Distributing the products

# What is Marketing channel?
Ans: - A set of interdependent organization that involve in the process of marketing a product and service available for use and consumption by the consumer and business user.

# How channel members add values?
Ans: - A marketing products and services availed to consumers; channel members add value by bridging the major time, place, and possession gaps that separate good and services from those who would use them members of the marketing channel perform many key functions. Some help to complete transactions –

1. Information: - Gathering and distributing marketing researches and intelligence information about actors and forces in the marketing environment needed for planning and aiding exchange.
2. Promotion: - Developing and spreading persuasive communications about an offer.
3. Contact: - Finding and communicating with prospective buyers.
4. Matching: - Shipping and fitting the offer to the buyers needs, including activities such as manufacturing, grading, assembling, and packaging.
5. Negotiation: - Reaching an agreement on price and other terms of the offer so that ownership or possession can be transferred.
6. Physical Distribution: - Transporting and storing goods.
7. Financing: - Acquiring and using funds to cover the costs of the channel work.
8. Risk taking: - Assuming the risks of carrying out the channel work.

# What is channel level? How many types of level in marketing channel?
Ans: - Channel level: A layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer. There are two types of marketing channels –
a) Direct marketing channel: - A marketing channel that has no intermediary levels. The company sells directly to consumers.
b) Indirect marketing channel: - A marketing channel containing one or more intermediaries levels.


# Difference between direct marketing and indirect marketing.
Ans: -
Direct Marketing Indirect Marketing
1. A channel that has no intermediary level. 1. A marketing channel that has one or more intermediary levels.
2. Company does direct sells. 2. Company does indirectly sell.
3. Company sell product to consumer directly. 3. Company sells product to consumer by intermediaries.
4. Company earn full profit 4. Company cannot earn full profit.
5. Door to door sell. 5. Sellers by distributors.

# Channel Behavior and Organization. ( Syllabus item)
Ans: - A marketing channel consists of firms that have partnered for their common good. Each channel members depends on the others. Channel behaviors are two types. They are –
1. Channel conflict: - Disagreement among channel members on goals and roles who should do what and for what rewards. It is two types –
a) Horizontal conflict: - It occurs among firm at the same level of channels.
b) Vertical conflict: - It occurs between different level at the same channel is even more common.
2. Conventional distribution channel: - A channel consisting of one or more independent producers, wholesalers, and retailers each a separate business seeking to maximize its own profits even at the expense of profit for the system as a whole.

# What is vertical marketing system? Define VMS component.
Ans: - For the channel as a whole to perform well each channel member’s role must be specified and channel conflict must be managed. The channel will perform better if it includes a firm, agencies or mechanism that provides leadership and has the power to assign roles and manage conflict.
Vertical Marketing System (VMS): - A distribution channel structure in which producers, wholesalers and retailers act as a unified system. One channel members owns the others has contract with them or has no much power that they all cooperate.

Producer


Wholesaler / Retailer


Consumer

Vertical Marketing System is three types –
1. Corporate VMS: - A vertical marketing system that combines successive stages of production and distribution under single ownership. Channel leadership is established through common ownership.
2. Contractual VMS: - A vertical marketing system in which independent firms at different level of production and distribution join together through contracts to obtain more economics or sells impact than they could achieve alone.
3. Administrative VMS: - A vertical marketing system that coordinates successive stages of production and distribution not through common ownership or contractual ties but through the size and power of one of the parties.

# What is horizontal marketing system?
Ans: - A channel arrangement in which two or more companies a one level join together to flow a new marketing opportunity.



# What in multi channel distributions system or hybrid marketing channel?
Ans: - A distribution system in which a single firm sets up two more marketing channel s to reach one or more customers segments.

Producer


Distributors

Retailers Dealers

Consumer segment1 Consumer segment2 Business segment1 Business segment 2

# Channel Design Decisions. ( Syllabus item)
Ans: - Designing channel system calls for analyzing consumer needs, setting channel objective, identifying major channel alternative and evaluating channel alternative.
1. Analyzing consumer needs: - Marketing channel are part of the overall consumer value delivery network. Every channel member adds value for customer. Designing channel should find out what consumer want from channel. Do they want to buy form near by location are they want to travel to more distance centralize location.
2. Setting channel objective: - A company should setting channel objectives to do their activity. A company’s channel objectives are influenced by nature of company, its products, its marketing intermediaries, its competitors and the environment.
3. Identifying major alternatives: - After define a companies channel objective it should next identifying major channel alternative in terms of types of intermediaries. Number of intermediaries is responsible of each channel member.
a) Types of intermediary: - A company should to identify types of channel member to carry out its channel works.
b) Number of channel member: - A companies should identifying number of cannel to use at each level.
c) Responsibility of channel member: - A producer and intermediaries need to agree on the terms and responsibility of channel member.
4. Evaluation of channel alternative: - A company has identified several channel alternatives. Among of them one alternative company selected base on long term benefit. Each alternative should evaluated base on company control and adapting criteria.

Pricing the Products

# What is price?
Ans: - Price is the amount of money charged for a product or service. Again price is the some of all values that consumer exchanges for the benefits of having or using the product or service.
1. Fixed price: - Setting on price of a product for all buyers.
2. Dynamic price: - Charging different price of a product depending on customer and situations.

# Show the impotency of pricing.
Ans: - Impotency of pricing are –
1. Price is only one elements of marketing mix that generate revenue.
2. Price is the most flexible element of marketing mix.
3. Most of the companies can not handle pricing well.
a) Company are too quickly reduce price to get sells rather convincing buyer that their product are worth a higher price.
b) Pricing is too cost oriented rather than consumers value oriented.

# General pricing approaches. (Syllabus item)
Ans: - A company sets price by selecting a general pricing approach that includes one or more these three sets of factors. We will examined the following pricing approaches –

1) Cost - based approach: - Cost based are three kinds :

a) Cost plus – pricing: - The simplest method of pricing is cost plus – pricing adding a standard mark up to cost of the product.
b) Break – even analysis: - Setting price brake even on costs of making and marketing a product or setting price to make a target profit.
c) Target profit pricing: - Setting price to earn a target profit.

2) Buyer based approach: - Setting price on perception value rather than on the seller cost.
• Value price: - Offering just the right combination of quality and goods service at a fair price.

3) Competition based approach: - Setting price based on price those competitors’ charges for similar product. It has two way –
a) Going rate: - Company se price based on what competitors are charging.
b) Sealed bid: - Company set based on what they think competitors will charge.

# Factor affecting Pricing Decisions. (Syllabus item)
Ans: - A companies pricing decisions are affected by both internal company factors and external environmental factors.

Internal factors affecting pricing decisions
Many internal factors influence the companies pricing decisions including the firms marketing objectives, marketing mix strategy, costs, and organizational considerations.
1) Marketing objectives: - Pricing strategies is largely determined by the decision on market positioning. Company’s marketing strategy can be different such as survival, maximization current profit, product quality leadership, marketing share leadership and others.
2) Marketing mix strategy: - Price is the only one marketing mix tool that the companies are used to achieve it objects. Pricing decision are co – ordinate with product design and quality, distribution and promotion decision to form consists marketing program.
3) Costs: - Cost is the set of floor for the price that a company can charge. The three type of costs are: -
a) Total cost: - The some of fixed cost and variable cost for any gave level of production.
b) Fixed cost: - Which cost that do not vary with the production or sales level.
c) Variable cost: - Which cost varies directly with level of production.
4) Organizational consideration: - In small company price of a product are set by top level management rather than production or seals department.
In large company of a product typically handled by divisional or product line management. In industrial market sells people may be allowed to negotiate with customers about price ranges.

External factors affecting Pricing Decisions
External environment that affected a companies pricing decisions such as nature of market and demand competitors cost, price, and offers, others external factors.
1) Nature of market and demand: - A companies pricing decisions depend on nature of market and demand. There are four types of market –
a. Pure competition: - This market consists of many buyer & sellers and they trading in a uniform product.
b. Monopolistic competition: - This market consists of many buyers and sellers who trade over a range of price rather than a single market price
c. Oligopolistic competition: - The market consists of few sellers who are highly sensitive to each other pricing and marketing strategy.
d. Pure monopoly: - The market consists of one seller. The seller may be a government monopoly a private regulated monopoly or a private non- regulated monopoly.

