Pricing Terminologies

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A business firm pays money for raw materials and other necessary supplies, manufactures different products and sells. They deduct all expenses from the income received from such sales.The remainder becomes their profit. Here some important terminologies have been given. E.g. Gross sales, net sales, cost of good sold, gross margin or profit, operating expenses, mark-up etc.

1. Gross Sales

The total sales or total amount received by a business firm from sales of goods is called gross sales. A gross sales becomes an important point of financial statement of a business firm. In this sales is multiplied by per unit price of the goods to find out sales amount. For example, price of a book is $ 20, if total 150 books have been sold out, then 150x$20 = $3000. Here, $3000 is gross sales.

2. Net Sales

Net sales are calculated by deducting sales returned (if sold out goods is returned back) and discount (if given to customers) from gross sales amount. For example, 5 books were returned back, so sales return is 5x30=$150. If total discount is given $50, then sales return $150+Discount $50= $200 should be deducted from gross sales, hence net sales= $3000-200= $2800.

3. Cost Of Goods Sold

A firm has to bear different expenses in the process of selling goods to customers. Under this include cost for production or purchase, cost of distribution, cost for promotional activities. While calculating selling cost, purchase cost is added to the stock remained at the beginning of the current year. Then distribution cost and promotional costs are added to it to find out the total cost of the goods available for sale. And then the final stock remained at the end of the current year is deducted from the total cost. Hence, the cost of goods sold comes out.


4. Gross Margin Or Profit

At first, cost of production or purchase and selling cost added together, then this amount is deducted from the amount of gross sales. The outcome is gross margin or profit. Indirect expenses need not be deducted. Net profit is calculated by deducting all kind of expenses. But if the expense exceeds the amount received from sales, then it is net loss.

5. Operating Expenses

All the expenses made on different activities in the process of sales and distribution of goods, such as selling expenses, salary to salesmen, commission, transportation charge, promotional cost, administrative and miscellaneous expenses etc. are operating expenses. For calculating net profit, the total operating expenses should be deducted from gross sales.

6. Mark-up

Mark-up is the difference between cost of good sold and selling price. For producers, per unit profit margin of the goods sold is mark-up. Similarly, for wholesalers, the amount that comes out from deducting the discount on purchasing price is the mark-up, and for retailers, the difference between purchasing price and selling price is mark-up

Modern Concept Of Marketing

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In the present day business world, the meaning of marketing is not limited to sales or distribution of products; besides sales of goods, other numerous important functions can also be included in marketing. Marketing should pay attention to satisfy the needs and wants of customers. Considering with the customer-oriented concept, marketing is taken in broad sense. According to this concept the function of marketing starts before production of goods and continues even after final sale. Although being a sub-system of the entire business system, marketing equally affects all the business decisions. Production depends mainly on marketing.

We can study some important definitions given by the scholars of marketing as follows:

Cinduff and Still define marketing as- " Marketing is the business process by which products are matched with markets and through which transfers of ownership are effected."

This definition has given emphasis to match products with market. That means to identify the needs and wants of potential consumers and to supply the products, which can satisfy their needs and wants. The word 'matching' emphasizes to match production and consumption, that means- " only the goods which can be produced can be sold out and so only the goods which can be sold out should be produced." If a business firm produces goods or services by studying and identifying the needs and wants of potential customers, it becomes successful to achieve its objective.

Nowadays, marketing has been highly influenced by consumerism. No business can be operated without consumers. The main objective of marketing is to identify consumers' needs and interests and provide them maximum satisfaction as possible.

William J. Stanton, Etzel and Walker have defined marketing as- " Marketing is a total system of business activities designed to plan, price, promote and distribute want satisfying products, services, and ideas to target markets in order to achieve organizational objectives."

This definition applicable to the non-profit making and profit making organizations has emphasized the systems approach of management. The entire system of business activities should be customer-oriented; and the customers should be given satisfaction in an effective way by identifying their needs. Marketing program starts from generating ideas for products and does not end until the customers are fully satisfied even after the final sale of the products. For the successful implementation of this definition, marketing should pay attention to maximize profitable sale in long run. So, for the success in business, an organization should give satisfaction to the customers in order to maintain their expectation for products or services and receive their purchase-order regularly.

In this way, marketing has been taken in broad sense. The old concept limited to buying and selling of goods cannot work in the present business environment. The new concept of marketing has become an integrated process to identify human needs, evaluate and supply or satisfy them. Before producing any goods, the subjects such as taking decisions what to produce, when to produce, how much price to determine, how to supply to ultimate consumers etc. are all concerned with marketing. Marketing starts from generating ideas to produce goods according to the interest of customers, and it does not end until they are fully satisfied even after final sale. So, the activity of marketing is also a dynamic process that goes on continuously.


Old Concept Of Marketing

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In old concept, marketing is economic process related with the exchange of goods and services in monetary value. This shows that the scope of marketing is limited to only buying and selling of goods and their advertisement. According to this old concept, the function of marketing starts only after production of goods and automatically ends when they are sold out. The old concept maintains that the main objective of marketing is to supply goods or services from producer to consumers and earn profit by selling them. For this, advertisement and different sales promotional techniques are used.

Different scholars have defined marketing in narrow sense:

Prof.Pyle has defined marketing as " Marketing comprises both buying and selling activities."
This definition has limited marketing within buying and selling activities.

Duddy and Revzan have defined marketing as " Marketing is the economic process bu which goods and services are exchanged and their values determined in terms of money prices."
This definition seems to limit marketing to buying and selling goods or services and determining their prices, i.e. exchanged activities.

According to the above mentioned definitions, marketing includes all the activities carrying products or services from producers to consumers. It includes selling goods or services, or exchanging them for monetary profit. The narrow meaning of marketing represents product-oriented concept, which gives emphasis to sell of goods produced by any business organization rather than to the needs, interests and wants of customers. This concept was true during the time when there was scarcity of goods and monopoly of sellers' market.

