Mrktng Concepts

NMIMS, 2007-08 (Concepts & Environment)

Marketing ConceptsNeeds, Wants, Demands

Needs Wants Demands What Deprivation of

basic, satisfactionExisting, few

Specific satisfiers of deeper needsWants are many

Specific Wants for products Wants + purchasing powerAbility & willingness

Influencers Natural, not created

Shaped by Social-family, friends,Peers or Institutional-Promotion

Shaped by status, Aspirations

Instances Food, clothing, belonging

Needs food-Wants McdonaldsNeeds clothes-Wants Allen Solly

Needs Car/TV, Wants Luxury Sedan/flat, As willing + able,Demand Benz/Plasma TV

Marketers Existing, minimum influence, House

Influence wants, Affordable&available Bank loan, EMls3 Bed Room

Influence demand by making product attractive/aspirational,Status Duplex / Bungalow

Product-Offered to satisfy needs / wantsProduct-tangible eg Books ; Service-Intangible eg Banking, Finance, HospitalityProducts also deliver services eg car-product & transportation-service, MobileFocus on products sans service risky eg TV, Fridge, AC without back-up Service Team-Risky

Brand-An identifying symbol/words/mark distinguishing a product/company from its competitors.Branding is an essential part marketing.Brand = (Functional + Economic + Emotonal) Value Propositions.Nokia-Functional, Amul- Economic, Saffola- Emotional

Value Proposition- Bundle of benefits the product provides to fulfill customer needs and wantsMarket (mercor-to buy Latin)Potential + Existing customers sharing a common need/want, able & willing to engange/enter in exchange to satisfy their needs/wants Eg Pharma Market=Doctors + Hospital + TradeEconomics-Buyers+ Sellers= Market, Marketers – Sellers is industry, Buyers is Market

Value (valere – latin – worth)-Consumer’s estimate of the utility/capacity of a product/brand to satisfy their needs. Fair return.Price is what you pay, value is what you get- Warren Buffet Mobiles- convergence

Customer-One who buys goods or services- Mother

Consumer-One who consumes, but may or may not have purchased- Kid

Client-A customer/consumer/ party who pays for professional services- Lawyer, Hotel, Consultancy

Prosumer: Producing consumers, active, regular and influencing consumers who also initiate feedback

Customer satisfaction: Core- Quality, service, value; Desire (Within an arms length of desire- coke), customer delight (kingfisher airline), delivery (blue dart), service (icici bank, taj)

MarketingMarketer Mix + Strategy Brand Value Customer

Mission: Create a difference between company’s & competitors offering on a/an attribute/s important to customers, to provide value, Scope.


Identifying, creating, managing demand to provide value to a customer for a profit – Kotler Mgmt process that identifies, anticipates, satisfies customer requirements profitability – CIM The right product, in the right place, at the right time, at the right price – Adcock Marshalling organizational resources to meet changing needs of the customer – Palmer Marketing is far too important to leave to the marketing department”, David Packard (HP)

1950 Concept- Satisfaction of the Customer & their needs, focus of business activities. IBM Philosophy- Owned by everyone from within the organization Marketing is not only much broader than selling, but not a specialized activity at all.

Marketing encompasses the entire business. The whole business seen from the point of view of the customer. Concern & responsibility for marketing must therefore permeate all areas of the enterprise. A business has only 2 basic functions that produce result, marketing and innovation, the rest are all costs – Peter Drucker

“if marketing is seminally about anything, it is about .. differentiating what you do and how you operate. All else id=s derivative of that and only that. “Theodore Levitt 1986”

Holistic marketing: From product to customer focus, from selling products to satisfying customers, visualizing broader ways to serve customers and assess how all departments affect customers satisfaction- delivery, service, performance

Reserve marketing: Customer initiatives help design products marketing mix – PCs, Travel Experiential marketing: Customer experience/ simulate product before buying foods, CDs

Planning Process of anticipating future events & conditions to determine the best way to achieve organizational objectives

Marketing planning- Implementing planning activities to achieve marketing objectives Strategic planning- Adopting courses of action to achieve organizational objectives Tactical planning- Planning that guides the implementation of activities in the strategic plan

Management (Manus – Hand Latin) – Optimal utilization of resources to achieve objectives eg Electricity

Management is doing things right, leadership is doing right things – Peter Drucker Manager-Responsible for application & performance of knowledge- Peter Drucker Marketing Management- Demand management

Dimensional Differentiation of Selling VS MarketingDimension Selling Marketing

1 Concept Integral part of Marketing Broader concept, Includes Selling, Brand, MR, Distribution, Promotion, Strategy, etc

