MM-2-Pre Mid Slides-Shared With Class

Review of MM1

Coverage in MM-1• Marketing Plan• Marketing Environment • Buyer Behavior

– Consumer Buying

– Business Buying

• Rural Marketing • Product

– New Product Development

– Product Strategy

• Branding – Brand Positioning and Equity

• Pricing • Services Marketing

Marketing Evolution

• Started as branch of applied economics– Study of Distribution Channels

• Became a management discipline – Engineering increase in sales

• Applied behavioral science– Concerned with understanding of buyer and seller

systems involved in marketing of goods and services

Marketing Evolution

• Shift in Marketing Focus– Commodity Focus

• Farm products, goods, services, minerals

– Institutional Focus• Manufacturers, wholesalers, retailers

– Functional Focus• Buying, selling, storing, moving

– Managerial Focus• Planning, analysis, control

– Social Focus• Market efficiency, value, quality, social impact

Core Concept of Marketing

• Transaction

– Exchange of values between two parties

– Things of Value

• Not limited to goods, services and money

• Include other resources

– Time, energy, feeling

– Examples of such transactions

» Watching a cricket match: exchanging time for entertainment

Core Concept of Marketing

• Producing desired responses in free individuals by judicious creation and offering of values

• Concept of Value is central to marketing – Marketer is trying to get value from market by

offering value to it (exchange)» Value is completely subjective

– Marketer must understand market in order to be effective in creating value

What is Marketing?

Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders

» American Marketing Association

• CCDVTP – Philip Kotler

What is Marketing?

What is value?

• Sum of perceived tangible and intangible benefits and costs to customers

• Customer Value Triad• Quality, Service and Price (qsp) • Value is directly proportional to Service and Quality• Inversely proportional to Price

How Marketers Create Value?

• Marketer creates value in four ways– Design the offering more attractively

• Configuration

– Put attractive terms on the offering• Valuation

– Add symbolic significance to the offering• Symbolization

– Make it easier for the market to obtain offering• Facilitation

• Offering– Value Proposition: Product, Services, Experiences and Information

Concept of Marketing Mix

• Marketing executive a ‘Mixer of Ingredients’– List of marketing mix of manufacturers

– Product Planning– Pricing– Branding – Channels of distribution– Personal selling– Advertising– Promotions – Packaging– Servicing– Physical handling– Fact finding and analysis

Concept of Marketing Mix - 4 P’s of Marketing

• Marketing is specifically concerned with how goods (or services) and transactions are

– created » Product

– valued » Price

– facilitated » Place

– stimulated » promotion

Seven Core Processes in Marketing• Sensing Value

– Bringing customer insight into the organization – Understanding opportunities and threats in the environment

• Defining Value – Converting insights into value propositions that is compelling for customers

• Realizing Value – Conversion of value proposition to an offering that is relevant and compelling to

customers• Delivering Value

– Taking the offering to the marketplace thru distribution channels and partnerships• Sharing Value

– Figuring out appropriate pricing mechanisms and revenue streams and being able to recapture some the value you have created

• Communicating Value – Articulating what your value proposition is, positioning, building brands (IMC)

• Sustaining Value – Continuous improvement of customer experience – Relationship marketing

Distribution Channels

Introduction

• How do you make your product available to consumer? – Moving– Storing– Merchandising

• Does it matter where you are sold?

• Is it an important decision?

Introduction

• Distribution cost as proportion of overall cost of the product to customer– A significant percentage of the price paid for the product

by the customer is cost of getting that product to customer– Estimating exact cost of distribution is difficult at best– Route(s) to Market’ is critical and difficult !!

Introduction

• Most producers do not sell their goods directly to the final users– between them stands a set of intermediaries performing a

variety of functions.

• These intermediaries constitute a marketing channel – trade channel or distribution channel

• Objective of the Marketing Channel– Make it easier and easier for the customer to buy your product– Not only serve the market but also create market

Distribution – Concepts

• Distribution – The act of spreading or apportioning

• Channel – Any distinct part of distribution system through which

a supplier reaches a customer

• Distribution Channel– A mechanism through which products are directed to

customer either through intermediaries or direct

Marketing Channel - Definition

• Set of interdependent organizations involved in the process of making a product (or service) available for use or consumption

• An organized network (system) of agencies and institutions which, in combination, perform all the functions required to link producers with end customers to accomplish the marketing task

Marketing Channel - Definition

A set of institutions necessary to transfer the title to goods and to move goods from the point of production to the point of consumption and, as such, which consists of all the institutions and all the marketing activities in the marketing process

» American Marketing Association

Key Points in the Definition

• Organized Network

• System’s view

• Interdependent Agencies

• Makes products/services available to consumer

• Links producers to end users and vice-a-versa

• Transfer of title of goods

• Movement of goods

Marketing Channel – Economic Utility Perspective

• Channel is an orchestrated network that produces value for consumer by creating economic utilities – Form, possession, time and place

Form Utility

Bulk Breaking

Lot Sizing

Place Utility

Place of Convenience

Time Utility

Convenient Time– When customer wants to

buy

Possession Utility

• Transfer of Ownership to Consumer

– Permanent • As in standard goods

– Temporary• Car Rental

Dimensions, Determinants and Bridging Activities

Processing, sorting, assorting and screening

Standardization and Classification

Quality 4

Collection and Distribution No. of buyers and sellers, volume of flows and transactions

Quantity 3

StoringProduction and TransportTime 2

TransportGeographical Distance Place 1

Key Bridging Activities DeterminantsDimensions

Different Views on Marketing Channels

– Supply chain view • forward to markets

• Physical linear flows

– Demand chain view • Backwards from customer

• Starts with the customer as focal point

• Providing solutions and not just goods

– Value Network• A system of partnerships and alliances that a firm creates to

source, augment and deliver its offers.

Route to market affects…

• Product Differentiation

– Dell vs. Others in personal computer industry

Route to market affects…

• Access

– Coca Cola

– Pepsi

Route to market affects …

• Brand Image

– Maruti

• Service Network

– Eureka Forbes• Maintenance services

Route to market affects …

• Pricing of products– based on type of channel

Online is usually cheaper than boutiques

Type of Channel Members

• Merchants– Take title to – Resell merchandise

– Examples– Retailers – Wholesalers


• Agents – Do not take title to goods– Search customers– Negotiate

– Examples– Property Brokers– Sales Agents


• Facilitators– Neither take title to nor negotiate – Support overall distribution process

– Examples– Banks– shared warehouses– transport companies

Why Channels?

• Why would a producer delegate some of the selling job to intermediaries?

• Delegation means relinquishing some control over how and to whom the products are sold

• What do Producers gain by using intermediaries?

• How do intermediaries add value to a product?

• The question is not whether various channel functions needs to be performed but rather, who is to perform them?

Why producers appoint intermediaries?

• Many producers lack the financial resources to carry out direct marketing

• Producers who do establish their own channels can often earn a greater return by increasing investment in their main business

Why producers appoint intermediaries?

• In some cases, direct sales is simply is not feasible – Examples: Soap, pens, matchbox etc.

