Business Studies Part I
Business Studies Part II


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A company may produce a good quality product, price it appropriately and make it available at the selling points, which are convenient to customers. But in spite of all this, the product may not sell well in the market. There is a need for developing proper communication with the market. In the absence of communication, the customers would not be able to know about the product and how it can satisfy their needs and wants or may not be convinced about its utility and benefits. Promotion refers to the use of communication with the twin objective of informing potential customers about a product and persuading them to buy it. In other words, promotion is an important element of the marketing mix by which marketers make use of various tools of communication to encourage the exchange of goods and services in the market. 


Promotion mix refers to a combination of promotional tools used by an organization to achieve its communication objectives. Various tools of communication are used by marketers to inform and persuade customers about their firm’s products. These include (i) Advertising, (ii) Personal Selling, (iii) Sales Promotion, and (iv) Publicity. These tools are also called elements of promotion mix and can be used in different combinations, to achieve the goals of promotion. For example, consumer goods firms may use more of advertising through mass media while the industrial goods firms may be using more of personal selling. What combination of these elements is used by a firm will depend upon various factors such as the nature of the market, natural product, the promotions budget, objectives of promotion, etc. Let us first know about these elements in some details.


We generally come across hundreds of advertising messages every day, which tell us about various products such as toilet soaps, detergent powder, soft drinks and services such as hotels, insurance policies, etc. Advertising is perhaps the most commonly used tool of promotion. It is an impersonal form of communication, which is paid for by the marketers (sponsors) to promote some goods or services. The most common modes of advertising are ‘newspapers’, ‘magazines’, ‘television’, and ‘radio’. The important distinguishing features of advertising are as follows: 

  • Paid Form: Advertising is a paid form of communication. That is, the sponsor has to bear the cost of Advertising “If you’re trying to persuade people to do something, or buy something, it seems to me you should use their language, the language in which they think.” —David Ogilvy “We find that advertising works the way the grass grows. You can never see it, but every week you have to move the lawn.” communicating with the prospects.
  • Impersonality: There is no direct face-to-face contact between the prospect and the advertiser. It is, therefore, referred to as the impersonal method of promotion. Advertising creates a monologue and not a dialogue.
  • Identified Sponsor: Advertising is undertaken by some identified individual or company, who makes the advertising efforts and also bears the cost of it. 

Merits of Advertising

Advertising, as a medium of communication, has the following merits:

  • Mass Reach: Advertising is a medium through which a large number of people can be reached over a vast geographical area. For example, an advertisement message placed in a national daily reaches lakhs of its subscribers.
  • Enhancing Customer Satisfaction and Confidence: Advertising creates confidence amongst prospective buyers as they feel more comfortable and assured about the product quality and hence feel more satisfied.
  • Expressiveness: With the developments in art, computer designs, and graphics, advertising has developed into one of the most forceful media of communication. With the special effects that can be created, even simple products and messages can look very attractive. (iv) Economy: Advertising is a very economical mode of communication if a large number of people are to be reached. Because of its wide reach, the overall cost of advertising gets spread over numerous communication links established. As a result, the per-unit cost of reach comes low.

Limitations of Advertising

The following are the major limitations of advertising as a tool of promotion:

