Define merchandising? (15 marks) Elaborate with a real merchandising example conducted by a brand, shop, supermarket, producer etc...(18 marks) Question 2: (33 marks) Why is pricing important for small businesses? (13 marks) Explain 5 different pricing strategies for small businesses and give examples on each. (20 marks) Question 3: (34 marks) Describe all stages of the product life cycle. (16 marks) Give an example of a real company's behavior in one of the life cycle stages of your choice (18 marks)

Question 1:

Merchandising is a process or system adopted by the companies to display and sell products to customers. Whether online or in store, retailers basically use merchandising to influence the customer's intention and reach their sales goals. It helps in improving sales, and quick inventory turnover. Moreover, there is a wide variety of merchandising techniques is used to manage products, communicate their value, and create an effective customer experience. Many exercises fit under the roof of merchandising, and there is a variety of merchandise types. These include Product merchandising, Retail merchandising, Visual merchandising, Digital merchandising and Omni channel merchandising. Establishing a right merchandising strategy always depend upon a variety of factors, such as sector, product qualities, and available space for the display. Furthermore, some stores modify the display location of items in the store frequently, in order to force their clients to walk through all the sections of the shop. Therefore, merchandising improves customers’ satisfaction, and raises its loyalty for the brand or product.

IKEA is one of the best multinational company examples that are using merchandising concepts in both online or in stores for promoting and selling more products to its clients. There are 433 IKEA stores operating in 52 countries, in addition to these stores, the company is also advertising its products through online stores. It is quite impossible to come out without any purchase from IKEA stores. Furthermore, they are following a good merchandising strategy to catch the attention of more customers to buy more products. IKEA has one of the great looking and inspiring showrooms with a good color combination to attract more customers to visit their stores. They offer furniture at a cheap cost and provide furnishing solutions to customers. Moreover, they also provide furniture pieces with complementary items. In addition to, IKEA uses digital merchandising by an e-commerce website to allow their customers to take an idea about their requirements and help them to take big and good decisions.

Question 2:

Pricing plays a key role in the determination of the profitability of the business as well as the position of the business in the market: -

Pricing is important for small business in the following ways: -

1. Pricing plays critical role in the determination of the profits of the business: - The prices that are set by the business are the ones that are going to determine the profit margins of the business, high prices means high profits for the business as long you dont loose the sales

2. The effects on the prices on the volume of the sales: - The amount of the sales volume is going to the determined by the prices you set on the products, increasing the prices has a tendency of reducing the volume of the sales, while a decrease the prices has a tendency of increasing the sales volume, this plays around the profitability of the business

3. The positioning of the business and the prices: - in short , the price you set it what is going to be used by the customers to communicate about your business, the products you offer as well as the value, all this have a direct effect on the brand, the image and the position of the business in the market

4. The market share of the business as well as the nature of the competition: - the prices that have been set are the ones that are going to determine if the business is competitive or not, this has a direct effect on the business on the share it has in the market, lowering the prices helps the business to increase its market share by attracting more customers into it, later on the prices can be adjusted once the customer loyalty has been won

Different pricing strategies for small businesses: -

1. penetration pricing method: - Here, an introductory pricing is done making sure that the pricing will be increased in the future, eg. in the mortgages

2. optional pricing: - here discounts are offered on one product in the hope that more money can be made from other extras. eg in the sale of printers

3. premium pricing: - here, few items can be sold at a higher price making sure that there are high profit margins, eg. in the sale of iphone

4. value pricing: - this includes the cost of production, giving low prices of the products, eg. in the sale of supermarket products.

5. competition pricing: - this entails putting the same prices as those of the competitors. eg in the sale of cold drinks.

Question 3:

Answer part 1:

Once a product is launched in the market, it has to pass through various phases until one day the product has to be withdrawn from the market. This is called the Product Lifecycle. There are 4 stages of a product life cycle and are as follows-

1st Stage :

Introduction- Once the a new product is created, it is introduced in the market for sales, this is known as the introduction stage. In this stage the product is new and is not known in the market. So a company has to spend a lot of money on Marketing and Advertising to promote the product. The company wants more and more customers to know about their new product. It announces special offers, trial offers, free sampling techniques to create awareness in the market and create demand. The sales are usually low in this stage.

2nd Stage :

Growth- In this stage the product is getting known in the market. The sales start growing and the product brings good revenue to the company. The company still spends some money on marketing, in order to increase its market share. In this stage the sales are usually high as the demand is growing.

3rd Stage :

Maturity - This is basically a saturation stage where the product sales have reached to its maximum level. The marketing department in this stage tries to maintain its market share as the competition is high. The sales will stop growing and in some cases it will also start dropping. The maturity period may last for many years but it depends on the type of the product.

4th and the last Stage:

Decline - This is the last stage, in which the products demand starts going down and hence the sales decline. Many products start phasing out in this stage. The revenue and the profitability also start to drop. This is more of a dying stage. The company's marketing department at this stage will start to invest on R&D and innovation to bring in upgradation in the existing product or introduce a new product.

Answer part 2:

Following is an example of a real company's behavior in one of the life cycle stages -

Nokia, once a leader in mobile phone industry lost the battle in the feature phone decline stage. Nokia held 50% market share in the feature phone market. In 2008 the first Android powered smartphone was launched by HTC. Samsung also tied up with Google for Android and launched its smartphones. The Android smartphone market started booming exponentially as Android became the common and most accepted platform for Mobile phone users. The feature phone product was in the DECLINE stage. Nokia realized this but did not react fast nor it was able to strike a deal with Google for its Android platform. They introduced windows based smartphones but failed. Nokia's sales declined and finally lost the battle in the smartphone market.