Marketing is seen as the task of creating, promoting and delivering goods

Marketing is seen as the task of creating, promoting and delivering goods and services to consumers and business

Marketing is a term of common usage. In general view, it is related to buying and selling goods produced. But marketing is not only concerned with buying and selling of goods and services. It is that commercial process which attends and facilitates the movement of goods and services through the economy to enlarge and satisfy consumer need consistent with the corporation's fundamental objectives. In other words, marketing is an exchange process between producers and consumers, in which the producer matches a marketing offering (the product or service, plus its promotion, distribution, and price) to the wants and needs of the consumer.

Marketing is the business function that identifies customer's needs and wants, determines which target markets the organization can serve best, and designs appropriate products, services, and programs to serve these markets. However, marketing is much more than just an isolated business function. It is a philosophy that guides the entire organization. The goal of marketing

is to create customer satisfaction profitably by building value-laden relationships with important customers.

Definitely, marketing is seen as the task of creating, promotional and delivering goods and services to consumers and business. Following definitions help to explain it. 

According to E. Jeome McCarthy, "Marketing is the performance of activities that seek to accomplish an organization's objectives by anticipating customer or client needs and directing a flow of need-satisfying goods and services from producer to customer or client."

In the words of Stanton, Etzel and Walker, "Marketing is a total system of business activities designed to plan, price, promote and distribute want-satisfying products to target markets to achieve organizational objectives."

According to American Marketing Association, "Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational goals."

According to Philip Kotler, "Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others."

The above definitions emphasize that marketing focuses on activities to satisfy customer. Marketing consists of those activities which are associated with product, price, place and promotion. Marketing is an on-going process of discovering and translating consumer needs and wants into products service through planning, producing and creating demand, serving customer and business demand through planned physical distribution system and expanding markets in the face of keen competition under certain commitments.

Now, we can say that marketing is seen as the task of creating, promotional and delivering goods and services to consumers and business because these are the core function of modern marketing. It focuses on consumer and business needs, coordinates all the activities that will influence consumers and business firms and generates profit by satisfying them.

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Distribution Practices in Nepal || Physical Distribution and Distribution Channel ||

The functions of supplying / carrying goods or service from production center to sales centers are called distribution activities or practices. The goods demanded by consumers should be supplied in right quantity, at right place and at right time. Right agents, middlemen or right distributors should be selected for effective distribution. For this, the producer should select suitable channel for distribution.

Physical distribution makes marketing complete. The channels used in transporting goods for systematic and effective distribution are mentioned as follows:

1. Physical Distribution

Physical distribution is the simple process of supplying the product to the final consumer / customers. Physical distribution creates place utility, time utility and ownership utility. The main components of physical distribution are mentioned as follows:

a) Order Processing

At first the customers send order for purchasing goods. When such orders are received, they should be collected, sorted out and goods should be delivered as ordered. Such different activities are, on the whole, called order processing. This function is very important for physical distribution. Customers should be made happy and satisfied through systematic and effective functions. If the customers become happy and satisfied, the business becomes successful and business earns more profits. But the aspect/function of order processing is very weak in Nepal. So, more attention needs to be paid towards making such activities effective.

b) Warehousing

Storing products in right place until they are demanded or supplied to market is called warehousing. It creates time utility by providing goods at the right time when demanded by customers. The warehouse management should keep products in safe. They also should be kept in proper stock and be carefully looked after. Otherwise there remains possibility of theft, damage, robbery, or so on. So, the warehousing should perform the works such as collecting, packing, shipping, providing safety etc. Such warehousing activities are found centered only in city areas. But good warehousing management is lacking in the hilly areas of Nepal.

c) Material Handling

Bringing raw materials for production and keeping produced goods in warehouse is called material handling. Besides, goods need to be taken to airport, railway station, bus station etc. Moving goods from one place to another, they may get damaged or broken. So, right equipment, technology, or methods should be used to minimize loss or damage. Porters, labors, trucks, cranes etc. are used to move goods to warehouse from factory/production place. But in our country, Nepal, new technologies are not found in practice or are not available.

d) Inventory Management

Proper inventory of goods/products should be kept in balance for effective distribution. Both unnecessarily huge and least quantity of inventory may be dangerous. So, an ideal inventory should be managed. The same function is called inventory management. If the inventory is least, goods cannot be supplied according to demand and even regular customers go away. If the inventory is more than needed, capital, warehouse cost, insurance cost may increase. So, inventory management should be analytical and balanced. In our country, inventory management is not found scientific. Its management aspect is very weak.

e) Transportation

Transportation creates place utility of goods by supplying them to consumers from factory/production place. Surface/road airways, pipe lines, trucks, ships etc. can be used for transporting goods. So, while selecting means of transportation and using them, their cost, speed/pace, consistency, safety, availability, etc. should be seriously considered. As far as possible, safe and lesser costly means should be selected. Since, our country lacks navigation development, bus, park, train, place etc. are used.