2) Competitors’ costs, prices and offers: - Another external that affected companies pricing decisions is competitors cost, price, and possible, competitor’s reactions to the companies own pricing moves. If the company follows high price and high margin strategy it may competitors but a low price and low margin strategy that stop the competitor and drive out them to market.
3) Other external factors: - Other external factors that affecting company’s pricing decision like as -
a. Economic condition: - Economic recession, inflation and interest rate affect the pricing decision.
b. Reseller need: -A company should set price that ensure reseller fair profit and easy to sell.
c. Government action: - Government action is another external factor which affects a company pricing decision.

# Discuss about new product strategies.
Ans: - Pricing strategies change as the product process through its life cycle. The introductory stage is especially challenging companies bringing out a new product face the challenge of setting prices for the first time. They can choose between two brand strategies –
a) Market - skimming pricing: - Setting a high price for a new product to skim maximum revenues layer by layer form the segments willing to pay the high price the company makes fewer but more profitable sales.
b) Market – penetration pricing: - Setting a low price for a new product in order to attract a large number of buyers and a large market share.



# Product Mix Pricing Strategies. (Syllabus item)
Ans: - The strategy for setting a product’s price often has to be charged when the product is a part of product mix. Product mix pricing strategies are fiver types –
1) Product Line Pricing: - Setting price steps between product line items. In product line pricing management must decide on the price steps to set between various products in a line. The price steps should take into account cost different between the products in the line. Customer’s evaluation of their different features and competitors price.
2) Optional - Product Pricing: - Pricing optional and accessory product that sold a main product but main product price remain same.
3) Captive – Product Pricing: - Pricing product that must be used with main product. Setting a price for products that must be used along with a main product such as blades for a razor and film for a camera.
4) By – Product Pricing: - Pricing low value by produce to get rid with them. Setting a price for by products in other to make the main products price more competitive. Some company produce main product with by - product and set price for by – product.
5) Product Bundle Pricing: - Pricing bundles of product that sold together within redact price. Combining several products and offering the bundle at a reduced price. For example fast – food restaurants bundle a burger, fries, and soft drink at a combo price.

# Price adjustment strategies. (Syllabus item)
Ans: - Companies usually adjust their basic prices to account for various customers’ differences and changing situations. The six price adjustment strategies summarized as –
1) Discount & Allowance Pricing: - Reducing prices for reward customer’s responses that carry pay or proportioning product.
I. Discount: A straight reducing in price on product during a period of time. Four types of discount are:
a) Cash discount c) Quality discount
b) Trade discount d) Seasonal discount

II. Allowance: - Promotional money paid by manufacturer to retailers. Allowance are two type:
a) Trade in allowance b) Promotional allowance

2) Segmented Pricing: - Adjusting prices of allow for different in customer, location and product. Selling a product or service at two or more prices where the difference in price is not based on differences in costs.
3) Psychological Pricing: - Adjusting prices for psychological effect. A price approach that considers the psychology of prices and not simply the economics the price is used to say something about the product. Psychological prices three types –
a) Old pricing b) Customary pricing policy c) Prestige pricing policy

4) Promotional Pricing: - Temporarily reducing price for increase short run sales. Temporarily pricing product below the list price and sometimes even below cost to increase short run sales.
5) Geographical Pricing: - Adjusting prices to account for the geographic location of customers. Five types of geographical pricing are –
a) FOB - origin pricing: - A geographical pricing strategy in which goods are placed free on board a carrier; their customer pays the freight form the factory to the destination.
b) Uniform - delivered pricing: - A geographical pricing strategy in which the company charges the same price pulse freight to all customers; regardless of their location.
c) Zone pricing: - A geographical pricing strategy in which the company sets up two more zones. All customers within a zone pay the same total price, the more distant the zone, the higher the price.
d) Basing - point pricing: - A geographical pricing strategy in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer.
e) Freight - absorption pricing: - A geographical pricing strategy in which the seller absorbs all or part of the freight charges in order to get the desired business.
6) International pricing: - Adjusting pricing for international market. To do business in international market company can charge different price for different countries. Price of a product depends on cost, consumer’s economical condition, competitive situations, law & regulations, and development of the wholesaling and retailing system.

# Discuss the key issues related to initiating & responding to price charges.
Ans: - When a firm considers initiating a price change it must consider customer & competitor reactions. There are different implications to initiating price cuts & initiating price increases.
a) Buyer reaction to price changes is influenced by the meaning customers see in the price change.
b) Competitors reactions flow from a set reaction policy or a fresh analysis of each situation.

There are also many factors to consider in responding to a competitors price changes. The company that faces a price change initiated by a competitor must try to understand the competitor’s intent as well as the likely duration & impact of the change. If a swift reaction is desirable the firm should preplanned its reactions to different possible price actions by competitors. When facing a competitors price change the company might sit tight, reduce its own price, raise perceived quality, improve quality and raise price, or launch a frighten brand.

Product & Service Classification

# Define product. (Syllabus item)
Ans: - A product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need of consumers products include more than just tangible goods.
Broadly defined, products include physical objects, services, events, persons, places, organization, ideas or mixes of these entities.
The term “product” broadly to include any or all this entities.

# What is service?
Ans: - Service means any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Examples are banking, hotel, airline, retail, tax preparation, and liome repair services.
# Classifications of product. (Syllabus item)
Ans: - Products and services fall into two broad classes based on the types of consumers that use them consumer products and industrial products. Broadly defined, products also include other marketable entities such as experiences, organization, persons, place, and ideas.
6. Consumer products: - consumer products are products and services bought by final consumer for personal consumption. Marketers usually classify this products and services further based on how consumers go about buying them. Consumer’s products include convenience products, shopping products, specialty products, and unsought products.
I. Convenience products: - Consumer product that the customer usually buys frequently immediately and with a minimum of comparison and buying effort. Example can be newspapers, fast-food.
II. Shopping products: - Consumer product that the customer, in the process of selection and purchases, characteristically compare on such bases as suitably, quality, price and style. Example furniture, clothing, hotel, and airlines services.
III. Specialty product: - Consumer product with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort. Examples high priced photographic equipment, designer clothes.
IV. Unsought product: - Consumer product that the either does not know about or knows about but does not normally thing of buying. Examples life insurances, blood donations to the Red – Cross.
7. Industrial products: - Industrial products are those purchased for further processing or for use in conducting a business. Thus, the distinction between a consumer product and an industrial product is based on the purpose for which the product is bought. The three groups of industrial product & services include Materials and parts, capital item and supplies & services.
I. Materials and Parts: - Materials & parts include raw materials and manufactured materials and parts. Raw materials consists of farm products (wheat, cotton etc), natural products (fish, lumber etc).
II. Capital items: - Capital items industrial products that aid in the buyers production or operations including installations and accessory equipment.
III. Supplies & Services: - The final group of business products is supplies and services. Supplies include operating supplies (Lubricants, coal, paper etc) and repairs maintain items.
# Individual product decision. (Syllabus item)
Ans: - Individual product and service decisions also focus on product attributes, banding, and packaging, labeling, and product support services.
1. Product and services attributes: - Developing a product or services involves defining the benefits that it will offer. These benefits are communicated and delivered by product attributes such as quality, features, style, and design.
а. Product quality: - One of the major positioning tools for the markets. The ability of product to perform its functions it include the product overall durability, reliability, precision, ease of operation & repair, and other valued attributes.
б. Product features: - A product can be offered with varying features. A stripped – down model, one without any extras is the starring point.
в. Product style & design: - Design is a larger concept than style. Style simply describes the appearance of a product. Styles can be eye – catching producing. A sensational style may grab attention but it does not necessarily make the product perform better.
2. Branding: - A name, term, sign, symbol, or design or a combination of these intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors. Brands also tell the buyer something about product quality. Branding also gives the seller several advantages.
3. Packaging: - The activities of designing and producing the container or wrapper for a product. Levels of packaging are (1) primary package, (2) secondary package and (3) tertiary package. Traditionally the primary function of package was to contain and protect the product.
4. Labeling: - Labeling is part packaging and consists of printed information that write down on the package (1) identification of product or brand unit price, (2) Description of who, where, and when it was made its contents and how to use safely, (3) Promote the product through attractive graphics.
5. Product support services: - Services is a major tool in getting competitive advantage. Comprises should design its support services to profitably meet the needs of target customers.

