Standardizing and Grading

Standardizing and grading (the sorting of prod­ucts into standard size and quality categories) enable the consumer to narrow his or her search for new shoes significantly by asking for 10 1/2 length, D width; to purchase jumbo⁸ eggs at the supermarket without weighing each egg individ­ually; or to purchase beef that is graded "prime," "choice," or "good." A system of standardization and grading that allows buyers to minimize or avoid com­pletely the physical inspection of products is obviously a convenient time saver for the customer. As will be discussed later, the use of brand names or trade­marks is a refinement of this concept. When you buy Green Giant peas, you presumably⁹ know from experience that you will be satisfied with the product. Trusting in the reliability of the trademark, you buy the product without serious reservations regarding your inability to inspect the contents of that particular can.

2.Give the summary of the text Financing1

Financing is another of the facilitating² functions. A farmer pur­chases seed, supplies, labor, and other factors of production during the growing season in anticipation³ of the revenues to be received after harvest when the crop is sold. Possibly he may have cash reserves large enough to support, or finance, these preliminary cash outflows. Frequently, however, the farmer must use credit to finance his operation during his cash requirement period, intending to repay the loan out of crop sales after the harvest. This credit could come from suppliers who allow him 90 days or more to pay for seed and supplies. Credit extended to a business customer in the form of deferred payment⁴ for goods or services is called trade credit. It allows the creditor time to sell his product before having to pay for his supplies. The farmer must pay his employees, pay taxes, buy livestock, and make other purchases for which trade credit is probably not available. Consequently, the farmer may need financing from banks, finance companies, or government agencies such as the Farm Credit Administration. These loans will be repaid from revenues earned in the future. The entire subject of financing merits⁵ close attention. However, remember that credit and other financing devices are critical elements of the marketing system.

Risk Bearing. Risk bearing is also a universal marketing function. A buyer for Macy's Department Stores who anticipates that men's suit jacket lapels⁶ will be narrowed in the following season and orders accordingly is accepting the risk that lapels might remain at the same width or even get wider. If this occurs, Macy's can be expected to take losses in the form of markdowns⁷ (reductions in selling price below standard markup) on its inventory to sell a garment⁸ that is not in demand. The buyer may attempt to negotiate with Macy's suppliers for the right to return unsold clothes for a credit if the clothes are not salable. This is a valid attempt to shift the risk to another participant in the marketing system. The risk can be shifted or shared, but cannot be eliminated. Someone must ulti­mately bear the risk that the goods produced might not meet consumer require­ments and might be salable only at a discount price (or unsalable alto­gether).

Marketing Information. All marketing systems must also provide for the transmittal of market-related information. At one level in the channel of distribution, manufacturers must make wholesalers and/or retailers aware of their product, its advantages, price, delivery terms, models and available options, and much more. Food manufacturers may do this by employing sales people to call on buyers at grocery wholesale firms and the larger food chains' central buying offices. Another way to transmit information might be to advertise heavily in publications read frequently by people in the food business, such as Progressive Grocer or Chain Store Age. Retailers, in turn, may communicate certain infor­mation such as the name of their store, its location, hours, and what kinds of merchandise and services the consumer can expect to find there. Retailers also frequently employ sales people to demonstrate and explain the merchandise once the consumer is in the store.

Market information also flows in the opposite direction—that is, from the consumer back through the marketing system to the manufacturer. Perhaps, a television manufacturer is trying to determine what percentage of his TV sets should have remote control (as opposed to less expensive conventional sets). To find out how important this feature is to consumers and how much extra they would be willing to pay for it, the manufacturer's market research team might give a questionnaire to a random⁹ sample of people who have been identified as "in the market" for a new TV. A less formal (and cheaper) approach would be to ask TV retailers if they noticed significant interest in the remote control option. Still another source of information might be the Television Manufacturers Asso­ciation, which might have industry sales data concerning the demand for remote control units. To sum up, marketing information flows two ways—to the con­sumer about what is available at what terms, and from the consumer to man­ufacturers, wholesalers, and retailers about what to produce and display.