2. Distribution Channel

Different business firms and companies produce goods of different quality. They should be transported to the places of end users. They way which is used to transport goods to the target markets is called distribution channel. The structure of distribution channel may be different due to nature of goods and environmental elements/factors. Some reputed companies involve producer – wholesalers – retailers in Nepal. Some other business firms use vertical channel system. Some companies supply their products to stock holders and the stock holders send the products to sales centers by appointing sales representatives. The sales representatives receive purchase orders and distribute the products to shop or sales centers according to the orders.

Due to difficult geographical region, distribution channel has not become systematic and effective. Nepal Liver Limited, Pepsi Company and Coco-Cola Companies are trying vertical distribution channel. Conflicts have also appeared in marketing channel due to inability to akin/fix the role of middlemen. However, it is expected that big companies will be able to solve such problems in near future. Products should be compulsorily carried to target markets through one or the other distribution channel. Suitable/proper channel should be selected according to the nature and condition of the goods. Generally, distribution channel for industrial goods becomes short whereas it may be long for consumer goods. Considering this matter, the distribution manager should select proper channel.

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Physical Distribution and Components of Physical Distribution

Meaning of Physical Distribution

Goods are produced for sale. So, the produced goods should be supplied to the ultimate consumers from production place. The function to supply goods to ultimate consumers is called physical distribution. Physical distribution creates place utility, time utility and ownership utility. As the distribution completes marketing, it is called second part of marketing.

This includes the task of transport management, storage management, stock control, transferring goods, order scanning etc. In order to satisfy / fulfill customers' wants, right goods in right quantity should be supplied to right place at right time. Physical distribution also properly cares such functions.

Related Topic:
Meaning and Objectives of Distribution

Physical distribution can be known as the process of supplying goods in demanded quantity at right time as wanted by them. Different experts and scholars have defined physical distribution. Important ones are mentioned as follows:

Prof. William J. Stanton has defined physical distribution as, "Physical distribution consists of all activities concerned with moving the right amount of right products to the right place at the right time."

 

Prof. Philip Kotler has defined it as, "Physical distribution or marketing logistics involves planning implementation and controlling the physical flow of materials, final goods and related information from the point of origin to points of consumption to meet customer requirement at a profit."

 

Condiff Still and Govani have defined it as, "Physical distribution involves the actual movement and storage of products after their production and before their consumption."

The above mentioned definitions make it clear that all the activities done to supply produced goods to target markets are included in physical distribution. Bringing improvement in customers' services, creating higher utility of goods, bringing stability in price and quality are the important objectives of physical distribution. Physical distribution plays an important role to achieve these objectives.

Components of Physical Distribution

- Order processing Order entry Order handling Order delivery - Warehousing Private and Public warehouse Number of warehouses Location of warehouse - Material handling Mechanical handling Non-mechanical handling - Inventory management Economic order quantity - EOQ Re-order point Safety stock ABC analysis Just in time - JIT - Transportation Types of Carrier Mode of Transportation

Several activities need to be done to supply goods to the place where the customers demand. Different elements should be active to perform such activities correctly. The same elements are called components of physical distribution. Such different components are also known as sub-system. The main components of physical distribution are mentioned as follows:

1. Order processing

Physical distribution function starts only after demand is received from customers. The task of separating such orders to send to the registration department and preparing bill and consigning (dispatching) it is called order processing. Order processing is very important function of physical distribution. This function should be effectively and systematically done to satisfy the customers so that they are enthralled to make reorder and high profit can be earned. Orders can be processed using computer or by hand. Mostly small firms / companies process orders by hand but big firms / companies use computers. Mainly three functions are included in order processing as follows:

• Order entry: When the orders are received from customers, their records should be entered / kept in the order according to date. Order for goods can be received through telephone, post, telegram, fax, etc. Records of total quantity, products type and subscribers / customers should be clearly kept. Besides, date and time of delivery should also be clearly mentioned in it.
• Order handling: After the order has been received from customers, the order should be kept recorded and sent to store and account sections. This task is called order handling. Store section ascertains/confirms whether the goods as ordered are stock or not in the store, and the account section confirms whether nay outstanding amount has remained to be recovered from the customer/subscriber or not. If the quantity of goods is not sufficient in the store to meet the demand, information is given to factory for production. If the credit amount (unpaid) is high, the customer is made aware that the company also wants to recover the credit due/ outstanding amount.
• Order delivery: If the goods as demanded are stock in store, they should be packed; if not, alternative arrangement should be done. After the goods are ready for shipment, transport section should be contacted. In case delivery is delayed for any reason, the customers may get angry or irritated. So, goods should be promptly delivered according to the order. While delivering goods in this way, bills/invoice and shipment document should be prepared. Then one copy should be given to transport section or company and other copy should be sent to the customer and the third copy should be kept filed in account section.