# Product line decisions (Syllabus item)
Ans: - A group of products that are closely related because they function in a similar manner are sold to the same customer groups are market through the same types of outlets, or fall within given prices ranges. Product line decisions involves product line length – the number of items in the product line may be too short or too long depends on companies objectives and resources company can length its product into two ways –
1. Stretching: - Length beyond current range, downward – upward and both way.
2. Filling: - Length within current range.

# Describe the decisions companies mark regarding product mix.
Ans: - The set of all products lines and items that a particular seller offers for sale. Avon’s product mix consists of major product line: beauty products, jewelry & accessories and inspirational products. These product mix dimensions provide the handles for defining the company’s products strategy. The company can increase its business in four ways. These are width, length, depth and consistency.

# Give explanation on major brand strategy decision.
Ans: - The major brand strategy decisions involve brand positioning, brand name selection, brand sponsorship and brand development.
Brand positioning Brand name selection Brand sponsorship Brand development
Attributes Selection Manufacture’s brand Line extensions
Benefits Private brand Brand extensions
Protection Multi brands
Beliefs & values Licensing co- branding New brands
1. Brand positioning: - Marketers need to position their brands clearly in target customers. They can position brands at any of three levels. Attributes are the least desirable level for brand positioning. A brand can be better positioned by associating its name with a desirable benefit. The strongest brands go beyond attribute or benefit positioning.
2. Brand name selection: - A good name can add greatly to a product’s success. However finding the best brand name is a difficult task. Desirable qualities for a brand name include the following –
a) It should suggest something about the product’s benefit and qualities.
b) It should be easy to pronounce, recognize and remember short name help.
c) The brand name should be distinctive.
d) It should be extendable.
3. Brand sponsorship: - A manufacturer has four sponsorship options. The product may be launched as a manufacturer brand. The manufacturers may sell to resellers who give it a private brand. Finally two companies can join forces and co - brand a product.
4. Brand development: - A company has four choices when it comes to developing brands. It can introduce line extension, brand extension, multi – brand and new brands. Brand development strategies:
Product category
Brand name Existing Existing New
Line extension Brand extension
New Multi brands New brand
a) Line extension: - Using a successful brand name to introduce additional items in a given product category under the same brand name such as new flavors, forms, colors, added ingredients or package size.
b) Brand extension: - Using a successful brand name to launch a new or modified product in a new category.
c) Multi – brands: - It offers a way to establish different features and appeal to different buying motives.
d) New brands: - A company may crate a new brand name when it enters a new product category for which none of the company’s current brand name is appropriate.

# what is services marketing?
Ans: - Service industries vary greatly. Government offer services through courts, employment services, hospital, military services, police and fire departments, portal services and schools. Privates not for profit organization offer services through museums, charities, churches, colleges, foundation etc.
# Marketing Strategies for Service Firms. (Syllabus item)
Ans: - Just like manufacturing business goods service firm use marketing to position them strongly in chosen their target market.
1. The service profit chain: - The chain that links service firm profits with employee and customer satisfaction. This chain consists of five links –
a) Internal service quality: - Superior employee selection and training, a quality work environment, and strong support for those dealing with customers, which result in internal service quality.
b) Satisfied & Productive service employees: - More satisfied, loyal and hard working employees, which result in satisfied & productive service employees.
c) Greater service value: - More effective and efficient customer value creation and service delivery, which results in greater service value.
d) Satisfied & loyal customers: - Satisfied customers who remain loyal, repeat purchases and refer other customers, which results in satisfied & loyal customers
e) Healthy service profits and growth: - Superior service firm performance.
2. Internal marketing: - Marketing by a service firm to train and effectively motivate its customer – contract employees & all the supporting service people to work as a term to provide customer satisfaction.
3. Interactive marketing: - Marketing by a service firm that recognizes perceived service quality depends heavily on the quality of buyer – seller interaction.

Market Segmentation & Targeting

# What is market segmentation?
Ans: - Dividing a market into smaller groups of buyers with separate needs, characteristics or behavior who might require separate products on marketing mixes.

# Bases & causes of segmenting consumer & business market. (Syllabus item)
Ans:- There is no single way to segment a market therefore the marketer tries different variables to see which give the best segmentation opportunities. For consumer marketing the major segmentation variables are geographic, demographic, psychographic & behavioral.

 Geographic segmentation: - In geographic segmentation the market is divided into different geographical units such as nations, regions, states, countries, cities or neighborhoods.
 Demographic segmentation: - In demographic segmentation the market is divided into groups based on demographic variables including age, gender, family size, family life cycle, income, occupation, education, religion, race, generation & nationality.
 Psychographic segmentation: - In psychographic segmentation the market is dividing into different groups based on social class, lifestyle or personality characteristics.
 Behavioral segmentation: - In behavioral segmentation the market is divided into groups based on consumer’s knowledge, attitudes, uses or responses to a product.
Business market uses many of the same variables to segment their markets. But business market also can be segmented by business consumer demographic, operating variables, purchasing approaches, situational factors & personal characteristics –
1. Demographics: - Including industry, company, location etc.
2. Operating variables: - Including technology, user – nonuser, customer capabilities.
3. Purchasing approaches: - Including purchasing function organization, power structure, nature of existing relationship, general purchases policies, purchasing criteria.
4. Situational factors: - Including urgency, specific application, size of order.
5. Personal characteristics: - Including buyer – seller similarity attitudes forward risk, loyalty.

# Requirements of effective segmentation. (Syllabus item)
Ans: - Clearly, there are many ways to segment a market but not all segmentations are effective. To be useful segments must be –
1. Measurable: - Size, purchasing power, profile of segment can be measured
2. Accessible: - Segments must be effectively reached and served.
3. Substantial: - Segments must be larger or profitable enough to serve.
4. Differential: - Segments must be responding differently to different marketing mix elements and actions.
5. Actionable: - Effective programs can be designed for attracting and serving the segments.

# What is target marketing?
Ans: - The process of evaluating each market segments attractiveness & selecting one or more segments to enter.
# Evaluating market segments. (Syllabus item)
Ans: - A total market has many segments. Really, this market has many subs – market. Every market are not same. In this market customers demand their like – dislikes are also different. In evaluating different segments a firm must look at three factors – segment size and growth, segment structural attractiveness, company objectives & resources.
• Segment size and growth: -Analyzed sells growth rates and expected profitability.
• Segment structural attractiveness: - Consider effects of competitor’s availability of substitute products & the power of buyers and suppliers.
• Company objectives & resources: - Company skills and resources are related to the segment look for competitive advantage.
# Selecting Market Segments. (Syllabus item)
Ans: - Consumers owns needs and wants are really individual. So most of the business organizations try to find out broader classes of buyers. So they can do different level of market segmentation.
I. Mass marketing: -No marketing segmentation is present here. The mass marketing was more popular in beginning of modern marketing system. A company marketed one brand of product to all classes of buyers. It also known as undifferentiated marketing.
II. Micro marketing: - The practice of tailoring products & marketing programs to the needs and wants to specific individuals and local customer group include local marketing and individual marketing.
III. Segmented market: - A market – coverage strategy in which a firm decides to target several market segments and designs separate offers each. It also known as differentiated marketing.
IV. Niche marketing: - A market – coverage strategy in which a firm goes after a large share of on or few segments on niche. It also known as concentrated marketing.

Undifferentiated (mass) ==> Differentiated (segmented) ==> Concentrated (niche) ==> Micro (local or individual marketing)
Marketing Marketing Marketing Marketing
Targeting broadly targeting narrowly

Consumer Markets & Consumer Buying Behavior

# Definition of Consumer buying behavior & Consumer market. (Syllabus item)
Ans: - Consumer buyer behavior refers to the buying behavior of final consumers – individuals & households who buy goods & services for personal consumption. All of these final consumers combine to make up the consumer market.
# Model of consumer behavior. (Syllabus item)
# Factors affecting consumer behavior. (Syllabus item)
Ans: - Consumer purchases are influenced by cultural, social, personal, & psychological characteristics.

• Cultural factor: - Cultural factors exert a bread & deep influence on consumer behavior. The market needs to understand the role played by the buyer’s culture, subculture, & social class.

a) Culture: - The set of basic values, perceptions, wants, & behaviors learned by a member of society form family & other institutions. Culture is the most basic cause of a person’s wants & behavior.
b) Sub-culture: - Each culture contains smaller sub-culture or groups of people with shared value systems based on common life experiences & situations.
c) Social class: - Almost every society has some form of social class structure. Social classes are society’s relatively permanent & order decisions whose members share similar values, interests, & behavior.

