uncertainty in decision-making.

  2. It helps identify new market opportunities.

  3. It allows companies to monitor their performance and customer satisfaction.

  4. It provides the data needed for financial planning and economic forecasting.

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What is Branding, Packaging & Trademarks? Marketing Management

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Branding, Trademarks, and Packaging

In the modern market, competition is rarely about the product itself; it is about the “augmented” product. As Prof. Theodore Levitt noted nearly 45 years ago, the new competition is about what companies add to their factory output in the form of packaging, services, advertising, and things people value.

A Brand is defined as a name, term, sign, symbol, or design (or a combination of them) intended to identify the goods and services of one seller and differentiate them from the competition.

However, a brand is much more than a tag. It is a contract with the consumer regarding performance. It builds a bond of faith and trust, eliminating search costs and risks for the buyer.

1. Brand Identity vs. Brand Image

It is crucial for students to distinguish between how a brand is seen internally versus externally.

A. Brand Identity (The Insider’s Concept)

Brand identity refers to the brand strategist’s vision. It is a unique set of brand associations that the company aspires to create or maintain. It represents what the brand stands for and implies a promise to customers.

Jean-Noel Kapferer identified six dimensions of Brand Identity (The Brand Identity Prism):

  1. Physique: The tangible, physical aspects (features, logo, packaging). Example: IBM’s physique includes desktops and servers.

  2. Personality: The brand character (using adjectives like “rugged,” “youthful,” or “sophisticated”). Example: Boost is energetic; Bajaj Pulsar is “Definitely Male.”

  3. Culture: The values and principles the brand reflects. Example: Apple symbolizes simplicity and innovation; Mercedes symbolizes German engineering efficiency.

  4. Relationship: The transaction and exchange between the brand and customer. Example: Nike’s “Just Do It” encourages the user to win; Apple conveys friendliness.

  5. Reflection: The image of the target consumer that the brand projects. Example: Pepsi reflects young, carefree, fun-loving people.

  6. Self-Image: How the customer perceives themselves when using the brand. Example: A Nike user sees their inner athlete.

B. Brand Image (The Outsider’s Concept)

Brand Image is the sum total of impressions created by the brand in the consumer’s mind. It encompasses physical characteristics, functional benefits, and symbolic meanings.

Types of Brand Associations:

  • Hard Associations: Perceptions of tangible attributes like speed, fuel economy, or sturdiness.

  • Soft Associations: Emotional perceptions. Example: Indian Airlines may be associated with dullness or inefficiency, while Bajaj Pulsar is associated with excitement.

The Three Elements of Brand Image (Alexander L. Biel):

  1. Image of Provider: The reputation of the manufacturer. An inappropriate corporate image can hurt a good product. Example: Apple is seen as creative/cool; DCM is seen as old/dull.

  2. Image of Product: The functional characteristics and technology. Example: Laundry detergents are driven by rationality, while perfumes are driven by emotion.

  3. Image of User: Who uses the product? Example: The image of Raymond Suitings is “The Complete Man.”

2. Brand Equity (The Value of the Brand)

Brand Equity is the value a brand adds to a product. It explains why a product with a brand name can command a higher price and loyalty than an identical unbranded product.

Definitions:

  • David Aaker: “Brands have equity because they have high awareness, many loyal consumers, a high reputation for perceived quality, and proprietary assets.”

  • Kevin Lane Keller: “Brand equity is the marketing effects uniquely attributed to the brand. It is when certain outcomes result because of the brand name that would not occur otherwise.”

The 5 Dimensions of Customer-Based Brand Equity: (By Lasser, Mittal, and Sharma)

  1. Performance: Is the product fault-free and durable?

  2. Social Image: Does the brand hold esteem within the customer’s social group?

  3. Value: The ratio between the cost and the perceived delivered value.

  4. Trustworthiness: Does the customer have faith in the brand’s quality and the people behind it?

  5. Identification: Does the customer feel emotionally attached to the brand? (Does it match their self-concept?)

3. Types of Brands

Marketers have several options when deciding the ownership of a brand.

  1. Manufacturer Brands (National Brands):

    • Initiated by producers.

    • The initiator controls distribution, pricing, and promotion.

    • Focus: Building brand loyalty and corporate image.

  2. Private Brands (Store/House Brands):

    • Initiated by resellers (wholesalers or retailers).

    • The manufacturer is not identified on the product.