  • Less Forceful: Advertising is an impersonal form of communication. It is less forceful than the personal selling as there is no compulsion on the prospects to pay attention to the message.
  • Lack of Feedback: The evaluation of the effectiveness of an advertising message is very difficult as there is no immediate and accurate feedback mechanism of the message that is delivered.
  • Inflexibility: Advertising is less flexible as the message is standardized and is not tailor-made to the requirements of the different customer groups.
  • Low Effectiveness: As the volume of advertising is getting more and more expanded it is becoming difficult to make advertising messages heard by the target prospects. This is affecting the effectiveness of advertising. advertising is one of the most frequently used media of promotion of goods and services, it attracts a lot of criticism. The opponents of advertising say that the expenditure on advertising is a social waste as it adds to the cost, multiplies the needs of people and undermines social values. The proponents, however, argue that advertising is very useful as it increases the reach, brings the pay unit cost of production down and adds to the growth of the economy. It is, therefore, important to examine the major criticisms against advertising and see the extent to which these are true. This is taken up as follows:
  1. Adds to Cost: The opponents of advertising argue that advertising unnecessarily adds to the cost of the product, which is ultimately passed on to the buyers in the form of high-Value AD Government Shining It’s not the heavyweight in the FMCG sector which are ruling the roost as top advertisers on the tube, but surprisingly it’s the government departments and public sector units. Apart from Procter & Gamble, Bajaj Consumer Care, Joyco and Eicher Motors, the list of top advertisers across television and print is dominated by Sarkari outfits flaunting their newfound passion for mass-media led public communication. An advertisement on TV, for a few seconds, for example, costs the marketers several lakhs of rupees. Similarly, an advertisement in print media says in a newspaper or a magazine costs the marketers a large amount of money. The money spent adds to the cost, which is an important factor in the fixation of the price of a product. True, advertisement for a product costs a lot of money but it helps to increase the demand for the product as a large number of potential buyers come to know about the availability of the products, its features, etc. and are persuaded to buy it. The increased demand leads to higher production, which brings with it the economies of scale. As a result, the per-unit cost of production comes down as the total cost is divided by a larger number of units. Thus, the expenditure on advertisement adds to the total cost but the per-unit cost comes down which in fact lessens the burden of consumers rather than adding to it.
  2. Undermines Social Values: Another important criticism of advertising is that it undermines social values and promotes materialism. It breeds discontent among people as they come to know about new products and feel dissatisfied with their present state of affairs. Some advertisements show new lifestyles, which don’t find social approval. This criticism is not entirely true. Advertisement in fact helps buyers by informing them about the new products, which may be an improvement over the existing products. If the buyers are not informed about these products, they may be using inefficient products. Further, the job of an advertisement is to inform. The final choice to buy or not to buy anyway rests with the buyers. They will buy if the advertised product satisfies some of their needs. They may be motivated to work harder to be able to purchase these products.
  3. Confuses the Buyers: Another criticism against advertisement is that so many products are being advertised which makes similar claims that the buyer gets confused as to which one is true and which one should be relied upon. For example, we may note similar claims of whiteness or stain removing abilities in competing brands of detergent powder or claims of the whiteness of tooth or ‘feelings of freshness’ in competing brands of toothpaste that it is sometimes confusing to us as to which one to buy. The supporters of advertisement, however, argue that we are all rational human beings who make our decisions for the purchase of products on factors such as price, style, size, etc. Thus the buyers can clear their confusion by analyzing the information provided on the advertisements and other sources before making a decision to purchase a product. However, this criticism cannot be completely overruled.
  4. Encourages Sale of Inferior Products: Advertising does not distinguish between superior and inferior products and persuade people to purchase even inferior products. In fact, superiority and inferiority depend on the quality, which is a relative concept. The desired level of quality will depend on the economic status and preferences of the target customers. Advertisements sell products of a given quality and the buyers will buy if it suits their requirements. No advertisement should, however, make false claims about the quality of a product. If a firm makes false claims it can be prosecuted for the same.
  5. Some Advertisements are in Bad Taste: Another criticism against advertising is that some advertisements are in bad taste. These show something which is not approved by some people say advertisements showing women dancing when not required or running after a man because he is wearing a particular suit or using a particular perfume are certainly not good. Some advertisements distort the relationship like employer-employee and are quite offensive. Celebrities’ Influence on Brands’ Performance Example of ad campaigns featuring celebrities, which resulted in brand building and growth in volumes.
  • Cadbury’s and Amitabh Bachchan: The commercial, a testimonial by Bachchan on a factory visit, was launched to rebuild the trust in the brand. Twelve weeks after the campaign was launched, the sales reached 90 percent of volumes prior to the worm crisis. Big B’s presence helped the company to get media coverage that added to the campaign’s impact.
  • Santro and Shah Rukh Khan: Shah Rukh was roped in Santro ad to strike an immediate bond with the consumers. Shah Rukh Khan is an unconventional superhero with a quirky acting style that matched the image of Santro.
  • Titan and Aamir Khan: Both are considered to be Indian icons and have made a mark internationally; the obsession with detail is common to both, as also a sense of style. The Mangal Pandey look, which was unconventional, made the advertisement stand out, along with the fact that Aamir is less exposed than the other celebrities.
  • Munch and Rani Mukherjee: The campaign for Munch was aired on TV roped Rani Mukherjee to give “a big brand feel”. The company got incredibly good results in recall and the ad was a big hit with kids. Rani was used as a consumer and not as a filmstar. Sachin Tendulkar and Boost: Research indicated that the brand’s association with Sachin has consistently been successful in strengthening the brand’s core values and building brand stature. Kids look up to Sachin as a true hero, want to emulate everything that he does and can’t seem to get enough of him.

