UNDERSTANDING THE 4 PS OF MARKETING: A CASE STUDY OF

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INTERNATIONAL RESEARCH JOURNAL OF MARKETING AND ECONOMICS VOLUME-2, ISSUE-4 (April 2015) ISSN: (2349-0314)

UNDERSTANDING THE 4 PS OF MARKETING: A CASE STUDY OF AMAZON INDIA Abhishek Misra, Research Scholar, University Business School, Panjab University, Chandigarh

ABSTRACT

The definition of ‘marketing’ as a concept has evolved over the past six decades. Marketing in its basic form was known to include only promotion and advertising. However, with the changing business environment and increasing integration, marketing has expanded to include several other factors, such as pricing of the product, means of distribution, and demands of the consumer. Further, the importance of marketing as part of any business strategy has also increased. The main aim of the research paper is to understand the marketing mix – an important marketing tool in today’s world of business, and to review the applicability of the tool through a case study. Key Words: Product, Price, Place, Promotion, Marketing Mix, Amazon India

Introduction and Review of Literature “Putting the right product in the right place, at the right price, at the right time,” is the very basic definition of the marketing mix. Marketing mix is a combination of factors that must be considered in order to develop a successful marketing strategy for any business. These factors together are known as the 4 ‘Ps’ of marketing – product, price, place, and promotion. The definition of ‘marketing’ as a concept has evolved over the past six decades. Marketing in its basic form was known to include only promotion and advertising. However, with the changing business environment and increasing integration, marketing has expanded to include several other factors, such as pricing of the product, means of distribution, and demands of the consumer. Further, the importance of marketing as part of any business strategy has also increased. A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories.

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The history of the concept of marketing mix dates back to the 1930s. The concept of marketing as a marketing mix is based on the idea of action parameters by Stackelberg (1939), later developed by Rasmussen (1955) as the parameter theory. According to this theory, competition in a market is based on four determinants – price, quality, service, and advertising. Borden (1960s) claims to be the first to use the term ‘marketing mix’, inspired from Culliton’s (1948) description of a business executive as a ‘mixer of ingredients’ who uses a mix of ingredients for his recipe of business. Borden’s marketing mix comprised of 12 elements – product planning, pricing, branding, distribution, personal selling, advertising, promotion, display, packaging, servicing, physical finding, and analysis and research. McCarthy (1964) refined Borden’s idea and defined the marketing mix as a combination of four factors, known today as the 4 ‘Ps’ of marketing – product, price, place, and promotion. Following McCarthy’s definition, many theorists have added more ‘Ps’ to the concept of marketing mix. Judd (1987) proposed another ‘P’ – people – to the idea of marketing. Booms and Bitner (1980) applied the concept of marketing mix to services, adding 3 ‘Ps’ – participants, physical evidence, and process. Kotler (1986) added political power, and public opinion, while McGrath (1986) added personnel, physical facilities, and process management, to McCarthy’s original 4 ‘Ps’ of marketing. Goldsmith (1999) suggested a total of 8 ‘Ps’, thereby adding participants, physical evidence, process, and personalization to the 4 ‘Ps’. Critique The 4 ‘Ps’ of marketing as a concept has faced many criticisms in the past. The implementation of the 4 ‘Ps’ lies in the hands of the people and the organisation, often resulting in the disintegration of the four factors due to the functioning limited to different departments of the organisation. Further, the marketing mix suggests that the 4 ‘Ps’ are equally important to any organisation. However, a number of studies have proved that the factors vary in importance for different organisations, the price and the product components being more important to most organisations. The marketing mix has also been criticised on the grounds of being production-oriented, rather than customer oriented. The tool has been said to regard customers as passive, thereby limiting its applicability, especially in today’s business world where customer is the king. A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories.