• Intermediaries normally achieve superior efficiency in making goods widely available and accessible to target markets

• Through their contacts, experiences, specialization, and scale of operations

Functions

• A marketing channel performs the work of moving goods from producers to consumers. It overcomes the time, place, and possession gaps that separate goods and services from those who need and want them – Members of the marketing channel perform a number

of key functions • forward flow of activity • backward flow of activity• both ways

Functions

• Typical functions of a traditional channel member– Gather information– Develop and disseminate persuasive communications– Reach agreements on price and terms– Acquire funds to finance inventories– Assume risks– Provide for storage– Provide for buyers’ payment of their bills– Oversee actual transfer of ownership

Functions

• All channel functions have three things in common

– They use up scarce resources

– They can often be performed better though specialization

– They can be shifted among channel members– Cannot be eliminated

Functions

• A manufacturer selling a physical product might require Four channels

1. A sales channel

2. A delivery channel

3. A service channel

4. Reverse Channel

Marketing Channel Flows Reverse Channel Flows

• Channels normally describe a forward movement of products from source to user

• Reverse-flow channels are important in the following cases

– To reuse products or containers– To refurbish products for resale– To recycle products– To dispose of products and packaging– To recall

Major Participants in the Marketing Channel

Producers&

Manufacturers

WholesaleIntermediaries

RetailIntermediaries

Intermediaries

Consumers Industries

Final Users

Commercial Channel Target Markets

Channel Levels

• The producer and the final consumer are part of every channel

• A zero-level channel – also called a direct-marketing channel– a manufacturer selling directly to the final consumer

• A one-level channel – contains one selling intermediary

• A two-level channel– contains two intermediaries

• wholesaler and a retailer

Levels - Consumer Marketing Channels Levels - Industrial Marketing Channels

Push Strategy in Channel Context

Push strategy involves the manufacturer using its sales force and trade promotion money to induce intermediaries to carry, promote, and sell the product to end user

Pull Strategy – Channel Context

Pull strategy involves the manufacturer using advertising and promotion to induce consumers to ask intermediaries for the product, thus inducing the intermediaries to order it

Push vs. Pull Strategy Decision

• Push strategy is appropriate where – there is low brand loyalty in a

category– brand choice is made in the

stores – the product is an impulse item– product benefits are well

understood

• Pull strategy is appropriate when – there is high brand loyalty

and high involvement in the category

– people perceive differences between brands

– people choose the brand before they go to the store

Push vs. Pull Strategy Decision

A combination of Push and Pull is the best strategy

Channel Development

• A new firm typically starts as a local operation selling in a limited market, using existing intermediaries

• If the firm is successful, it might branch into new markets and use different channels in different markets

– International markets pose distinct challenges– Customers’ shopping habits can vary by countries– The channel system evolves as a function of local

opportunities and conditions

Hybrid Channels

• Simultaneous use of two or more channels

• Companies that manage hybrid channels must make sure these channels work well together and match each target customer’s preferred ways of doing business

Hybrid Channels

• Customers expectations from channel integration

– The ability to order a product online and pick it up at a convenient retail location

– The ability to return an online ordered product to a nearby store of the retailer

– The right to receive discounts based on total online and off-line purchases.

Consumer Behavior & Marketing Channels

• Different consumers have different needs during the purchase process

• The same consumer may choose to use different channels for different functions in making a purchase


• Buyer Categories

– Habitual shopper• Purchase from the same place in same manner over time

– High value deal seekers• Know their needs • Channel surf a great deal before buying at the lowest possible price

Consumer Behavior & Marketing Channels• Buyer Categories

– Variety-loving shoppers• Gather information in many channel, • take advantage of high touch services • buy in favorite channel• regardless of price

– High-involvement shoppers• Gather information in all channels • make their purchase in low cost channel • take advantage of high touch channel customer support


• Type of shoppers and their store preferences– Service/quality customers

• Variety and performance of products• Service provided by the store

– Price/value customers• Concerned about spending money wisely

– Affinity customers• Stores that suited people like themselves or the members of groups they

aspire to join

Distribution Channels in India

Challenges

• Country of Retailers – 12 Million+ retailers

• What are the challenges ? – Infrastructure

– Logistics cost is more than 13% of GDP – Cold chains not available– Public Distribution system is inefficient

– Remote rural areas – Unorganized and Fragmented system

Indian Rural Markets

• The Myth– Huge geographical dispersion, uneconomical to

serve• India's 6,27,000 villages, poor connectivity

and so on

• The Reality • Through the 3000-odd town and 5000 wholesale assembly markets (with

a lot of overlap) and about 25,000+ 'haats/shandies', penetration into rural areas facilitated through the wholesaler, semi-wholesaler retailer, 'arhatia' and itinerant merchant network is quite efficient and effective

BangloreMysore

Typical rural market Rural market buying power

Taxonomy of Indian Consumer & Channel

Channel Decisions

Objective

• To understand

– Channel Design

– Channel Management

• How? – Theory & Examples

• Dabur Story

Channel Design

Analyze customer needs

Evaluate major channel alternatives

Identify major channel alternatives

Establish channel objectives

Decision Areas in Marketing Channels

Place Objectives

Direct

Type of Channel Desired Customer

Service Level

Indirect Lot Size

Delivery Time

Spatial Convenience

Product Variety

Service Backup

Degree of market exposure desired

(Intensive, Selective, Exclusive)

Type of Middlemen or

Facilitators Needed

How to Manage

Channel Relationships

Channel Design & Modification

Channel Modifications

• Distribution channels become outdated

– a gap arises between the existing distribution system and the ideal system that would satisfy target customers’ needs and desires

– Most marketing channels will not remain effective over the whole product life cycle

Channel Modifications

• In competitive markets with low entry barriers, the optimal channel structure inevitably changes over time

• Change can be in form of: – Adding or dropping individual channel members

– Adding or dropping particular market channels

– Developing a totally new way to sell goods

Channel Modification

• It becomes necessary when– the distribution channel is not working as planned

– consumer-buying patterns change

– new competition arises

– Innovative/new distribution channels emerge

– the product moves into the later stages in the product life cycle

Kalyan Pharma Ltd.

Objectives for Distribution System

• Improving Customer Service

• Bringing down cost of distribution

• Special Concerns – Order processing time – Stock levels at different points in distribution system

• Finished goods stores, regional depots, distributors

Changes in Distribution System at KPL

• 1972: Sole selling agency• Exclusive sole selling agent for distribution

– Distributed all company products at commission of 15%• Agent developed 30 branches located in important cities

• 1979: Regional Marketing Companies• Strengthening presence in secondary and tertiary markets in four zones• Distribution taken over by KPL

– Distribution from the company branch to the retailers • Promoting products to doctors and retailers given to regional marketing

company • Company’s own branches (42 in number) served as stock points as well

as offices for regional marketing companies


• 1979-87: Introduction of wholesalers– DPCO (drug price control order) led to reduction in retailer

margins• Retailers became reluctant to deal directly with company

– Company started giving credit and annual sales target based rebates

– Wholesalers were appointed – around 2000• Expected to provide credit• Reduced company’s efforts on invoicing and order processing

– Wholesalers neither equipped nor willing to promote products led to higher book debts and high costs of distribution

– KPL did away with regional marketing companies and took the marketing/sales staff under its direct control


• 1987-1991– In 1987, brought down number of branches from 42 to

21• Bringing down cost of distribution

– KRDs (Stock Points) in each state• Stocks to be dispatched from KRD to branches • Most KRD were in same location as branch with enhanced

warehousing infrastructure • Disadvantages of KRD

– Higher cost of distribution– Poor customer service– 60 of manager’s time at branch was spent on distribution and

collection » Sale promotion was neglected

KPL Distribution - Pre 1991

Factory KRDDistributing Branches

Wholesalers

Retailers / Doctors

Goods Flow

Information Flow


• 1991– Cutting down number of branches resulted in poorer

service and higher cost of distribution– A new link (Distributors) were added to system

• Service to customers (wholesalers)• Reducing accounts receivables • Improving sales and profitability

– Physical flow• Factory KRD Distributors Wholesalers • Branches cut off from physical distribution • Better service to wholesalers


• 1991– April 1991, KPL had 40 distributors in total – New distribution system comprising of distributors

resulted in • Reduced inventory levels at different links• Book debts went down from 90 days to 7 days

– Increased profitability

• Distribution manpower at KPL reduced from 600 to 200• Customer service improved

– Fast order processing

KPL Distribution in 1991

FG Stores at Factory KRD Branch

DistributorsStockist / Wholesaler

Goods Flow

Order Information Flow

Retailer

Institutional Buyers

Theoretical Connect

• How the distribution channels evolve over time

– Modifications to a channel depending on

• need of the market

• objectives of the company

• Physical distribution

– Inventory, Order processing, Warehousing and IT

Sales and Distribution

Illustration of Pharmaceutical Industry

Introduction

• Pharmaceutical marketing

– a specialized field

– Medical Representatives (MR) assigned to defined territories form the backbone of entire marketing and sales effort

– Role of MR• meet doctors, chemists and

stockiest as per company norms

• try to influence prescription pattern of doctors in favor of their brands

Role of Distributors and/or Wholesalers

• Direct to Pharmacy – Number of interactions?

