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MARKETING MANAGEMENT
For
MBA-SEM II-Bharathiar University, CBE
BY
PROF. NARAYAN PRASADBE ( MECH. ), PGD-MM, MBA.
INTERNATIONAL INSTITUTE OF BUSINESS STUDIES,
BANGALORE.
E-Mail : [email protected]
CELL PHONE : 9481778351
Unit - I• Marketing Concepts & Tasks. Defining & delivering customer value & satisfaction.
• Value Chain : Delivery Network, Marketing Environment, Adapting Marketing to new liberalised economy.
• Digitalisation, Customisation, Changing Marketing Practices, e-business : setting-up web sites.
• Marketing Information System, Strategic Marketing Planning & Organisation.
2
Reference Books
3
SL.
No.NAME AUTHOR
1 “ Marketing Management ”
13th Edition-A South Asian Perspective
( Pearson Education-Prentice Hall )
Kotler, Keller,
Koshy & Jha
2 “ Marketing Management ”
( Tata McGraw Hill Publication )Rajan Saxena
3 “ Marketing Management ”
( Vikas Publications )
Arun Kumar &
N.Meenakshi
4 “ Marketing Management ” Biplab .S. Bose
Philip Kotler
4
5
FUNDAMENTALS
OF
MARKETING
Definition of Market
“Market” is a geographical region
or a place which facilitates
interaction & exchange between
Buyers & Sellers. It can be an
actual or conceptual place, where
in forces of demand & supply
operate.
Types of MarketsOn Geographic or Area basis
• 1. Local market
• 2. National market
• 3. International market or Global market
On Economic basis-
• 1. Perfect market
• 2. Imperfect market
On the basis of Business
• 1. Wholesale market
• 2.Retail market
On the basis of Customer type
• 1. Consumer market
• 2. Business market or Industrial market
What is Marketing ?
9
Definition of Marketing
Traditional Definition : Marketing is a
management process that identifies,
anticipates & satisfies customer needs
profitably, in order to achieve the
organizational goals & objectives.
Modern Definition : Marketing is an
organizational function and a set of processes
for creating, communicating & delivering
value to customers and for managing
customer relationships in ways that benefit the
organization and its stakeholders.
Needs, Wants & Demands
• Need : Something you have to have
• Want : Something you would like to have
• Demand : Want accompanied by buyer‟s
ability to buy
Needs, Wants & Demands
Needs: are the basic human requirements, such as : food, air, water, clothing, shelter, etc. People also have strong needs for recreation, education & entertainment.
• A Human need is a state of felt deprivation of some basic necessity or satisfaction.
•Marketers cannot create basic „Needs‟, but constantly try to create specific „Wants‟
Wants
• Wants: “Needs” become “Wants” when they are directed to specific objects that may satisfy the needs.
• Wants are shaped by one‟s Society, Culture & Individual Personality. Wants are „desires‟ for specific satisfiers of these deeper needs.
Eg: An American Needs food, but Wants burger. An Indian also Needs food but Wants Rice. So basic human Needs are the same as outlined above, but human Wants keep on changing & can be unlimited.
Demands
• Demands: are wants for specific
products, backed by an ability to
pay & willingness to buy them.
• Companies must not only measure
how many people want the product,
but how many would actually be willing
& able to buy them.
14
Customer Needs & Wants are fulfilled through a Marketing offering, which may be products, services, information or experiences or a combination thereof, offered to a market to satisfy a need or want.
The American Marketing Association (AMA) defines Marketing as “The process of planning & executing the conception, pricing, promotion and distribution of ideas / goods / services to create exchanges that satisfy individual & organizational goals.”
15
Marketing starts with identifying customer needs and wants and ends with satisfying them through a coordinated set of activities that also allows a firm to achieve its own goals, profitably.
Marketing lays emphasis on providing the righttype of products to customers at the right place,at the right price, at the right time and in the rightform i.e. Marketing provides Form, Time, Place& Possession Utilities to customers. { The extentto which a product / service satisfies customer needs / wants is
called „Utility‟ }. Communication of information aboutthe product helps customers determine whetherthe product satisfies their needs.