• Social factors: - A consumer’s behavior also is influenced by social factors, such as the consumer’s small groups, family & social roles & status.

a) Groups: - Two or more people who interact to accomplish individual or mutual goals. A personal behavior is influenced by many small groups
 Membership: - Groups that have a direct influence & to which a person belongs are called membership groups.
 Aspiration Groups: - This group is one to which the individual wishes to belong.
 Reference groups: - This group exposes a person to new behaviors & lifestyles influence the person’s attitudes & self concept.
 Opinion leaders: - People within a reference group who, because of special skills, knowledge, personality or other characteristics, exert influence on others.
b) Family: - Family members can strongly influence buyer behavior. The family is the most important consumer buying organization is society & it has been researched extensive.
c) Roles & Status: -The personal position in each group can be defined in terms of both role & status. A role consists of the activities people are accepted to perform according to the persons around them.

• Personal factors: - A buyer decisions also are influenced by personal characteristics such as the buyer’s age & lifestyle cycle stage, occupation, economic situations, lifestyle, & personality & self- concept.

a) Age & lifestyle cycle stage: - People change the goods & services they buy over their lifetimes. Tastes in food, cloths, furniture & recreation are after age related. Buying is also shaped by the stage of the family life cycle.
b) Occupation: - A person’s occupation affects the goods & services bought. A blue collar worker tends to buy more sagged work clothes, whereas executives buy more business suites.

c) Economic situations: - A persons economic situations will affect product choice.

d) Lifestyle: - Lifestyle is a person’s pattern of living as expressed in his or her activities, interest, & opinions.

e) Personality & self concept: - Personality refers to the unique psychological changes that lead to relatively consistent & testing responses to his or her own environment
• Psychological factors: - A persons buying choices are further influenced by four major psychological factors – motivation, perception, learning, beliefs, and attitudes.
a) Motivation: - A need becomes a motive when it is around to a sufficient level of intensity. A motive is a need that is sufficiently pressing to direct the person to seek satisfaction need.
b) Perception: - The processes by which people select organize and interpreted information to form a meaningful picture of the world.
c) Learning: - Learning describes changes in an individual’s behavior arising from experience. Learning theorists say that most human behavior is learned.
d) Belief: - A belief is a descriptive thought that a person hold about something from his own mind.
e) Attitudes: - Attitude describes a person’s favorable or unfavorable evaluations filling & tendencies toward an object or idea.

# Name the types of buying decision behavior.
Ans: - Buying behavior differs greatly for a product to product. More complex decisions usually involve more buying participants & more buyer deliberations.
Significant differences between brands High involvement Low involvement
Complex buying behavior Variety seeking buying behavior
Few differences between brands Dissonance reducing buying behavior Habitual buying behavior

Complex buying behavior: - Consumer buying behavior in situation characterized by high consumer involvement in a purchases and significant perceived difference among brands.
Dissonance - reducing buying behavior: - Consumer buying behavior in situations characterized by high involvement but few perceived differences among brads.
Habitual buying behavior: - Consumer buying behavior in situations characterized by low consumer involvement & few significant perceived brand differences.
Variety seeking buying behavior: - Consumer buying behavior in situations characterized by low consumer involvement but significant perceived brand differences.

# The buying decision process. (Syllabus item)
Ans: - The buyer decision process consists of five stages: need recognition==> information search==> evaluation alternatives==> purchase decision ==> post – purchase behavior.
Clearly the buying process starts long before actual purchases & continuous long after. Marketers meet to focus on the entire buying process rather than on just the purchases decisions.
Need recognition: - The first of the buyer decisions process in which the consumer recognizes a problem or need.
Information search: - The stage of buyer decision process in which the consumer is aroused to search to more information, the consumer may simply have heightened attention or may go into active information search.
Evaluation of alternatives: - The stage of buyer decision process in which the consumer uses information to evaluate alternative brands in choice set.
Purchases decision: - The buyers decision about which brand to purchase.
Post – purchase behavior: - The stage of buyer decision process in which the consumers take further action after purchases based on their satisfaction or dissatisfaction.

* Cognitive dissonance: - Buyer discomfort caused by post – purchases conflict.




# The buyers decision process for new products/ services. (Syllabus item)
Ans: - A new product is a good, service, or idea that is perceived by some potential customer as new. When a new product is first time marketed the marketer need to understand consumer’s response about the product.

Adaptation process: - The mental process through which an individual passes from first hearing about an innovation to final adoption.
Stage in the adoption process: - Consumers go through five stages in the process of adopting a new product –
Awareness: - The consumer becomes aware of the new product but lacks information about it.
Interest: - The consumer seeks information about the new product.
Evaluation: - The consumer considers whether trying the new product makes scene.
Trial: - The consumer tries the new product on a small scale to improve his or her estimate of its value.
Adoption: - The consumer decides to make full and regular use of the new product.
This model suggests that the new product marketer should think about how to help consumers move through this stages.

# Individual differences in thovativeness.
# Influence of product characteristics on rate of adoption.
Ans: - The characteristics of the new product affect its rate of adoption. Some products catch on almost overnight, whereas other takes a long time a gain acceptance (HDTV). Five characteristics are especially important in influencing a rate of adoption. For example consider the characteristics of HDTV in relation to the rate of adoption.
1. Relative advantage: - The degree to which the innovation appears superior to existing products. The greater the perceived relative advantage of using HDTVs will be adopted.
2. Compatibility: - The degree to which the innovation fits the values & experiences of potential consumers. HDTV, for example, is highly compatible with the lifestyles found in upper middle – class homes. However, it is not very compatible with the programming & broadcasting system currently available to consumers.
3. Complexity: - The degree to which the innovation is difficult to understand or use. HDTVs are not very complex and, therefore, once programming is available & prices come down will take less time to penetrate U.S. homes than, ore complex innovations.
4. Divisibility: - The degree to which the innovation may be tried on a limited basis. HDTVs are still very expensive. To the extent that people can lease then an option to buy, their rate of adoption will increase.
5. Combinability: - The degree of which the results of using the innovation can be observed or described to others. Because HDTV lends itself to demonstration & description, its use will spread faster among consumers.
Other characteristics influence the rate of adoption, such as initial & ongoing costs, risks & uncertainty, and social approval. The new – product marketers has to research all these factors when developing the new product and its marketing program.

# Explains influence of product of characteristics on rate of adoption.
Ans: - The characteristic of the new product affects its rate of adoption. Some products catch on almost overnight whereas others take a long time a gain acceptance (HDTV). Five characteristics are especially important in influencing an innovations rate of adoption. For example, consider the characteristics of HDTV in relation to the rate of adoption.
1. Relative Advantage: - The degree to which the innovation appears superior to existing products. The grater the perceived relative advantages of using HDTV say in picture quality & ease of viewing – the sooner HDTVs will be adopted.
2. Compatibility: - The degree to which the innovation feeds the values & experiences of potential consumers. HDTV for example is highly compatible with the lifestyles found in upper middle – class homes. However, it is not very compatible with the programming & broadcasting systems currently available to consumers.
3. Complexity: - The degree to which the innovation is difficult to understand or use. HDTVs are not very complex and therefore once programming is available and prices come down will take less time to penetrate U.S. homes than more complex innovations.
4. Divisibility: - The degree to which the innovation may be tried on a limited basis. HDTVs are still very expensive. To the extend that people can lease then an option to buy, their rate of adoption will increases.
5. Communicability: - The degree to which the results of using the innovation can be observed or described to others. Because HDTV lends itself to demonstration & description its use will spread faster among consumers.
Other characteristics influence the rate of adoption such as initial & ongoing costs, risk & uncertainty, and social approval. The new product marketers have to research all these factors when developing the new product & its marketing program.

Marketing Environment

# The Micro & Macro marketing environment. (Syllabus item)
Ans:- Marketing environment consists of the actors & forces outside marketing that affect marketing ability to develop & maintain successful transactions with its target customer. The marketing environment is made up two environmental conditions. They are –
1. Micro-environment
2. Macro-environment

1. Micro-environment: - The macro-environment consists of the actors that are related closely to the company that affect its ability to serve its consumers- the company, suppliers, intermediaries, customer, competitors & publics.
• Company: - Functional areas such as top management, finance & marketing etc.
• Suppliers: - Provide the resources needed by company to produce its goods & services.
• Marketing intermediaries: - Help the company to promote, sell & distribute its goods to find buyers such as physical distribution firms, marketing service agencies & financial intermediaries.
• Customers: - The Company needs to study five types of customer market closely. Such as; consumer market, industrial market, reseller market, Govt. market & international market.
• Competitors: - Those who serve a target market with similar products & service.
• Public: - The Company’s marketing environment also includes various public. A public is any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives. We can identify seven types of public: - financial, media, Govt., citizen-action, local, general, internal publics.
2. Macro-environment: - The macro-environment consists of the large societal forces that affect the macro-environment demographic, economic, natural, technological, political & cultural forces.