    • Example: Shoppers’ Stop brands.

    • Trend: Gaining popularity in India as large retail chains grow (e.g., Reliance Retail).

  3. Licensed Brands:

    • A company allows approved manufacturers to use its trademark for a royalty fee (2% – 10% of revenue).

    • Example: P&G licensed the ‘Camay’ soap brand to Godrej in India for a period.

    • Risk: The licensor loses control over manufacturing, which may hurt the brand reputation.

  4. Generic Brands:

    • Products that indicate only the product category (e.g., “Aluminium Foil” or “Paracetamol”).

    • They are usually sold at lower prices than branded versions.

4. Branding Strategies (Detailed)

Companies grow by adding products. They must decide how to name them. Here are the six generic strategies:

1. Product Branding Strategy (One Product, One Brand)

The company assigns a unique name to every product. The brand reflects its own personality and does not take on company associations.

  • Philosophy: “Singularity.” Create the perception that there is no product quite like this one.

  • Example: P&G (Tide, Ariel, Pantene, Vicks, Old Spice) and HUL (Lux, Dove, Liril, Lifebuoy). Even though Ariel and Tide are both detergents by P&G, they have separate identities.

  • Advantage: You can cover different market segments without confusion. If one brand fails, it doesn’t hurt the company’s reputation.

  • Disadvantage: Extremely expensive to build a new brand from scratch ($5 million – $50 million).

2. Line Branding Strategy

Products share a common concept. The brand starts with one product and extends to complementary products that “surround” the core need.

  • Example: Lakmé (Core concept: Beauty). The brand extends to lipsticks, winter lotions, and face wash because they all complement the core concept of beauty. Park Avenue (Core concept: The upwardly mobile man).

  • Advantage: Stronger brand identity; promotion of the main brand helps all items in the line.

3. Range Branding Strategy (Brand Extension)

Different product categories share the same brand name because they fall under the company’s “Area of Expertise.”

  • Difference from Line Branding: In Line Branding, products complement each other (lipstick + makeup remover). In Range Branding, products might not complement each other, but they share a domain.

  • Example: Maggi (Noodles, Sauces, Soups, Dosa mixes). The area of expertise is “Fast Food.” Himalaya (Ayurvedic concepts).

  • Advantage: One brand banner covers many products, lowering promotional costs.

  • Risk: Overstretching may confuse consumers.

4. Umbrella Branding Strategy (Mega Branding)

The company name is the brand name for all products across diverse, unrelated categories. This is common in Eastern companies (Japan, Korea).

  • Example: Samsung, Sony, Tata, Amul, Philips, GE.

  • Advantage: Very economical. Transfers the goodwill of the company to new products instantly.

  • Disadvantage: Not market-focused. A failure in one category (e.g., a faulty toaster) can tarnish the image of another category (e.g., medical equipment).

5. Double Branding Strategy

Combining the company name AND a product brand name. Both are given equal status.

  • Example: Bajaj Pulsar, Maruti Suzuki Swift, Tata Indica.

  • Why? The product gains trust from the company name (Bajaj) and excitement/differentiation from the product name (Pulsar – “Definitely Male”).

  • Limitation: Works best when the product is consistent with the company’s expertise.

6. Endorsement Branding Strategy

A variation of double branding where the Product Brand dominates, and the Company Name takes a back seat, acting only as a seal of quality (endorsement).

  • Example: Kit-Kat (endorsed by Nestlé), Cinthol (endorsed by Godrej).

  • Advantage: The brand gets freedom to have its own distinct image (fun, youthful) while assuring the customer of the manufacturer’s quality.

5. Packaging and Trade Marks

Packaging

Packaging includes all activities focused on the development of a container and a graphic design for a product. It is often called the “Silent Salesman.”

  • Functions: It protects the product, identifies the brand, offers convenience to the user, and acts as a promotional tool on the shelf.

Trade Marks

A trademark is a brand, brand name, brand mark, or trade character that has been given legal protection. It protects the seller’s exclusive rights to use that brand name or mark, preventing competitors from copying it.

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Product Management: Planning, Mix, Product line, Product Improvement & Life Cycle

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In the world of marketing, the “Product” is the engine that pulls the rest of the marketing program. It is the most critical element of the marketing mix because if the product fails to deliver value, no amount of clever pricing or promotion can save it.