Source: Adopted from the Indian Journal of Marketing, Oct. 5, 2006, Personal Selling ‘Most people think ‘selling’ is the same as ‘talking’.

But the most effective salespeople know that listening is the most important part of their job.’ —Roy Bartell ‘You don’t close a sale, you open a relationship if you want to build a long-term, successful enterprise.’ —Patricia Fripp, We have seen the views of the opponents and the proponents of advertising. There may be some chances of misuse of advertising as a tool, which can be properly safeguarded by the law or by developing a code of conduct by the advertisers, for their self-regulation. However, most of the criticism against advertising is not entirely true. In the changing economic environment of globalization, advertising is considered as an important tool of marketing. It helps a firm in effectively communicating with its target market, increasing the sale and thereby reducing the per-unit cost of production. It is not a social waste, rather it adds value to the social cause by giving a boost to production and generating employment.


Personal selling involves an oral presentation of the message in the form of conversation with one or more prospective customers for the purpose of making sales. It is a personal form of communication. Companies appoint salespersons to contact prospective buyers and create awareness about the product and develop product preferences with the aim of making a sale.

Features of Personal Selling

  • Personal Form: In personal selling, a direct face-to-face dialogue takes place that involves an interactive relationship between the seller and the buyer.
  • Development of Relationship: Personal selling allows a salesperson to develop personal relationships with prospective customers, which may become important in making a sale.

Merits of Personal Selling

  • Flexibility: There is a lot of flexibility in personal selling. The sales presentation can be adjusted to fit the specific needs of individual customers.
  • Direct Feedback: As there is direct face-to-face communication in personal selling, it is possible to take direct feedback from the customer and to adapt the presentation according to the needs of the prospects.
  • Minimum Wastage: The wastage of efforts in personal selling can be minimized as a company can decide the target customers before making any contact with them.


Personal selling plays a very important role in the marketing of goods and services. The importance of personal selling to businessmen, customers and society may be described as below. Importance to Businessmen Personal selling is a powerful tool for creating demand for a firm’s products and increasing its sales. The importance of personal selling to a business organization may be described as follows:

