NCERT Solutions Class 12 Business Studies Chapter 11

Q.1 State any two advantages of branding to marketers of goods and services?

Ans. Branding implies giving a unique name, sign, symbol, or term for identification of a product. The following are the advantages of branding to the marketers:

• Branding enables a firm to distinguish its products from the product of other firms.
• It facilitates advertising of the product. A product with a generic name cannot be advertised.

Q.2 How does branding help in differential pricing?

Ans. Branding enables a firm to charge different price for its products than that charged by its competitors. This is possible because, if customers like a brand and become habitual of it, they do not mind paying a little higher for it.

Q.3 What is the societal concept of marketing?

Ans. According to societal concept of marketing the organisations must identify the needs of the market and the target consumers and deliver the desired results in an efficient manner. The organisation should identify not just the immediate needs of the market rather should aim at long –term well being of the consumers. Besides consumer satisfaction, organisations should aim at ecological, ethical and social aspects such as pollution, scarcity of resources etc.

Q.4 List the characteristics of convenience products.

Ans. Convenience products refer to those products that are purchased frequently, immediately and with minimum time and effort.

The following are the characteristics of a convenience product:

• Such products are easily available at convenient places with minimum time and effort wastage.
• Convenience products are consumed frequently and have a continuous demand. Essential commodities come under the category of convenience products.
• They are available in small units and low and standardised prices.

The competition in the market for such products is high. As such, heavy advertising is required for these products

Q.5 Enlist the advantages of packaging of consumer products.

Ans. Packaging refers to the process of developing and designing the container for a product.

A good packaging has the following advantages:

• It enables differentiation and identification of a product from other products.
• It acts as a promotional tool. Use of colours, symbols, pictures, symbols in packaging helps in attracting the customers.
• Appropriate packaging contributes to the convenience of handling the product.
• It helps in protecting the quality of the product from any kind of damage, spoilage, breakage etc. particularly at the time of storage and transportation.

Q.6 What are the limitations of advertising as a promotional tool? Enlist.

Ans. The following are the limitations of advertising as a promotional tool:

• It lacks personal form of communication and hence is less forceful.
• Evaluation regarding the effectiveness of the advertisement is very difficult to conduct.
• Advertisements come in standardised form and cannot be moulded as per requirements of different groups of people.
• Effectiveness of advertising is low as there can be numerous advertisements.

Q.7 List five shopping products purchased by you or your family during the last few months.

Ans. Utensils

• Clothes
• Washing machine
• Furniture
• Grocery

Q.8 A marketer of colour TV having 20% of the current market share of the country aims at enhancing the market share to 50 per cent in next three years. For achieving this objective he specified an action programme. Name the function of marketing being discussed above. (Ans. Marketing planning.)

Ans. Marketing Planning refers, a marketer is to develop appropriate marketing plans so that the marketing objectives of the organisation can be achieved.

For example, a marketer colour TV having 10% of the current market share in the country, aims at enhancing his market share to 50 per cent. In the next three years, he will have to develop a complete marketing plan covering various aspects like: Increasing the level of production, promotion of the products, etc. and specify the action programmes to achieve these objectives.

Q.9 What is marketing? What functions does it perform in the process of exchange of goods and services? Explain.

Ans. Marketing refers to the process wherein the buyers and sellers interact with each other for purchase and sale of goods and services. Earlier, marketing had different approaches with respect to its definition.

• It was sometimes described as post- production process that involves purchasing of the final products and sometimes, as a pre-production process that involves merchandising (designing) of the product. In reality, marketing is a much wider concept than this.
• It consists of those activities that are involved in the process of exchange of goods and services between producers and consumers.
• These activities are basically the functions performed under marketing. It involves planning and designing of the product, packaging and labeling of the product, standardising, branding, warehousing, transportation, advertising, priding and distribution.
• It also includes activities that are performed even after the sale of product such as maintaining customer relations and collecting feedback.

Q.10 Distinguish between the product concept and production concept of marketing.

Ans.

Q.11 Product is a bundle of utilities. Explain.

Ans. When a customer decides to buy a product, his/her main focus lies on the utility which he/she receives while consuming it. A customer seeks different types of satisfaction from the product. Benefits derived from a product can be of three types – functional benefits, psychological benefits and social benefits.