This comprehensive article covers the entire journey of a product: from its policy and planning to its development and eventual life cycle in the market.

What is a Product? (Concepts & Levels)

A Product is anything that can be offered to a market to satisfy a want or a need. It is not just a tangible object; it includes services, events, persons, places, organizations, and even ideas.

According to Philip Kotler:

“A product is anything, tangible or intangible, which can be offered to a market for attention, acquisition, use, or consumption that might satisfy a need or want.”

The 5 Levels of a Product (Customer Value Hierarchy)

To understand what a customer truly buys, marketers analyze a product on five levels:

  1. Core Benefit: The fundamental service or benefit that the customer is really buying. (e.g., For an Air Conditioner, the core benefit is “Cooling and Comfort”).

  2. Generic Product: The basic version of the product that performs the function. (e.g., The AC machine itself with basic components).

  3. Expected Product: The set of attributes and conditions buyers normally expect when they purchase this product. (e.g., Remote control, warranty, quiet operation, cooling speeds).

  4. Augmented Product: Additional features, benefits, or services that exceed customer expectations and set the product apart from competitors. (e.g., Free installation, 24/7 customer support, smart-home connectivity). Competition mostly happens at this level.

  5. Potential Product: All the possible augmentations and transformations the product might undergo in the future. (e.g., An AC that runs on solar power, purifies air like a tree, and is completely silent).

What is Product Policy Decisions? (Nature & Scope)

Before a single product is made, top management must set the ground rules. This is called Product Policy.

Product Policy refers to the broad guidelines and rules set by top management that determine the nature, volume, and timing of the products a company offers. It acts as a compass for all product-related decisions, ensuring they align with the company’s long-term goals.

Nature of Product Policy:

  • Strategic Guide: It is a long-term strategic plan, not a short-term tactic.

  • Top Management Function: Critical decisions (like entering a new market or dropping a product line) are taken by the Board of Directors.

  • Focus: It balances maximizing customer satisfaction with ensuring profitability and growth.

Objectives of Product Policy:

  1. Survival: To keep the company viable in a competitive market.

  2. Growth: To increase sales volume and market share over the long run.

  3. Flexibility: To remain adaptable to changing customer needs and technology.

  4. Resource Utilization: To optimize the use of production capacity, finance, and marketing networks.

Scope of Product Policy (What it covers):

  • Product Mix Decisions: Broadening or narrowing the product mix.

  • Product Line Decisions: Stretching or filling the product line.

  • Product Differentiation: How to distinguish the product (branding, packaging).

  • Product Innovation: Policies regarding R&D for new products.

Product Mix (Product Assortment)

Most companies do not sell just a single product. They sell a variety of goods to satisfy different market needs. The total set of all products and items that a particular seller offers for sale is called the Product Mix, also known as Product Assortment.

To understand this concept, let’s look at two real-world examples: Patanjali and Nestlé.

Real-World Examples

1. Patanjali Ayurved: Patanjali does not just sell toothpaste. Its “Product Mix” is massive.

  • It sells Personal Care (Dant Kanti, Soaps, Shampoos).

  • It sells Food Products (Atta, Ghee, Biscuits, Noodles).

  • It sells Home Care (Dishwash bar, Detergents).

  • It sells Medicines (Ayurvedic supplements).

2. Nestlé India: Nestlé is a classic example of a deep and wide product mix.

  • Milk Products: Milkmaid, Everyday.

  • Beverages: Nescafé, Nestea.

  • Prepared Dishes: Maggi Noodles, Maggi Sauces, Maggi Soups.

  • Chocolates: KitKat, Munch, Milkybar.

The 4 Dimensions of Product Mix

A product mix is defined by four dimensions: Width, Length, Depth, and Consistency.

1. Product Mix Width (Breadth)

This refers to the number of different product lines the company carries.

  • Example: Patanjali has a wide mix because it deals in Medicine, Cosmetics, Grocery, and Garments (Paridhan).

  • Strategy: Companies increase width to diversify risk and capitalize on their brand reputation.

2. Product Mix Length

This refers to the total number of items in the mix. It is the sum of all the products within all the lines.

  • Example: If Nestlé has 5 milk products, 5 beverages, and 10 chocolates, the “Length” of its mix is 20.

3. Product Mix Depth

This refers to the number of versions offered of each product in the line. It includes different sizes, flavors, and formulations.