But in the present era of business competition, product-oriented concept of marketing is not appropriate. This concept maintains the function of marketing starts from production of goods or services and ends with sale. But in the changed business environment, the function of marketing starts before the production of any goods or services. Anticipation of customers' demand, needs and interest should be made before developing and producing any goods. Taking decision on price, market and other promotional activities are also the functions of marketing. The task of marketing does not end after the final sale. If any business organization wants to receive purchase-orders from customers again and again, it should fully satisfy the customers as the success of business depends on the customers' satisfaction. For these reasons, the old concept of marketing has become outdated. In other words, the concept of marketing has changed. Consumer-oriented concept has developed in the place of old product-oriented concept. Now, it is believed that the customers are the real force to direct business and their satisfaction is the ultimate goal of business activities.

Problems Of Agricultural Marketing

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The problems of agricultural marketing are as follows:

1. Lack Of Organized Market
Majority of farmers live in villages. Organized markets have not developed in villages to sell their products. So, there are no markets to supply neither agricultural products to the customers, not agricultural inputs to the farmers in rural areas. So, agricultural market has remained unorganized.

2. Predominance Of Intermediaries
Agricultural market is totally controlled by intermediaries. They have predominance in determining prices, buying and selling of agricultural product. So, neither the farmers can get reasonable prices of their products, nor the customers can get the products at cheap prices. Intermediaries buy agro-products at cheap prices from farmers and sell to consumers at high prices. So, agricultural market has been seriously affected by exploitation of intermediaries.

3. Lack Of Standardization And Grading
Farmers produce various kinds of goods. But they are not standardized and graded according to their quality. Rather there is malpractice of adulteration of standard and inferior quality goods. Bad quality products are mixed with good quality and sold at high price.

4. Lack Of Warehousing
There is no proper warehousing facility for storing agricultural products. The farmers have the compulsion to sell their products at cheap price on the one hand, the quality of goods declines and quantity decreases due to the leakage on the other. Similarly, as there is no adequate facility of transportation, farmers cannot get reasonable prices of their products.

5. Lack Of Transportation Facility
There is no transportation facility in every part of the countries. If there is transportation facility, agricultural market can get expanded. Due to the lack of transport facility, it becomes impossible. Although the importance of agricultural market is paramount in every village, there is lack of transport facility.

6. Lack Of Marketing Skill
Because of the lack of proper education, the small farmers and businessmen have no marketing skill. Small farmers, businessmen are not skilled in determining price, storing, packaging and grading the agricultural products. AS a result, they have not got benefits from agricultural occupation.

7. Lack Of Effective Peasants' Organization
There are many peasants organizations affiliated to one or the other political organization. But they are not concerned with the farmers' occupational interest. There is lack of peasants' organization which would focus its attention on occupational interest of peasants.So, real farmers are always exploited.

8. Lack Of Market Information
There is lack of institutional body to give information to the farmers about the production situation, price, demand and changes in price, market situation etc. of the agricultural products. Farmers are exploited or cheated by local landlord, moneylenders and agro-businessmen due to their wrong information.

9. Lack Of Minimum Price Fixation System
There is lack of minimum price fixation system of the agricultural products. As a result, farmers have to suffer exploitation.

In this way, absence of organized market, predominance of intermediaries, lack of standardization and grading, lack of warehouse and transportation facility, absence of effective peasants' organization, lack of market information, lack of minimum price fixation system etc. are the problems of agricultural marketing.


Features Of Agricultural Marketing

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The features of agricultural marketing can be discussed as follows:

1. Perishable Products

Agricultural products are dealt with in agricultural market. Most of the agricultural products are of perishable nature. Fruits, green vegetables, fish, meat, milk, other dairy products etc. perish within shorter time. But some other remain fresh for a little longer. So, proper management of storage, distribution and transportation should be made according to the nature of products.

2. Continuous Demand

Most of agricultural goods are produced in certain seasons. But they are necessary for consumption round the year. So, warehouse management should be made effective for regular supply of such goods.

3. Fluctuation In Price

Since balance cannot be maintained in demand and supply of agricultural products, price remains fluctuating in agricultural markets. Supply rises high and price falls low in harvesting time. Bu in off-season, supply falls low then prices rise high. 

4. Presence Of Intermediaries

Producer's predominance prevails over industrial products but intermediaries' predominance prevails over agricultural products. Intermediaries buy agricultural products at low price directly from the farmers at the time of harvest. They keep the collected products in warehouse and sell them at high prices. So they take responsibility of market management. They perform all the functions of marketing such as collecting, standardizing, pricing, storing of agricultural product. So, farmers cannot get reasonable price for their products.

5. Inelastic Demand

Agricultural products are of compulsory for daily life. Any change in their price does not affect much. An increase or decrease in prices does not affect demand for agricultural products. So, demand remains inelastic in agricultural market.

6. Elastic Supply

Supply of agricultural products remains elastic, even if demand remains inelastic. Supply is affected by the change of price of agricultural products. If price of agricultural products rises, then supply also increases together. If price decreases, supply also decreases.

In this way, buying and selling of perishable goods, continuous demand, fluctuation in prices, presence of intermediaries, elastic supply etc. are the important features of agricultural marketing.

Types Of Agent Wholesalers

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Agent wholesalers can be classified into two classes as brokers and agents:

1. Broker
Broker helps to have contact between buyer and seller temporarily. Compared to other middlemen, work of broker is limited. Brokers do not involve in financial arrangement or physical ownership. They do not bear any special risk. Their job is to find out buyers and sellers and help them to have exchange agreement. The party taking service pays brokerage-fee to brokers.

Brokers deal in different goods and services. Some deal in foodstuff, some deal in land and houses, some deal in securities (bond, shares), insurance etc.

i. Foodstuff Broker
Food brokers make arrangement to sell foodstuff to retailers, merchant wholesalers, industrial buyers and food processors. Buyers and sellers use food brokers to work according to the changes in the situation of food markets and to take help in grading, to have negotiation, inspection of goods etc. 

ii. Real Estate Broker
Real estate brokers help buyers and sellers in buying or selling land and houses. They bring buyers and sellers together, make them negotiate in buying and selling. They do not represent buyer or seller permanently. They involve in advertisement and other promotional activities to increase their activities. 

iii. Other Brokers
In this class include securities and insurance brokers. Security brokers brings buyers and sellers together selling or buying securities i.e shares, bonds etc. Insurance brokers also help insurance company and customers to come together to buy and sell insurance policies.