2. Warehousing

Produced goods should be safely kept in warehouse until demanded by market, the same is called warehousing. It creates time utility by providing goods to the customers at the time when demanded. Warehousing includes the functions to keep products / goods safe until they are sold out. Warehousing plays an important role in providing best service at the least cost. Goods should be kept stock, properly stored in warehouse and looked after them carefully. Otherwise, they may be stolen, get damaged, broken or putrefied. Warehousing collects goods, divides units, stores them, packs and ships out them.

Warehousing does not only keep goods safely, it also works as distribution center. The warehouse manager or officer should also take rational decision on how to use the warehouse. In addition to this, the functions of warehousing include from selection of place for establishment of warehouse to decision taking how much or what number of products should be kept in.

Generally, the following matters should be kept in mind while taking decision for warehousing:

• Private and public warehouse: Mainly there are two types of warehouses. They are private and public. Private warehouse is established and operated, handled and controlled by the business organization itself. Although huge cost is needed to build, it can be operated at cheap cost. Such private warehouse can be build according to the nature, shape, size etc. of the products intended to store in. the warehouse established by public sectors (government) is called public warehouse. Goods can be stored/ kept in such warehouse paying certain rent. The manager for physical distribution should take proper decision whether to store goods in private warehouse or public warehouse.
• Number of warehouses: Manager for physical distribution should take decision about the number of warehouses. As it directly affect the distribution cost and customer services, such decisions should not be taken at hunch or haphazardly. Geographical area of the market, storage facility with the wholesaler and sales quantity of goods help in taking decision on the number of warehouses.
• Location of warehouse: Place analysis also should be done for establishing a warehouse. It can be established nearer to market for some reasons or nearer to factory for other reasons. If the warehouse it nearer to the factory, operation cost becomes less and transport cost more. Just the opposite if the warehouse is nearer to the market, operation cost becomes more and transport cost becomes less. Besides, best services can be provided to customers. The physical distribution manager should take proper decision to establish warehouse where it becomes appropriate.

3. Material handling

Raw materials should be purchased for production. Such materials are used to produce finished goods. Until demands for such finished goods are received, they need to be kept in warehouse. When demands have been received, they are dispatched. Generally, such activity is called material handling. For handling the materials in such way, appropriate equipment also should be selected. Efficient and proper equipment cuts down material handling cost and save from breaks and damages. Nature of goods, package size, and packing method etc. also determine the sorts of handling equipment. Material handling can be done in two ways:

• Mechanical handling: Different types of equipment and machines are used to move goods from places to places. Lorry, truck, crane, fork-lift conveyer belt, etc. are some examples of mechanical handling. They are used to transfer goods. Similarly, pallet and containers also help in mechanical handling.
• Non-mechanical handling: Under this non-mechanical handling, human labor is used instead of machines. Porters can be employed to transfer carton or boxes. Similarly, trolley can be used in transferring small packages of goods, which is done by the porters or labors.

4. Inventory management

Goods should be kept collected in stock to supply them at right time and place to the customers when demanded. This task is called inventory management. Both short stock and large stock are dangerous for any company. So, considering both aspects, goods should be kept in balance. Hence, the same function is called inventory management. If the stock / inventory are insufficient, goods cannot be supplied to meet the demand. As a result, regular customers go away. Similarly, if the inventory/ stock are more than necessity, capital investment, warehouse cost, insurance cost etc. increase. While managing inventory/stock, condition of goods, demand of customers and flow of supply should be studied and analyzed carefully, and only then proper decision should be taken. Generally, the following methods should be studied and analyzed for inventory management:

• Economic order quantity (EOQ): Giving order for supply of goods in the quantity that minimizes total expense is called economic order quantity. In this economic order quantity, ordering cost and hauling/ carrying cost lessen.
  