2 Objective Transaction Exchange, Customer & Demand management3 Target Buyer Needs/wants of the Customer4 Focus Product Brand/Service5 USP Price Value6 Strategy Sales force & Promotion Marketing Mix7 Period Short term Long term8 Controls Sales, delivery, collection Customer Satisfaction, Market Share9 Skills Selling, Communication Analytical

10 Orientation People Team 11 Begins When you have a product Much before and long after a produst

Organizational Orientation


Production- PSUsProduct- InfosysSelling- SansuiMarketing- HutchFinance- SBIService- ICICI

Marketing EnvironmentM8 +C5 + PESTND (Case – Mobile Industry)Surrounds & impacts the organization, 3 key perspectives- Macro, Micro and Internal environments.

Environment

Internal Micro Macro • Internal Envt-M8-8 M’s 6C’s PESTND Important for Men Components Political managing changeMaterial Corporate Economic • Internal Envt-C5-Money Channel Socio-cultural Influences organization Minutes Communication Technological directly, Relationship Markets Customer Natural between firms & driving Machines Competition Demographic forcesMethods Direct impact Out of direct control • Macro Envt-PESTNDMind Influencing factors, but Change management out of direct control,

environmental change

PEST NDPolitical Factors

Huge, influence policy & regulations and spending power of customers Government- VAT, WTO-GATT, Taxation, Reservations

Economic Factors Economy – Sensex, Forex, Interest rates, Inflation, Employment level, Per Capita, GDP,

Sociocultural Factors Ethnicity, local factors and issues, environmental issues- Bandra- Worli Sealink Attitudes to foreign products and services- KFC Bangalore, Language impact Cultural and religious factors- Mcdonalds French fries controversy, Nivea in Latin America

Technological Factors Technology- New, accessible, better, cheaper, innovation, investment intensive- ATM, Net

Natural Factors Raw material availability, Pollution, Environment, Monsoon - Pharmaceuticals

Demographics Age profile, Geriatrics, Life expectancy, Mortality, Geography, Consumption, Psychographics

Analyzing the Environment


5 Forces Analysis5 Forces Analysis (Porter)

Analyses forces driving industry competition, intensity ofcompetition- Indian Hotels not Tatas

Collective strength determines profit potential,identifies areas where company can defend

5 Key areas- threat of entry & substitutes, power ofbuyers & suppliers, competitive rivalry

The threat of entry Economies of scale- Production, coverage,

distribution- Reliance Polyester Entry/Exit Barriers- FDI, Retail Access to distribution channels- Shelf space Cost advantages- Bazee- Ebay Product Differentiation- Baby products- J&J Government policy- Insurance Sector

NB: Gambar lihat di situs aslinya

Will competitors retaliate?Price cuts, promotional onslaught, technology – Mobiles

The power of buyersMonopoly, Oligopoly, Cartelling- Tyre, Vitamin manufacturers

The power of suppliers Switching costs high – technology, distribution – Tata GSM Power Brand- Amul, Integration- Tata Tea- Barista Fragmentation, consolidation, integration

The threat of substitutes Disruptive innovations- Mobiles- convergence affects 32 industries Need substitution- Better toothpaste reduces need for dentist, Diagnostics can avoid diseases Generic substitution- Stop smoking cigarettes, Gutka ban Technology- Blue tooth, Java

Competitive Rivalry High, where entry is likely/threat of substitute products/suppliers/buyers control the market

FMCG, Pharma, IT Pre-emptive eg leader drops price/intensifies promotion to scuttle new competitor entry

Effective 5-Force Analysis Structural analysis and competitive strategy for defending/increasing market share Strategic moves to influence balance of force Anticipating and exploiting change to emerge stronger

PEST Analysis (Porter) Environmental analysis preceding the marketing process


Should be continuous & feed all aspect of planning

SWOT Analysis (Case) Tool for auditing organization and environment 1st Stage of planning, helps marketers focus on key issues Identify key issues & objectives, use with other audit & analysis tools, like PEST / 5-Forces Strength & weaknesses- internal factors, Opportunities & threats-external Strengths- Specialty, economies, reputation, innovation, service, tech, location, quality Weaknesses- lack of strengths Opportunities- Competition, innovation, technology, regulatory

Successful SWOT analysis guidelines Short, simple and fair analyses especially about strengths & weaknesses of your organization Anticipation of PEST factors in the industry, Avoid grey areas Competitive analysis through benchmarking, popular tool, quick & easy to learn

Disadvantages Can be very subjective, Not very reliable, Bias steps in Two people rarely come-up with the same final version of SWOT Use only as a guide