• Via Distributor – Number of interactions and

transactions routine?

Producers or Intermediaries May Be Channel Captains Push vs. Pull System• Acute Therapy Area • Chronic Therapy Area

Current Distribution System Current Distribution System

• Prices and Margin at different levels of distribution – CFA– Stockists or Distributors– Retailers

Channel Decisions

Continued…

Decision Areas in Marketing Channels

Place Objectives

Direct

Type of Channel Desired Customer

Service Level

Indirect Lot Size

Delivery Time

Spatial Convenience

Product Variety

Service Backup

Degree of market exposure desired

(Intensive, Selective, Exclusive)

Type of Middlemen or

Facilitators Needed

How to Manage

Channel Relationships

Channel Design

Analyze customer needs

Evaluate major channel alternatives

Identify major channel alternatives

Establish channel objectives

Channel Design & Modification

Channel Design

Channel Service Outputs – Understanding and Segmenting the market

Lot size

Waiting/delivery time

Spatial convenience

Product variety

Service backup

Channel Design

• Establishing Objectives and Constraints

– Channel institutions should arrange their functional tasks to minimize total channel costs and still provide desired levels of service outputs

– Planners can identify several market segments that want different service levels

Channel Design

• Establishing Objectives and Constraints

– Channel objectives vary with product/market characteristics

– Channel design must take into account the strengths and weaknesses of different types of intermediaries

– Legal regulations and restrictions also affect channel design

Identifying Major Channel Alternatives

– Each channel has unique strengths as well as weaknesses

– Most companies use a mix of channels

– Each channel (hopefully) reaches a different segment of buyers and delivers the right products to each at the least cost


• A channel alternative is described by three elements:

• The types of available business intermediaries

• The number of intermediaries needed.

• The terms and responsibilities of each channel member

Types of intermediaries

Number of intermediaries

Terms and responsibilities


• Types of Intermediaries

– A firm needs to identify the types of intermediaries available to carry on its channel work

– A Real Estate Company• Its own branch offices • Property brokers


• Sometimes a company chooses an unconventional channel because of the difficulty, cost, or ineffectiveness of working with the dominant channel

• The advantage is that the company will encounter less competition during the initial move into this channel

– Eureka Forbes took a different route to market » Why?

– Amway/Tupperware went into network marketing» What is the benefit of MLM?


• Number of Intermediaries

Exclusive

Selective

Intensive


• Terms and Responsibilities of Channel Members– determine the rights and responsibilities of

participating channel members • The main elements in the “trade-relations mix”

are– Price policy– Conditions of sale– Distributors’ territorial rights– Mutual services and responsibilities

Evaluating the Major Alternatives

• Economic Criteria– Different channels produce a different level of sales,

service and costs

– Align customers and channels to maximize demand at the lowest overall cost

– Replace high-cost channels with low-cost channels as long as the value added per sale is sufficient

Value-Adds vs. Costs Evaluating the Major Alternatives

• Control and Adaptive Criteria• Commitment

– leads to a decrease in the producer’s ability to respond to a changing marketplace

• In volatile markets– the producer needs channel structures and policies that provide high

adaptability

• Asset specificity, relational investments and dilemma of flexibility vs. relationship

“You must control the end-outlets in order to increase your sales. Controlling end-outlets is costly, but not controlling them is even more costly. If you lose a prospective buyer, he is not likely to comeback”

Inventory Classification Techniques

• ABC– Based on Usage Value

• Not volume

• FSN• FMG/SMG/NMG

– Movement or Velocity

• VED– Criticality (Vital-Essential-Desirable)

Order Size and Frequency

• Effect of Order Size and Frequency

– On inventory level in Synnex Distribution Chain

– Service Level• Stock out and availability

Why consumers buy online?

The InternetThe Internet

• Steps in Buying Decision

– Recognition of need

– Definition of product needed

– Develop specifications

– Search for the product

– Analyze offers

– Evaluate

– Select

These steps now

being done more and

more on the Internet

Why Consumers Buy Online

• Communication

– Marketer to Consumer

– Consumer to Marketer

– Consumer to Consumer

• Blogs, Social Networking

Multichannel Marketing


The blending of different communication and delivery channels that are mutually reinforcing in attracting, retaining, and building relationships

with consumers who shop and buy in the traditional marketplace

eCommerce

• E-commerce – the company or site offers to transact or facilitate the

selling of products and services online – pure-click companies and brick-and-click companies

• M-Commerce


• Dual Distribution

• Multichannel Retailing

• Multichannel Marketing


• Implementation of Multichannel Marketing

– Transactional Website • Channel Conflicts

– Promotional Website

Multi Channel - Example

Publisher

of

Computer

(Specialty)

Books

General Book Wholesaler

Computer Supplies

and Accessories

Specialty Wholesaler

Internet Book

Retailer

Independent Book

Retailer

Electronics Superstore

Chain

Book Store Chain

Final

Consumer

Direct Salefrom

Publisher Website

Multi-channel

• Companies can gain three important benefits

– Increased market coverage

– Lower channel cost• Not always!

– More customized selling

• Problems of cooperation, control and conflict

Channel Management Decisions

Channel-Management Decisions

Selecting channel members

Training channel members

Motivating channel members

Evaluating and Controlling channel members

Modifying channel members

Selection of Channel Members

• General Criteria

– Number of years in business

– Other lines carried

– Growth and profit records

– Financial strength

– Cooperativeness

– Service reputation

Selection of Channel Members

• If the intermediaries are sales agents– Number and character of other lines carried– Size and quality of the sales force

• If the intermediaries are department stores that want exclusive distribution– Locations– Future growth potential– Type of clientele

Training and Motivating Channel Members

– understand their needs and wants

– provide training programs and market research programs to improve their performance

– communicate its view that the intermediaries are partners in a joint effort to satisfy end users of the product

Evaluating Channel Members

– Benchmarks or Performance Standards• sales quota attainment• average inventory levels• customer delivery times• treatment of damaged and lost goods• cooperation in promotional and training programs

– Under performers can be • counseled • retrained • motivated • terminated

Channel Conflict

• Channel conflict – when one channel member’s actions prevents the

channel from achieving its goal

• Channel coordination – when channel members are brought together to

advance the goals of the channel, as opposed to their own potentially incompatible goals

Types of Conflict

• Vertical channel conflict – conflict between different levels within the same channel.

• Horizontal channel conflict – conflict between members at the same level within the

channel.