2. Agent
Agent is middleman in the channel of distribution, who works as a permanent representative of buyer or seller. Under this include producers' agent, sales agent, commission agent etc.

i. Manufacturer's Agent
The sellers appointed by a producer/manufacturer to distribute their products in certain geographical region are called manufacturer's agents.Such agents sell the products in the condition and price fixed by the manufacturer and take fixed commission. The special feature of manufacturer's agent is that they can represent different manufacturers at a time and conduct their business together in the goods of different product lines. But the goods produced by different manufacturers should not be competitive of one another. Manufacturers' agent help producers to expand their market.

ii. Sales Agent
Selling agents take responsibility to sell or distribute different products or all products of certain product line of a producer. Sales agents provide different services such as credit facility, delivery facility, storage facility etc. and also involve in promotional activities. But they do not get rights and ownership of goods. Mostly, sales agents are used to sell caned foods, household appliances, clothes, metal goods etc.

iii. Commission Merchants
Commission merchants do not get ownership of goods, but keep physical control over the goods received from producers. They receive goods from producers and supply to market, sell at good price, and take the fixed commission, pay the rest amount to producers. The commission merchants get authority and price and other sales related terms and conditions. Commission agents make arrangements for delivery of goods and provide transport facility. Such merchants mainly deal in agro-products, sea foods, artistic goods, furniture etc. Their business is seasonal or for short term.

Types Of Merchant Wholesalers

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Merchant wholesalers can be classified in full-service wholesaler and limited service wholesaler:

1. Full-service Wholesaler
Full-service wholesalers perform all the functions of a wholesaler. They provide various services to customers. They buy and sell goods, divide them, make arrangements of transportation and warehouse, make arrangement of finance, provide credit facility, bear risk, help in promotional activities, collect market information etc. They provide different facilities to both producers and retailers.

Full-service merchandise wholesalers can be divided in three classes as follows:

i. General Merchandise Wholesaler
General merchandise wholesaler deals in various kinds of goods. This type of wholesaler purchases medicines, construction materials, perishable and non-perishable foodstuffs, cosmetics, clothes, sports and electrical goods, furniture, etc. stores and sells them. Such wholesalers could be found more in the initial stage of development of marketing. But nowadays, this type of wholesaler can be found rarely in this stage of growing specialization.

ii. Limited-line Wholesaler
Limited-line wholesaler deals in the good of only certain product line. Foodstuff product line wholesaler deals in foodstuffs, tea, coffee, cooking oil, caned fruits, fishes etc. The wholesaler who deals in electrical goods sells bulbs, tubes, wire, holders, heaters etc. General merchandise wholesaler deals in various types of goods of all product lines, while the limited line wholesaler deals in only goods of certain line. But we can find similarity in the services provided by both types of wholesalers.

iii. Specialty Wholesaler
Specialty wholesaler deals in only one special goods of particular product line. The wholesaler who deals in only oil, or electrical goods, or medicines, or so on can fulfill the special needs of customers. Specialty wholesaler can deal in only the product of certain producer. This type of wholesaler can provide high-level technical advice and services to both producer and customers. So, nowadays, popularity of this type of wholesaler is increasing.

2. Limited Service Wholesaler 
Limited service wholesaler is such a merchant wholesaler who takes rights and ownership of goods. But he performs only some selected functions of those that are generally performed by a wholesaler. This type of wholesaler does not perform all the functions like a full service wholesaler. Limited service wholesaler performs only some limited functions, which can fulfill special needs.

Limited service wholesalers can be divided into cash and carry wholesaler, truck wholesaler, rack jobber, drop shipper, mail-order wholesaler etc.

i. Cash-and-carry Wholesaler
Cash and carry wholesalers are such a limited service wholesalers who neither sell goods on credit to customers, nor provide transport facility. Retailers and other customers go to their warehouse of cash and carry wholesalers taking means of transportation by themselves, load the goods they want and pay cash to the wholesalers. Mostly, such intermediaries deal in limited product line of goods, e.g. foodstuffs, construction materials, electrical goods, office supplies etc.

ii. Truck Wholesaler
Truck wholesalers provide transportation facility for carrying goods to the customers for inspection and selection. Generally, such wholesalers use a certain regular route and give facilities to retailers or customers to determine their needs. These type of middlemen sell goods in small quantity. They make arrangement of transportation of goods for customers on their own ownership. Truck wholesalers sell perishable goods such as fruits, fish, vegetables etc. to small food stores. Such wholesalers also sell chips, tobacco made goods, etc. They play an important role in markets. The main feature of truck wholesalers is to provide limited services for hand cash. Their warehouse is truck itself.

iii. Rack Jobbers
Rack jobbers are those wholesalers who buy and keep stock of goods for retailers. They don't have their own warehouse. They carry goods by their own means of transportation, fill in retailers' racks, display them, even they keep inventory/record of stick goods of retailers. Retailer's job is to provide place for goods. Rack jobbers also take back unsold goods. Retailers sell such goods. Rack jobbers supply goods such as dolls, foodstuffs, medicines and other goods of short life cycle. Rack jobbers bear risk of producers and retailers by supplying to customers. Because of the rack jobbers' service, retailers do not have to bother about purchasing of goods or about unsold goods.

iv. Drop Shipper
Drop shipper wholesalers take ownership of goods, sign sales contract but they do not take responsibility for physical transportation or delivery. They receive order from industrial users, other wholesalers and retailers for large amount of goods. They order producers for necessary volume of goods. Then the producers directly send goods to customers. Drop shippers take right and ownership of goods. Physical stock of goods remains with the producer or in public warehouse. Such wholesalers help in exchanges through sales activities. They may or may not provide credit facility but they do not transport goods.

v. Mail-order Wholesalers
Mail-order wholesalers sell goods to retailers, industrial users and institutional customers on the basis of the catalog sent to them through mail. The customers study the catalogues and send order for necessary goods. Then wholesalers supply demanded goods to them through mail. As the mail order wholesalers occupy a nominal place of the entire wholesaling, it is taken to be separate class due to its unique features. Generally, mail order wholesalers sell cosmetics, special goods, motor parts, etc. to retailers and other customers through mail. They also sell light consumer goods in small quantity through mail.