  • Example: Maggi Noodles comes in Masala, Chicken, Atta, Oats, and varied pack sizes (single pack, family pack). This variety represents the depth of the Maggi line.

4. Product Mix Consistency

This refers to how closely related the various product lines are in end-use, production requirements, or distribution channels.

  • Example: Amul has high consistency because almost all its products (Milk, Butter, Cheese, Ice Cream) are dairy-based and use a cold-chain distribution network.

  • Example: Samsung has lower consistency because it sells everything from Smartphones (Consumer Electronics) to Heavy Ships and Insurance.

Product Line Decisions

A Product Line is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, or fall within given price ranges. Product managers must constantly decide whether to expand or cut their product lines.

1. Line Stretching

This occurs when a company lengthens its product line beyond its current range. This can be done in three ways:

  • Downward Stretch: A company located at the upper end of the market introduces a lower-priced line.

    • Reason: To plug a market hole that would otherwise attract a new competitor or to respond to an attack on the high end.

    • Example: Mercedes-Benz introducing the A-Class (a smaller, cheaper car) to compete in the lower-luxury segment.

    • Risk: It might cheapen the brand image.

  • Upward Stretch: Companies at the lower end of the market may enter the higher end.

    • Reason: Higher margins and faster growth rates at the top.

    • Example: Maruti Suzuki, known for budget cars (Alto, WagonR), launched the Nexa channel to sell premium cars like the Ciaz and Grand Vitara.

    • Risk: Customers may not believe the “budget” brand can produce “premium” quality.

  • Both-Way Stretch: Companies in the middle range may decide to stretch their line in both directions.

    • Example: Titan Watches sells Sonata for the budget segment and Nebula (gold watches) for the luxury segment, while keeping Titan in the middle.

2. Line Filling

This involves adding more items within the existing range of the product line.

  • Reason: To reach for incremental profits, satisfy dealers who complain about missing items, utilize excess capacity, or keep out competitors.

  • Risk: If overdone, it results in “cannibalization” (new products eating the sales of old ones) and customer confusion.

3. Line Pruning

The opposite of stretching. This involves cutting down the number of items in the product line.

  • Reason: When products are dead weight (unprofitable) or when production capacity is short.

  • Example: P&G significantly pruned its “Head & Shoulders” shampoo line from 31 items down to 15 to reduce complexity and focus on best-sellers.

New Product Development (NPD) Process

Innovation is key to survival. However, new products have a high failure rate. To minimize risk, companies follow a systematic New Product Development (NPD) process.

The 7 Stages of NPD:

  1. Idea Generation: The systematic search for new product ideas. Sources include internal employees, customers, competitors, and distributors.

  2. Idea Screening: Filtering the ideas to spot good ones and drop poor ones as soon as possible. (e.g., Is it feasible? Is there a market?).

  3. Concept Development & Testing: A “product idea” is a possible product; a “product concept” is a detailed version of the idea stated in meaningful consumer terms. This concept is then tested with a group of target consumers to gauge their reaction.

  4. Business Analysis: A review of the sales, costs, and profit projections for a new product to find out whether they satisfy the company’s objectives.

  5. Product Development: Turning the product concept into a physical product (prototype) to ensure the idea is workable and safe. This involves R&D and engineering.

  6. Test Marketing: Introducing the product and marketing program into realistic market settings (a few select cities) to test consumer response before a full-blown launch.

  7. Commercialization: The full-scale launch of the product into the market. This involves high costs for advertising and distribution.

The Product Life Cycle (PLC)

The Product Life Cycle (PLC) is a concept that describes the stages a product goes through from when it was first thought of until it finally is removed from the market.

According to Philip Kotler:

“The PLC is an attempt to recognize distinct stages in the sales history of the product… corresponding to these stages are distinct opportunities and problems with respect to marketing strategy and profit potential.”

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The PLC typically has four stages: Introduction, Growth, Maturity, and Decline.

Stage 1: Introduction Stage

This starts when the new product is first launched.

  • Sales: Low and slow. It takes time for the product to roll out to markets and for dealers to stock it.

  • Profits: Negative or low. Distribution and promotion expenses are at their highest.

  • Competition: Low. Few or no competitors.

  • Marketing Objective: Create product awareness and trial.

Strategic Decisions in Introduction:

  • Rapid Skimming Strategy: Launching at a High Price with High Promotion. (Example: Apple iPhone launches).