The Core Concepts of Marketing
Needs
Wants
Demands
Products
Value
Cost
Satisfaction
Exchanges
Transactions
Relationships
Markets
Marketing
Marketers
1
2
3
4
5
6
Marketing Management
“Marketing Management is abusiness discipline which isfocused on the practicalapplication of marketing-techniques & the managementof a firm's marketingresources & activities.”
Functions of Marketing
Importance of Marketing(A) Importance of marketing to society
1. Delivery of standard of living
2. Provides Employment
3. Decrease in distribution cost
4. Increase in national income
(B) Importance of marketing to the Firm
1. Helpful in business planning & decision-making
2. Helpful in increasing profits
3. Helpful in communication between firm & society
THE EVOLUTION OF MARKETING• The stage of barter
• The stage of money economy
• The stage of industrial revolution
• The stage of competition
• The emergence of marketing
DISTINCT CONCEPTS OF MARKETING
• The Exchange concept
• The Production concept
• The Product concept
• The Sales concept
• The Marketing concept
21
Evolution of Marketing1. Product Era : 1600 – 1750
2. Production Era : 1780 – 1920
3. Sales Era : 1920 - 1955
4. Marketing Era : 1955 - 1985
5. Modern Marketing : Since late 1980s
Marketing Concept :
i. Customer Orientation
ii. Long - term Profitability
iii. Functional Integration
iv. CRM / SCM / BPO / e-C / BM & RE
Production Concept
Product Concept
Selling Concept
Marketing Concept
Consumers prefer products that are widely available and inexpensive
Consumers favor products thatoffer the most quality, performance,or innovative features
Consumers will buy products only ifthe company aggressivelypromotes/sells these products
Focuses on needs/ wants of target -markets & delivering value better than competitors
Company Orientations Towards
the Marketplace
Marketing Myopia• Short sighted & inward looking approach to
marketing that focuses on the needs of the firm instead of defining the firm and its products in terms of the customer' needs and wants.
• Such self-centered firms fail to see and adjust to the rapid changes in their markets and, despite their previous eminence, falter, fall, and disappear.
• This concept was discussed in an article (titled 'Marketing Myopia,' in July-August 1960 issue of Harvard Business Review) by Professor of Marketing, Theodore C. Levitt, who suggests that firms get trapped in this bind because they omit to ask the vital question, "What business are we in?"
Difference between Marketing & Selling
Marketing Selling1. Marketing focuses on customer needs
1.Selling focuses on the needs of the seller
2.Customer enjoys supreme importance
2.Product enjoys supreme importance
3.Integrated approach to achieve long term goals
3.Fragmented approach to achieve immediate goals
4.Converting customers needs into products
4.Converting customer needs into profits
5.Cavet Vendor (Let the seller beware)
5.Cavet Emptor (Let the buyer beware)
6. Profits through customer satisfaction
6.Profits through sales volume
DIFFERENCE BETWEEN SELLING & MARKETING
SELLING MARKETING
Emphasis on product Emphasis on consumer needs and wants
Company manufactures the product
first and then decides to sell it
Company first determines customer
needs and wants and then decides how
to deliver a product to satisfy these wants
Management is sales volume
oriented
Management is profit oriented
Planning is short-term oriented in
terms of today‟s products and
markets
Planning is long-term oriented in terms of
new products, tomorrow‟s products and
future products
Stresses needs of a seller Stresses needs and wants of a buyer
Views business as a goods
producing process
Views business as a consumer satisfying
process
Emphasis on staying with existing
technology and reducing cost
Emphasis on innovation in every sphere,
on providing better value to customers by
adopting a superior technology
SELLING MARKETING
Different departments
work as highly separate
watertight
compartments
All departments of a business
operate in an integrated
manner, the sole purpose
being generation of consumer
satisfaction
Cost determines price Consumers determine price,
price determines cost
Selling views
customers as the last
link in business
Marketing views the
customers as the very
beginning of a business
DIFFERENCE BETWEEN SELLING & MARKETING
The Marketing Concept holds that the key to achieving organizational goals consists of the company being more effective than its competitors in creating, delivering & communicating customer value to its target markets.