• For instance, when a customer purchases a car, it provides him functional utility as a means of transport. He also receives psychological benefits in the form of pride and self esteem that he has brought a car. Along with this come the social benefits in the form of acceptance by the peers.
• Thus a product is said to be bundle of utilities and a buyer while buying a product values all kinds of utilities.

Q.12 What are industrial products? How are they different from consumer products?

Ans. Industrial products refer to those products that are used as inputs for the production of other goods. Such goods are not meant for final consumption rather they are used as raw material and inputs by the manufacturers for the production of consumer goods. For example, machine, tools etc are industrial products.

Consumer products refer to those products that are used by ultimate customers for their personal consumption. For example, toothbrush, edible oil and detergents are consumer goods.

Difference between industrial product and consumers products are as follows:

Q.13 Distinguish between convenience product and shopping product.

Ans. Following are the difference between convenience product and shopping product –

Q.14 Describe the functions of labeling in the marketing of products.

Ans. In the marketing process, labeling plays an important role in packaging of the product. Label on a product provides detailed information about the product, its contents, methods of use etc. the various functions performed by a label are as follows:

• Describe the product and specify its content: One of the most important functions of labels is that it describes the product, its usage, caution in use etc.
• Identification of the product or brand: A label helps in identifying the product or brand e.g. we can easily pick our favorite soap from a number of packages only because of its label.
• Grading of products: Label helps in grading the product into different categories. Sometimes marketers assign different grades to indicate features or quality of the product e.g. different type of tea is sold by some brands under yellow, red and green label categories.
• Help in promotion of products: An important function of label is to aid in promotion of the products. A carefully designed label can attract customers to purchase that product. Some labels provide promotional messages, some show discount or other schemes.
• Providing information required by law: Another important function of labeling is to provide information required by law. E.g. the statutory warning on the package of cigarette or pan masala – ‘smoking is injurious to health’ or ‘chewing tobacco causes cancer’.

Q.15 Discuss the role of intermediaries in the distribution of consumer non-durable products.

Ans. The term channels of distribution refer to transfer of goods from place of production to the place where they are consumed.

The following are the different functions of intermediaries in the distribution of consumer non durable products:

Arrangement: an intermediary receives the supply of goods from various sources. He then sorts these goods into homogenous groups based on their characteristics such as size, quality etc. For instance, an electronic goods seller receives supply of different electronic goods and then sorts them based on their functions.

Collection: An intermediary maintains large stock of goods so as to ensure easy flow of supply. For instance, an electronic goods seller maintains large stock of each type of electronic item.

Allocation and Packing: This function includes breaking the larger stock into smaller units. For instance each electronic and their spare parts are packed separately.

Building Variety: An intermediary acquires various goods from different sources and assembles them at a single place. Thus it maintains a variety of goods. He procures the products and then sells them in different combinations as desired by the consumers. For instance, a television and a video player are preferred together by most of the people. Thus, the retail can sell a combination of both.

Promotion of product: They assist in the promotion activities, undertaken by the manufacturers. For example, the manufacturers use advertising for the promotion of their product. The intermediaries can aid this process by putting banners and displays. For example an electronic goods retailer puts up banners for various products highlighting their features.

Mediation: Middle men perform the function of setting a deal that can satisfy both the producers and consumers. They negotiate the price, quality, quantity etc. for efficient transfer of ownership so as to satisfy the needs of both the parties.

Bearing risk: Risk taking is the basic responsibility of the intermediaries. Intermediaries acquire goods from the producers and keep them in their possession till the final sale. Suppose a retailer acquires large quantity of sugar. After a period of time, the price of sugar rises which reduces its demand. Thus the retailer may lose out as the stock remain unsold.

Q.16 Explain the components of physical distribution.

Ans. The main components of physical distribution are:

Order processing – Processing of order comprises number of steps such as placement of order, transmission of order by the intermediaries to the manufacturer, maintenance of inventory as per requirement, delivery of goods etc. As all such processes take time a physical distribution system should be such that it should ensure speedy and proper order processing.

Transportation of products – Transportation of goods refers to physical movement of goods from the place where they are manufactured to the place where they are consumed. To make the goods physically available to the consumers they must be transported from the place of production to the place of consumption.