* Demographic: - The study of human, population in terms of size, density, location, age, gender, occupation & other statistics. Key demographic trends of Bangladesh.
* Changing age structure * Geographic shifts in population
* Changing family structure * Increased education.
* Economic: - Factors that affect consumer buying power & spending patterns. Key terms – A) Subsistence Vs industrial economy B) Changes of income C) Changing consumer spending pattern.

• Natural: - Natural resources that are needed as inputs by marketers or that are affected by marketing activities. Shortages of raw materials, increased cost of energy, increased pollution, and increased Govt. intervention affected natural environment.
• Technological: - Forces that create new technological product & market opportunities. It perhaps the most force now shaping our destiny.
• Political: - The political environment consists of laws, Govt. agencies, & pressure groups that influence or limit various organizations & individuals in a given society. Increasing legislation; regulations are to protect companies, consumers & society, changing Govt. agency enforcement, federal trade commission, the food & drug administration etc.
• Cultural: - The cultural environment is made up of institutions & other forces that affect a society basic values, perceptions, preferences & behaviors. Persistence of cultural values shift in secondary cultural values, core beliefs, and secondary beliefs affected it.

# Identify the major trends in the firm’s natural & technological environment.
Ans: - The natural environment shows the three major trends – Shortage of certain raw materials, higher pollution levels & More Govt. intervention in natural resources mgt. Environment concern, create marketing opportunities for alter companies. The market should watch for four major trends in the technological environment - the rapid pace of tech. change, high R & D budgets, the concentration by companies on minor product improvements, & increased Govt. regulation companies that fail to keep up with technological change will miss out on new product & marketing opportunities.

# How changes in the demographic environment affect marketing decisions?
Ans: - Demography is the study of the characteristics of human populations. Today’s demographic environment shows a changing age structure, shifting family profits, geographic population shift, a better-educated & more collar population, & increasing diversity.

# Discuss how companies can react to the marketing environment.
Ans: - Companies can passively accept the marketing environment as an uncontrollable element to which they must adapt, avoiding threats & taking advantage of opportunities as they can take a proactive stance working to change the environment rather than simply reacting to it. Whenever possible, companies should try to be proactive rather than reactive.

Foundations of Marketing

# Definition of marketing. (Syllabus item)
Ans:- we define marketing as a social & managerial process by which individuals & groups obtain what they need & want through creating & exchanging products & value with others. Hence, we define marketing as the process by which companies’ create value for customers & build strong customer relationships in order to capture value from customers in return.

#Scope of marketing. (Syllabus item)
Ans:- Marketing is a total system of business activities designed to plan, price, promote & distribute want satisfying product to target markets to achieve organizational goal. About the scope of marketing is discussed widely in below –
1. Marketing activities: - Marketing activities mean different activities accomplished from producer to customer. Mainly include in the activities buying, selling, storage, transportation, grading, risk taking, market information, financing etc.
2. Marketing mix: - The combination of four P’s are called marketing mix. The 4P’s are interrelated & must be balanced into one integrated whole to satisfy some target markets need & preference. All present time marketing mix also recognizes 4C’s. They are customer solution, cost, convenience & communication. The 4P’s are product, place, price, & promotion.
3. Pre-plan of Production: - According to marketing pre-plan of production is the process of collecting industrial goods & pre-goods of production.
Marketing ==> Production ==> Demand ==> Consumption ==> Production.
4. Business activity: - All present any countries business activity is include in marketing activities.
5. Organizational marketing: - Which orgn control & govern the activities of flow of goods that is called orgnal marketing e.g. retailer, broker, T.C.B. etc.
6. Management process: - Marketing is connected with different ethic method of management. The management process, as applied to marketing, consists basically
• Planning a marketing program (develop strategic plan, marketing plan)
• Implementing it & (carry out the plan)
• Evaluating its performance. ( Measurement of result, evaluate the result)
7. Economic process: - Marketing process is governed by economic activity. Marketing is the creation of place, time & possession utilities.
8. Social process: - Marketing is human activity directed at satisfying needs & wants through exchange process.

# Modern functions of marketing. (Syllabus item)
Ans:- Marketing include those business activities to the flow of goods & services between producers & consumers. Marketing activities can be classified in three types-
*. Exchanging function
*. Distribution function
*. Subsidiary function
*. Exchanging function:-
1. Purchase: - An important activity of marketing is purchasing. Ownership of goods, services changed by purchasing process. Marketing activities start by purchasing.
2. Sales: - Most important activity of marketing is sales because other elements of marketing are connected with sales.
3. Propriety transfer: - Transfer of ownership is closely related with propriety transfer.
4. Transfer of risk: - Risk of a good is transferred to buyer on the time of transfer of ownership of goods. Any uncertainty creates risk.
5. Giving advice: - Marketers give advice to buyers about use of goods, quality, plan etc. A good relation is build up among the seller & buyer by this activity.

*. Distribution function: -
1. Standardization & grading: - It is important activity in marketing. The process of setting goods according on its original quality that is called grading.
2. Transportation: - Transportation is another important activity of marketing. It creates place activity.
3. Warehousing: - Warehousing create time utility of a product.
4. Packaging: - Packaging protects quality of the goods & prevent spoilt of the product.
5. Collection of goods: - One type of goods collect from different place & stock in one place that is collection of goods.

*. Subsidiary function: -
1. Financing: - Marketer collects money from different source. It could be long term or short term. This collection of money is called financing.
2. Collection of market information: - To research & analysis market condition collection of market information helps.
3. Fixation of policy: - Another important activity of marketing is fixation of policy.
4. Service given: - Another important activity of marketing is service given. Good service creates good sales.
5. Create market: - Create new market of a good is one of the important tasks of marketing.

# What are the philosophy / concept of marketing?
Ans: - Marketing concept is a customer orientation blocked by integrated marketing aimed at generating satisfaction as the key to satisfying orgnal goal. Marketing activity govern by five concept. They are given below –
1. Production concept: - The production concept holds the idea that customers will favor product that are available & highly affordable.
2. Product concept: - The product concept holds the idea that consumers will favor products, that offer the most in quality, performance, & features & that the orgn should therefore devote its energy to making continuous product improvements.
3. Selling concepts: - Many companies follow the selling concept, which hold the idea that consumers will not buy enough of the firm’s products unless it undertakes a large-scale’s selling & promotion effort.
4. Marketing concept: - The marketing concept holds the idea that achieving orgnal goals depends on knowing the needs & wants of target markets & delivery the desired satisfactions better than competitors do.
5. Societal marketing concept: - A principle of enlightened marketing that holds that a company should make good marketing decision by considering customers wants, the company’s requirements, consumers long- run interests & society’s long-run interests.

# Marketing system & Goals. (Syllabus item)
Ans: - The main goal of marketing is to earn profit through customer satisfaction. Method of marketing doesn’t influenced only buyers & sellers it also influenced different classes of people in society. The goals of marketing system are given below-
• Maximize consumption: -
Main activity of marketing is that reached the customer consumption to raise higher level. Because people expense, buy & consume as much as more & become so happy. Marketing do maximize consumption of consumers by two way->

a) Mass production: - If a product produce in large scale of production cost its cost is redact & its price is also redact. In this condition customer demand also increases.
b) Proper distribution: - Proper distribution of the product creates maximize consumption of the customers.

• Maximize consumer’s satisfaction: -
It is another important target of marketing activities. Maximize consumers satisfactions are discussing below: -
a) Creation new utilities of production: - New utilities of production creates maxim satisfaction of a consumers
b) Adjusting demand & supply: - Marketing maintains balance between demand & supply.