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With the above background, the main objectives or the aim of the research paper is to understand the marketing mix – an important marketing tool in today’s world of business, and to review the applicability of the tool through a case study. Understanding the marketing mix The 4 ‘Ps’ The marketing mix can be defined in terms of its four components – product, price, place, and promotion. Understanding each of these factors can give us a clear picture of the tool. Product: Stated simply, a “product” can be defined as the company’s offering. A product is that item which a company develops and is ready to offer to consumers. The product can also be in the form of a service, for example, a taxi company that offers rides to consumers from one place to another in exchange for a fee. This “P” of the marketing mix is fundamental to all businesses. While developing the product, a company must consider the following factors that are crucial to the business. •

The demand for the product



The needs of the customer that are satisfied through the product



The market for the product in the future



Competitive products in the market



Adaptability of the product to the changing environment



Factors affecting the demand for the product



Branding and packaging of the product



Goal achieved through selling the product

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Price: Price is an important factor in the marketing mix. Many companies today are advertising “free services” or “complimentary products”. However, this does not mean that the price component of the marketing mix is of no consideration as free or low-cost products often have a distinct advantage over other products. The price component of the marketing mix does not always refer to the cost of the product, but the perceived value of the product or service. Consumers choose one product over the other because of its value to them, resulting from personal choice, experience, economic conditions or other factors. For example, a consumer may buy a more expensive bathing soap than a cheaper one due to his/her fondness for the fragrance of the soap. Similarly, a consumer may be loyal to an expensive brand of clothing due to his/her past experiences. Thus, cost alone is not the determining factor for a consumer to purchase a product. The following factors must be considered by a company before evaluating the price of its product or service. •

Cost of the product



The value of the product or service to the consumer



Price sensitivity of the product



Prices of competitors’ products



Discounts and incentives that can be offered



Tradeoffs for the consumer

Place: The place component of the marketing mix does not only mean the physical place of selling the product. Here, place also refers to the method by which the product or service is distributed to the consumers. The following factors are to be considered while deciding the place of distribution of the product. •

The place or medium where the consumer will look for the product or service

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The location of the store, in case a physical store is required



The feasibility of online presence of the product



The distribution channels that can be used other the main channel opted for

distribution of the product •

Requirement of a sales force



Distribution channels followed by competitors and scope for differentiation

Promotion: Promotion of the product refers to all the methods through which the public is informed about the product of service that a company has to offer. ‘Promotion’ includes advertising, public relations, branding, and sales. Promotion can affect sales in a huge way as it ultimately makes the product visible to the consumer. A company must consider the following for a sound promotional strategy. •

Knowledge of the target audience



Mediums to gain access to the target audience



Time of promotion to get full attention of the target customers



Use of internet, social media to increase visibility of the product or service



Environmental or social issues that may dictate the timing of launch of the product



Timing of subsequent promotions



Ways of increasing brand awareness



Handling promotion at the point of sales



Promotional strategy of competitor

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INTERNATIONAL RESEARCH JOURNAL OF MARKETING AND ECONOMICS VOLUME-2, ISSUE-4 (April 2015) ISSN: (2349-0314) Implementing the marketing mix

The various components of the marketing mix are important to any business while formulating a marketing strategy. The following steps can be followed to apply the 4 ‘Ps’ to a sound marketing strategy. •

Every company must begin by identifying clear goals and objectives of the business



The entrepreneur must choose the product or service he/she wishes to offer

• A detailed market research should be conducted to answer various questions regarding each of the elements of the marketing mix • The target audience must be clear and a list of priority audience can be prepared for a focused launch of the product/service •

The budget for the various functions of the business must be clearly laid out



The entrepreneur must have clarity on his/her position in the market vis-à-vis competitors

• The considerations listed for each element of the marketing mix (product, price, place, and promotion) should be clearly thought of and answered • A promotional plan should be developed • The product/service can be tested on a smaller audience before the official launch through free

trials

• The marketing strategy must be reviewed from time to time and adjusted to the changing environment, such as change in preferences of consumers, availability of new technology, or

launch of similar products/services by competitors or new players in the market.