• Multi-channel conflict – when the manufacturer has established two or more channels

that sell to the same market

– when the members of one channel get a lower price or work with a lower margin

Causes of Channel Conflict

• goal incompatibility

• unclear roles and rights

• differences in perception

Managing Channel Conflict

• Adoption of super-ordinate goals • Exchange persons between two or more channel levels • Co-optation

– an effort by one organization to win the support of the leaders of another organization by including them in advisory councils, and the like

• Joint membership in and between trade associations • Diplomacy• Mediation• Arbitration• Lawsuits

Managing Channel Conflict

• Channel Power– the ability to alter channel member’s behavior

• Types of power used to motivate channel members and elicit cooperation

– Objectively Observable• Coercive power• Reward power

– Subjective in Nature • Legitimate power• Expert power• Referent power

Channel Integration

• Vertical Marketing System (VMS)– the producer, wholesaler(s), and retailer(s) acting as

a unified system – One channel member, the channel captain, owns the

others, franchises them, or has so much power that they all cooperate

– VMSs achieve economies through• Size• Bargaining power• The elimination of duplicated services

Channel Integration

• Three types of VMS– Corporate VMS

• combines successive stages of production and distribution under single ownership

– Administered VMS• coordinates successive stages of production and distribution through the

size and power of one of the members – Manufacturers of a dominant brand are able to secure strong trade

cooperation and support from resellers

– Contractual VMS• independent firms at different levels of production and distribution

integrating their programs on a contractual basis to obtain moreeconomies or sales impact than they could achieve alone

Channel Integration

• Contractual VMS– Wholesaler-sponsored voluntary chains

– Retailer cooperatives

– Franchise organizations • manufacturer-sponsored retailer franchise.

• manufacturer-sponsored wholesaler franchise.

• service-firm-sponsored retailer franchise

Vertical Marketing Systems

Fairly goodto good

Contracts

McDonald’s

Complete

One company ownership

Florsheim

Some to good

Economic power and leadership

General Electric

Characteristics

Type of channel

Little ornone

None

Typical “inde‐pendents”

Amount of cooperation

TraditionalVertical marketing systems

Administered Contractual Corporate

Control maintained by

Examples

Channel Integration

• Horizontal Marketing Systems

– two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity

Rural Distribution Rural Distribution

• Traditional Channels for Reaching Out to Rural Customers– Haats– Mandis– Melas

Rural Distribution

• Innovative Distribution Channels for Rural Markets

– Hub and Spoke (Dabur, Reliance World etc.)

– Mobile shops and offices– Linkage with community based

organizations• (SHGs, NGOs, and cooperatives)

Retailing &

Wholesaling

RETAILING

• Retailing includes all the activities involved in selling goods or services directly to final consumers for personal non-business use

• Retailer – any business enterprise whose sales volume comes

primarily from retailing. – Any organization selling to the final consumer—no

matter how or where they are sold

Levels of Service

• Retailers can position themselves as offering one of four levels of service:– Self-service– Self-selection– Limited service– Full service

• Wheel of Retailing

Non-store retailing

• Non-store retailing has been growing much faster than store retailing

Direct selling

Buyingservice

Automatic vending

Directmarketing

Retailing vs etailing

• Advantages over etailing– Products that consumers can actually see, touch, and

test

– Real-life customer service

– No delivery lag time

– Provide a shopping experience • In-store entertainment

Private Labels

• A private label – also called reseller, store, house, or distributor

brands– is developed by retailer’s and wholesalers

• Experts Belief– 50 percent is the natural limit for carrying private

brands because:• Consumers prefer certain national brands• Many product categories are not feasible or attractive on a

private-brand basis

Why Private Labels ?

• They are more profitable than national brands

• Retailers develop exclusive store brands to differentiate themselves from competitors

Private Labels

• Growing power of store brands – Consumers are more price-sensitive.

– They are noting the better quality of the private-label brand

– Reduction in brand equity caused by a reduced advertising by national brand

– The endless stream of brand extensions and line extensions has blurred brand identity and led to a confusing amount of product proliferation

Generics

• Unbranded, plainly packaged, less expensive versions of common products. – offer standard or lower quality

• at a price that may be as much as 20 to 40 percent lower than nationally advertised brands

• 10 to 20 percent lower than private label brands

• The lower price of generics is made possible by lower-quality ingredients, lower-cost labeling and packaging, and minimal promotion

WHOLESALING

Includes all the activities involved in selling goods and services to those who buy for resale

or business use

Wholesalers vs. Retailers

• Pay less attention to promotion, atmosphere, and location

• Mostly deal with business customers

• Transactions are usually larger

• Cover a larger trade area

• The government deals with them differently in terms of legal regulations and taxes

WHOLESALING

• Wholesalers are more efficient in performing the following functions

• Selling and promoting• Buying and assortment building• Bulk breaking• Warehousing• Transportation• Financing• Risk bearing• Market information• Management services and counseling

MARKET LOGISTICS

Involves planning the infrastructure to meet demand, then implementing and controlling the physical flows of materials and final goods from points of origin to points of use, to meet customer

requirements at a profit

MARKET LOGISTICS

• The total cost of market logistics can amount to 30 to 40 percent of the product’s cost

– Lower market-logistics cost will permit lower prices

– A well-planned market-logistics program can be a potent tool in competitive marketing.

MARKET LOGISTICS

• Each possible market-logistic system will lead to the following costs:

M = T+FW+VW+S

• Where M = total market-logistic cost of proposed system

• Where T = total freight cost of proposed system

• Where FW = total fixed warehouse cost of proposed system

• Where VW = total variable warehouse costs (including inventory)

• Where S = total cost of lost sales due to average delivery delay under proposed system

MARKET LOGISTICS

• Role of Market Logistics– Deciding on the company’s value proposition to its

customers– Deciding on the best channel design and network

strategy for reaching the customers– Developing operational excellence in sales forecasting,

warehouse management, transportation management, and materials management

– Implementing the solution with the best information systems, equipment, policies, and procedures

MARKET LOGISTICS

• Supply Chain Management (SCM) Perspective – Supply chain management starts before the physical

distribution and helps in • Procuring the right products

• Converting them efficiently into finished products

• Dispatching them to their final destinations

• Identifying superior suppliers and distributors and improving their productivity

Market-Logistics Decisions

• Four major decisions must be made with regard to market logistics:– Order Processing

• How should orders be handled?

– Warehousing • Where should stocks be located?

– Inventory• How much stock should be held?

– Transportation• How should goods be shipped?


• Order Processing– the order-to-payment cycle

• That is the elapsed time between an order’s receipt, delivery, and payment

• Most companies today are trying to shorten the order-to-payment cycle

• The longer this cycle takes the lower the customer’s satisfaction and the lower the company’s profits.


• Warehousing – Every company has to store finished goods until they

are sold• production and consumption cycles rarely match

– Storage function helps smooth discrepancies between production and quantities desired by the market

– Number of inventory stocking locations• goods can be delivered to customers more quickly

• higher warehousing and inventory costs


• Inventory– Inventory decision making involves knowing

• when to order?&

• how much to order?

– The optimal order quantity can be determined by observing how order-processing costs and inventory-carrying costs sum up at different order levels

Determining Optimal Order Quantity Market-Logistics Decisions

• Inventory Classification– Companies are reducing their inventory costs

by treating inventory items differently• They are positioning inventory items according to risk and

opportunity

• They are also keeping slow-moving items in a central location while keeping faster moving items closer to customers

Inventory Classification Techniques

• ABC– Based on Usage Value

• Not volume

• FSN• FMG/SMG/NMG

– Movement or Velocity

• VED– Criticality (Vital-Essential-Desirable)


• Transportation

– Transportation Choices affect

• product pricing

• on-time delivery performance

• the conditions of the goods upon arrival

– All these affects customer satisfaction


• Transportation Factors– Speed– Frequency– Dependability– Capability– Availability– Traceability– Cost


• Combination of Two Modes of Transportation– Piggyback

• rail and trucks

– Fishyback• water and trucks

– Trainship• water and rail

– Airtruck• air and trucks

Integrated Logistics Systems (ILS)

• An integrated logistics system (ILS) includes materials management, material flow systems, and physical distribution, aided by information technology

Viral Marketing

• What is Viral Marketing?