Marketing Mix (Neil H. Borden) Marketing ‘tactics’ or tools or ‘4Ps’ (McCarthy) Other Ps- Pace, People, Policy, Process, Packaging, etc Car-Mix of Engine, Mileage, Looks, Price, Features, Quality, EMI options Mix element vary leading to different strategies, perception & value proporsitions

Product Brand, features, design, quality, rangeWarranty, AMC, service, size,packing, performance

PriceStrategies,

Credit,Costs

PromotionSales promotion, Personal Selling, Advertising,Sponsorship, Multi-level Marketing, DirectMarketing, Trade fair & Expositions

PlaceChannels, location, coverage,

Transportation, inventory, width,Spread, reach, shippers

Promotion Marketing communication Objectives- Sales, attract/retain/covert, trial, awareness, remind, reassure Retention Levels- reading 10%, listening 20%, Audio-visual 70%; Sight, Sound, Motion

effective. Integrate individuals promotion mix components for effective communication

Promo Tools / Mix (SPPASM DT)Sales Promotion

Personal Selling

Public Relations

Advertising Sponsorship MLM Direct Trade Fair Expo

ContestsCouponsLow finance

PresentationsSamplesDemo

InsertsPress kitSeminars

AdvtsHoardingsBanners

EventsPeriodTheme

Residual IncomeNetworkCommission

DatabaseMailersCRM

DemosBrochuresTeach-info

Personal Selling- (Car, Insurance) Effective but expensive way to manage personal customer relationships (Medical

Representative)


Sales Promotion- (Akai/Aiwa/Sansui) Incentive to buy, ensure trial, D2C through trade BOGOF, Coupons, Discounts, Contests, Trial

Public Relation (PR)- (Political parties/top companies/IPO) Subtle inserts used in image building, firefighting- impact if managed well, economical, if

long-termDirect (Credit card/insurance company mailers)

Targeted communication- update database, response monitoring, multiple use 2% response Mailers of contests, EMI options, transfer of credit, mail order catalogues, CRM

Trade Fairs and Exhibitions (Print/Auto/Pharma/IT Expo) Trade, product display / demonstration/awareness/trial, recent decline due to internet

Advertising ‘Paid for’ communication, difficult to measure Ad impact (Amul bylines excellent, sales

impact). Helps develop attitudes/create awareness/communicate message, elicit response Type of Ads- FRESHEN- Fear, Rational, Emotional, Social, Humour, Ethical, Negative Media- Print- Newspaper/magazine/journals (local, national, trade, specialty)/ pamphlets

Electronic- TV/ radio Virtual- Internet, Mobiles Outdoor- Hoarding/Banners/kiosks/transport ( bus, train, taxi, vans) Captive- Theatres, train compartments, Cable TV

Sponsorship (Femina-Miss India) Organization pays to associate with an event/cause- Sahara- Indian Cricket/Hokey/Olympics Event attributes then associate with sponsor- Pepsi- Youth, Sahara- Patriotism

Multi-Level Marketing (HerbalLife, Amway) Networking, Residual Income, Flexi-timings, Initiators earn maximum, financial schemes-

suspectPromotional Spend Methods- (Half my Ad- spend is wasted, but which hall? John Wanamaker)

Affordable- Amount decided on supposed affordability, ignores promo needs % of sales- Anticipated sales, not guided by opportunities, promo- spend varies, % basis

arbitrary Competitive parity- Share of voice, Assumes competitive spend- collective industry wisdom-

debatable, Own opportunities/strength/reputation not considered- IIPM highest print spender

Objective & Task Method- Define objective/tasks, allocate promo-spend, difficult to implement

Full VS Push: Push – Sales Force + Trade Promotion, Pull – Advertising + Customer PromotionStrategies differ across industry players, traditionally HLL – Push and P&G – Pull strategy worldwide Promotion Mix Strategy – ICICI

Place (distribution/channel/intermediary) Set of institutions performing activities to move product from production to consumption-

Bucklin Functions- Order Processing, Warehousing, Inventory, Transportation, Collections Ensures- Availability, Visibility (Dikhta hai voh bikhta hai), Movement, CRM, Feedback Width- Trade coverage, Reach- Customer coverage, Depth- Brand coverage Growing impact of convergence- internet, mobile, retail, revolution

1-Level 2-Level 3-Level 4-Level 5-LevelManufacturer Manufacturer Manufacturer Manufacturer Manufacturer