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Case study: Amazon India The company Amazon.com, Inc. is an e-commerce company started in the United States in 1994. Amazon started its operations in India in June 2013, when it opened the Amazon Marketplace in the country. Prior to Amazon India, the company had its presence in India through Junglee.com, a website that informs customers of the best deals available for a number of products online. Working model Indian laws prevent foreign e-commerce firms from starting a wholly-owned company in India which can sell products directly to customers. Amazon India, thus, works on a third party model, wherein it provides a platform to third party retailers, shop owners and publishers to sell their products to customers. This model is different from that of Flipkart’s, an established e-commerce firm in India, which has its own inventory of products. Amazon India started with a modest 100 retailers in India in 2013. However, the goal of the company remains one of building Earth’s biggest selection in India. Strategy Amazon India’s strategy comprises of three main components: •

A vast selection of products



Offerings to customers at low prices



Ensuring fast delivery to customers

In sync with the goal of the company, which is expansion as opposed to profitability, Amazon India’s strategy is customer-centric. The company aims to provide an enjoyable, reliable, and trustworthy online shopping experience to each customer in order to win brand loyalty. The focus of the company is building quick and convenient delivery mechanisms. A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories.

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Questionnaire The researcher prepared a questionnaire for employees working with Amazon India in Hyderabad (India) to get a better understanding of the company. The questions posed in the questionnaire were as follows:

1.

What is your role in the organization?

2.

What is the working culture in Amazon and how does it impact its productivity?

3.

What is the importance of the 4 ‘Ps’ of marketing in Amazon India’s strategy? Which ‘P’ of marketing (Product, Place, Price, and Promotion) is most important

4.

for Amazon India’s strategy?

5.

How does Amazon India implement the 4 ‘Ps’ of marketing?

6.

What is the main goal of Amazon India?

7.

What are the problems faced by Amazon India in achieving its goal?

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The 4 Ps of Amazon India:

Product: The Product component of the 4 ‘Ps’ of marketing plays a vital role in Amazon India’s strategy as the company competes rigorously with other e-commerce portals in India. Products & categories offered Amazon India started with offerings in two categories, that is, books, movies & TV shows in June 2013. In September 2013, Amazon.in opened four new stores, namely, toys & games, baby products, personal care appliances, and health care devices. This brought the total number of categories offered to eleven, including over nine million books, more than 70,000 products covering several brands, and over 1.7 million eBooks. By the end of June 2014, Amazon India had included fifteen million products across twenty eight categories as a part of its offerings, overtaking other Indian based e-commerce portals. Flipkart offers about ten million products, while Snapdeal offers 4 million products to its customers. The US-based portal, eBay, offers over 1.5 million products in India. The strongest categories for Amazon.in remain books, consumer electronics, baby products and shoes. Deals on products Amazon.in offers several deals for one specific day to its customers, under the category “today’s deals” on its website. Through these deals, many products are offered at discounted rates for one day in order to increase sales and reach to more customers. Similarly, the website also offers flash deals which give consumers a certain time frame to avail the discounts on specific products or categories. Recommended products

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INTERNATIONAL RESEARCH JOURNAL OF MARKETING AND ECONOMICS VOLUME-2, ISSUE-4 (April 2015) ISSN: (2349-0314) Apart from offering specific deals, Amazon.in gives its own recommendations to customers based on his/her search. The website will suggest related products or related brands promptly to the customer. This often results in additional sales for the website and a wider and easy choice for the customer. Services offered

Amazon.in also offers three important services to its clients, namely: 

Sell on amazon: This service enables sellers to list their products on Amazon.in after registration other website. The customers are then able to view the products along with the other products available on the website. The customers can purchase the product desired, and Amazon.in delivers the same to them. The seller whose product has been sold receives payment for it from Amazon India, after deduction of the requisite fee. This service helps small businesses reach a nationwide audience as well as save on delivery costs.



Fulfilment by Amazon: This service gives sellers access to Amazon India’s fulfilment resources. Third party sellers can send their products to an Amazon fulfilment centre, where the products are stored. Customers can order the seller’s products from Amazon and have the same delivered to them using Amazon’s experience. This service helps third-party sellers by giving them access to Amazon’s fulfilment expertise, acclaimed customer service, and trusted shipping options.