• Maximize Choice: - Main target of marketing should be variation of goods. Because consumers can purchase his goods according on his choice & personality.

a) Expanding Market: - Consumers choice is increasing by create new market of product.

b) Improving standard of living: - Marketing help the people to improve their standard living & it increase maxim choice of product.
• Maximize of life quality: - Marketing help to maximize life quality of people. People’s life quality is increase in this way.

a) Economic development: - Which countries economic condition is so developed that countries people’s life quality is also developed. Which country’s marketing condition developed that country’s economy is also developed.
b) Arranging employee: - Marketing do important task to solve unemployment problem of a country.

# What is the marketing system?
Ans: - Marketing system is the process of reaching goods & services from producer, consumers & internal connection with all related party.





# Marketing Mix. (Syllabus item)
Ans: - Marketing mix is the set of controllable, technical marketing tools that the firm blends to produce the response it wants in the target market. A company designs a marketing mix made up of four factors. They are-

1. Product: - Product means the goods & services combination the company offers to the target market.
2. Price: - Price is the amount of money customers have to obtain the amount.
3. Place: - Place includes company activities that make the product available to target market.
4. Promotion: - Promotion means activities that communicate the merits of the product & persuade target customers to buy it.

# Identify the five core concepts of marketplace.
Ans: - The core marketplace concepts are needs, wants & demands, marketing offers (Products, services & experience), value & satisfaction, exchange and relationship and markets. Wants are the form taken by human needs when shaped by culture & individual personality. When backed by buying power, wants become demands companies address needs by putting forth a value proposition, a set of benefits that they promise to consumers to satisfy their needs. The value proposition is fulfilled through a marketing offer that delivers customer value & satisfaction, resulting in long term exchange with customers.

# What is customer relationship management, customer perceived value & customer satisfaction?
Ans: - Customer Relationship Management: - The overall process of building & maintaining profitable customer relationship by delivering superior customer value & satisfaction.
Customer Perceived Value: - The difference between total customer value & total customer cost.
Customer Satisfaction: - The extent to which a product’s perceived performance matches a buyer’s expectations.

# Describe about marketing strategy.
Ans: - Marketing strategy means the marketing logic by which the business unit hopes to achieve its marketing objectives. Companies know that the can not profitably serve all consumers in a given market at least not at all consumers in the same way. There are too many different kinds of consumers with too many different kinds of needs. And most companies are in a position to serve some segments being better than others. Thus, each company must divide up the total market, choose the best segments, and design strategies for profitably serving chosen segments. This process involves three steps –
1. Market segmentation: - Dividing a market into distinct groups of buyers who have distinct needs characteristics, on behavior & who might require separate products or marketing mixes.
2. Target marketing: - The process of evaluating each market segments attractiveness & selecting one or more segments to enter.
3. Market positioning: - Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.

Insurance practices in Bangladesh

@#: Problem of insurance business in Bangladesh?
Bangladeshis develop country the development of the insurance company is less than the other country. Many problems present in the insurance business of Bangladesh some important problem are present below:
1. Weak Economy: - Insurance Company developments are depends on the development of the other sector of the economy. But Bangladesh economy is not strong as a result the insurance business of Bangladesh is very weak.
2. Lack of capital: - Insurance business willingly run depends on the large amount of capital and large scale opportunities are not available.
3. Lower rate of savings:- In our country the national income rate is very low so; general people can not able to sufficient savings as a result insurance company can not take sufficient premium.
4. Lack of public trust: - In our country general people have not any trust on the insurance company. Many times general people cannot receive the clame money.
5. Inefficient of management: - In Bangladesh insurance company management is very inefficient because they are not well organized for the insurance company management.
6. Lack of publicity and education: - In our country does not know the importance and benefit of the insurance company because the publicity and education of insurance is not sufficient.
7. Weakness in industrial sector: - Our industrial sector management and administration department is very weakly. They do not bill the necessary of insurance in the industrial sector.

Insurance Pricing

#QUS: Insurance pricing.
Fundamental principle of insurance pricing is that if insurance are to sell coverage willingly, they must received premiums that –
1. Are sufficient to fund claim costs and administrative costs and
2. Provide an expected profit to compensate for the cost of obtaining the capital necessary to support the sell of coverage.
The premium level that is just sufficient to fund the insurer’s expected cost and provide insurance company owners with a fair return on their invested capital is known as the fair premium. The fair premium that would be charged in a perfect competitive insurance market its major determinants are summarized in figure below: -







1. Expected claim cost: - Claim cost must be paid by the insurer for a contract or group of contracts. This cost represents the largest component of the fair premium for most types of insurance. They are discuss below: -
a. Homogeneous buyers: - When a there is existed a large number or group of insurance buyers and each buyer has the same loss distribution then the buyers are said to be homogeneous. For example, among a group of buyer each buyers has a 0.15 probability of loss taka 1000 and 0.85 probability of having no loss. Here assume that is buyers each buyers loss is independent of the loss of other buyers. As we seen that a large number of homogeneous insurance can charge a premium equal to the expected claim cost and be able to cover to its claim costs. Thus a fundamental of insurance premiums is the expected claim cost. If the insurer charged less then the expected claim cost average claim cost would exceed average revenues. On the other hand competitor keeps the insurer from charging the more than the expected claim cost.
b. Heterogeneous buyers: - When there are existed two groups of consumers with different loss distribution then the groups are called heterogeneous buyers.


The following example can clearly shows the different loss distribution:
Group Probability of loss Probability of no loss Size of loss Expected loss
A 0.10 0.90 tk1000 tk100
B 0.20 0.80 tk1000 tk200
Here we have to know the risk classification the process by which insurers estimate the expected claim cost for different buyers and changed premiums that vary according to expected claim costs. Buyers in risk classes with higher expected claim costs are charged higher rates. Insurers have strong incentives to classify buyers based on all information that helps predict differences in claim costs across buyers provided that the information can be obtain at a sufficiently low cost.
2. Investment income:- Given the ability of insurers to earn investment income on premiums prior to the payment of claims the fair premium reflects the discounted value of expected claims costs .As a result the fair premium is inversely related to the level of interest rates and to the length of the claims.
3. Administrative costs: - The fair premium includes an expense loading to cover the insurer’s administrative costs including both underwriting expanses and loss adjustment expenses.
4. Fair profit loading: - The fair premium includes a profit loading to compensate investors for the disadvantages like double taxation of investment returns of investing in an insurance company other things being equal. The fair profit loading is higher for lines of insurance with more uncertainty concerning future claim costs because the insurer needs to hold more capital to achieve a given probability of insolvency.

@#. Name the method of insurance pricing.
Ans: The principle pricing method of insurance can be classified in three categories –
1. Individual rating: Under individual the insured is charged a unique premium based largely upon the judgment of the person setting the rate.
2. Class rating: Under class rating the insured are classified according to a few important and easy indentified characteristics and insured in each class are charged some rate. The method of rating is referred manual rating. Two approach of determining charged of class rate –
a) The loss – ratio approach b) The pure – premium approach
3. Modification approach: Under modification approach the rate maker distinguishes among insured in the same rating class on the bases of different expected losses. Four principle of modification rating method they are –
a) Schedule rating b) Experience rating
c) Retrospective rating d) Premium discount plan


#. Discuss about the theory of probability.
Ans: The theories of probability reveal (cÖKvk Kiv) the possibility of occur a certain event. In insurance the theory of probability reveal the chance of death of a person out of the group of person. There are three types of theory of probability –
1. Certain probability: The certain probability is expressed as one. It’s mean the 100% chance of damage in a certain event.
2. Simple probability: When the event is naturally exclusive or when only one event is present the probability will be known as simple probability.
3. Compound probability: When the events are mutually exclusive or when two or more event is present the probability will be known as compound probability.

@#. Discuss about the estimation of probability?
Ans: Estimation of probability is two types. They are:
1. Priori basis: In these cases the probability is estimated merely on the bases of knowledge.
2. Posteriori basis: In this fact the probability is calculated on the bases of experiment.

@#. Mortality table
Ans: The mortality table is to predict the future mortality. It is also described as the picture of a generation of individual passing through kind. Construction of mortality table is needed the number of death in a year dedicated from the number of living at the beginning of the year to get the number of living in the beginning of next year.
Formula:
The number of death during the year
The number of living beginning the next year


@#. Write the features of mortality table.
Ans: There are four features of mortality table –
1. Observation of generation: In preparation of mortality table person generations are selected and they are observed up to the death.
2. Start form a point: The mortality table starts from a point which depends on the requirement of the insurance and will continue up to point of all then has been death.
3. Yearly estimated: The mortality table record the yearly death as survival rate.
4. Mortality and survival rate: Mortality and survival rate of the generation who are selected at a particular age are considered each and every year.