– WOMM• Origin of Viral Marketing

– Connected Marketing

– Role of Internet

Viral Marketing

The use of electronic media, alone or in

conjunction with other media, to generate

the distribution of an idea/message within

an active network of consumers

My network offriends/associates

One-to-One W3 Marketing

Many-to-Many Social Network Marketing

Your network of friends/associates

Their network offriends/associates

Mass MarketingOne-to-Many

Models of Media Influence (Source: Marsden) Media Mix

• Conventional Media vs. Internet

– What will be the future?

Personal SellingPersonal Selling

Introduction

• Promotion is communicating with potential customer– Personal selling is one of the most effective way

• Personal Selling is often a company’s largest single operating expense

What is Personal Selling?

• Personal presentation by the firm’s sales force for the purpose of making sales and building customer relationships.

• Personal selling is paid personal communication that attempts to inform customers and persuade them to purchase products or services


• Personal selling allows the marketer or seller to– communicate directly with the prospect or customer

and listen to his or her concerns

– answer specific questions

– provide additional information

– inform

– persuade

– sometimes even recommend other products or services


• Personal Selling

– Is it a Marketing Channel?

– Is it part of Promotion and/or Communication?

– What was Eureka Forbes doing with Direct Sales Model?

Strategy Planning for Personal Selling

Target Market

Product Place Promotion Price

PersonalSelling

MassSelling

SalesPromotion

Numberand type of

salespersonsneeded

SalesTechnology

Support

Selection and

TrainingProcedure

Compensationand

Motivation Approach

Personal Selling

Techniques

Designing a Sales Force

Sales force objectives

Sales force strategy

Sales force structure

Sales force size

Compensation

Marketing Communications


Marketing communications are the means by which firms attempt to inform, persuade, and

remind consumers, directly or indirectly, about the products and brands they sell.


• Inform, Persuade and Remind

• Directly or Indirectly

Marketing communications represent the ‘voice of the brand’ and are a means by which it can

establish a dialogue and build relationships with consumers.

Marketing Communications Mix

• Advertising

• Sales promotion

• Events and experiences

• Public relations and

publicity

• Direct marketing

– Interactive marketing

– Word-of-mouth / Word-of-

web marketing

• Personal selling

Communication Platforms

Advertising• Print and broadcast ads• Packaging inserts• Motion pictures• Brochures and booklets• Posters• Billboards• POP displays• Logos• Videotapes

Sales Promotion• Contests, games,

sweepstakes• Premiums• Sampling• Trade shows, exhibits• Coupons• Rebates• Entertainment• Continuity programs


Events/ Experiences• Sports

• Entertainment

• Festivals

• Arts

• Causes

• Factory tours

• Company museums

• Street activities

Public Relations• Press kits• Speeches• Seminars• Annual reports• Charitable donations• Publications• Community relations• Lobbying• Identity media• Company magazine


Personal Selling

• Sales presentations

• Sales meetings

• Incentive programs

• Samples

• Fairs and trade shows

Direct Marketing• Catalogs• Mailings• Telemarketing• Electronic shopping• TV shopping• Fax mail• E-mail• Voice mail• Blogs• Websites

How advertising and promotions work?

How advertising and promotions work? Communication Process Models

Macro Model• Parties

– Sender– Receiver

• Tools – Message– Media

• Functions – Encoding– Decoding– Response– Feedback

• Noise

Micro Model• Consumer’s specific response

to communications • The buyer passes through

– Cognitive (learn) stage– Affective (feel) stage– Behavioral (do) stage

• learn-feel-do– High involvement high differentiation

• do-feel-learn – High involvement low differentiation

• learn-do-feel – Low involvement low differentiation

Elements in the Communications Process key factors in effective communication

– Senders must know what audiences they want to reach and what response they want to get

– They must encode their messages so that the target audience can decode them

– They must transmit the message through media that reaches the target audience

– Develop feedback channels to monitor the responses

Field of Experience

Receiver’s field

Sender’s field

Communication Process & Perception

• Perception depends on

– the physical stimuli

– the stimuli in relation to the surrounding field

– The conditions within the individual


• The key point is that perception can vary widely among individuals exposed to the same reality

• In marketing, perceptions are more important than the reality – it is perceptions that will affect consumers actual

behavior

•People can emerge with different perceptions of the same object because of three perceptual processes

Selective attention

Selective distortion

Selective retention


Selective Attention

• It has been estimated that the average person may be exposed to over 1,500 ads or brand communications a day – A person cannot possibly attend to all of these stimuli – Selective attention means that marketers have to work

hard to attract consumers notice

• The real challenge is to explain which stimuli people will notice

Selective Attention

• People are more likely to notice stimuli – that relate to a current need

» A person who is motivated to buy a computer will notice computerads; he or she will be less likely to notice DVD ads

– that they anticipate » more likely to notice computers than radios in a computers store

– whose deviations are large in relation to the normal size of the stimuli

» more likely to notice an ad offering $100 off the list price of a computer than one offering $5 off

– which is unexpected » Sudden offers

Selective Distortion

• Even noticed stimuli do not always come across in the way the senders intended

• Selective distortion – the tendency to interpret information in a way that will

fit our preconceptions – Consumers will often distort information to be

consistent with prior brand and product beliefs

Selective Distortion & Strong Brands

• Selective distortion can work to the advantage of marketers with strong brands when consumers distort neutral or ambiguous brand information to make it more positive

– Food may seem to taste better– An automobile may seem to drive more smoothly

– When tasting both on a blind basis • Consumers were found to be equally split in their preference

for Diet Coke versus Diet Pepsi

– When tasting the branded versions • Consumers preferred Diet Coke by 65% and Diet Pepsi by

only 23%, with the remainder seeing no difference

Selective Retention

• People fail to register much information to which they are exposed in memory, but tend to retain information that supports their attitudes and beliefs

• Because of selective retention people are likely to remember good points about a product they like and forget good points about competing product

Selective Retention

• Selective retention also works to the advantage of strong brands

• It explains why marketers need to use repetition in sending messages to their target market – to make sure their message is not overlooked

Micro Models Communication

• It is necessary to explore the possibilities people have for – thinking– feeling – behaving

towards the various products and services in their lives

Response Hierarchy Models


• This isn’t easy because we are all capable of being

– logical and illogical

– objective and subjective

– obvious and subtle

all of this simultaneously

Theories of Advertising Effectiveness

• Economic– a rational consumer who consciously considers functional cost-

utility information in a purchase decision

• Responsive– a habitual consumer conditioned to thoughtlessly buy through

rote, stimulus-response learning

• Psychological– an unpredictable consumer who buys compulsively under the

influence of unconscious thoughts and indirect emotions

• Social– a compliant consumer who continually adjusts purchases to

satisfy cultural and group needs for conformity

Economic theory

• Consumers act in their own financial self-interest– They look for maximum utility at the lowest cost– Rational, methodical calculation

• Consumers must have functional information to make a decision

• This old, much-revered theory most often applies to commodity items

Responsive theory• Consumers are lazy and want to buy with

minimum effort– They develop habits through stimulus-response

learning

• The process is non-rational and automatic as repetition builds and then reinforces buying activity for routine products

• Information serves a reminder/exposure, ratherthan thoughtful, purpose

Psychological theory

• Explains consumer behavior as ego involvement– the personality must be defended or promoted– essentially unpredictable, undeliberate and latent

• Implicit product attitudes are more important thanfunctional benefits for the selective products that touch people so deeply

Social theory

• Describes consumers as basically imitative– People watch what others buy and comply/adjust

to get along or be inconspicuous• It is an emotional, insecure behavior

– Group role, prestige, status and vanity concerns are involved

• Opinion leaders and word-of-mouth communication are important for the visible products affected

Involvement

• a continuum of consumer interest in products and services– On the high side are those that are important in

money cost, ego support, social value or newness• they involve more risk, require paying more attention to

the decision and demand greater use of information

– Low involvement decisions are at the other extreme

• they arouse little consumer interest or infor-mation handling because the risk is small and effort can be reduced accordingly