Warehousing – Warehousing refers to the process of storing the produced goods before the final act of sale. If a company has a larger number of warehouses, it will be able to readily provide goods on time at different locations. Maintaining warehouses involves costs.

Maintenance of inventory – The firms maintain inventory so as to ensure timely supply of products. Similar to warehousing, maintenance of inventory shares a positive relation with customer service.

Q.17 Define advertising? What are its main features? Explain.

Ans. Advertising can be defined as the paid form of non personal presentation and promotion of ideas, goods or services by an identified sponsor.

Following are the important features of Advertising:

Non-Personal: Advertising is a non-personal form of presenting information regarding a product, service or idea. There is no face to face contact. The advertisement is directed to a large number of persons simultaneously.

Identified Sponsor: Advertising is done by an identified seller or the manufacturer who makes efforts for getting the product or service advertised and also bears all its costs.

Paid form: Advertising is a paid for of communication. Sponsor has to bear the cost of advertising the product to the target customers.

Q.18 Discuss the role of ‘sales promotion’ as an element of promotion mix.

Ans. Sales promotion refers to the incentives that are offered to the buyers so as to encourage them to purchase the product. It includes activities such as offering discounts, gifts, free samples etc. Such activities supplement other promotional activities undertaken by the company such as advertising and direct selling. They increasingly attract the customers and induce them to immediately purchase the product. Such activities are especially useful at the time of the launch of the product. They bring an initial boost to sales.

Following sales promotion techniques employed by manufacturers are:

Samples: Free samples are distributed in small packs to stimulate consumers. It can be done on a door-to-door basis, by demonstrations or inserting in another packet containing a similar product. For example, shampoo pouches are given free with tooth paste.

Coupons: Sometimes in the packet of a product there will be a discount coupon for the next purchase For example, Reliance Textiles distribute discount coupons to their shareholders. Discount coupons are also printed in certain advertisements appearing in magazines. They have to be presented to the retailer while buying the product.

Product combinations: Offering another product free, as a gift, with the purchase of a product, e.g., a milk shaker along with Nescafe, or mugs with Bournvita, or a pen stand along with a packet of chips. They are effective in getting new consumers for the product. Such incentives are opted by companies to attract more customers and boost its sales.

Q.19 As the marketing manager of a big hotel located at an important tourist destination, what societal concerns would be faced by you and what steps would you plan to take care of these concerns? Discuss.

Ans. Marketing refers to the process wherein buyers and sellers interact with each other for purchase and sale of goods and services. It comprises of a range of activities such as planning, designing the product, packaging and labeling of the product, pricing and distribution and also after sale services such as maintaining customer relations and collecting feedback.

Selling on the other hand, refers to the promotion activities undertaken for the sale of goods and services. Such promotion activities can be in the form of advertising, publicity, etc. Through the process of selling, product is converted into cash. Thus selling can be regarded as part of marketing.

Following are the difference between selling and marketing:

Q.20 What information is generally placed on the package of a food product?

Design a label for one of the food products of your choice.

Ans. The following are the information placed on the package of a food product:

• Name of the product.
• Graphic symbolising the product.
• Content /ingredient of the product.
• Direction to use.
• Special features of the product.
• Caution if any, to be taken.
• Date of manufacture.
• Date of expiry.

Q.21 For buyers of consumer durable products, what ‘customer care services’ would you plan as a manager of a firm marketing new brand of motorcycle. Discuss.

Ans. The following are the customer care services for marketing new brand of motorcycle:

• easy monthly installment.
• extended warranty periods.
• free first service.
• 0% finance scheme.

Q.22 What is the marketing concept? How does it help in the effective marketing of goods and services?

Ans. Marketing concept of marketing management lays emphasis on customer satisfaction; It believes that customer satisfaction plays a vital role in the success of any organisation. In the long run, any organisation can survive and maximise profits only if it identifies customer needs and effectively work towards fulfilling them. This concept identifies the fact that people purchase a product for satisfaction of specific needs such as functional, social, psychological needs. Any organisation must aim towards identifying such needs and satisfy them in an effective manner. That is it must take all decisions based on needs and requirements of the customer. An organisation works and sells not according to what it has but according to what the customers wants.