The Marketing Concept rests on four pillars: Target Market, Customer Needs, Integrated Marketing & Profitability.
Relationship Marketing aims to build long-term mutually
satisfying relations with key parties : customers, suppliers
& distributors in order to earn and retain their long-term
preference and business.27
Relationship MarketingRelationship Marketing is an integrated &
coordinated effort to identify, maintain & build up a
network with individual customers & other parties
( employees & suppliers ) & continuously strengthen
the network for the mutual benefits of all the parties
concerned.
Transactional Marketing is one in which a Company
or its employees communicate & offer their products or
services to the customers only when they approach
the firm. Gaining Customer-Loyalty is not a priority.
There is clear lack of personal touch / focus on the
customers‟ requirements.
Egs: Govt. Services, Public Sector Banks, etc.28
Relationship Marketing
• is a philosophy of doing business that
focuses on keeping current customers and
improving relationships with them.
• does not necessarily emphasize acquiring
new customers.
• is usually cheaper for the firm ( keeping a
current customer costs less than attracting a new one ).
• the focus is less on attraction & more on
retention and enhancement of customer
relationships.
Customer Goals of Relationship Marketing
A Loyal Customer is One Who...
• Shows Behavioral Commitment buys from only one supplier, even though
other options exist
increasingly buys more and more from a
particular supplier
provides constructive feedback/suggestions
• Exhibits Psychological Commitmentwouldn‟t consider terminating the relationship
has a positive attitude about the provider
says good things about the provider
Underlying Logic of Customer Retention
Benefits to the Organization
Customer Retention &
Increased Profits
Employee Loyalty
Quality of
Products/Service
Customer Satisfaction
Benefits of Relationship Marketing :
( I ) Benefits for the Firm :
1. Customer Loyalty
2. Reduced threat from Competitors
3. Increased revenues from existing customers
4. Positive Word-Of-Mouth Publicity
5. High Employee / Supplier morale
( II ) Benefits for the Customers :
1. Satisfying Service Benefits.
2. Reliable & Personalized Attention
3. Time & Cost Benefits
33
The Societal Marketing Concept holds that the
organization‟s task is to determine the needs,
wants & interests of target markets and to deliver
the desired satisfactions more effectively and
efficiently than competitors in a way that
preserves or enhances the consumer‟s and the
society‟s well-being.
The Societal Marketing concept calls upon marketers
to build social and ethical considerations into their
marketing practices. They must balance and juggle
the often conflicting criteria of company profits,
consumer want satisfaction and public interest.34
6
Holistic Marketing
Holistic Marketing is a process of
integrating the : value exploration,
value creation & value delivery
activities, with the purpose of building
long-term, mutually satisfying
relationships and co-prosperity among
key stakeholders.
7
Holistic Marketing Dimensions
37
The Marketing Process
Below is a 5-step model of the Marketing Process:
1. Understand the market-place and customer needs & wants.
2. Design a customer-driven marketing strategy.
3. Construct a marketing program that delivers superior value.
4. Build profitable relationships and create customer delight.
5. Capture value from customers to create profits & customer
quality.
In the first four steps, we create value for customers and
build customer relationships. In the fifth step, we capture
value from customers in return.
38
What is a Product ?Product is anything that can be offered
to a market for attention, acquisition,
use or consumption, that will satisfy a
need. It is considered to be a bundle of
benefits or utilities. Products include more than
just tangible goods. Broadly defined, products include
physical objects, services, events, persons, places,
organizations, ideas or mixes of these entities. Services are
a form of product that consists of activities, benefits or
satisfactions offered for sale that are essentially intangible
and do not result in the ownership of anything.