Modified Response Hierarchy

• Learn-Feel-Do

– Does not necessarily occur in sequential path

– Sequence can change

Alternative Response Hierarchies: Three-Orders Model

Perceived Product

Differentiation

High

Low

(Learning model)

Cognitive

Affective

Conative

(Dissonance attribution model)

Conative

Affective

Cognitive

(Low Involvement model)

Cognitive

Conative

Affective

High Low

Topical Involvement

Strong vs. Weak theories of Advertising

• Jones’s Strong Theory of Advertising

– Consumers are passive

– Ad can persuade & generate repeat purchase behavior

• Ehrenberg’s Weak Theory of Advertising

– Consumers are active problem solvers

– Driven by habit to make a purchase

– Awareness-Trial-Reinforcement framework (ATR)

Steps in Developing Effective Communications

Identify target audience

Determine objectives

Design communications

Select channels

Establish budget

Decide on Communication mix

Measure results/ manage IMC

Identify Target Audience

• Who are they?– Potential buyers of the

company’s products– Current users, deciders, or

influencers– Individuals, groups, or

particular publics– General public

• Decisions based on target audience– What to say– How to say it– When to say it– Where to say it– To whom to say it





Select channels

Establish budget



Communications Objectives

Category Need Brand Awareness

Brand Attitude Purchase Intention

Category Need

• Communication objective of establishing a category need– Establishing a product or service category as necessary

to remove or satisfy a perceived discrepancy between a current motivational state and a desired emotional state

– Used for new-to-the-world products

Brand Awareness

• Ability of identify (recognize or recall) the brand within the category in sufficient detail to make a purchase

• Brand Recognition vs. Brand Recall – Recall is important outside the store

– Planned purchases

– Recognition is important inside the store– Impulse items

Brand Attitude

• Evaluating the brand with respect to its perceived ability to meet a currently relevant need.

• Relevant brand need can be – Negatively Oriented

• Problem removal, problem avoidance, incomplete satisfaction and normal depletion

– Positively Oriented • Sensory gratification, intellectual stimulation or social

approval

Brand Purchase Intention

• Self instructions to purchase the brand or to take purchase related action

– Encouraging consumers to make a mental commitment to buy

– Sales Promotions often help in this• BOGOF

Consumer States for Two Brands Steps in Developing Effective Communications




Select channels

Establish budget



Design Communications

What to Say?Message Strategy

How to Say?Creative Strategy

Who should Say?Message Source

Design Communications – Message

What to Say?Message Strategy

AppealsThemes Ideas

Brand Positioning

Point of Parity OR Point of Difference

• Creative Strategy

– how a message is being expressed

– content of the message itself

Creativity Design Communications – Creativity

Information Appeal

– Product benefits or attributes

– Assumes rational processing on part of consumer

– Problem solving, product demonstration, product comparison, testimonials

Information Appeal

• Three types of informational appeals

– Conclusion drawing

– One-versus-two-sided arguments

– Order of argument presentations

Transformational Appeals

– Non-product-related benefit or image

• What kind of person uses a brand?

• What kind of experience results from using the brand?

Design Communications – Which Appeals?

• Negative appeals – Fear– Guilt– Shame

• Positive appeals – Humor– Love– Pride– Joy

Points-of-difference (PODs)

• Attributes or benefits consumers strongly associate with a brand, positively evaluate and believe they could not find to the same extent with a competing brand

– points where you are claiming superiority or exclusiveness over other products in the category

Points-of-parity (POPs)

• Associations that are not necessarily unique to the brand but may be shared by other brands

– where you can at least match the competitors claimed benefits

– they may usually not be the reason to choose a brand, but their absence can certainly be a reason to drop a brand

Herzberg’s Theory

– Two Factory Theory

• Motivation – PoD

• Hygiene – PoP

Borrowed Interest

• Motivational or “borrowed interest” devices are often employed to attract consumer attention and raise their involvement with an ad

– Borrowed interest advertising • firms “borrow” consumers’ interest in something outside the

company — is a way for companies to ride on the success/appeal of larger events,

» Example: Olympics, president’s birthday, a steep rise in gas prices, Valentine’s day promotion.

Borrowed Interest

• You don’t need to borrow any interest if you communicate the things that buyers are interested in hearing

• Archie's advertising valentine’s day gifts during February – “borrowed interest”?

Break Through the Clutter

• A challenge in arriving at the best creative strategy– figuring out how to “break through the clutter” to attract

the attention of the consumer—but still be able to deliver the intended message

Break Through the Clutter

• With so many advertisers vying for the attention of consumers in so many places– How can any particular message get noticed?– How to fight advertising glut?

• Get noticed amidst the glut by adding to it — “adjusting”spending levels to market conditions

• Use innovative media ideas

• Make breakthrough creative

Design Communications – Message Source

• Spokesperson’s credibility

• Factors underlining credibility • Expertise• Trustworthiness• Likeability

Design Communications – Message Source

• Congruity

– Positive attitude towards source and product

– communicators can use their good image to reduce some negative feelings toward a brand but in the process might lose some esteem with the audience





Select channels

Establish budget



Communication Channels

Personal • two or more persons

communicating directly face-to-face, person to audience, over the telephone, or through e-mail

• Products– Expensive, risky, infrequently

purchase, indicate status or taste

Communication Channels• Steps to stimulate personal

influence channels – Create opinion leaders – Work through community

“influentials”– Develop word-of-mouth referral – Establish an electronic forum – Use viral marketing – Use influential or believable people in

testimonial advertising – Develop advertising that has high

“conversation value”.

Non-Personal Communication Channels

• Communications directed to more than one person

– Media

– Sales promotions

– Events and experiences

– Public relations

Non-Personal Communication Channels

Mediaprint, broadcast, network, electronic, and display

Sales Promotionconsumer promotions, trade promotions, and business and sales-force promotion

Events and Experiencessports, arts, entertainment, and cause events

Public Relationsdirected internally or externally to consumers, other firms, media, and government

Events and Experiences

• The lasting effects of events on brand awareness, knowledge, or preference will depend upon

– the quality of the product – the event itself, and – its execution

Communicating to the Rural Audience

• Large variations – language – culture

• Campaigns have to be tailor made for product and region• Product demonstrations

– haats, mandis, and melas (fairs)

• TV and print media do not reach all villages and all customers

• Wall paintings and signboards are very popular• Folk theatre, magic shows and puppet shows are also

used as a media vehicle





Select channels

Establish budget



Communication Budget

Affordable

Percentage-of-Sales

Competitive Parity

Objective-and-Task

Objective-and-Task Method

– Establish the market share goal– Determine the percentage that should be reached– Determine the percentage of aware prospects that

should be persuaded to try the brand– Determine the number of advertising impressions per

1% trial rate– Determine the number of gross rating points that

would have to be purchased– Determine the necessary advertising budget on the

basis of the average cost of buying a GRP

FMCG Ad Spend Steps in Developing Effective Communications




Select channels

Establish budget



Characteristics of The Marketing Communications Mix

• Advertising– Pervasiveness– Amplified

expressiveness/dramatization – Impersonality

• Sales Promotion– Attention/Communication– Incentive– Invitation

• Public Relations and Publicity– High credibility

– Dramatization

• Events and Experiences– Relevant

• Personal involvement

– Involving• Active engagement

– Implicit• Soft/indirect selling

Characteristics of The Marketing Communications Mix

• Direct Marketing– Customized

– Up-to-date

– Interactive

• Personal Selling– Personal interaction

– Response

– Cultivation of relationships

• Word-of-Mouth Marketing– Credible– Personal– Timely

Factors in Setting Communications Mix

• Type of product market– B-to-B vs. B-to-C– Complexity, risk, price

• Buyer readiness stage– Awareness, Comprehension, Conviction, Order, Reorder

• Product life cycle stage– Introduction

• Advertising, Events and Experiences, PR• Personal Selling; Direct Marketing and SP