The marketing concept is based on the following points:

• The effort of all marketing activities must be directed towards a particular segment of market or group of customers.
• The organisations must clearly identify the needs and requirement of the target customers.
• It should develop such products and services that satisfy the needs of the customers.
• It should not just independently work towards customer satisfaction but should also aim at satisfying the customers better than its competitors.
• The main aim of all marketing is profit.

Marketing concept helps in effective marketing of goods and services. If all marketing activities are directed towards customer satisfaction, marketing of goods and services would take place in an effective manner. If decisions of production, pricing, designing, etc are based on needs of the customers, selling would not be a problem.

Q.23 What is marketing mix? What are its main elements? Explain.

Ans. Marketing mix refers to the set of marketing tools that are used to achieve various objectives of marketing. In the process of marketing, market offering plays a pivotal role. For effective marketing, an organisation must decide the various features of the products such as its size, quality, local of sale etc. Such decisions are affected by large number of factors.

These can be broadly divided into two:

controllable factors and non controllable factors.

Controllable factors are those which can be influenced at the level of the firm. For example whether the drink will be packed in glass bottles or plastic cans, what will be the brand name of the drink, what will be its price, what distribution network will be used, how the advertisement will be etc is decided at the level of marketing manager of the firm. But there are certain factors which affect the decisions but are not controllable at the firm’s level. These are called environmental variables. For example – the political factors such as government policy on whether to allow any technical or financial collaboration in the area of soft drink, production or economic factors such as rate of inflation prevailing in a given period or a credit policy of the central bank affecting the total availability of money in the market, all of which affect the sale of a particular product but cannot be controlled from within. To be successful, the decisions regarding ‘controllable factors’ are to be taken keeping the environmental variables into consideration.

The controllable variables become the marketing tools which are constantly shaped and reshaped by marketing managers to achieve marketing success. For example a firm can reshape a market offering by bringing in a change in any of the variables under its own control like change in price or product feature etc. Thus from a number of alternatives available a firm can choose a particular combination to develop a market offering.

Thus marketing mix is described as the set of marketing tools that a firm uses to pursue its marketing objectives in a target market.

The following are the elements of marketing mix:

Place or physical distribution mix refers to the activities relating to making the products available to the customers at the right place and at the right time. Physical distribution mix consists of two things; physical distribution and channels of distribution. Physical distribution includes all those activities involved in moving products or service from producer to consumer. It includes activities such as – Order processing, Transportation, warehousing, Inventory control, etc. The channels of distribution are those routes through which goods move from the producer to the ultimate consumer. These channels of distribution consists of middlemen such as wholesalers retailers, agents.

Product means goods or services or anything of value and satisfies needs of a customer. For example, car, soap, toothpaste, etc are products. In marketing, a product relates not just to the physical product but it also includes the satisfaction of various needs and utilities of the consumer. For example, toothpaste is bought for whitening teeth, strengthening gums etc. product also includes after sales services such as taking feedback, redressing consumer complaints etc. Important decisions regarding a product relate to its designing, quality, features, labelling, branding and packing.

Promotion deals with informing and persuading the customers regarding the firm’s product. Promotion mix refers to the activities relating to persuading and motivating customers to buy the product. Promotion mix involves decision with respect to:

• Advertising
• Personal selling
• Publicity
• Sales promotion.

Price is defined as the amount of money paid by a buyer in consideration of the purchase of a product or service.

The factors considered in the pricing decision are:

Product Cost: It sets the minimum price level at which product would be sold. It includes cost of producing, selling and distributing, along with a reasonable profit margin for the manufacturer.

Competition: If there is no competition the business firm can fix the price freely. But if there are competitors in the market the firm must consider the factor before fixing the price. Higher competition in the market leads to lower pricing due to fear of losing customers to competitors.

Q.24 How does branding help in creating product differentiation? Does it help in marketing of goods and services? Explain.

Ans. Branding implies giving unique name, sign, symbol or term for the identification of a product. Through branding a firm differentiates its products from that of other similar products. A marketer has to decide whether the firm’s products will be marketed under a brand name or a generic name. Generic name refers to the name of the whole class of the product. If products were sold by generic names, it would be very difficult for the marketers to distinguish their products from that of their competitors. Thus most marketers give a name to their product which helps them in identifying and distinguishing their products from the competitors’ products.