Arguments Against Elimination Of Wholesalers

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Some marketing experts say that wholesalers have important contribution to the development of marketing. They provide valuable services to marketing. So, wholesalers should not be eliminated from distribution channel. The arguments against elimination of wholesalers can be presented as follows:

1. Valuable services

Wholesalers keep on providing different valuable services to producers and retailers in marketing. Not any other can perform more economically and skillfully than wholesalers can do in marketing. Wholesalers make financial arrangement, provide credit facility, bear risk in distribution process, they maintain balance between production and consumption as well as store of goods. So, if they are eliminated from distribution channel, several difficulties will arise.

2. Marketing Certainty

As wholesalers take all responsibilities for sales and distribution of goods, producers become free from the difficulties and troubles of marketing their products. As a result, producers can concentrate their mind on production.

3. Specialization

The present age of business demands specialization and labor in every field. Wholesalers have fulfilled such demand in the field of marketing. They should not be eliminated because they have gained special knowledge and experience in sales and distribution of goods.

4. Difficulties to Consumers

If wholesalers are eliminated, consumers will feel difficulties to bet necessary goods to satisfy their needs. Producers produce goods of different types and qualities, in such situation it will be difficult for the consumers to find necessary goods directly contacting different producers.

5. No Possibility Of Cost Reduction

The argument that elimination of wholesalers brings reduction in cost and the decrease in price of goods is not logical. This cannot be found in practice.

The above mentioned arguments are presented by the persons who are against elimination of wholesalers from the distribution channel.

Arguments For Elimination Of Wholesalers

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Some of the important arguments for elimination of wholesalers are as follows:

1. Increase in Price

Wholesalers are responsible for increase in prices of goods. In the excuse of providing services, wholesalers collect large amount of commission and also take additional price for earning a lot of profit. As they invest in transportation, warehousing, storing, insurance, credit facility, etc. they fix sufficient margin of profit to cover their investment. This increases price of the goods.

2. High Profit Without Risk Bearing

Wholesalers earn much profit compared to the risk they bear. Different industries have to bear various kind of risks, for instance strikes, lock-up, trade depression, changes in fashion, and style etc. Wholesalers do not bear the risks of the loss caused by these factors. Instead, they try to earn more profit using such situations as opportunities. In  this way, wholesalers get more benefit or profit without bearing any risk.

3. Advertisement Of Unnecessary Goods

Mostly, wholesalers make publicity and advertisement if different kinds of goods with the intention to earn profit. They create demand for the goods in society. This cannot be beneficial to society. On the other, they do not take interest to deal in different new or useful products yielding less profit.

4. Black Marketing

Wholesalers encourage black marketing. They keep stock of goods with the intention of earning more profit. They obstruct continuous flow of goods, due to which they become able to earn much profit through immoral means.

5. Rise Of New Trend

Different new trends are developing in marketing. As a result, the producers have become able to sell their products directly to the consumers. In such situation, it is not necessary to depend on the unnecessary middlemen like wholesalers. So, the wholesalers should be eliminated.

In this way, the arguments that the wholesalers should be eliminated from the channel of distribution can be presented.

Meaning And Features Of Operating Supplies

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Operating supplies are supposed to be the convenience goods of business sector. They have short life span; they can be bought at low price and with little effort. Operating supplies help in regular operation of business firm, but they are not the part of finished goods. In other word, the goods which are needed in industrial production process but do not become the part of finished goods are called 'operating supplies'. Fuels like petroleum, coal, oily materials, grease, cleaning cloth, paper, pencil, carbon paper, type ribbon, ink etc. are the examples of operating supplies.

In the lack of operating supplies, production and operation of business firm gets interrupted and effectiveness does not come in office operation. Purchasing manager makes necessary arrangement for regular supply of such materials. They are bought from middlemen or nearby retailers. Operating supplies are purchased mostly in little quantity, in short time and with less effort. 

Like consumer convenience goods, business-operating supplies are distributed or sold through several middlemen. The manufacturing firms of such materials widely use wholesalers, as per unit price of such materials stand low, consumer buy in little quantity and such supplies reach the hands of many users. Price competition is found more in such supplies, because competitive goods are well standardized and graded. Branding or advertisement is rarely used. However, some producers give brand and advertise their products.

Features Of Operating Supplies

1. Unit Price
Per unit price of operating supplies stands low.

2. Life Span
Life span/durability of such products become short.

3. Purchase Frequency
Operating supplies are purchased regularly.

4. Purchase Quantity
Such goods/materials are purchased in little quantity.

5. Convenience Industrial Products
Operating supplies are taken as convenience industrial products.

Meaning And Features Of Accessory Equipment

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Accessory equipment needs to be used in the production process in any business firm. But it does not have any important effect on operational level. The accessory equipment does not include in real part of finished goods. Accessories have shorter life than installations.

Besides installations, small accessories also have important place in production process. Handhold tools, small machines, forklift truck, hammer, wrench, lever etc. make production function easy and fast. Such tools are not costly and do not last long. No consent of high-level management is necessary to buy such accessories. Staff of concerned department can purchase them when needed.

It becomes difficult to reach conclusion of marketing accessories produced by any business firm. In some situation, they are sold directly to users and in some other situations indirectly through middlemen. If the business firm has received purchase order for large quantity of different units or per unit cost of such accessories is relatively high, producer sells them directly to business users. The firm, which manufactures forklift truck, can sell it directly to users, because its per unit cost is high. The manufacturing firm wants to make distribution policy profitable. But, if the market is geographically scattered, potential customers are of different types and personal orders are for small quantity, the manufacturers use middlemen to sell accessory equipment.