  • Slow Skimming Strategy: Launching at a High Price with Low Promotion. Used when the market size is limited and competition is not expected soon.

  • Rapid Penetration Strategy: Launching at a Low Price with High Promotion. Used to capture a large market share quickly in a price-sensitive market. (Example: Reliance Jio launch).

  • Slow Penetration Strategy: Launching at a Low Price with Low Promotion. Used when the market is price sensitive but not promotion sensitive.

Stage 2: Growth Stage

If the new product satisfies the market, it enters the growth stage.

  • Sales: Climb rapidly. Early adopters continue buying, and more consumers follow.

  • Profits: Increase rapidly as promotion costs are spread over a larger volume and unit manufacturing costs fall.

  • Competition: New competitors enter, attracted by the opportunities for profit. They introduce new product features.

Strategies for Growth:

  1. Product Improvement: Improve quality and add new product features or styling.

  2. New Models: Add new models and flanker products (different sizes, flavors) to protect the main product.

  3. New Segments: Enter new market segments.

  4. New Channels: Enter new distribution channels (e.g., moving from online-only to retail stores).

  5. Shift in Advertising: Shift from building product awareness to building product conviction and purchase.

  6. Price Cuts: Lower prices slightly to attract the next layer of price-sensitive buyers.

Stage 3: Maturity Stage

This is the longest stage for most products. Sales growth slows down or plateaus.

  • Sales: Peak sales. The market is saturated (most people who want the product already have it).

  • Profits: Begin to decline. Competition is fierce, leading to price wars and increased advertising spending to defend market share.

  • Competition: Intense. Weak competitors drop out.

Strategies for Maturity:

  1. Market Modification: Try to increase consumption by finding new users or new segments (e.g., Johnson & Johnson marketing baby oil to adults).

  2. Product Modification: Change characteristics such as quality, features, or style to attract new users (e.g., Car manufacturers launching “facelift” versions of existing models).

  3. Marketing Mix Modification:

    • Price: Cut prices to match competitors.

    • Distribution: Seek more outlets.

    • Promotion: Use aggressive sales promotion (contests, discounts).

Stage 4: Decline Stage

The sales of most product forms and brands eventually dip. This can happen slowly (oatmeal) or rapidly (VHS tapes).

  • Sales: Declining.

  • Profits: Eroding.

  • Reason for Decline: Technological advances (CDs replacing Cassettes), shifts in consumer tastes, or increased competition.

Strategies for Decline:

  1. Maintain: Continue hoping that competitors will leave the industry. (Example: P&G remained in the liquid soap business while others withdrew, eventually making good profits).

  2. Harvest: Reduce various costs (R&D, advertising, sales force) and hope that sales hold up. This is also called “milking the brand.”

  3. Divest: Drop the product from the line. Sell it to another firm or liquidate it.

Example Case Study:

  • Introduction: 3G Mobile Phones (High price, low awareness initially).

  • Growth: 4G Smartphones (Rapid adoption, many competitors like Samsung, Apple, Xiaomi).

  • Maturity: Laptops (Everyone has one, competition is on price and minor features).

  • Decline: Landline Telephones / Typewriters (Replaced by newer tech.

Product Improvement & Diversification

Companies cannot rely on one product forever. They must improve existing products and find new markets.

Product Improvement

This is the process of making meaningful changes to an existing product to satisfy customers better or combat competition. Unlike NPD, this focuses on upgrading what you already have.

Why Improve Products?

  • To extend the Product Life Cycle (especially during the Maturity stage).

  • To create a “new” talking point for advertising (e.g., “New and Improved Formula”).

  • To fix customer complaints or defects.

3 Main Strategies for Product Improvement:

  1. Quality Improvement: Increasing the durability, reliability, or speed. (e.g., A smartphone using stronger glass).

  2. Feature Improvement: Adding new functions that make the product more versatile or safe. (e.g., WhatsApp adding “Delete for Everyone”).

  3. Style/Aesthetic Improvement: Changing the look, feel, or color without changing functional performance. (e.g., A car facelift with new headlights).

Product Diversification

Diversification is a growth strategy where a company enters a new market with a new product. It is high-risk but high-reward.

Types of Diversification:

  1. Concentric Diversification: Adding new products that are related to existing products (technology/marketing). Example: A shoe company starting a line of socks.