It helps in marketing of goods and services in the following ways:

Enables Marking Product Differentiation – Branding helps a firm in distinguishing its product from that of its competitors.

Helps in Advertising and Display Programmers’ – Branding helps in advertising and display programs.Without a brand name, the advertiser can only create awareness for the generic product and can never be sure of the sale for his product.

Differential Pricing: Branding helps a firm to charge different price for its products than that charged by its competitors. This is possible because if customers like a brand and become habitual of it, they do not mind paying a little higher for it.

Ease in Introduction of New Product: If a new product is introduced under a known brand, it is likely to get off to an excellent start. Thus, many companies with established brand names decide to introduce new products in the same name. For example, Samsung extended the brand name of its Television to Washing Machines and other durable products, like Microwave oven.

Q.25 What are the factors affecting determination of the price of a product or service?

Ans. Price’ is defined as the amount of money paid by a buyer in consideration of the purchase of a product or service. Pricing plays an important role in the marketing of tools.

The following are the factors that determine price of a product or service:

Product Cost: One of the most important factor affecting price of a product or service is its cost. This includes the cost of producing, distributing and selling the product. The cost sets the minimum level or the floor price at which the product may be sold. At the time of introducing a new product or while entering a new market, the products may be sold at a price, which does not cover all the costs. But in the long run, a firm cannot survive unless at least all its costs are covered. There are broadly three types of costs: viz., Fixed Costs, Variable Costs and Semi Variable Costs. Fixed costs are those costs, which do not vary with the level of activity of a firm. Those costs which vary in direct proportion with the level of activity are called variable costs. Semi variable costs are those costs which vary with the level of activity but not in direct proportion with it. For example, compensation of a sales person plus a commission of 5 per cent on sales. With an increase in the volume of sales, the total compensation will increase but not in direct proportion with the change in the volume of sale. Total Costs are the sum total of the fixed, variable and semi-variable costs for the specific level of activity, say volume of sales or quantity produced.

The Demand and Utility: The price must reflect the interest of both the parties to the transaction—the buyer and the seller. The buyer may be ready to pay up to the point where the utility from the product is at least equal to the sacrifice made in terms of the price paid. The seller would, however, try to at least cover the costs. According to the law of demand, consumers usually purchase more units at a low price than at a high price. The price of a product is affected by the elasticity of demand of the product. The demand is said to be elastic if a relatively small change in price results in large change in the quantity demanded. In the case of inelastic demand, the total revenue increases when the price is increased and goes down when the price is reduced. If the demand of a product is inelastic, the firm is in a better position to fix higher prices.

Extent of Competition in the Market: The lower limit and the upper limit where the price would settle down is affected by the nature and the degree of competition. The price will tend to reach the upper limit in case there is lesser degree of competition while under conditions of free competition, the price will tend to be set at the lowest level.

Legal Regulations: In order to protect the interest of public against unfair practices in the field of price fixing, Government can intervene and regulate the price of commodities. Government can declare a product as essential product and regulate its price.

Pricing Objectives: Pricing objectives are another important factor affecting the fixation of the price of a product or a service. If the firm decides to maximise profits in the short run, it would tend to charge maximum price for its products. But if it is to maximise its total profit in the long run, it would opt for a lower per unit price so that it can capture larger share of the market and earn greater profits through increased sales.

Apart from profit maximisation, the pricing objectives of a firm may include:

Obtaining Market Share Leadership: If a firm’s objective is to obtain larger share of the market, it will keep the price of its products at lower levels so that greater number of people are attracted to purchase the product.

Surviving in a Competitive Market: If a firm is facing difficulties in surviving in the market because of intense competition or introduction of a more efficient substitute by a competitor, it may resort to discounting its products or running a promotion campaign to liquidate its stock.

Attaining Product Quality Leadership: In this case, normally higher prices are charged to cover high quality and high cost of Research and Development.

Methods of Marketing: Price fixation process is also affected by other elements of marketing such as distribution system, quality of salesmen employed, quality and amount of advertising, sales promotion efforts, the type of packaging, product differentiation, credit facility and customer services provided.