@#. Show the different types of mortality table.
Ans: There are three types of mortality table. These are –
1. Aggregate mortality table: A table is constructed without distinguishing the select and ultimate tines this are called aggregate mortality table.
2. Select mortality table: The mortality table giving notes depend on both age and duration elapsed since entry are called select mortality table.
3. Ultimate mortality table: The mortality table in which the rates in the select period are omitted and only the ultimate rates are tabulated is called ultimate mortality table.

@#. Discuss about the calculation of premium method. Ans: There are two types of method of calculating the premium –
1. Net premium: The net premium is based on the mortality and interest rates.
2. Gross premium: The gross premium depends upon the mortality rate, the assumed interest rate, the expenses, and the bonus loading.
The two premiums are further subdivided into two parts.
a. Single premium: Single premium is paid in one lump sum and is exactly adequate.
b. Level premium: The level premium is paid periodically in installments. The level premium may be yearly, half – yearly, quarterly, and monthly.

@#.Show the types of net single premium calculation policy.
Ans: There are different types of calculation of net single premium policy –
1. Term insurance
2. Net single premium in whole life policy
3. Net single premium in endowment policy
4. Net single premium in ordinary endowment policy
5. Net single premium in double endowment policy
6. Net single premium for a joint life policy
7. Net single premium for last survival policy

@#. Show the distribution expenses over a period policy.
Ans: There are four categories of expenses over a period of policy –
1. The recurring expenses: The recurring expenses are those expenses which are including every year for the policy.
2. The initial expenses: The initial expenses are those which are include at the first before or at the time of insuring the contract.
3. The final expenses: The final expenses are those expenses which are including at the time of payment of the claim or of surrender value.
4. The general expenses: This expense are fixed and incurred for the business as a whole.

@#. What are the various forms of payment of surrender value?
Ans: the policy holder can get the surrender values in any of the following forms –
1. Cash surrender value: The policy holder can get the value of surrender in cash. When the policy holder gets the cash the contract comes to an end and the insurer has to further obligation to pay on that particular policy.
2. Reduced paid up insurance: In this case, the surrender value is not paid immediately, but the original amount of policy is reduced in certain proportion and the reduced amount is paid according to the term of policy.
3. Extended term insurance: The net cash value arisen at the time of surrender of a policy can be used for payment of a single premium for purchases of term insurance, where the some assured will be paid only when death of life assured occurs with in the term of the policy.
4. Automatic premium lone: Under this scheme, the surrender value is used for payment of future premium. Thus the policy will continue up to the period the surrender value is adequate enough to meet the amount of further premiums.
5. Purchase of annuity: The policy holder with the surrender value can purchase an annuity. Thus instead of taking surrender value in cash, the annuity is purchased from the available surrender value.

@#. Show the difference between actual total loss and constructive total loss.
Actual total loss Constructive
1. Actual total loss is related with the physical impossibility. 1. Constructive total loss is related with the commercial impossibility.
2. The subject matter of actual total loss is totally damage. 2. The subject matter is constructive total loss is not totally damage.
3. In actual total loss the insured is irretrievable deprived of the ownership goods. 3. In constructive total loss the insured is not irretrievable deprived of the ownership of goods.
4. In actual total loss the goods is totally been lost. 4. In constructive the good is not totally been lost.
5. In actual total loss there have no salvage value of goods. 5. In constructive total loss have salvage value of goods.

Reinsurance

@#. Reinsurance
Reinsurance is insurance for insurance companies. It is a way of transferring the financial risk of one company to another company. Here the first insurance company is insured and who take the reinsurance they are reinsurer. Reinsurance is very important on the insurance environment because with out reinsurance the movement of insurance industry become bolt.
When an insurance company can not bear the over lode of his company risk then the company transfer the risk to the other insurance company that is reinsurance.
@#. Show the advantage of reinsurance.
Ans: There are some advantages of reinsurance. They are given below: -
1. The original insurer can accept the risk to the extent to his limit. In absence of reinsurance a person need to take money policy.
2. Reinsurance contract makes it possible to purchase only one policy form an insurer.
3. Reinsurance minimizes an insurance company overloaded risk.
4. It reduces the insurance company’s burden of loss at each stage.
5. It transfer risk form one company to another company.
6. The reinsurance makes stability in underwriting and consistency in underwriting results over a period.
7. It provides a safe guard against serious effects of fire.
8. The reinsurance has the effect of stabilizing income and losses over a period of year.
@#. Discuss about the limitation of reinsurance.
Ans: There are some limit of reinsurance are given below: -
1. The financial status and premium income of the insurer. A new insurer with small premium income can not afford to sustain a loss
2. The experienced in a particular class of risk:
a) The degree of the fire hazard present
b) The extent of the damage likely to be sustained
c) The fire extinguishing facilities available
3. The limit will vary according to nature and size of concerns proposing for insurance.
4. Location and other factors also affected upon the limit of risk.

@#: Reason for reinsurance.
Many reasons are present in the insurance environment for the reinsurance. These reasons are present here:-
1. Risk minimization by spreading: By the reinsurance an insurance company minimization there overloaded risk.
2. Flexibility: By the reinsurance insurance company the burden of loss at each stage.
3. Risk transfer: By the reinsurance an insurance company transfer risk to another insurance company.
4. Accumulation: Reinsurance reduces the additional risk load of the insurance company.
5. Development: The growth of insurance is particularly dependent on sound financial standing which is based on the stability of profit and loss. Reinsurance tends to stabiles profit and losses and permits more rapid growth of an insurance company.
6. New insurer: The new started insurance company whose business cannot certainly develop they cannot survive in the absence of reinsurance protection.
7. Prediction for rating: An insurer needs to have large number of similar cases in his book for the purpose of predicting an accurate rating structure.


@#. Discuss the method of reinsurance.
Ans: There are three method of reinsurance. They are given below –
1. Shopping or street reinsurance: Under this method there is no standing agreement regarding reinsurance of risk of one company by another company. Each policy is treated on an individual basis. The reinsurer is sought only when the need of reinsurance on a policy arises.
2. Facultative reinsurance: The essential feature of this method is that the reinsurer is offer the particular of original contract. The reinsurer will see the plan and report on the risk offered for reinsurance. The insurer may qualify the acceptance subject to plan and report. The ceding office may retain the certain amount of insurance. The agreements do not make it binding upon Reinsurance Company to provide reinsurance on particular risk.
3. Automatic or treaty reinsurance: Under the method there is an agreement between the ceding office and Reinsurance Company that the amount of insurance on a policy above the retention of the ceding office will be submitted by it for reinsurance and the same will accepted by Reinsurance Company.
@#. Different treaties in reinsurance.
Ans: Treaties are of various types and the important ones are –
1. Quota share treaty: This type of treaty requires the direct insurer to cede a predetermined proportion of all its business accepted in a certain class to the reinsurers and the reinsurers also agrees to accept that proportion in return for a corresponding proportion of the premium.
2. Surplus treaty: The important feature here is this that the direct insurer agrees to reinsure only the surplus amount, after its retention, and the reinsurers agree to accept such cessions, usually up to a predetermined upper limit.
3. Excess of loss: Under this system unlike facultative, quota or surplus, this sum – insured does not from any basis and it is not expressed in terms of proportion or percentage of the sum – insured here, the insurer first decides as to how much amount of loss he can bear on each and every loss under a particular class of business. The agreement such that if a loss exceeds this predetermined amount then only reinsurers will bear the balance amount of loss. Nothing is payable by the reinsurers if the amount of loss falls below this selected amount. There may usually be an upper limit of liability of the reinsurers beyond which they will not pay.
4. Excess of loss ratio: This type of agreement is also known as STOP LOSS reinsurance and is a bit different from the excess of loss arrangement, even though both basically base on loss rather than sum – insured. Here, a relationship usually drawn in between the gross premium and the gross claim over a year in a particular class of business. The ceding company decides a gross loss ratio up to which it can sustain. The arrangement with the reinsurers is such that if at the year and it is found that the total of all losses with in the class has exceeded the predetermined loss ratio than the reinsurers will pay the balance loss so as to keep the loss ratio of the ceding company with in the predetermined ratio. The treaty may contain an upper limit also.
5. Pool or Syndicate Method: Pools usually operate in respect of especially hazardous classes of business or where the market as a whole is weak to absorb the risk.
@#. Application of reinsurance to various branches of insurance.
Ans: Indications will now be made as to the proper applicability of various types of reinsurance in different branches of insurance.
1. Fire: Surplus treaty is most widely used. Quota share treaties are used by the newly established companies or with regard to new business of established companies.
2. Marine and Aviation: Quota share at the surplus are quite common even though facultative method is still very widely used.
3. Accident: All types of treaties are commonly used
4. Life: The most commonly used type is the surplus treaty. Facultative cover is also still in use although in a very limited degree.
Chapter 06 – Insurance Market

@#. Distinctions between representation and warranties.
Ans:
Representation Warranties
1. A representation is required to be substantially true, i.e. the material portion of the statement must be literally true even though the immaterial portion of the statement need not be true or correct. 1. Warranty must be strictly and literally complied with.
2. With regard to representation if the insurer wants to avoid the contract on grounds of misrepresentation, it has to be proved by the insurers that the misrepresentation relates to a material fact. 1. With regard to warranty any breach whether material or immaterial is enough for the insurers to avoid the contract.
3. A representation does not appear In the policy. 3. A warranty must appear in the policy either expressly or by way of reference.