Features Of Accessory Equipment

1. Unit Price
Per unit price of accessory equipment is neither high nor low, it is moderate.

2. Life Span
Life span of accessory equipment is shorter than of installations.

3. Purchase Frequency
Purchase frequency of accessory equipment is moderate.

4. Purchase Quantity
Accessory equipment are bought in small quantity.

Meaning And Features Of Installations

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Installations are high priced capital or industrial products. They are costly, durable and are the main equipment of business users. In other word, the big, costly and long lasting machines necessary for business uses are called installations. Computer, planes for Airline Company, bus and truck for transport company, machine for sugar company, or diesel engine for railway service, upset printing machine for press etc. are the examples of installations. The main feature of installation is that it directly affects operational level. When five new computers are added, an improvement comes in the operation of business office. But addition of five computers in the office of airline company does not improve its operation. Instead of five computers, if five jets are added, it improves operation of the airways. So, planes become installation in airways, but no computers. Installation depends on the nature and size of business. The recommendation of department chief and approval of top level management of the business firm is required to take decision for buying costly and big installations.

Marketing of installation is a challenging task of management. To be able to sell even only one installation becomes important. Generally, no help of middlemen is necessary; producers directly contact with users and sell the product. Per unit price becomes high of such installations. Installation goods are produced according to the specifications given by customers. Pre-sale and post-sale services are essential for installation goods. High-level skilled manpower is necessary in selling installations. Sales engineer is used in selling such goods. Personal selling is given priority for promotion; sometimes advertisement is also used.

Features Of Installations

1. High Unit Price
Per unit price of installations is very high.

2. Life Span
Life span or durability of installations is long, they last very long.

3. Purchase Quantity
Installations are purchased in small quantity.

4. Purchase Frequency
Installations are purchased infrequently, or they are purchased after long intervals.

5. Repair And Maintenance
Installations need time-to-time repair and maintenance.

Meaning And Features Of Fabricating Materials And Parts

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Fabricating materials and parts are those which become the actual parts of finished industrial products. In comparison of raw materials, these goods are processed in some degree. Semi finished goods needs to be processed before. For example, steel is obtained from pig iron, cloth from yarn, bread from flour, etc. All such semi finished goods become parts of finished goods. On the other, ready-made machine parts are used in finished goods without changing their form. For example, zip, buttons used in clothes, chips used in computer, barrel of gun, car battery, tire etc. are the examples of fabricated goods.

Fabricated goods or parts are bought in huge volume. Customers may give order in advance for the supply of such goods for a year long or more time. Per unit price of such goods is generally low.

As customers buy large quantity of fabricating materials and parts giving purchase order in advance, producers direct sell them to users. But they are sold to small buyers through middlemen. Customers' buying decision depends on the price of the goods and services to be provided by the seller. Generally, branding is not important. However, some business firms try to familiarize brand and name of their products through advertisement. 

Features Of Fabricating Materials And Parts

1. Per Unit Price
Per unit price of fabricating materials and parts is low.

2. Life Span
The life span or durability of fabricating materials and parts depends on the final or finished goods.

3. Purchase Frequency
Fabricating materials and parts are purchased occasionally or infrequently.

4. Large Quantity
Such goods are purchased in large quantity.

Meaning And Features Of Raw Materials

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The material, which is indispensable to use for production of any finished physical goods, is called raw materials. The raw materials used in production process are (i) Natural goods like minerals, land, forest, materials found in seas. Coal, petroleum, copper, iron, gold, magnesia, limestone etc. found in mines and wood, herbs, etc. found in forest and valuable stones, shells found in seas are the examples of natural raw materials. (ii) Agricultural goods like wheat, maize, paddy, cotton, jute, sugarcane, potato, fruits, vegetables, animal products, cattle etc. and eggs, milk, dairy products, are the examples of raw materials necessary to produce finished goods.

Finished goods are produced using different natural raw materials and agro-products according to the nature of business. But features of these raw materials may be different. Supply of natural resources remains limited. Quantity of such materials cannot be increased as desired. Big producers keep control of such materials. Due to heavy weight, per unit price of natural materials have generally low price. As natural materials become available only in certain places, long distance lies between producer and business user. So, transportation is very important to transport such materials. These materials should be carefully graded and standardized. Price is determined by supply and demand situation. Due to limited supply of such raw materials, business users are compelled to book necessary raw materials in advance for a year.

On the other, many but scattered small farmers living far from market areas supple agricultural raw materials for business. Producers or the farmers control supply of these raw materials. Their supply cannot be quickly increased or decreased in large amount. Agro-products are perishable and cannot be produced at same cost for year-round

As the quality of finished goods depends on the quality of raw materials; while purchasing raw materials; quality, price, quantity, suppliers' reputation should be carefully considered. High level executive and  skilled technicians involve in purchasing the raw material that share larger part of total production cost.

According to the differences between the features of natural and agricultural raw materials, consideration in their marketing also should be different. The use of natural raw materials should be minimum depending on the nature of the materials and distribution channel should be shorter. Most of producers send raw materials directly to business users. If needed, they may use one intermediary or middleman between producer and user. 

Features Of Raw Materials

1.Low Unit Price
Per unit price of raw materials remains very low.

2. Short Life Span
Generally, life span of raw materials is short, mostly it is of perishable nature.

3. Purchase Frequency
Raw materials are frequently bought.

4. Large Quantity
Raw materials are bought in large quantity.

5. Sources Of Materials
Mainly, there are two sources of raw materials i.e. agro-raw materials and natural raw materials.

Meaning And Types Of Industrial Or Business Goods

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The goods which are purchased to operate a business organization or produce other goods, are called business or industrial products. Industrial goods are purchased in line with the objective or goal of any business organization. The business organizations such as manufacturers, business houses, non-profit organizations and government offices buy such goods. Business or industrial goods are purchased ti facilitate effective operation of organization to improve efficiency and increase organizational effectiveness. 

There are some basic differences between consumer goods and industrial goods. Individual customers buy goods to fulfill personal or family needs. But organizational customers buy goods to achieve organizational objective. The consumer goods are related with the satisfaction or psychological reward of the consumers, whereas industrial goods are related with operational aspect of the organization.

As different business organizations have their own objectives, needs and operational areas, they need goods of different natures and types. So, it is not easy to classify business or industrial goods, however, they can be classified as follows:

1. Raw Materials
The material, which is indispensable to use for production of any finished goods, is called raw material.