ProductExperiences
Places
Persons
ServicesGoods
Events
Ideas Information
Properties Organizations
PRODUCT
15
Classification of Products
PRODUCTS
GOODS SERVICES
INDUSTRIAL
GOODSCONSUMER GOODS( Durables & Non-Durables )
1. RAW MATERIALS
Egs: Steel, Wood,
Cotton ,etc
2. COMPONENTS
Egs: Tyres, Spare
Parts, Gear Box, etc
3. CAPITAL GOODS
Egs: Machinery,
Equipments, etc
1. CONVENIENCE GOODS Egs: Tea, Chocolates, Soap
2. SHOPPING GOODSEgs: Furniture, TV, Bike, Jeans
3. SPECIALTY GOODSEgs: Jewelry, Car, Flat
4. UNSOUGHT GOODS
Egs: Gluco-Meter, Hearing Aid
Health Care;
Education; Hotels;
Hospitality; Banking;
Legal Services;
Travel;
Transportation;
Beauty & Body Care;
Entertainment,
Security, Auditing;
Recreation; etc
41
Product & Service Classifications:
Products fall into two classes based on how
consumers use them :
1. Consumer Products & 2. Industrial Products
Consumer Products are the products bought by final
consumers for personal consumption. They include:
(a) Convenience Products: These are the products
that customer buys frequently, immediately and with a
minimum amount of comparison and buying effort.
Eg: Soap, Bread, Milk, Tea/Coffee, Tooth Brush/Paste.
(b) Shopping Products: These are the products that
customers compare carefully on suitability, quality,
price and style. They are less frequently purchased
products. Eg : Furniture, TV, Cell Phones, etc.
42
(c) Specialty Products: These are products with
unique characteristics or brand identification for
which buyers will make special purchase effort.
For these kind of products, buyers can even
travel to great distances & spend a lot of time
before purchasing.
Egs : Expensive Jewellery, Property, Cars, etc.
(d) Unsought Products: These are the products
that either the customer does not know or does
not think of buying under normal circumstances.
These products are bought due to emergency
situations. Egs : Medical Aids, Life/Medical /Fire
Insurance, etc.
43
2. Industrial Products: are those
products which are purchased for
further processing for use in
conducting business or for Re-Sale.
They include:
( i ) Raw Materials & Consumables
( ii ) Components & Parts.
( iii ) Capital Goods : These products
help the buyer in production or operation.
44
The Marketing MixMarketing Mix refers to the tools available to an organization to gain the reaction it is seeking from its target market in relation to its marketing objectives. Traditionally it is known as the 4 P‟s of Marketing, i.e.
1. Product
2. Price
3. Promotion
4. Place or Physical Distribution
NOTE : The success of a firm, depends upon the co-ordination of these ingredients in such a way as to create a suitable mix to the particular situation in hand.
Elements of the Marketing Mix
45
PRODUCT PRICE PROMOTION PLACE [Physical Distribution ]
Design
Quality
Features
PLC
Branding
Product Line
Product Mix
Packaging
Labelling
Warranties
Pricing -------
- Strategies
Discounts
Allowances
Payment -
Terms
Credit Period
Advertising
Sales Promotion
Personal Selling
Publicity / PR
Direct Marketing
Channels of
Distribution
( Wholesalers
& Retailers )
&
Logistics of
Distribution
(Assortments
Locations
Inventory
Transport )
The Marketing Mix
Blend of the Marketing Mix depends upon :
Marketing Objectives
Type of Product
Target Market
Market Structure
Rivals‟ Behaviour
Global Issues (Culture/Religion, Etc. )
Marketing Position
Product Portfolio
From the Sellers view
4P’s
From the Buyers view
4C’s
Product Customer Satisfaction
Price Cost to the customer
Promotion Communication
Place Convenience
Marketing Mix : 4P‟s vs 4C‟s
48
Marketing Tasks
1. Marketing Mix
2. Segmentation
3. Targeting ( Target Markets )
4. Positioning.
Segmentation, Targeting & Positioning
1. Identify
segmentation
variables and
segment the
market
2. Develop
profiles of
resulting
segments
MarketSegmentation
3. Evaluate
attractiveness
of each
segment
4. Select the
target
segment(s)
MarketTargeting
5. Identifypossible
positioningconcepts foreach target
segment
6. Select,develop, andcommunicate
the chosenpositioning
concept
MarketPositioning
Defining & Delivering Customer
Value & Satisfaction Customer Value is the ratio of the perceived
benefits & costs that the customer has to incur
in acquiring a product or a service.
