Page 3 - Lesson Note 6

helps the firm in terms of the cash flows but also in terms of its ability to maintain production at a

consistent level.

The major factors determining inventory levels include:

(a) firm’s policy regarding the level of customer service to be offered. Higher the level of service greater

will be the need to keep more inventories;

(b) Degree of accuracy of the sales forecasts. In case more accurate estimates are available, the need for
keeping very high level of inventory can be minimized;

(c) Responsiveness of the distribution system i.e., ability of the system to transmit inventory needs back
to the factory and get products in the market. In case the time required to respond to the additional

demand for the products is high there is a need to maintain higher inventory. But if the additional

demand can be met in less time, the need for inventory will also be low; and

(d) Cost of inventory, which includes holding cost such as cost of warehousing, tied up capital, etc and

the manufacturing cost.

PROMOTION

A company may produce a good quality product, price it appropriately and make it available at the

selling points, which are convenient to customers. But in spite of all this, the product may not sell well in
the market. There is a need for developing proper communication with the market. In the absence of

communication, the customers would not be able to know about the product and how it can satisfy
their needs and wants or may not be convinced about its utility and benefits.

Promotion refers to the use of communication with the twin objective of informing potential customers
about a product and persuading them to buy it.

In other words, promotion is an important element of marketing mix by which marketers makes use of

various tools of communication to encourage exchange of goods and services in the market.

PROMOTION MIX