2. Fabricating materials and parts
Fabricated materials and parts are those which become the actual parts of finished industrial products. 

3. Installations
Installations are high priced capital or industrial products.

4. Accessory equipment
Accessory equipment needs to be used in the production process in any business firm.

5. Operating supplies
Operating supplies are supposed to the convenience goods of business sector.

Meaning And Features Of Unsought Goods

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There are three main classes of consumer goods: convenience goods, shopping goods and specialty goods. But there are also some other goods not included in any of the above classes. They are called unsought goods. Two types of goods include in unsought goods. They are (a) Newly introduced goods about which customers have not known and (b) the goods which the customers are not interested to buy or do not make effort to buy.

For example- the above (a) class goods like video television or talking computer may be a unsought goods for some people. The examples of (b) class goods are encyclopedia; life insurance policy, valuable stones etc. They must be unsought goods for some people. The consumers may know about such goods but are not interested in buying. Until they feel need of these types of goods, they don't think to buy them. So, costly and effective personal selling method needs to be used to sell such goods.

Features Of Unsought Goods

1. No Purchase Plan
Neither plan nor effort is made to buy unsought goods.

2. Rarely Purchased
Unsought goods are purchased rarely.

3. High Price
Generally, price of unsought goods is high.

4. No Brand :Loyalty
Consumers have no brand loyalty to unsought goods.

5. Specific Outlets
Such goods are purchased only from specific or certain shops.

Meaning And Features Of Specialty Goods

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The special goods for which the customers need specific effort and long time to buy is called 'specialty goods'. Customers make plan for buying specialty goods. Since they know everything about the goods they need to buy, they do not accept alternative goods. They do not compare alternative with specialty goods, rather wait for time. They give priority only to the special brand. As such goods are generally costly and durable, customers do not buy them every time.

Specialty goods should be of certain quality and special brand identity. Consumers give importance to special brand or producer. Price of the goods is secondary. Watch, stereo, motors, restaurant services, electric goods, electronic equipment, instruments, TV, old tickets and coins, ornaments, tailoring service, photography etc. of special producer or brand are the examples of specialty products.

Very short channel is used to sell specialty goods. Some producers sell such goods from their own retain stores. For selling specialty goods, only a certain market or area or certain numbers of retailers are used. Most of the retailers are found to sell specialty goods of particular producer or certain brands. Branding, packaging and shop decoration play only a nominal role. The sale of such goods may be very low in quantity, but per unit profit stands high. The responsibility for conducting promotional activities and advertising the specialty goods lies with both producer and retailers. Sometimes producer may bear certain portion of advertising expenses made by retailer. In such advertising, the name of retailers is also included in the advertisement made by producer.

Features Of Specialty Goods

1. Purchase Plan
Consumers take considerable time, think well and make plan and effort to buy specialty goods.

2. Infrequent
Such goods are not bought every time or frequently.

3. Particular Outlet
Consumers buy specialty goods only from particular shop or store. So, they have strong store or shop loyalty.

4. Brand :Loyalty
Consumers have strong brand loyalty . They do not accept alternative goods.

5. No Price And Quality Comparisons
Consumers do not compare quality, service and price of specialty goods.

Meaning And Features Of Shopping Goods

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The goods for which the customers make plan to buy or take buying decision only after considering and thinking carefully are called shopping goods. Customers compare different brand goods of different stores on the basis of price, features, quality, utility, design, services, warranty etc. They take adequate time for purchasing plan and selection of goods. They visit shop to shop in search of the goods to satisfy their particular needs.

Furniture, household appliances, motor cycles, car, radio, TV set, refrigerator, swing machine, suit, lady's dress, shoes etc. are the examples of such goods. Customers think much, make plan to buy these goods, use adequate time and make efforts, visit different shops, compare quality and price, and finally take buying decision. They do not buy such goods frequently. Such goods are much costlier than convenience goods.

 The distribution channel for shopping goods is relatively short. Mostly, producers themselves sell such goods. The seller should be knowledgeable about quality, price, utility etc. of the goods and skilled to sell them. So, branding and packaging have no role in such goods. The responsibility of advertising shopping goods lies with retailers. Role of retailers is important in selling shopping goods. Goods are sold in confidence of the sellers of shop. So, decoration plays no role nor has any meaning. Per-unit profit margin of such goods is more than of convenience goods.

Features Of Shopping Goods

1. Proper Purchase Plan
The consumers make plan to buy shopping goods and make hard efforts before buying them.

2. Purchase Frequency
The consumers buy such goods only occasionally and use them slowly.

3. Price And Quality Comparisons
Consumers compare the quality, prices, features, service, design and utility to buy such goods.

4. Selective Outlets
Consumers buy shopping goods from selected shops.

5. Low Brand Awareness And Loyalty
Customers have low or less brand awareness, conviction and loyalty towards such goods.

Meaning And Features Of Convenience Goods

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The goods, which the consumers buy regularly with less effort, less expense and less time, are called convenience goods. Breads, tea, milk, cigarette, light drinks, sweets, medicines, newspapers, soap, toothpaste etc. are the examples of convenience goods. Consumers buy these type of goods conveniently and in shorter time. Such goods are used regularly. They need to be bought daily. Mostly, Convenience goods are found at convenient places. Their price is less and consumers know everything about them. Demand and supply of such goods are regular. In the lack of these goods, daily human life become difficult. The consumers do not need to make purchase plan and decision to buy such goods. They can easily buy necessary amount of such goods at accessible retail shop. While buying convenience goods, generally the buyers do not compare price or quality. These type of goods are produced in bulk quantity on the basis of demand estimation. Intense competition takes place among producers to produce such goods. Alternative goods can be easily found in market. Generally convenience goods are of perishable nature. The consumers buy such goods regularly in small quantity.

The producers use long distribution channels to sell convenience goods. Mostly, such goods are sold through retailers. Selling such goods through several retail stores of daily consumer goods, increases total sales volume. But aggregate profit becomes low due to low per-unit price. 

Advertisement of convenience goods should be made more aggressive. The producer should take responsibility for advertisement. Decoration and packaging is important for convenience products. Convenience goods can be sold with brand name.