– Growth• Word of Mouth

– Maturity • All

– Decline • SP

Major Media Types

• Newspapers

• Television

• Direct mail

• Radio

• Magazines

• Outdoor

• Yellow Pages

• Newsletters

• Brochures

• Telephone

• Internet

Choosing Among Major Media Types

• Target audience and media habits

• Product characteristics

• Message characteristics

• Cost

Cost Effectiveness by Buyer Readiness Stage

Promotional Tools and Purchase Decision Stages Two Step Process – Integration of Channels

• Mass communications affect personal attitudes toward behavior through a two-step process

– Ideas flow from mass media to opinion leaders

– Opinion leaders to the less media-involved population groups

Models of Media Influence (Source: Marsden) Models of Media Influence

• The influence of mass media on public opinion is not as direct, powerful, and automatic as supposed– It is mediated by opinion leaders– People interact primarily with their own social groups

and acquire ideas from opinion leaders in their group

• Hence, mass communicators should – direct messages specifically to opinion leaders, and – let opinion leaders carry the message to others

Deciding On Media Timing and Allocation

• The macro-scheduling problem – scheduling the advertising in relation to seasons and the business

cycle

• Micro-scheduling problem – allocating advertising expenditures within a short period to obtain

maximum impact

Factors Affecting Timing Patterns

• Buyer turnover– the higher this rate, the more continuous the

advertising should be

• Purchase frequency– the higher the purchase frequency, the more

continuous the advertising should be

• Forgetting rate– the higher the forgetting rate, the more continuous the

advertising should be

Media Schedule Patterns

• The advertiser has to choose among

– Continuity

– Concentration

– Flighting

– Pulsing

Classification of Advertising Timing Patterns

Media Selection

• Finding the most cost-effective media to deliver the desired number and type of exposures to the target audience

• Deciding on– Reach– Frequency– Impact

• Readership and Circulation

Reach– Launching new products

– Flanker brands

– Extensions of well-known brands

– Infrequently purchased goods

– Going after an undefined target market

Frequency – There are strong competitors

– A complex story to tell

– High consumer resistance

– A frequent-purchase cycle

Relationship Among Trial, Awareness, and the Exposure Function

• The relationship between reach, frequency, and impact is captured in the following concepts:

– Total number of exposures (E) is reach times the average frequency:

E = R x F– Also called GRP (Gross Rating Points)

– Weighted number of exposures (WE) is the reach times average frequency times average impact:

WE = R x F x I

Selecting Specific Vehicles

• Most cost-effective vehicles within each chosen media type

• Estimates of – Audience size

» Circulation» Audience» Effective audience» Effective ad-exposed audience

– Composition» Audience Profile (E.g. Magazines have reader profiles)

– Media cost » cost per thousand persons reached by a vehicle





Select channels

Establish budget




• It is necessary to explore the possibilities people have for – thinking– feeling – behaving

towards the various products and services in their lives


• This isn’t easy because we are all capable of being

– logical and illogical

– objective and subjective

– obvious and subtle

all of this simultaneously

Consumer & Sales Effect Research

• Communication-Effect Research– Consumer feedback method

– asks consumers for their reactions to a proposed ad

– Portfolio tests– ask consumers to view or listen to a portfolio of advertisements,

then consumers are asked to recall all the ads and their contents

– Laboratory tests– uses equipment to measure physiological reactions to an ad

• Sales-Effect Research

Measuring Sales Impact of Advertising Consumer States for Two Brands

Advertising

• What is Advertising?

– Any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor

• Half of ad dollars are wasted.. The problem is we don’t know which half ?

– Can be a cost-effective way to disseminate message• to build a brand preference

or • to educate people

Advertising

• Five M’s of Advertising

Advertising

• An advertising goal

– specific communication task and achievement level

– to be accomplished with a specific audience

– in a specific period of time

Advertising Objectives

Informative advertising

Reminderadvertising

Reinforcementadvertising

Persuasiveadvertising

Advertising

• Classification of Advertising Objectives– Informative Advertising

• to create brand awareness

• knowledge of new products

• new features of existing products

– Persuasive Advertising • to create liking, preference, conviction, and purchase of a

product or service

Advertising

• Classification of Advertising Objectives

– Reminder Advertising

• to stimulate repeat purchase of products and services

– Reinforcement Advertising

• to convince purchasers that they made the right choice

Advertising

• Advertising Spend (Budget)?

– Are you spending the right amount?

– treated as a current expense

– an investment in building brand equity

Advertising Budget – Factors to Consider

Market share and consumer base

Competition and clutter

Advertising frequency

Product substitutability

Stage in the product life cycle

Television

Advantages• Reaches broad spectrum

of consumers

• Low cost per exposure

• Ability to demonstrate product use

• Ability to portray image and brand personality

Disadvantages• Brief

• Clutter

• High cost of production

• High cost of placement

• Lack of attention by viewers

Print Ads

Advantages• Detailed product

information

• Ability to communicate user imagery

• Flexibility

• Ability to segment

Disadvantages

• Passive medium

• Clutter

• Unable to demonstrate product use

How to Evaluate Print Advertisements

• Is the message clear at a glance? Can you quickly tell what the advertisement is all about?

• Is the benefit in the headline? • Does the illustration support the headline? • Does the first line of the copy support or explain

the headline and illustration? • Is the ad easy to read and follow? • Is the product easily identified? • Is the brand or sponsor clearly identified?

Advertising

• Radio Ads– Radio’s main advantage is flexibility:

• Stations are very targeted• Ads are relatively inexpensive to produce and place• Short closing allow for quick response

– Disadvantages • The lack of visual images• Relatively passive nature of the consumer processing that

results

Actual and Projected Growth of Indian Radio Industry

InternetInternet

Online Promotional Opportunities

• Websites

• Microsites

• an individual web page or cluster of pages which are meant to function as an auxiliary supplement to a primary website

• Search ads & Display ads

• Interstitials

– web page advertisements that are displayed before or after an expected content page

• Sponsorships

• Online communities

• Email

• Mobile marketing

• Internet-specific ads and videos

Alternative Advertising Options – Place Advertising

• Creative and unexpected ad placement to grab

consumer’s attention

• Reaching people in other environments, such as

where they • Work

• Play

• Shop

Place Advertising

• Examples- Billboards- Public places- Product placement- Point-of-purchase

Public Relations Public Relations

PUBLIC RELATIONS

Public relations (PR) involves a variety of programs designed to promote or protect a company’s image or its individual products

– A public is any group that has an actual or potential interest in or impact on a company’s ability to achieve its objectives

Tasks Aided by Public Relations

• Launching new products• Repositioning a mature product• Building interest in a product category• Influencing specific target groups• Defending products that have encountered public

problems• Building the corporate image in a way that

reflects favorable on products

Public Relations Functions

• Press relations

• Product publicity

• Corporate communications

• Lobbying

• Counseling

Major Tools in Marketing PR

• Publications

• Events

• Sponsorships

• News

• Speeches

• Public Service Activities

• Identity Media

Decisions in Marketing PR

Establish objectives

Choose messages

Choose vehicles

Implement

Evaluate results

Direct Marketing

What is Direct Marketing?