C&F C&FStockiest Stockiest


Retailer Retailer RetailerConsumer Consumer Consumer Consumer Consumer

Industrial, IT IT Hardware Retail/Malls Garments Pharma/FMCG

Channel Intermediaries Distributor (C&F)- Bulk to smaller packs, handle major area, supply to stockists Wholesalers (Stockists)- Resell to retailers, storage, coverage essential Others- Commission agents, co-operative (farmers), Indentors (Imports), agents (magazine) Retailers- Strong customer influence, consumption/purchase pattern insight, service Specialty (Sport), Supermarket (Big Bazar) Convenience (Kirana), Factory Outlets,

Warehouse, Direct sellers (Encyclopedia)- D2D, Vending Machine (Tea, Coffee), co-operative (Apna Bazar, Grahak Peths, Societies), Chain stores (Monginis)

Internet (Service)- Channel margins and inventory costs major saving- can be passed, hence economical, death of distance, geographically disperse market, niche products reach wider audience, low entry barriers, display variety & functionality, interactive, Payment Risky, gaining popularity, delivery costly- Books, CDs, medicine, travel, tourism

3rd Party Logistic (AirFreight, GATI)- tremendous scopeChannel Decisions

Direct or indirect channels/single or multiple channels Length of channel Types of intermediaries/Number of intermediaries at each level Which intermediaries? Avoid intrachannel conflict- Nike

The Retail Revolution CasePrice

Fit between crucial financial component-cost & marketing component-value Center-stage in marketing wars, inter-firm rivalry-Mobile Industry Product differentiation blunted- Surf-Ariel, Mature product/Markets- TVs Economic Value Proposition- Titan- High priced brands inspite of local & grey market

competition Objective- Profits/ROI, competitive position, demand, costs, survival, product, Portfolio,

EntryPricing Methods

By cost- Cost Plus and Break Even By competition- Going rate, competitive pricing, cartelling- Tyre industry, sealed bids

(tenders) Customer Oriented- Perceived Value (Lifestyles), Auctions (Bazee), Value-Buffett, McDonalds

Pricing Strategies Penetration- HQLP- NPL, Entry, Attract, Ensure trial- Amul Premium- HQHP- Sustainable advantage- Bose Speakers, Benz Economy- Functionally & Value-, Nirma, Supermarket- own brand Skimming- LQHP- Significant advantage, unsustainable- Reliance Mobile Rip-Off- Medium quality, very high price- Pricey Hotels/ Restaurant 1,5,9- coexist in same market till buyers insist on quality, price, value 2,3,6- ways to attack 1,5,9 as 2 = HQMP, 3 = HQLP, 6 = MQLP 4,7,8 overpricing wrt quality- customers feel ‘taken’, bad oral publicity, avoid

Exercise- Gives examples of each pricing strategy

PriceHigh Medium Low

Quality(Quality is only indicative)

High 1- Premium 2- High Value 3- PenetrationMedium 4- Over-charging 5- Medium Value 6- Good ValueLow 7- RipOff/Skimming 8- False Economy 9- Economy


Other Pricing Strategies Psychological- Bata, Mobile Airtime Tariffs Geographical- Medicine/Electronics across countries or Urban/Rural- Electronics Promotional- Extensive usage, if successful-copied, if unsuccessful-financial drain Loss leader- Factory outlets Special Discount/Rebates- BOGOF, % Off, Sale Financing- EMIs, Low interest rates Warranties/AMCs- Extended warranties, TVs-Onida 4 year warranty, Free AMC Psychological Discounting- Prices slashed 399 to 199, Baazee Old for New- New for Old discounts- Exchange offers- Van Heusen, TVs Price Point- Cadburys- Re1- Éclair, Rs2-Chocky, Rs5-5star, Rs50-Heroes, RS100-(Heroes) Value- Superstores- Big Bazaar

Discriminatory- Same brand/ service, 2 price Customer segment- Student discount Product form- Ketchup- 100gm-20, 250gm-45, 500gm-75 Image- Hotels- Taj Palaces (Premium), Resorts (Lifestyle), Hotels (Business), Indione (Budget) Location- Theatres- Stall-50, Balcony-75, Dress Circle-100, Stadium- Pavilion, Stands Time- Seasonal- Cheaper/costlier during season, Happy Hours, Bakeries-25% off after 8pm

Product Mix- Profitable brands take care of others in the portfolio Product line- full range in all segments- Maruti Cars 2 Lacs at every 25000 intervals Optional feature pricing- Ford Ikon-Insurance+Deck+Central Lock+Auto Cop Free Captive product- Cameras/Razors cheaper but consumables – Film / Blades costly 2-Part- Esselworld-admision + rides, Airtime + SMS/VMS/STD By-Product- Lubricants with petrol Product bundling- Season tickets, Time share