Features Of Convenience Goods

1. No Purchase Plan
Consumers do not need to make purchase plan for convenience goods. Only little effort is made to buy such goods.

2. Low Quantity
Consumers buy such goods in small quantity.

3. Purchase Frequency
Consumers buy convenience goods frequently and regularly.

4. Convenient Outlets
Convenient or accessible shop/place is very important for costumers to buy such goods. Convenience goods are sold from many retail shops.

5. Price And Quality Comparison
While buying convenience goods, consumers rarely compare price or quality.

6. Brand Loyalty
Consumers have more awareness of brand, but less brand loyalty.

Classification Of Consumer Goods

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Consumer products can be classified in different types on the basis of nature, durability, necessity, buyers' buying behavior etc.

Classification Of Consumer Goods According To The Nature Of Product

1. Perishable Consumer Goods

Perishable goods cannot be kept stored for long time. Such goods remains usable for very short time between production and consumption. A marketer uses very little time and controlled level for selling perishable goods. Green vegetables, fish, meat, milk etc. are the examples of perishable goods.

2. Non-durable Consumer Goods

Compared to perishable goods, non-durable goods have longer durability. But if they are kept for long time, their quality declines. As such goods have short marketing life span, the buyers consume within short time. Soap, cigarette, rice, shampoo, bottled or canned food, drinks etc. are the examples of non-durable consumer goods.

3. Durable Consumer Goods

The goods, which last long or can be used for years are called durable goods. Consumers get benefit from such goods for many years. Motorcycle, car, television, refrigerator etc. are the examples of durable consumer goods.

Classification Of Consumer Goods According To consumers' Buying Motive

1. Necessity Products

The main motive of buying necessity products is to fulfill consumers' physiological (eating, wearing, living), security and social needs. Such products are basic needs. They are related with basic benefits and utility. Foodstuffs, clothes, education, medicines, furniture, entertainment etc. are the examples of necessity products.

2. Luxury Products

Consumers buy luxury products to fulfill the wants and needs related with their status, ego, dignity, and self-respect. Dignity, self-respect and ego motives affect buying of luxury products. Costly cars, ornaments, French perfumes, foreign visit programs etc. are the examples of luxury products.


Classification Of Consumer Goods According To The Involvement Of Consumer

1. High-involvement Products

The involvement of consumer remains more in information, inquiry, study, and evaluation stages of buying process of high involvement products. If the product is very costly, risky, infrequently buying and self-expressive; consumers' involvement remains high. For buying high involvement products, the consumer should know about the quality, features, utility, and benefits of such products. Costly cars, computers and laptops, land and houses etc. are the examples of high involvement products.

2. Low Involvement Products

The consumers can easily buy low involvement products without proper plan, information, any inquiry, and knowledge about the features, quality, utility etc. of the product. Low involvement products are less costly, less risky and needed to buy again and again. They are not self expressive. Consumers become knowledgeable about such products. If consumers get knowledge of such products, they become confident about their quality, features, utility, and durability of the products of that brand. They also become knowledgeable about different brand products. They buy any brand products without comparing them. Soap, toothpaste, coffee, tea etc. are the examples of low involvement products.


Services Provided By Bonded Warehouse

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The facilities and services provided by bonded warehouse to marketing community can be mentioned as follows:

1. Storage Facilities

Bonded warehouse provides better, reliable, safe and economy storage facility. Insurance facility and physical security of the goods are provided in such warehouse.

2. Installment Payment Of Custom Duty

Importers can pay custom and taxes in installment and can take out their goods according to the ration of the paid installment. There is no compulsion to pay lump sum custom at a time.

3. Financing

Banks and financial companies accept bonded warehouse receipt for security to provide loans to the owners of the goods.

4. Sales Of Goods

Bonded warehouse provides facility to the importers to sell their goods to perspective customers from warehouse.

                             Also Read: Types Of Warehouses

5. Storage Facility For Local Products

Bonded warehouse also provides safe storage facilities for the owners of local products such as tobacco, tea, sugar, matches, medicines, drinks etc. until their excise duty or tax has been cleared.

6. Facility For Exporters

Exporters can keep their goods in bonded warehouse under the care of warehouse authority until ship or train arrives. Similarly, such warehouse is very useful and economy to store goods imported from any country and re-exports them to other. The re-exporter need not pay import tax, and if the tax is paid in advance, it is refunded,

7. Other Facilities

Bonded warehouse provides drying, cleaning and packaging facilities.

In this way, bonded warehouse is very important in marketing. From the arrangement of bonded warehouse goods can be kept safe. Warehouse plays an effective and important role in marketing. It helps in promoting internal and external trade.

Types Of Public Warehouses

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Generally, public warehouses are divided in three types as general merchandise warehouse, special commodity warehouse and cold-storage warehouse.

1. General Merchandise Warehouse

The warehouse where goods of imperishable nature such as raw materials, semi-finished, finished goods and other business commodities are kept is called general merchandise warehouse. Producers, wholesalers, and retailers keep their goods in such warehouses paying certain rent. In this warehouse, goods are kept safe from weather change. Such warehouses do not need arrangement of special temperature, humidity or any daily operation.

2.Special Commodity Warehouses

This type of warehouse is used to store the goods, specially agro-products and other special nature commodities. Special arrangement of warehouse is made for different nature goods. For example - separate arrangements are made to store agro-products like foodstuffs, wool, jute, cotton, tobacco, tea-coffee, and for fuels like petroleum, coal, chemicals and other special nature goods. Such warehouses are called special commodity warehouses.

                             Also Read: Role And Functions Of Warehousing 

3. Cold-storage Warehouse

The warehouse in which perishable goods are stored such as fish, meat, vegetables, fruits, eggs, cheese, butter and other dairy products, drinks, medicines etc. are known as cold-storage warehouse. Such goods are kept in cold-storage warehouse to protect them from heat, air, humidity, pollution etc. An arrangement of artificial chilling system is made in such warehouses. Nowadays, all types of perishable products can be kept safe in cold-storage warehouse and can be made available in market round the year. Such warehouse is also called refrigerated warehouse.