  Economic order quantity (EOQ) should be made out by applying the following formula. Economic order quantity =$\sqrt{\mathrm{<sup>2AO</sup>/<sub>C</sub>}}$ Where, A = Annual requirement O = Ordering cost per order C = Carrying cost per unit Suppose, A = 6000 units C = $2 O = $30 EOQ = ? EOQ = $\sqrt{\mathrm{<sup>2AO</sup>/<sub>C</sub>}}$ = $\sqrt{\mathrm{<sup>2x6000x30</sup>/<sub>2</sub>}}$ = $\sqrt{\mathrm{<sup>360000</sup>/<sub>2</sub>}}$ = $\sqrt{\mathrm{180000}}$ EOQ = 424.26 units

Re-order point: Repeated orders should be given for keeping stock of goods/inventory. Decision should be taken to give timely re-order for the supply of goods so that there is neither lack of stock nor unnecessarily huge quantity of inventor. For this also reorder result should be made out using the following formula.

For this also, reorder result should be made out using the following formula. Re-order Point = Lead time x Daily consumption Imaginative example: Annual consumption = 720000 units Lead time = 12 days Solution: Daily consumption = Annual consumption/ Days in year = 720000/360 = 2000 units Re-order Point = Lead time x Daily consumption = 12 x 2000 ROP = 24000 units

Safety stock: Sufficient stocks of goods should always be kept in warehouse. If there is no such stock, goods cannot be distributed according to the demands. Safety stock should be kept so that there is no shortage of goods at any time.

This is made out by using the following formula: Safety stock = Average usage x Lead time Imaginative example: Average usage = 600 units Lead time = 12 days Solution: Safety stock = Average usage x Lead time = 600 x 12 = 7200 units

ABC (Activity Based Costing) analysis: Under analysis, stock/inventory goods are classified in A.B.C. groups according to their cost. A class includes costly goods, in B average priced goods and in C cheap priced goods. While classifying goods in this way, there is not any certain basis what priced goods should be classified as costly and what should be classified as cheap goods. So, the goods which are being dealt in are classified in A, B, C groups according to the relative prices. A class goods are controlled more than B class goods and B class goods are controlled more than C class goods. In this way, the goods are controlled according to their class.

A table of ABC Analysis

Group	Item Percent	Items value percent
A	10	70
B	20	20
C	70	10

Just in time: Receiving just in time method of inventory control has become very popular. According to this concept, very small amounts of goods are purchased. They reach at the right time of production or right time of sale. In some countries, inventory manager can give such direction to high level management.

5. Transportation

Transportation creates place utility by carrying goods from production place/factory to other places. This is 5th important element of the physical distribution. This links production place with consumer markets. Transport also has four elements such as road, means, power and objective. Transport takes around 50% expenses of physical distribution. The physical distribution manager should take wise/rational decision on the following two matters in order to systematize the transportation.

• Types of carrier: There are different types of transportation means. Among them suitable means should be selected according to the nature, destination and condition of the goods. Physical distribution manager should study the following alternatives while taking decision on type of carrier.
• Private carrier: If any company uses its own means of transportation/carrier, this is called private carrier. The company itself operates and controls such transportation carrier/means. As the company has sole authority on its transportation means, it may be flexible to some extent. On the other hand, as the company has to manage these affairs by itself, the company has to invest much and incur high operation cost.
• Contract carrier: If goods are transported contracting with independent transport organizations/companies, this is called contract carrier. As such organizations acquire special experience in transportation, they can transport goods effectively. Contract carrier costs lower than private ones.
• Common carrier: The transportation carrier operated by public sector is called common carrier. Such carrier is conducted according to fixed timetable. Places of destination are fixed earlier. Whoever uses its services should pay predetermined rate of fare. Such public/common transportation service becomes available everywhere.
• Mode of transportation: Train road, plane, ships are the chief modes/means of transportation. Any of the modes can be used according to the nature and condition of goods. Pipeline is used to transport liquid material. The decision to use transport means/mode should not be taken at hunch; it needs wise as well as rational decision. Cost of transport means, pace/speed, appropriateness, safety, availability etc. should be considered. They are mentioned as follows:
• Cost: All the expense to be incurred for transportation is called cost. The distributor should, as far as possible, select less costly means/ carrier. Plane transport is the most costly means and ship is the least transport means.
• Speed: Generally, the quickness of transportation is called speed/ pace. As far as possible the distributor should select fast speeding mode/ carrier. Air transport is the fastest means whereas transportation by human and animal is slow speeding means. Time and nature of goods also affects the decision what means should be selected.
• Consistency: Regular, consistent and dependable means of transport should be selected. Means of transportation, which reach the destination on right time and are conducted regularly, should be selected.
• Safety: Distributor should select safe means of transportation. If goods are transported by safe means, the goods remain safe from theft, robbery, damage or breaks. Generally, air transport becomes safer than train or bus transport.
• Availability: Easy finding of means of transportation in markets is called availability. All the means of transport cannot be found every time whenever needed. The intended means of transport may or may not be available at the time when needed. So, while selecting means of transport, the distributor should consider their availability.