Q.26 What do you mean by ‘channels of distribution’? What functions do they play in the distribution of goods and services? Explain.

Ans. Channels of distribution refer to the individuals, institutions, agents who facilitate the process of distribution. As the potential consumers are spread over a larger geographical area, it becomes difficult for the producers or the manufacturers to directly contact the customers for the sale of their products. Here channels of distribution play an important role. They facilitate the transfer of goods from the place of production to the place where they are consumed. For example, for a manufacturer of sugar in Punjab, it would be difficult to contact the customers in other parts of the country. To ease the process, it would sell its products to the wholesalers who in turn would sell it to the retailers. The retailers then finally sell the products to the customers. Channel of distribution also reduces the efforts of the customers by offering various goods and services at a convenient single location. For example at a retail store a customer can get a wide variety of goods.

The following are the functions of channels of distribution.

Arrangement: An intermediary receives the supply of goods from various sources. He then sorts these goods into homogenous groups based on their characteristics such as size, quality etc. For instance, an electronic goods seller receives supply of different electronic goods and then sorts them based on their functions.

Collection: An intermediary maintains large stock of goods so as to ensure easy flow of supply. For instance, an electronic goods seller maintains large stock of each type of electronic item.

Allocation and Packing: This function includes breaking the larger stock into smaller units. For instance each electronic and their spare parts are packed separately.

Building Variety: An intermediary acquires various goods from different sources and assembles them at a single place. Thus it maintains a variety of goods. He procures the products and then sells them in different combinations as desired by the consumers. For instance, a television and a video player are preferred together by most of the people. Thus, the retail can sell a combination of both.

Promotion of product: They assist in the promotion activities, undertaken by the manufacturers. For example, the manufacturers use advertising for the promotion of their product. The intermediaries can aid this process by putting banners and displays. For example an electronic goods retailer puts up banners for various products highlighting their features.

Mediation: Middle men perform the function of setting a deal that can satisfy both the producers and consumers. They negotiate the price, quality, quantity etc. for efficient transfer of ownership so as to satisfy the needs of both the parties.

Bearing risk: Risk taking is the basic responsibility of the intermediaries. Intermediaries acquire goods from the producers and keep them in their possession till the final sale. Suppose a retailer acquires large quantity of rice. After a period of time, the price of rice rises which reduces its demand. Thus the retailer may lose out as the stock remains unsold.

Q.27 Explain the major activities involved in the physical distribution of products.

Ans. Physical distribution refers to movement of products from the place of production to the place of consumption. The following are the major activities involved in the physical distribution of products:

Processing of order: Processing of order comprises number of steps such as placement of order, transmission of order by the intermediaries to the manufacturer, maintenance of inventory as per the requirement, delivery of goods etc. As all such processes take time, a physical distribution of system should be such that it should ensure speedy and proper order processing and customer satisfaction.

Transportation of products: Transportation of products refer to the physical movement of goods from the place where they are manufactured to the place where they are consumed. To make the goods physically available to the customers, they must be transported from the place of production to the place of consumption.

Warehousing: Warehousing refers to the process of storing the produced goods before the final act of sale. If a company has a larger number of warehouses, it will be able to provide goods on time at different locations.

Maintenance of inventory: The firms maintain inventory so as to ensure timely supply of products. Similar to warehousing, maintenance of inventory shares a positive relation with customer service. Maintenance of inventory also involves cost as a huge amount of capital remains tied up in the stock unless it is sold. A firm’s decision to maintain inventory is based on several factors such as how well the distribution system responds to the orders and the deliveries, cost involved in holding the inventory, firms’ objectives etc.

Q.28 ‘Expenditure on advertising is a social waste.’ Do you agree? Discuss.

Ans. Advertising is criticized on the grounds that it unnecessarily adds to the cost of the company, weakens social values and aggravates, builds up consumer needs and desires for multiple products. However, some people think that advertisement through greater sales bring down the cost and aids the process of growth.

The following points helps in judging whether advertising can be considered as a waste.