Product ads: Through this service, sellers can register for their product ads by uploading their products on an Amazon Seller Central account. Amazon India will then create an ad for the seller’s products and upload it on Junglee.com. Customers will be able to see the ads when searching for similar products on Junglee.com. Customers who click on the ad will be directed to the seller’s website. This service helps sellers by making their product ads reach engaged shoppers on Junglee.com, acquire new customers and increase sales.

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INTERNATIONAL RESEARCH JOURNAL OF MARKETING AND ECONOMICS VOLUME-2, ISSUE-4 (April 2015) ISSN: (2349-0314) Amazon India continues to expand the number of products and services it offers to its customers. The company’s culture is such that it always tests new ideas. Amazon’s CEO Jeff Bezos believes, “If you double the number of experiments you do per year, you’re going to double your inventiveness.” Thus, experimentation has contributed largely to the vast selection of products and services offered by Amazon in India.

Price: The Price component of the 4 ‘Ps’ of marketing is important for Amazon India as it works on a third-party model, and the major source of its revenues is the fee charged to sellers. Cost to seller To sell on the Amazon Marketplace, the seller bears a monthly subscription fee of Rs. 499. This fee was not chargeable for a year since Amazon India’s launch for promotional purposes. The transaction fee is 12% of the item value, which was set at 5% for a year for promotion. There is also a closing fee of Rs. 10 for every sale. Each of the three services offered by Amazon, namely Sell on Amazon, Fulfilment by Amazon, and Product Ads, have their own rate cards for sellers, as specified on Amazon India’s website. Cost to Amazon India As mentioned earlier, Amazon India significantly reduces the price of its products through several deals offered to customers online. However, Amazon has to bear a major portion of its delivery expenses as 90% of the goods ordered online in India are moved by air, pushing up delivery costs by around half. Road and rail transport are used rarely as shipping options as they remain underdeveloped. Place: The Place component is the most important among the 4 ‘Ps’ of marketing for Amazon India as the company relies highly on customer satisfaction. The logistics arm of Amazon, Amazon A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories.

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INTERNATIONAL RESEARCH JOURNAL OF MARKETING AND ECONOMICS VOLUME-2, ISSUE-4 (April 2015) ISSN: (2349-0314) Logistics, has developed and used a number of mediums for fast and accurate delivery of products. External partners Other than Amazon’s own logistics staff, the organisation works closely with external courier partners, including, Blue Dart, FedEx, and Gati. Amazon India recently partnered with India Post to reach about 19,000 pin codes in the remote areas of the country. Fulfillment centers Amazon India has two fulfilment centres, one in Mumbai and the other in Bangalore, each measuring about 15,000 sq. feet. These centres have the capacity to store millions of products across several categories from sellers. These facilities have allowed Amazon India to meet the growing customer demand, 60% of which is eligible for next-day shipping of products. M-commerce Amazon India has made its website available to customers on the go. More than 35% of Amazon India’s traffic is now through mobiles, making the website the fastest growing m-commerce site for Amazon.6

Last year, Amazon India launched its Apple iPhone and iPad applications,

making the website readily available to Apple users. In October, 2013, Amazon.in made its catalogue available for Android users on the Amazon Mobile App. This mobile application allows users to search, browse, compare offers, read reviews, and make purchases on their mobile devices through Amazon.in. The application also gives users access to some of Amazon’s international wesbites. Pick-up points Amazon India has used several innovative means to ensure fast delivery of its goods to customers. In Bangalore, Amazon started piloting the concept of enlisting kiranas (small grocery stores) as delivery points. The staff and individual entrepreneurs at various small kiosks are trained by Amazon India for such deliveries. Similar ‘Amazon pickups’ are being experimented A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories.