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Distribution: Meaning, Objectives and Importance of Distribution || Act of Supplying the Products to the Target Market ||

Meaning of Distribution

Production and sale center do not remain at same place. Distributors are needed to supply production to the consumers/customers. Production of goods or services becomes meaningful only if they are supplied to the consumers/customers. So, the activities performed for supplying the products to the target markets on the whole is called

distribution. Distribution creates time utility, place utility, ownership utility of products. Management of product storing creates time utility whereas exchange creates ownership utility. Management of good transport system creates place utility. Distribution management satisfies customers’ wants by supplying necessary goods to them and heightens their lifestyle.

Products have no utility at production place. Their utility increases immediately after they have been taken to consumption places. For example, publishers have no use of books, but when they reach among readers and students their utility increases. Similarly, suppliers provide means of productions and work as bride between producers and target markets by supplying products. Distribution includes the tasks of distribution channels and physical distribution. Distribution channels of marketing provide products to customers whereas physical distribution transports products to warehouses and target markets. Both these functions are the important channels of distribution.

The task of carrying finished goods to target markets is called physical distribution. This includes the important functions such as transport management, warehouse management, stock control, product management, order scanning etc. In the lack of distribution, marketing becomes lame/ crippled. To make physical distribution clearer, different definitions given by different experts and writers can be presented as follows:

According to Prof. William J. Stanton, “Physical distribution consists of all activities concerned with moving the right amount at the right product to the right place at the right time.”

 

According to S.A. Sherlekar, “Physical distribution is an important marketing function describing the marketing activities relating to the flow of raw materials from the suppliers to the factory and the movement of finished goods from the end of production line to final consumers or users.”

From the above mentioned definitions, it becomes clear that physical distribution provides distribution channels and supplies products to the target consumers. Physical distribution is task or the function of supplying products from production place to the final consumers or industrial users at the right time they demand for. Mostly, transport and storage/warehouse related functions are emphasized in physical distribution.

Marketing channel is also called distribution channel. They way which is used to supply products to the consumers is called marketing channel. As the channel carries water to the farm from its origination, the distribution channels carry products to markets or consumers from place of production. So, distribution channel can be taken as the pillar of marketing.

To make the marketing channel much clearer, the following definitions have been presented:

According to Prof. William J. Stanton, “ A channel of distribution (sometime called a trade channel) for a product is the route taken by the title to the product as it moves from the producers to the ultimate consumers or industrial users.”

 

Accordint to Prof. Philip Kotler, “ Distribution channel as the set of firms and individuals that take title or assists transferring title to the particular goods or services at it moves from the producers to the consumers.”

From the above definitions, it becomes clear that marketing channel is a simple as well as an easy way through which products reach the target markets. Proper channel should be used for distribution according to the nature of products or service. Generally, distribution channel of industrial goods become short. But channel of consumer goods becomes long.

Objectives of Distribution

Distribution, in marketing, has narrowed the world market and makes it very easy. Any product can be easily delivered/ supplied to every geographical place or region at any time if demanded by customers. No any producer has to fret over how to distribute the products. Distribution management takes all the responsibilities to distribute any goods produced by any producer to any place at proper time. The distribution management also decides which goods of what nature should be distributed through what channel to which place and at what time. So, the main objectives of distribution management which discharges such important responsibility are as follows:

1. Minimization of total cost

Producers produce various goods. A lot of expense needs to distribute them. The producers may give responsibility to any channel to distribute. Channel management may deliver products to a certain place at minimum cost for distribution. While distributing products in such way, many channels may involve in it. The function of distribution can be completed at minimum cost calculating the average labor of persons or groups spend on it. So, distribution channel sets the objective to minimize the total cost.

2. Making the goods available

Effective distribution channel makes arrangements for easy availability of any goods. Any goods or services demanded by customers become available at any place and any time. If goods are available when demanded, sale quantity of such goods increases on the one hand and healthy competition with competitors can be easily faced on the other. In this way, distribution channels always have the objective to maintain the availability of the products regularly.

3. Regular supply of goods

Any business firm or producer can give the responsibility of distribution for channels. Then the distribution channel manages regular supply of goods. In other word, distribution channel delivers right product at the right time and right place to buyers. So, all the customers of target market do not feel the lack of goods. Thus, distribution channel sets objective to render crucial services of regular supply of goods.

4. Transfer of product ownership

The distribution function also fulfills the process of ownership transfer. For any product documents/papers should also be given together with product by signing a contract. Ownership of some other goods should be handed over, in presence of government authority, with documents by completing every legal process and requirement. Only after formally transferring ownership, the goods can belong to the buyer or customer. So, distribution channels also take responsibilities to transfer ownership of goods.