  2. Horizontal Diversification: Adding new products that are unrelated to current products but appeal to the same customer group. Example: A gym selling protein shakes.

  3. Conglomerate Diversification: Adding new products that are totally unrelated to current products and markets. Example: Tata Group moving from Steel to Salt to Software.

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What is Consumer Behavior? Buying Motives, Process & its Influencing Factors

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Understanding Consumer Markets & Buying Behaviour

In marketing, the consumer is king. Understanding why, when, and how consumers buy is the most critical task for any marketing manager. Consumer Behavior is the study of the acts of individuals involved in obtaining and using goods and services, including the decision-making processes that precede and follow these acts.

The goal is to answer the ultimate question: Why does a consumer buy?

1. Types of Consumer Markets

Consumer markets can be categorized based on the products they sell:

  • Fast-Moving Consumer Goods (FMCG): Low value, high volume, and fast repurchase (e.g., Soaps, Juices, Chocolates).

  • Consumer Durables: High value, low volume, and used for a long time (e.g., TV, Fridge, Gaming Consoles).

  • Soft Goods: Similar to durables but wear out faster (e.g., Clothes, Shoes).

  • Services Market: Intangible products (e.g., Teaching, Parlors, Childcare).

Markets can also be classified by Area (Local, National, International), Time (Short/Long period), and Competition (Perfect, Imperfect).

2. Types of Customers in the Market

Not all customers behave the same way. Based on purchase habits, we can identify five types:

  1. Loyal Customers: They buy the same brand repeatedly. Marketers must communicate with them regularly to keep them happy, as they are likely to recommend the brand to others.

  2. Discount Customers: They buy based on price or sales. They help turnover inventory but can increase costs due to higher return rates.

  3. Impulse Customers: They make purchase decisions at the moment of buying (e.g., picking up a candy bar at checkout). They are a great source of insight.

  4. Need-Based Customers: They buy only to fulfill a specific need. If they don’t find what they need, they leave immediately. They are harder to please but are the greatest source of long-term growth.

  5. Wandering Customers: They make up the largest traffic in a retail store but the smallest percentage of sales. They visit stores more for the experience or location than to buy.

The Consumer Buying Decision Process (5 Stages)

A consumer goes through a specific journey before making a purchase.

Credit : Shutterstock

Stage 1: Need Recognition & Problem Awareness

The process starts when a consumer realizes a gap between their current state and their desired state.

  • Internal Stimuli: Hunger, thirst, or basic needs.

  • External Stimuli: Seeing an ad, smelling food, or admiring a friend’s new car.

  • Marketer’s Job: Identify the drive (motive) and arrange cues to trigger this need.

Stage 2: Information Search

Once the need is aroused, the consumer looks for information.

  • Internal Search: Memory and past experiences.

  • External Search:

    • Personal Sources: Family, friends (Most effective).

    • Commercial Sources: Ads, salespeople (Most informative).

    • Public Sources: Mass media, consumer ratings.

    • Experiential Sources: Handling or examining the product.

Stage 3: Evaluation of Alternatives

The consumer compares different brands based on product attributes (price, quality, features).

  • Cognitive Evaluation: Based on logic and objective criteria.

  • Affective Evaluation: Based on emotions and feelings.

Stage 4: Purchase Decision

The consumer forms an intention to buy. However, two factors can still interfere:

  1. Attitude of Others: (e.g., a spouse disapproving of the purchase).

  2. Unanticipated Situational Factors: (e.g., sudden job loss or the store is out of stock).

Stage 5: Post-Purchase Behavior

After buying, the consumer compares the product’s performance to their expectations.

  • Performance < Expectations: Dissatisfaction.

  • Performance = Expectations: Satisfaction.

  • Performance > Expectations: Delight.

  • Note: If a consumer is dissatisfied, they may return to Stage 1 but will likely exclude the brand they just bought from future choices.

Factors Influencing Consumer Behavior

A consumer’s decision is never made in isolation. It is influenced by four major factors.

1. Cultural Factors (The Broadest Influence)

  • Culture: The set of basic values, perceptions, and behaviors learned from family and society. (e.g., Indian culture values family and savings; American culture values individualism and consumerism).

  • Sub-Culture: Smaller groups with shared value systems (e.g., Punjabi vs. South Indian culture).

  • Social Class: Society’s ordered divisions (Upper, Middle, Lower) whose members share similar values and behaviors.