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INTERNATIONAL RESEARCH JOURNAL OF MARKETING AND ECONOMICS VOLUME-2, ISSUE-4 (April 2015) ISSN: (2349-0314) in Delhi and Mumbai. Through this move, Amazon is using a hybrid model, wherein an online store can leverage corner shops to minimize failed deliveries Amazon India has also introduced pick-up services where customers can pick up their purchases from In & Out stores located at BPCL petrol stations. This has accelerated delivery of goods to customers to some extent. Scheduled deliveries Amazon.in not only promises one-day delivery of products, but is also the first e-commerce portal in India to offer scheduled deliveries for large appliances, such as TVs. On ordering a TV set from Amazon.in, customers can choose the time slot for its delivery at their home. Currently, this service is available in Mumbai. Local manufacturers As Indian lawmakers are considering allowing global online retailers such as Amazon to sell their own products in the country, Amazon.in is hopeful that such a move would be good for consumers. This move would allow Amazon India to partner with local manufacturers to source products not carried by other sellers in the marketplace. Indian consumers would have a wider choice of products at low prices. Return policy Under Amazon India’s ‘A-to-z guarantee protection’ policy, a customer has the right to file a return claim for the product purchased, within a particular time period. The website allows the customer to replace the product with another of the same value, or credits the customer’s account with the value of the product. This gives consumers a lot of confidence while purchasing from Amazon.in. Accurate delivery Amazon India ensures that the delivery of a product is made to the right customer by verifying a digital signature taken from the customer at the time of delivery. A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories.

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Promotion: Amazon India uses a variety of media to promote its website despite its already existing brand name. Affiliate program The Amazon affiliate program can be used by entrepreneurs by building Amazon affiliate links or banners on their websites to earn money. One can add Amazon links or banners to his/her webpage. When visitors to the webpage click on these links, the website owner can earn up to 10% of all purchases made via these links as an incentive. Through product links, the website links to a specific product on Amazon.in and shows information about that product. Amazon provides a ‘Products Links Tool’ to help websites build customized text and image links. Amazon also provides a ‘Banners Tool’, helping websites create banners that can connect to categories and promotions on Amazon.in. Emails Amazon.in uses emails extensively as a way of promotion, using the huge database of Amazon consumers. The emails inform existing as well as potential customers of the deals for the day and other special offers on products. Social media Amazon India makes use of social networking sites, such as Facebook and Twitter to connect instantly with consumers. The facebook page of Amazon India is updated regularly with deals for the day, offers, and any news connected to the organisation. It also gives consumers the option to connect directly to Amazon.in. Amazon.in also has its own blog that helps connect and interact with consumers. The blog contains articles on several products and occasions. For example, close to Father’s Day, an article was published on Amazon India’s blog on various ideas for gifts on the occasion, wherein A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories.

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INTERNATIONAL RESEARCH JOURNAL OF MARKETING AND ECONOMICS VOLUME-2, ISSUE-4 (April 2015) ISSN: (2349-0314) many of Amazon.in’s products were discussed. The comments and queries by readers on this blog are answered promptly. Use of celebrities Amazon India also uses celebrities for promotional purposes. They recently interviewed Bollywood celebrities, Alia Bhatt and Arjun Kapoor, asking them about their choice of footwear in professional and personal lives. Through the interview, Amazon was able to bring to the viewers’ interest the variety of footwear available on the website. Amazon India also conducts interviews of many authors and thus highlights the number of books by such authors available on Amazon.in. TV commercials The marketing team of Amazon India has successfully created many innovative advertisements for TV. The ads used by Amazon are usually such that catch the attention of the viewers. The very recent advertisement of Amazon.in features a couple betting Amazon’s products while watching the FIFA World Cup, keeping in mind the interest of the season. Testimonials The website of Amazon India has a section for testimonials from users and consumers of products. These testimonials give new customers a certain level of confidence while shopping from Amazon.in Conclusions The case study on Amazon India with respect to the 4 ‘Ps’ of marketing indicates that each of these components is important for the company’s strategy. Amazon India has emphasized the ‘Place’ component of the marketing mix as focus lies on one-day delivery and beating incumbents such as Flipkart and Snapdeal. The company has also laid stress on the ‘Product’ component of the marketing tool as it strives to increase the number of categories offered to customers.