5. Promotion of goods and services

Effective distribution channel also promotes goods or services. Distributor reaches target market taking goods from production center. After reaching target market, the distributor gets chances to show the goods to customers. Customers become very happy to see and know about the goods. They also can ask about the product if anything unclear. They become acquainted with the product after the distributor gives true information and answers to them about the products. In this way, distributor has the target to promote the product or service of the producer.

Importance of Distribution

In the lack of distribution, products become meaningless. Distribution has very important role in marketing. The importance has been mentioned in short as follows:

1. Utility of the product

In marketing, distribution creates utility of goods/ products. If the products are not carried to the consumption place, no any benefit or utility can be obtained from them. Mainly transportation, storage and exchange are involved in distribution. Transportation creates place utility of the product by carrying wanted goods to the right places. Storage creates product utility of time by storing and providing goods at the time when wanted. Similarly, exchange creates ownership utility of goods by transferring ownership. By different activities, it becomes clear that distribution motivates customers by creating place utility, time utility and ownership utility.

2. Need satisfaction

In this competitive business age, at first the needs of customers should be studied and understood. Then goods should be produced accordingly. The distribution meets/satisfies the needs of the customers by supplying the right goods to right place at right time. If there is no proper arrangement of distribution, needs/ wants of the customers cannot be satisfied at right time. Distribution plays an important role to heighten the life style of customers. This function should compulsorily be conducted by carrying goods from production place to the selling centers.

3. Employment and occupation

Distribution is one of the important tasks of marketing. This provides job or employment to many persons. Distribution plays an important role in providing employment opportunities to the people. Many persons get employment by involving in wholesale business, retail business, agents, intermediary, etc. A large number of people have adopted it as their occupation. Similarly, transport, banking and insurance have provided job to large number of people. Distribution has been found successful to provide job to a large number of people in the industrial and developed countries. In the developing country like Nepal, distribution has provided job opportunities to a lot of people.

4. Means of production

The producers need means to produce different goods. Raw materials, machines and machinery parts, big machines and equipment, production function, supply etc. help in production. Besides this, it also provides necessary financial resource to conduct production function effectively. Without means of production, production function becomes meaningless, and in the absence of it, marketing itself becomes worthless.

5. Financing

Several intermediaries are involved in distribution function. They manage financial resources themselves for distribution. Besides this, they also manage financial resources for extra warehouse and stock. So, the producers need not make financial arrangement for distribution and creating distribution channel. Hence, the producers do not need to invest stock financial resources. Produced goods change in cash immediately. So, no any difficulty arises in managing financial resources for market research, production of new goods, development of goods and other functions.

6. Communication

Distribution function establishes contact between producer and customers. So, distribution works as link between the two sides. Producer makes flow of message about products, price, promotion, etc. to the customers through the persons or groups of person involved in distribution. Through the persons involved in distribution, they also get feedback about competitors, environment change etc. Hence, it becomes clear that distribution function also works as a means of communication.

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Meaning of Marketing Mix and Components of Marketing Mix

Meaning of Marketing Mix         

All the activities from market research to satisfy customers’ need is called marketing mix. This included the questions such as ‘What type of goods need to be produced? How to determine price of the goods? How and in which market to present the goods for sale? How to motivate the possible customers to buy the goods? The combination of these components is called marketing mix. Need of targeted market can be fulfilled with proper combination of marketing and success can be achieved in competitive market. James Colleton had first used the word ‘marketing mix’ in 1948. Neil H. Borden carried out a research on the concept of marketing mix in 1964 being influenced by the thought of James Colleton.

Product, place, price and promotion are included in marketing mix. Wants or needs of targeted market can be fulfilled with the proper mixture of these components. But there is no unanimity among writers and experts of marketing over the elements of marketing mix. The following experts and writers have claimed that the elements given below are included in marketing mix:

Albert W. Fray

• The offering – product, packaging
• Methods and tools – advertisement, personal selling

J. E. McCarthy

• Products
• Place
• Price
• Promotion

W. Laxer and E. J. Kelley

• Goods and services mix
• Communication mix
• Distribution mix

Philip Kotler

• Price
• Promotion
• Place
• Product

Petter D. Bennett

• Product
• Price
• Promotion
• Distribution

W. J. Stanton, M. J. Etzel & B. J. Walker

• Product
• Price
• Distribution
• Promotion

The above given facts make us clear that there are differences among experts and writers over the marketing mix. A. W. Fray has supposed offering, methods and tools as the elements of market mix whereas J. E. McCarthy has supposed product, place, price and promotion as the elements of market mix. Similarly, Lazer and Kelley have supposed goods, and services mix, communication mix and distribution mix as the elements of market mix. Philip Kotler has supposed price, promotion, place and product, and Stanton, Etzel and Walker have supposed product, price, distribution, and promotion as the elements of marketing mix. Similarly, Petter Bennett has supposed product, price, promotion and distribution as the elements of marketing mix. The views of McCarthy and Kotler are found same about the marketing mix.