Factors influencing buying decision process

2. Social Factors

  • Reference Groups: Groups that influence a person’s behavior (e.g., friends, co-workers). Marketers try to target “Opinion Leaders” within these groups.

  • Family: The most important consumer buying organization in society. Buying roles are changing (e.g., children influencing car purchases).

  • Roles & Status: A person plays different roles (e.g., a father vs. a CEO). Each role carries a status that influences clothing, car, and lifestyle choices.

3. Personal Factors

  • Age & Life Cycle Stage: Tastes change with age. A bachelor’s spending differs vastly from a “Full Nest” family with young children.

  • Occupation: A blue-collar worker buys work clothes; a CEO buys suits.

  • Lifestyle: A person’s pattern of living as expressed in their AIO (Activities, Interests, Opinions).

  • Economic Situation: Income, savings, and borrowing power affect product choice.

4. Psychological Factors

    • Motivation: A need becomes a motive when it is strong enough to drive action.

      • Maslow’s Hierarchy of Needs: Explains that people satisfy needs in a specific order: Physiological -> Safety -> Social -> Esteem -> Self-Actualization.

Shutterstock

  • Perception: How we select and interpret information. (e.g., If you perceive a brand as “premium,” you act accordingly).

  • Learning: Changes in behavior arising from experience.

  • Beliefs & Attitudes: Descriptive thoughts (beliefs) and enduring evaluations (attitudes) about brands. These are hard to change.

Summary: Why Study Consumer Behavior?

  1. To segment the market effectively.

  2. To design a better marketing mix (Product, Price, Place, Promotion).

  3. To assess new market opportunities.

  4. Ultimately, because The Consumer is King. Ignoring their preferences leads to failure.

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Complete financial managemnt notes bba sem 3 for lucknow university lu notes, lunotes.in

Financial Management Full BBA Syllabus Lucknow University 3rd Semester

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Hey, Lucknow University students!

“Financial Management” is often considered the backbone of the BBA curriculum and  appears in the 3rd Semester of exams. This subject moves from simple accounting to teach you the methodologies of decision-making: How do companies decide where to invest? How do they raise money? How do they manage cash?

Lu notes has organized the complete syllabus into easy-to-understand notes to help you master these calculations and concepts. Just click on your desired topic below to access the notes!

 

Unit 1: Introduction & Investment Decisions

This unit covers the basics of finance and the crucial tools for deciding long-term investments.

  • Introduction to Financial Management: Concept, Functions, Objectives, Profitability vs. Shareholder Wealth Maximization [View Notes]

  • Time Value of Money- Compounding & Discounting [View Notes]

  • Investment Decisions: Capital Budgeting (Payback, NPV, IRR, ARR) [View Notes]

Unit 2: Financing Decisions

This unit focuses on how companies raise funds and the cost associated with those funds.

  • Financing Decision: Capitalization Concept & Basis [View Notes]

  • Consequences and Remedies of Over and Under Capitalization (I have already explained this topic in the first article “Introduction to Financial Management.”
    Please visit that article, and you will find the detailed explanation below in that post.

  • LINK TO THAT ARTICLE [View Notes]

  • Cost of Capital & WACC (Weighted Average Cost of Capital) [View Notes]

  • Determinants of Capital Structure [View Notes]

  • Capital Structure Theories [View Notes]

Unit 3: Dividend Decisions

This unit explores how companies decide how much profit to keep and how much to give back to shareholders.

  • Dividend Decision: Concept and Relevance [View Notes]

  • Dividend Models: Walter’s Model [View Notes]

  • Dividend Models: Gordon’s Model [View Notes]

  • Dividend Models: MM Hypothesis (Modigliani-Miller) [View Notes]

  • Dividend Policy and its Determinants [View Notes]

Unit 4: Working Capital Management

The final unit deals with the day-to-day financial health of a business.

  • Management of Working Capital: Concepts & Approaches [View Notes]

  • Management of Cash [View Notes]

  • Management of Receivables [View Notes]

  • Management of Inventory [View Notes]

CREDIT : Shutterstock

📚 Keep Studying!

We hope these Financial Management notes help you master the numbers and ace your exams. LuNotes is your one-stop solution for all Lucknow University notes. Don’t forget to check out our notes for other subjects in your semester!

  • [Link to Marketing Management Notes]

  • [Link to Human Resource Management Notes]

  • [Link to Operations Management Notes]

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