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INTERNATIONAL RESEARCH JOURNAL OF MARKETING AND ECONOMICS VOLUME-2, ISSUE-4 (April 2015) ISSN: (2349-0314) Amazon India, however, has been facing obstacles in implementing its marketing strategy in the country. The company is facing the problem of offloading by commercial airlines, which frequently remove parcels of e- commerce portals to make more room for passengers. This costs Amazon.in and other online retail stores dearly as each company is trying to win customers with their quick delivery of products. In order to overcome the problem of offloading, Amazon India has set up regional warehouses in the country to be able to reduce air shipments. As mentioned earlier, the company is also piloting pick-up delivery points at grocery stores and petrol stations. Amazon has also tied up with the Indian Postal Service to reach remote areas in India. Another major problem faced by Amazon is the restrictions imposed on it by Indian lawmakers, banning global online retail stores from selling their own inventory. This is why Amazon.in has to rely on third-party suppliers. Amazon is in talks with the government to ease such restrictions, thereby making a wider choice of goods available to Indian consumers. This move can also help small manufacturers and retailers in India by boosting consumption. Companies today cannot rely only on the 4 ‘Ps’ of marketing. With the increasing influence of consumers, their perspective must be kept in mind right from designing the product to aftersales services. Today, the marketing strategy of firms begins much before the actual product launch. Managers have to consider the demands and preferences of prospective customers before designing the product. The customer needs to be the focus of the strategy even after the sale of the product as customer relations have taken a front seat. This has created the need for expansion of the marketing mix beyond the 4 ‘Ps’ to include people’s perspective and many other such aspects. On the one hand, as business is becoming more and more globalized and customers more demanding, new challenges are being posed for the marketer every day. With the increasing environmental pressures, the pace of change is quickening, requiring marketers to update strategy on a real time basis. On the other hand, new social trends and technological advancements have opened new avenues for marketers. The growing

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INTERNATIONAL RESEARCH JOURNAL OF MARKETING AND ECONOMICS VOLUME-2, ISSUE-4 (April 2015) ISSN: (2349-0314) popularity of the internet has made it easy to promote a product or brand through social media platforms. One of the most important factors of the new marketing mix is market analysis and research. Through research, a company can have complete information on the expectations of the consumer and design its product and strategy based on facts. Market trends can be studied to predict any uncertainties in the future. A clear cut plan needs to be developed for the safe launch of a product. Using market research and other components of the marketing tool, a company can conduct its business with less risk in the future.

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• Anupam Saxena, “Now shop on Amazon.in using Amazon's Android app,” www.gadgets.ndtv.com, http://gadgets.ndtv.com/apps/news/now-shop-on-amazonin-usingamazons-android-app-429944, October 9, 2013. •Rohin Dharmakumar, “Amazon's Perfect Timing for India,” www.forbes.com, http://forbesindia.com/article/big-bet/amazons-perfect-timing-for-india/35517/1, July 2, 2013. •Jeff Oxford, “6 things online retailers can learn from Amazon,” www.forbes.com, http://www.forbes.com/sites/groupthink/2013/09/24/6-things-online-retailers-can-learn-fromamazon/, September 24, 2013. •Debojyoti Ghosh, Deepti Chaudhary, Sohini Mitter, “India's E-Tail Battleground: Amazon, Flipkart and Snapdeal Fight for Top Slot,” www.forbes.com, http://forbesindia.com/article/realissue/indias-etail- battleground-amazon-flipkart-and-snapdeal-fight-for-top-slot/38058/1, June 24, 2014. • The Amazon India website, www.amazon.in. A Monthly Double-Blind Peer Reviewed Refereed Open Access International e-Journal - Included in the International Serial Directories.

International Research Journal of Marketing and Economics (IRJME) Website: www.aarf.asia. Email: [email protected] , [email protected] Page 65

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UNDERSTANDING THE 4 PS OF MARKETING: A CASE STUDY OF

INTERNATIONAL RESEARCH JOURNAL OF MARKETING AND ECONOMICS VOLUME-2, ISSUE-4 (April 2015) ISSN: (2349-0314) UNDERSTANDING THE 4 PS OF MARKETING: A CAS...

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