Now, a new concept of marketing mix has been developed. It is called ‘mega marketing’. According to this concept, the six elements of marketing mix are price, promotion, place, product, power and public relation. Different writers and experts have defined marketing mix as follows:

According to Philip Kotler, “Marketing mix is the setting of the firms of marketing decision variables at a particular point in time.”

 

According to William J. Stanton, “Marketing mix is the term that is used to describe the combination of the four inputs that constitute the core of company’s marketing system: the product, the distribution system, the price structure and the promotional activities.”

 

According to Pitter D. Bennett, “Marketing mix is the marketing program including product conception and development, pricing decision, promotion of the product and distribution to consumers.”

 

According to Jerome E. McCarthy, “Marketing mix is the controllable variables, which the company puts together to satisfy its target market.”

 

According to Thomas A. Staudt and Donald A. Taylor, “Marketing mix refers to the actual work that must be done to reach target market and achieve corporate objectives.”

 

In conclusion, the mix of activities done to satisfy the wants of target market is called marketing mix. Products, place, promotion and price are the elements of marketing mix. Organizational goal cannot be achieved without proper mix of these elements of marketing.

Components of Marketing Mix          

The mix of activities done to satisfy the wants of target market is the marketing mix. The writers and experts of marketing are found different in their views about the elements of marketing mix; however, the main elements of marketing mix are products, place, price and promotion. Success can be achieved through the proper mix of these four elements. The following figure makes the elements of marketing mix clearer.

Elements of Marketing Mix

As the first letter of all the four elements of marketing mix is P, it is also called 4Ps of marketing. All these elements of marketing mix have also their own elements. This is made clear by the following figure:-

Elements of marketing mix

1. Product Mix

The thing or material which satisfies the human wants is called product. This is an important element of marketing mix. In its absence, no activities of marketing can be done. Product mix includes the elements such as design of the product, quality, variety, features, specialty, branding, packaging, service, warranty etc. Firm or industry cannot satisfy the wants of target market in the lack of product. So, product, plan and development, standardization, grading etc. should be seriously considered. Only attractiveness in looking does nothing, the product should also be good quality. Otherwise, the product cannot compete in market. Similarly, brand, packaging and labeling of the product also play important role in market. Name or brand of the product should be short, attractive and easily memorable and packaging should reflect the features of the product. Besides, the packaging should be attractive and cost effective. Labeling should give necessary information about the product and the firm should be fully responsible for the information. Warranty should also be given in order to increase the demand of the product in market, because the customers like to buy the products having warranty rather than those of no warranty.

The following points make the elements of product mix clearer:-

• Quality of product
• Product design
• Standardization and grading of product
• Variety of product/or product line and items
• Branding of product
• Packaging of product
• Warranty of product
• Features of product
• Product planning and development
• Services

2. Place Mix

The other important element of marketing mix is place. The entirety of different activities to supply products to the targeted market is called place mix. Mainly the channel of distribution and the activities related to physical distribution are included in place mix. Distribution channel includes agents, dealers, wholesalers and retailers whereas order processing, warehousing, material handling, inventory management and transportation are included in physical distribution. If the channel of distribution and physical distribution is not good, it affects adversely. So, physical distribution should be made according to the nature of product through proper channel. Generally, direct distribution channel becomes appropriate for receiving and proper means of transport should be used. Considerable quantity of stock should be kept. If the products, in the quantity, to the place and at the time as wanted by customers are supplied, sale quantity can be increased. So, this also should be wisely considered. The following points make it clearer.