Direct marketing is the use of consumer-direct channels to reach and deliver goods and services to customers without using market middlemen

– Permits target market selectivity– Can be personalized– Is flexible– Allows for early testing and response measurement

Direct Marketing Channels

Direct mail

Catalogs

Telemarketing

Other direct response

Constructing a Direct-Mail Campaign


Select target prospects

Develop offer elements

Test elements

Execute

Measure success

RecencyRecency

FrequencyFrequency

Monetary valueMonetary value

RFM - Selecting Prospects

Events &

Experiences

Introduction

• A phenomenon or any observable occurrence that has a beginning and an end i.e. it occurs in a specific time period

• It also means some type of gathering– Ceremonies, exhibitions, performances, festivals,

media events, parties, competition, convention (meeting) etc

• Involvement of customer – Creates experiences and feelings about products or

brands

Events and Experiences

• Involvement of Brand in events and experiences can broaden and deepen its relationship in consumers’ lives– Becoming part of a special and more personally

relevant moment in consumers’ lives

– affecting consumers’ brand attitudes and beliefs

– Atmospheres or “packaged environments” create or reinforce leaning toward product purchase

Why marketer’s sponsor events ?

• To identify with a particular target market or life style• To increase awareness of company or product name• To create or reinforce consumer perceptions of key

brand image associations• To enhance corporate image dimensions• To create experiences and evoke feelings• To express commitment to the community or on social

issues• To entertain key clients or reward key employees• To permit merchandising or promotional opportunities

Major Sponsorship Decisions

Choosing Events

Designing Sponsorship Programs

Evaluating Sponsorship Activities

Choosing an Event – An Ideal Event

Audience closely matches target market

Event generates media attention

Event is unique with few sponsors

Event lends itself to ancillary activities

Event enhances brand image of sponsor

Sales PromotionSales Promotion

IntroductionIntroduction

Sales promotion and packaging help move prospects and customers through the decision process started by

other MC functions

Sales promotion and packaging help move prospects and customers through the decision process started by

other MC functions

Public RelationsDirect Marketing

Website

Awareness InterestAwareness Interest Desire ActionDesire Action

Sales Promotion Packaging

What is Sales Promotion?

• Sales promotions consist of a collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular products or services by consumers or the trade

• Includes tools for– Consumer promotion– Trade promotion– Sales-force promotion

What is Sales Promotion?

• The media and non-media marketing pressure applied for a predetermined, limited period of time at the level of consumer, retailer, or wholesaler in order to stimulate trial, increase consumer demand, or improve product availability

– American Marketing Association

Types of Sales Promotion

Consumer PromotionConsumer Promotion Trade PromotionTrade Promotion

The use of incentives to motivate end users to purchase a brand and thus pressure retailers to stock that brand•Used by marketers as part of a pull strategy

The use of incentives to motivate end users to purchase a brand and thus pressure retailers to stock that brand•Used by marketers as part of a pull strategy

The use of incentives to motivate the buying and reselling of products•Used as part of a push strategy

The use of incentives to motivate the buying and reselling of products•Used as part of a push strategy

Types of SP. . . .

Manufacturer Trade

Customer

Trade Promotions

Retailer PromotionCustomer Promotion

Push

Push

Pull

• What do we want the consumers and trade to do?

– Buy More

– Buy Now

Major Sales Promotion Decisions


Select tools

Develop program

Pretest

Implement and control

Evaluate results

Sales promotions objectives

• Objectives can be classified into three different categories – Consumers – Retailers or Intermediaries– Sales Force

Considerations in Developing a Sales Promotion

• Short term impact

– Sales

• Long term effect on the brand

– Brand equity

– Profitability

• Competitive reaction

– Retaliatory promotions

• Quick fix?

Types of Buyers

• Loyals– Buy a particular brand on a more or less consistent basis

• Competitive loyals– People who are loyal to the competing brand

• Switchers– Purchase of various brands in one category

• Price buyers

• Non Users

Results that are needed ….• Loyals

– Reinforce behavior– Increase consumption– Change buying timing

• Competitive Loyals– Break loyalty– Encourage brand switching

• Switchers– Persuade to buy the “right” brand more often

• Price – Value added to make price less important

• Non users– Create awareness, create category worth

Sales Promotion Tools

• Manufactures promotions – rebates and gifts

• Retailer promotions – price cuts, feature advertising, coupons, contests, premiums

• Consumer franchise-building promotions – build brand equity while moving product

• Trade-promotion tools – award money/incentive to the trade

• Sales-force-promotion tools – used to gather business leads, impress, and reward customers,

and motivate the sales force to greater effort

Franchise-Building and Non-franchise Building Promotions

Consumer Franchise Building Promotions – Promotional activities that communicate distinctive brand attributes and contribute to the development and reinforcement of brand identity.

Examples: free samples, in-store demonstrations and service materials like recipes

Consumer non-Franchise Building Promotions – Promotional activities that are basically intended to generate immediate sales, or shorten the buying decision process rather than implanting unique and important ideas about the brand in the consumer’s mind.

Examples: price-offs, coupons and free gifts

• CFB promotions– communicate distinctive brand attributes

– reinforce brand identity

– encourage repeat purchase and brand loyalty

– convert consumers to loyal customers

• Non-FB promotions– accelerate purchase decision process

– generate immediate increase in sales

– borrow customers from other brands

Franchise-Building and Non-franchise Building Promotions

CFB activities affect sales for about 4 years

Non-CFB activities affect sales for 1 year or less

When you spend too much on non-CFB relative to

CFB, profits decline within 2 years

Franchise-Building and Non-franchise Building Promotions Developing the Program

• Factors to be considered– The size of the incentive

– The conditions for participation

– The duration of the promotion

– The distribution vehicle

– The timing of the promotion

– The total sales-promotion budget

Pre-testing

• To determine if

– the tools are appropriate

– the incentive size optimal

– the presentation method efficient

Implement and Control

• Prepare implementation and control plans for each individual promotion that cover lead-time and sell-in time

• lead-time – the time necessary to prepare the program prior to

launching it • sell-in time

– begins with the promotional launch and ends when the merchandise is in the hands of consumers

Evaluation

• Can be evaluated using three methods

– Sales data

– Consumer survey

– Experiments

• Evaluate the effect on brand image/loyalty

Advertising versus Sales Promotion

• Above the Line vs. Below the Line• Advertising to sales promotion ratio

– The ratios of advertising expenditure to that of sales promotion in developed countries is around 30:70

– Although focus on advertising is higher, a trend of preference for Sales Promotion over advertising is visible in developing countries as well

– What are the Reasons ??

Impact of displays/featuring

• Average sales increase with a 10% price cut = 20%

• Increase with 10% price cut AND ad feature = 78%

• Increase with 10% price cut AND display = 105%

• Increase with all three = 203%

Why the Growth???

• Instant results

• Faster implementation

• Measurable

• Relatively easy and inexpensive

Integrated Marketing Communications

(IMC)

• Conceptualize IMC in

terms of “All Contacts”

between customer &

brand

What is IMC ?

IMC is a strategic business process used to plan, develop, execute and evaluate coordinated, measurable, persuasive brand communication programs with consumers, customers, prospects employees and other relevant external and internal audiences.

The goal of IMC is to generate

short‐term financial returns

and build long‐term brand

value.

What is IMC?

• It is concept of marketing communications planning that recognizes the added value of a comprehensive plan

– Such a plan evaluates the strategic role of a variety of communications disciplines – for example, general advertising, direct response, sales promotion, and public relations – and combines these disciplines to provide clarity, consistency, and maximum impact through the seamless integration of messages

Reasons for Growing Importance of IMC

Traditional compensationTraditional compensation Performance-based compensation Performance-based compensation

Media advertisingMedia advertising Multiple forms of communicationMultiple forms of communication

Mass mediaMass media Specialized mediaSpecialized media

Manufacturer dominanceManufacturer dominance Retailer dominanceRetailer dominance

General focusGeneral focus Data-based marketingData-based marketing

Low agency accountabilityLow agency accountability Greater agency accountabilityGreater agency accountability

Limited Internet availabilityLimited Internet availability Widespread Internet availabilityWidespread Internet availability

FromFrom TowardToward

IMC to Build Brand Equity

Documents

MM-2-Pre Mid Slides-Shared With Class