  • Effective Promotional Tool: Personal selling is a very effective promotional tool, which helps in influencing the prospects about the merits of a product and thereby increasing its sales.
  • Flexible Tool: Personal selling is more flexible than other tools of promotion such as advertising and sales promotion. It helps business persons in adopting their offer in varying purchase situations.
  • Minimizes Wastage of Efforts: Compared with other tools of promotion, the possibility of wastage of efforts in personal selling is minimum. This helps the business persons in bringing the economy in their efforts.
  • Consumer Attention: There is an opportunity to detect the loss of consumer attention and interest in a personal selling situation. This helps a business person in successfully completing the sale.
  • Lasting Relationship: Personal selling helps to develop a lasting relationship between the salespersons and the customers, which is very important for achieving the objectives of the business.
  • Personal Rapport: Development of personal rapport with customers increases the competitive strength of a business organization.
  • Role in Introduction Stage: Personal selling plays a very important role in the introduction stage of a new product as it helps in persuading customers about the merits of the product.
  • Link with Customers: Salespeople play three different roles, namely persuasive role, service role, and informative role, and thereby link a business firm to its customers.
  • Importance to Customers: This role of personal selling becomes more important for the illiterate and rural customers, who do not have many other means of getting product information. The customers are benefited by personal selling in the following ways:
  1. Help in Identifying Needs: Personal selling helps the customers in identifying their needs and wants and in knowing how these can best be satisfied.
  2. Latest Market Information: Customers get the latest market information regarding price changes, product availability and shortages and new product introduction, which helps them in taking the purchase decisions in a better way.
  3. Expert Advice: Customers get expert advice and guidance in purchasing various goods and services, which help them in making a better purchase.
  4. Induces Customers: Personal selling induces customers to purchase new products that satisfy their needs in a better way and thereby helps in improving their standards of living.

Importance to Society

Personal selling plays a very productive role in the economic progress of society. The more specific benefits of personal selling to society are as follows:

  • Converts Latest Demand: Personal selling converts the latent demand into effective demand. It is through this cycle that the economic activity in the society is fostered, leading to more jobs, more incomes and more products and services. That is how economic growth is influenced by personal selling.
  • Employment Opportunities: Personal selling offers greater income and employment opportunities to the unemployed youth.
  • Career Opportunities: Personal selling provides an attractive career with greater opportunities for advancement and job satisfaction as well as security, respect, variety, interest, and independence to young men and women.
  • Mobility of Sales People: There is a greater degree of mobility in salespeople, which promotes travel and tourism in the country.
  • Product Standardisation: Personal selling increases product standardization and uniformity in consumption patterns in a diverse society.


Sales promotion refers to short-term incentives, which are designed to encourage the buyers to make immediate purchases of a product or service. These include all promotional efforts other than advertising, personal selling, and publicity, used by a company to boost its sales. Sales promotion activities include offering cash discounts, sales contests, free gift offers, and free sample distribution. Sales promotion is usually undertaken to supplement other promotional efforts such as advertising and personal selling. Companies use sales promotion tools specifically designed to promote to customers (e.g., free samples, discounts, and contests), tradesmen or middlemen (e.g., cooperative advertising, dealer discounts and dealer incentives and contests) and to the salesperson (e.g., bonus, salesmen contests, special offers). Sales promotions include only those activities that are used to provide short term incentives to boost the sales of a firm.

Merits of Sales Promotion

  • Attention Value: Sales promotion activities attract the attention of the people because of the use of incentives.
  • Useful in New Product Launch: Sales promotion tools can be very effective at the time of the introduction of a new product in the market. It induces people to break away from their regular buying behavior and try the new product.
  • Synergy in Total Promotional Efforts: Sales promotion activities are designed to supplement the personal selling and advertising efforts used by a firm and add to the overall effectiveness of the promotional efforts of a firm.

Limitation of Sales Promotion

  • Reflects Crisis: If a firm frequently relies on sales promotion, it may give the impression that it is unable to manage its sales or that there are no takers of its product.
  • Spoils Product Image: The use of sales promotion tools may affect the image of a product. The buyers may start feeling that the product is not of good quality or is not appropriately priced.