The elements that are included in place mix are:

• Distribution channel
• Agent
• Dealer
• Wholesaler
• Retailer
• Direct
• Physical distribution
• Order processing
• Warehousing
• Material handling
• Inventory management
• Transportation

3. Price Mix

The amount to be paid by customers for any goods is called price. Price is the measure of exchange. The price of any goods should agree with the quality of the goods. Price is the other important element of marketing. The price of goods directly affects the quantity of sale. If the price of goods is low, sale becomes high, and if the price is high, sale becomes low. In other words, the lower the price, the higher becomes quantity of sale. So, the price of goods should be minimized by minimizing production cost as far as possible. As the customers pay price for the quality, the utility of the goods should be equal to the price. Otherwise, the goods cannot get popularity in markets and also cannot compete with the substitution goods. While determining the price of any product, all the elements affecting it should be analyzed. Price mix includes discount, terms and conditions of sale, price list, production cost, price of substitute goods, allowances etc. This is made clearer by the following points:

Elements of price mix:

• Trade or cash discount
• Credit period
• Terms and conditions of sales
• Setting price list
• Cost of goods
• Price of substitute goods
• Allowances

4. Promotion Mix

The other important element of marketing mix is promotion. All activities and efforts to be made in order to increase sale quantity as a whole is called promotion mix. This includes advertisement, publicity, personal selling, exhibition, free sample, request, and pestering. The task sale promotion is creative as well as artistic one. Success can be achieved in the competitive environment by increasing sale quantity through sale promotion activities. In this competitive age, increase of sale quantity cannot be imagined without sale promotion activities. So, the customers should be persuaded to realize the need and be motivated to buy goods. Otherwise, goods of whatever the best quality, they cannot be taken out from warehouse. It is also said that those who become active and dynamic can get success but those who are lazy can get nothing. Even if the goods are bad, promotional activities can create demands for them. But without any sale promotional programme, even the best quality goods cannot be sold. The elements of sale promotion have been presented in the following points for easy understanding:

Elements of promotion mix:

• Advertising: Radio, TV, Newspaper, Internet etc.
• Sale promotion: Premium, exhibition, free sample etc.
• Personal selling: Salesmanship, experience, training, politeness etc.
• Public relations: meeting and contacting
• Publicity: Propagation program
• Service after sale: Exchanging the sold goods, free repairing, instructing who to use and keep safe etc.

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Effects of Inflation in the Economy | Effects on Production | Effects on Consumption | Effects on Distribution

• Inflation has serious social and economic effects. Some economists have named it legal dacoits. It invisibly imbalance economic factors and delay the speed of economic growth. The following are the main effects of inflation.

Effects on Production

1. Decrease in the quality of goods: The demand for goods increase due to inflation. So, any type of goods can be sold. As a result, the profit seekers lessen the quality of goods to increase the profit.
2. Reduces saving: Due to inflation, most of the income is spent on consumption. So the saving reduces. As a result, there is less capital investment.
3. Encourages holding and speculation: The producers start to store the necessary goods. Due to this, the goods become even scarce; the businessmen hide the goods and create artificial scarcity, for black marketing.
4. Reduction in productivity: In the time of inflation, there is less capital formation. As a result, it is difficult to make available factors of production. It brings uncertainties in the economy, and entrepreneurs become discouraged in the production.
5. Devaluation of money and loss in faith: People have less trust of money due to the devaluation of money and its decreasing purchasing power. Foreign investors also can return their investment due to the loss of faith.

Effects on Consumption

1. Change in consumption pattern: In the time of inflation, the demand for quantity decrease as the price of the quantity increases. Those who have various sources of income buy luxury goods, foreign goods and goods of comfort but those who have limited source of income start to buy only essential goods. Most of the consumers start to consume artificial goods than natural ones.
2. Debt instead of saving: In the time of inflation, the consumer surplus slowly decreases because he has to pay more than he wants to pay. If there is high inflation, he will get loan.
3. Unequal consumption and lifestyle: In the time of inflation, the lifestyles of rich and poor will become more polarized. Those who have only limited income, is compelled to buy only the essential goods. Due to this, life becomes more difficult. But those, who have various sources of income feel opposite of that.

Effects on Distribution

1. Fixed income groups: Government officials, pensioners and those depend on post savings are the fixed income group. In the time of inflation, general price increases, so the expenditure on living increases and the life becomes harder.
2. Creditors and debtors: In the time of inflation, creditors are in loss and debtors are in profit because of the decrements in the purchasing power of money. As the creditor give the money having more purchasing power and get it back when it has less purchasing power. Therefore, they get in loss.
3. Salary and wage earners’ group: This group will be in hard time as the expenditure of living increases where as wage and salary do not increase.
4. Merchants and industrialists benefited: In the time of inflation, merchants and industrialists get sudden profit. The price of assets (stock) increase but the cost of current capital does not increase so much, so merchants and industrialists get extra profit.
5. Effect on Balance of Payment: Inflation has negative effect on balance of payment. Indigenous goods happen to be more expensive than foreign goods. So the farmer cannot compete with foreign goods. As a result, import increase and export decrease. Thus, balance of payment becomes negative. In the long run, it creates scarcity in the foreign exchange.

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