Types Of Warehouses

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Storage system should be suitable and safe according to the nature of goods. The warehouses can be classified and studied as follows:

1. Private Warehouses

The warehouses, which are established, owned and operated by big producers or business entrepreneurs investing their own capital, are called private warehouses. They keep their own products or purchased goods in warehouses until they are sold out. The big business firms, which deal in bulk quantity of goods: build their own warehouses for their own use. Producers, private companies, stockiest, agents, distributors, and wholesalers operate warehouse for private use.

The large firms, which transport goods or deal in bulk quantity, build their own warehouses. Departmental store, supermarket, multiple shops, cooperative societies may have their own warehouses. Such warehouses may be established and operated in center, regions, or different parts of a country according to the necessity and volume of business. Such private warehouses may be established by the firms themselves or taken on hire. For establishing private warehouse, it is necessary to estimate its cost and do comparative analysis of the cost for operating it on rent. The firm needs to invest adequate capital for building such warehouse.

There are merits and demerits of private warehouse. As this type of warehouse is operated under personal control of the owner, it can provide various facilities, become safe and economical. Such warehouses are established at proper places, properly looked after, and controlled. They are merits of private warehouses. But such warehouse takes high amount of capital, it has no flexibility of place, it has limited physical facilities, vacant space cannot be given on rent etc. However, big business firms can earn operating efficiency skill, goodwill and profit through the use of their own warehouse.

                         Also Read: Role And Functions Of Warehousing

2. Public Warehouses

Since establishment and operation of warehouse needs a lot of capital, most of business firms cannot build private warehouse. It is also not necessary for some business firms to establish or operate their own warehouse, as quantity of the goods they deal in does not need big space for storage. For such firms public warehouses are used. Public warehouses provide space to producers or business firms for storing their goods on rent.

Public ware is the system of providing certain space of warehouse to producers, intermediaries, businessmen or firms to store their goods safe taking certain rent for certain period. AS industrial products can be stored safe in warehouses by paying certain charge, such warehouse is called 'duty paid warehouse'. So, the warehouse established and operated with the purpose of providing storage facility to producers, business men or firms taking certain charge or fee is known as public warehouse or duty pay warehouse.


Public warehouses are established as institution taking government permission. Such warehouses are established and operated at railway station, airport, seaports, major city areas and operated as public limited company and Government corporation.

Generally, public warehouses are big in size. So, business entrepreneurs and firms can get various facilities and benefits from such warehouses. As they are established nearby railways, airports, and seaports, it becomes easy to receive, supply and transport goods. Special equipment and machines can also be available to use in handling goods. Public warehouses are also safe and secure as arrangement of security guards is made to watch over such warehouse 24 hours. Public warehouses are less costly. The receipt given by warehouse authority is accepted as security by banks and financial companies to provide loan. Facilities for packaging, branding, grading, displaying, selling become available in such warehouses. In this way, the role of public warehouses is important in marketing.

                                 Also Read: Types Of Public Warehouses

3. Bounded Warehouses

Imported or other goods whose custom duty or government taxes have remained unpaid are stored in bounded warehouses. These type of warehouses are established taking government permission, operated and controlled by government rules and regulation. Generally, such warehouses are established in the vicinity of airports, railway stations and seaports.

Until the importer pays a custom duty and other taxes, the goods are kept in bounded warehouses. The owners can take out their goods in order of custom authority after payment of custom and taxes. An agreement is made between warehouse owner, concerned businessmen or firm and custom authority that the goods cannot be taken out from the warehouse until custom and other necessary taxes is paid off. Government taxes can be paid either on lump sum or installment basis. The goods can be taken out on the ratio of the payment of the tax and custom.


Role And Functions Of Warehousing

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In marketing, warehousing has a great role. It brings regularity in production and supply of goods. It creates time utility of goods. Warehousing helps to protect goods and to maintain price stability. So, the important role of warehousing and its functions can be discussed as follows:

1. Regular Production

Warehousing helps in regular production of goods. Storing of raw materials helps to continue production process. On the other, some kinds of goods are produced to supply only certain seasonal demand. But their production can be continued through out the year. Such goods produced regularly even during off-season and are kept safe in store to supply when demanded.

2. Regular Supply

Storage or warehousing plays an important role in regular supply of goods. Paddy, rice, maize, wheat, potato, etc. are produced in certain season. But they are used round the year. So, such seasonally produced goods should be kept safe in store for their regular supply to the market when they are demanded.

                              Also Read: Types Of Warehouses

3. Protection From Risk

Warehouse protects goods from risks and can be kept safe from fire, theft, robbery, any loss or damage. So, the producers, businessmen, distributors etc. store their goods in warehouse. Warehouse is built with special way to keep goods safe. If an agreement is made with insurance company for goods kept in warehouse, the insurance company gives compensation for any loss to the concern businessman.

4. Price Stabilization

With the help of warehousing facility, goods can be regularly supplied to market. It prevents price fluctuation. If the goods are supplied more than demand, then price declines and if demand is higher than supply, then the price rise. Warehousing prevents such situation. It keeps proper balance between supply and demand. So, it plays important role to bring stability in price.


5. Preservation Of Quality

Proper warehousing preserves quality and even increases quality of goods. It preserves quality, taste, nutritive elements, flavor and utility of fruits, vegetables, drinks etc. It increases the quality of the goods such as tobacco, alcohol, sauce, pickle and so on, for which price also can be increased.

6. Financing

In some countries, warehouse authorities accept the goods as security and provide loans to the owners of the goods. If the warehouses is fully government permitted, banks and financial companies accept the warehouse-receipt as security and provide loans to owners of the goods. Hence, the warehousing helps to acquire necessary finance in marketing.

7. Better Price

Warehousing helps the producers to wait for better price. Goods are kept in warehouse until the price become better. When the prices of the goods increase, then the goods are taken out from store and sold out for higher profit.

8. Maximum Service

In fact, the warehouses located in different parts of the country are the distribution centers. They are involved in distribution services. They give emphasis to maximum customer services at reasonable cost.

In this way, warehousing provide different services and helps to business entrepreneurs and customers. Warehousing plays an important role in marketing especially in physical distribution.