Commonly used Sales Promotion Activities

  1. Rebate: Offering products at special prices, to clear off excess inventory. For example, a car manufacturer’s offer to sell a particular brand of car at a discount of Rs 10,000, for a limited period.
  2. Discount: Offering products at less than list price. For example, a shoe company’s offer of ‘Discount Up to 50%’ or a shirt marketer’s offer of ‘50+40% Discount’.
  3. Refunds: Refunding a part of the price paid by the customer on some proof of purchase, say on return of empty foils or wrapper. This is commonly used by food product companies, to boost their sales.
  4. Product Combinations: Offering another product as a gift along with the purchase of a product, say the offer of a pack of ½ kg of rice with the purchase of a bag of Atta (wheat flour), or ‘Get 128 KB Memory Card Free with a Digicam’ or Buy a TV of 25+ and Get a Vacuum Cleaner Free’ or ‘100 Gm Bottle of Sauce Free With 1 kg Detergent.’
  5. Quantity Gift: Offering an extra quantity of the product commonly used by the marketer of toiletry products. For example, a shaving cream’s offer of ‘40% Extra’ or A Hotel’s offer of “Take a 2 Night 3 Days Package At the Hotel and Get an Extra Night Stay At Just Rs 500” or ‘Buy 2 Get 1 Free’ offer of a marketer of shirts.
  6. Instant Draws and Assigned Gift: For example, ‘Scratch a Card’ or ‘Burst a Cracker’ and instantly win a Refrigerator, Car, T-shirt, Computer, with the purchase of a TV.
  7. Lucky Draw: For example, the offer of a bathing soap to win a gold coin on lucky draw coupons for free petrol on purchase of a certain quantity of petrol from a given petrol pump or lucky Sales Promotion draw coupon on the purchase of easy undergarment and win a car offer.
  8. Usable Benefit: ‘Purchase goods worth Rs 3000 and get a holiday package worth Rs 3000 free’ or ‘Get a Discount Voucher for Accessories on Apparel Purchase of Rs 1000 and above.’
  9. Full finance @ 0%: Many marketers of consumer durables such as Electronic goods, automobiles, etc offer easy financing schemes such as ‘24 easy installments, Eight Up Front and 16 To Be Paid as Post Dated Cheques’. However, one should be careful about the file charges, which sometimes is nothing but interest recovered in advance.
  10. Sampling: Offer of free sample of a product, say a detergent powder or toothpaste to potential customers at the time of launch of a new brand.
  11. Contests: Competitive events involving the application of skills or luck, say salving a quiz or answering some questions.


Publicity is similar to advertising, in the sense that it is a non-personal form of communication. However, as against advertising, it is a non-paid form of communication. Publicity generally takes place when favorable news is presented in the mass media about a product or service. For example, if a manufacturer achieves a breakthrough by developing a car engine, which runs on water instead of petrol, and this news is covered by television or radio or newspapers in the form of a news item. It would be termed as publicity because the engine manufacturer would benefit from such dissemination of information about its achievement by the media but would not bear any cost for the same. Thus, the two important features of publicity are that:

  • Publicity is an unpaid form of communication. It does not involve any direct expenditure by the marketing firm.
  • There is no identified sponsor for the communication as the message goes as a news item. In publicity, as the information is disseminated by an independent source, e.g., the press in the form of news stories and features, the message has more credibility than if that comes as a sponsored message in advertising. Also, as the message goes in the form of news rather than direct sales communication, it can reach even to those persons who otherwise may not pay attention to paid communication. However, an important limitation of publicity is that as a medium of promotion, it is not within the control of a marketing firm. The media would cover only those pieces of information, which are newsworthy and which symbolize some achievement in the field. Thus, a firm can’t use publicity to actively promote its products.

  1. The tool of promotion being taken into consideration by Reema is advertising. (Reema is of the opinion that in order to increase the sale of their products, they should advertise about it on television.)
  2. Vibha is insisting that they should set up an online portal to market their products across the globe i.e. adopting direct marketing or zero-level channel (manufacturer – consumer). Whereas at present they are using indirect channels of distribution i.e. one level channel (manufacturer – retailer – consumer)by operating through a chain of retail outlets at five different places in Delhi.
  3. No, Ratna is not fully justified in her argument although advertising as a tool of promotion is often criticised on the ground that it adds to the cost of distribution which is passed on to the consumers in the form of higher prices. Therefore, it increases the burden on the consumers. But, this argument is not entirely true because advertisements help to increase demand for the product. In order to meet the increased demand the production levels have to be raised. As a result, the business is able to reap advantage of economies of scale and eventually the cost of production per unit comes down and benefits the buyers as the product’s prices are reduced consequeuence.