Higher cost: advertisement expenses adds to the cost of the company. The companies pass on these increased prices on the customers in the form of higher prices. However the supporters of advertisement argue that advertisement in fact brings down the per unit cost of production. This is because through advertisement greater number of customers will be attracted towards the product which in turn implies an increase in the demand for the product. In response to the increase in demand, manufacturers increase production. With increase production, the per unit cost of production comes down.

Weakens social values: One of the major criticism to advertising is that it weakens social value and instead promotes materialism in the society. Advertisement attracts customers through new products and induces them to purchase it. With increased knowledge about the availability of the new products, customers feel dissatisfied about what they currently have. Hence they end up buying even what is not required. Such a process of discontentment and purchase of new product is never ending and materialism increases. On the other hand it is argued that advertisement just informs the buyers about the availability of various products and the final decision to purchase the product lies with the customers.

Creates confusion: it is often argued that a number of advertisement on similar products confuse the customers. For example a number of advertisement on different toothpaste claim for healthy, strong and white teeth by their use. With numerous advertisement, the customers get confused as to which brand he should buy. Supporters of advertisement do not agree on this and argues that advertisement provides choice to the customers.

Promotes inferior goods: It is argues that products of inferior quality and superior quality are advertised. However such claims are partially true as quality is a relative concept. What can be inferior to one customer can be superior to another. Hence advertisement promotes all kinds of goods and customers purchases them if it suits them.

Objectionable advertisement: It is said that often advertisement undermine social values and are in bad taste. Sometimes, languages, images and content of the advertisement may not appeal to the society at large. On the other hand it is argued that good or bad taste is a subjective phenomenon and varies from person to person. What may be accepted by one, may be offensive for other.

Thus it can be said that expenditure on advertisement though draws criticism but the objections are not entirely true.

Q.29 Distinguish between advertising and personal selling.

Ans. Advertising is an impersonal, paid form of communication used by the marketers for the promotion of goods and services. On the other hand personal selling involves direct communication of the seller with the potential customers.

The following are the differences between advertising and selling-

Q.30 Explain the factors determining the choice of channel of distribution.

Ans. Channels of distribution refer to the individuals, institutions, agents who facilitate the process of distribution. As the potential consumers are spread over a larger geographical area, it becomes difficult for the producers or the manufacturers to directly contact the customers for the sale of their products. Here channels of distribution play an important role. They facilitate the transfer of goods from the place of production to the place where they are consumed. For example, for a manufacturer of sugar in Punjab, it would be difficult to contact the customers in other parts of the country. To ease the process, it would sell its products to the wholesalers who in turn would sell it to the retailers. The retailers then finally sell the products to the customers. Channel of distribution also reduces the efforts of the customers by offering various goods and services at a convenient single location. For example at a retail store a customer can get a wide variety of goods.

The following are the functions of channels of distribution.

Arrangement: An intermediary receives the supply of goods from various sources. He then sorts these goods into homogenous groups based on their characteristics such as size, quality etc. For instance, an electronic goods seller receives supply of different electronic goods and then sorts them based on their functions.

Collection: An intermediary maintains large stock of goods so as to ensure easy flow of supply. For instance, an electronic goods seller maintains large stock of each type of electronic item.

Allocation and Packing: This function includes breaking the larger stock into smaller units. For instance each electronic and their spare parts are packed separately.

Building Variety: An intermediary acquires various goods from different sources and assembles them at a single place. Thus it maintains a variety of goods. He procures the products and then sells them in different combinations as desired by the consumers. For instance, a television and a video player are preferred together by most of the people. Thus, the retail can sell a combination of both.

Promotion of product: They assist in the promotion activities, undertaken by the manufacturers. For example, the manufacturers use advertising for the promotion of their product. The intermediaries can aid this process by putting banners and displays. For example an electronic goods retailer puts up banners for various products highlighting their features.

Mediation: Middle men perform the function of setting a deal that can satisfy both the producers and consumers. They negotiate the price, quality, quantity etc. for efficient transfer of ownership so as to satisfy the needs of both the parties.

Bearing risk: Risk taking is the basic responsibility of the intermediaries. Intermediaries acquire goods from the producers and keep them in their possession till the final sale. Suppose a retailer acquires large quantity of rice. After a period of time, the price of rice rises which reduces its demand. Thus the retailer may lose out as the stock remains unsold.