@#. What is assignment of fire insurance policy?
Ans: Assignment in fire insurance can not be recognized without prior consent of the insurer, change of interest in fire policies are not valid unless and until the consent of the insurer has been given. The fire policies are not in the nature of assignment nor intended of to be assigned from one person to another without the consent of the insurer. Assignment in fire insurance constitutes a new contract.

@#. What do you mean by particular average loss and constructive loss?
Ans: Particular average loss: Particular average loss is defined as ‘a partial loss’ of the subject – matter insured caused by a peril insured and is not a general average loss. The general loss or expense is voluntarily done for the common safety of all the parties insured. But the particular average loss is fortuitous or accidental. It can not be partially shifted to others but will be borne by the person directly affected.
Constructive loss: Where the subject – matter is not actually lost in the above manner, but is reasonably abandoned when its actual total loss is unavoidable or when it can not be preserved from total loss without involving expenditure which would exceed the value of the subject – matter.


@#. Difference between Total loss and Partial loss.
Total loss Partial loss
1. Losses are deemed to be total or complete when the subject matter is fully destroyed or lost or ceases to be thing of its kind. 1. Partial loss is there where only part of the property insured is lost or destroyed or damaged.
2. Total loss generally two types: Actual total loss and Constructive total loss. 2.Partial loss generally four types: Particular average losses, General average losses, Special Charges, Salvage charges

Principles of insurance

@#.Principles of insurance
Ans: The special contract of insurance involves principle they are: -
1. Insurable interest: For an insurance contract to be valid, the insured must process an insurable interest in the subject matter of insurance. The insurable interest is the pecuniary interest whereby the policy – holder is benefited by the existence of the subject – matter and is prejudiced by the death or damage of the subject matter.
2. Utmost good faith: The important principle ‘Utmost good faith’ which applies to all forms of insurance. Both parties of the insurance contract must be of the same mind at the time of contract.
3. Indemnity: As rule all insurance contract except personal insurance are contracts of indemnity. According to this principle the insurer undertakes to put the insured in the event of loss in the same position that the occupied immediately before the happening of the event insured against.
4. Subrogation: The doctrine of subrogation refers to the right of the insurer to stand in the place of the insured, after settlement of a claim in so far as the insured’s right of recovery from an alternative source of involved.
5. Proximate causes: The efficient cause of a loss is called the proximate cause of the loss. For the policy to cover the loss must have an insured peril as the proximate cause of the loss or also the insured peril must occur in the chain of causation that links the proximate cause with the loss. The proximate cause is not necessarily, the cause that was nearest to the damage either in time or in place, but is rather cause that was actually responsible for loss.
6. Contribution: If any properties are taken insurance more than one insurance company. In this situation every insurance company pay the claim amount against the committed ratio of contribution. The principle of contribution is the payment of all insurance company is basis on the ratio chart which amount is pay to the insured.

@#: Essentials of insurable interest.
Ans: The following are the essential of insurable interest –
1. There must be property, rights, interest, life, limb or potential liability developing upon the insured capable of being covered by a policy of insurance.
2. Such property, rights, life, limb, interest or liability must be the subject matter of insurance.
3. The insured must bear such relationship, recognized by law, to that subject matter of insurance whereby he benefits by the safety of that subject matter and is prejudiced by the loss, damage or destruction thereof.
When a person fulfils the above criteria or when a person has such a relationship with the subject matter, it is said that he has insurable interest and it is only then that he can insure.


@#: When insurable interest must exist.
Ans: The question as to when insurable interest must exist varies depending on the type insurance. The position is as follows: -
1. Life: Insurable interest must exist at the time of affecting the policy and it may not exist at the time of claim.
2. Marine: Insurable interest must exist at the time of claim although it need not exist at the time of affecting the policy. However, at the time affecting the policy the insured must prove that he going acquire insurable interest soon.
3. Fire: Insurable interest must exist both at the time of affecting the policy and at the time of claim.
4. Accident: Like fire, insurable interest must exist both at the time of affecting the policy and at the time of claim.
#. What is indemnity? What are the conditions for indemnity principle?
Ans: Indemnity: As a rule all insurance contract except personal insurance are contract of indemnity. According to this principle, the insurance company pays compensation against any kinds of loss which are present in the insurance contract. In certain form of insurance the principle of indemnity is modified to apply. The whole life insurance policy the insurer gives insurance claim after death of the insured and the insurance policy after complete the term, the insurance company pay the compensation causes of principle of indemnity the general people take the insurance policy.
Condition for indemnity principle:
1. The insured has to proof that he will suffer for loss on the insured matter at the time of the event and the loss is actual monetary loss.
2. Compensation amount must not be more than the amount insured.
3. If the insured gets more amount than the actual loss the insurer has right to get the extra amount back.
4. If the insured gets some amount from third party after fulfill indemnified by insurer, the insurer will have right to receive the entire mount paid by the third party.

@#. What is Subrogation? Ans: The most common form of subrogation is when an insurance company pays a claim caused by the negligence of another. Subrogation occurs when an insurance company that has paid off its injured client takes the legal rights the client has again a third party that caused the injury and sues that third party. Under property insurance, if the whole property become loss and the insurance company pay all kind of payment or cover the loss the remaining proof of the property are the actual owner become the insurance company and the transfer process is the doctrine of subrogation.

@#. Essentials of Doctrine of subrogation.
1. Corollary to the principle of indemnity: The doctrine of subrogation is the supplementary principle of indemnity. The latter doctrine says that only the actual value of the loss of the property is compensated, so the former follows that if the damaged property has any value left, or any right against a third party the insurer can subrogate the left property or right of the property if the insured is allowed to retain, he shall have realized more than the actual loss, which is contrary to principle of indemnity.
2. Subrogation is the substitution: The insurer, according to this principle, becomes entitled to all the rights of insured subject – matter after payment because he has paid the actual loss of the property. He is substituted in place of other persons who act on the right and claim of the property insured.
3. Subrogation only up to the amount of payment: The insurer is subrogated all the rights, claims, remedies and securities of the damaged insured property after indemnification but he is entitled to get these benefits only to the extent of his payment.
4. The subrogation may be applied before payment: If the assured got certain compensation form third party before being fully indemnified by the insurer, the insurer can pay only the balance of the loss.
5. Personal insurance: The doctrine of subrogation does not apply to personal insurance because the doctrine of indemnity is not applicable to such insurance.
@#. How subrogation arises?
Ans: Subrogation arises in the following ways:
1. Under tort: This is a wrong doing to another. In other words it is a breach at duty owed to third party. A person can not do wrong to another thereby causing damage to another’s property or inflicting injury to the person at that another.
2. Under contract: A contract may put some obligation on the person making breach of the contract to compensate the person who has been learn aggrieved as result breach. As for example:-contract of bailment.
3. Under statute: Statues may also create liability, for making compensation, arising out of a breach thereof. Examples are, factories act, occupies liability act. The riot act, carriage of goods by sea act etc.

@#. What facts need not be disclosed in Utmost good faith?
Ans: Facts need not be by the insured.
The following facts, however, are not required to be disclosed by the insured –
1. Facts which tend to lessen the risk.
2. Facts of public knowledge.
3. Facts which could be inferred from the information disclosed.
4. Facts waived by the insurer.
5. Facts governed by the conditions of the policy.