Value for Customers includes different types of
benefits such as economic, functional &
emotional, that they seek / expect from the
product or service.
Costs include monetary costs, time costs,
energy costs & cognitive costs.
Michael Porter
51
Michael Porter : is the founder of a nonprofit
organization called the Initiative for a Competitive
Inner City and one of the founders of The Monitor
Group. His main academic objectives focus on
how a firm or a region can build a competitive
advantage & develop a competitive strategy.
Porter's strategic system consists of:Porter's Five Forces Analysis, Strategic
Groups , Value Chain, Generic Strategies,
Global Strategy, Porter's clusters of competence
for regional economic development & the
Diamond model.52
VALUE CHAINThe VALUE CHAIN, also known as Value Chain
Analysis, is a concept from business management
that was first described and popularized by Michael
Porter in his 1985 best-seller, Competitive -
Advantage: Creating & Sustaining Superior Performance.
He suggested that activities within the organisation
add value to the products & services that the
organisation produces, and all these activities should
be run at optimum level if the organisation is to gain
any real competitive advantage. If they are run
efficiently the value obtained should exceed the
costs of running them.
Porter‟s Generic Value Chain
Primary Value Chain activities are :
Inbound Logistics: the receiving & ware -
housing of raw materials, and their distribution
to manufacturing as they are required.
Operations: the processes of transforming
inputs into finished products and services.
Outbound Logistics: the warehousing and
distribution of finished goods.
Marketing & Sales: the identification of
customer needs and the generation of sales.
Service: the support of customers after the
products and services are sold to them.
These Primary Activities are supported by
a set of Support Activities, such as:
• The Infrastructure Of The Firm :
organizational structure, control systems,
company culture, etc.
• Human Resource Management :
employee recruiting, hiring, training,
development, and compensation.
• Technology Development : technologies
to support value-creating activities.
• Procurement : purchasing inputs such as
materials, supplies, and equipment.
• It is in these activities that a firm has the
opportunity to generate superior value.
• The firm's margin or profit then depends on
its effectiveness in performing these
activities efficiently, so that the amount that
the customer is willing to pay for the products,
exceeds the cost of the activities in the value
chain.
• A competitive advantage may be achieved by
reconfiguring the value chain to provide lower
cost or better differentiation.
58
MARKETING PLAN
59
Marketing Environment
Marketing EnvironmentThe Marketing Environment consists of
external forces that directly or indirectly influence
an organization acquisition of inputs & creation
of outputs. It can be classified into :
1. Micro Environment ( Internal ) &
2. Macro Environment ( External ).
Internal Environment include those
factors over which a firm has full control &
External Environment are those factors
which cannot be directly controlled by an
organization.
Factors Affecting Mktg. Environment Micro / Internal
Company
Employees
Market / Customers
Suppliers
Share-Holders
Financers
Competitors
Media
Intermediaries &
Public.
Macro / External
Demographic
Economic
Government
Political / Legal
Cultural
Technological
&
Global Environment
Environmental Scanning
The major components of
Environmental Scanning are :
1. External Environmental Scanning
2. Customer Analysis
3. Competitor Analysis
4. Market Analysis
5. Company Analysis
Environmental Scanning
The major components of
Environmental Scanning are :
1. External Environmental Scanning
2. Customer Analysis
3. Competitor Analysis
4. Market Analysis
5. Company Analysis
Environmental Appraisal
The Environment of any organization is
“the sum of all conditions, events &
influences that surround and affect it”
The Marketing Environment is Complex,
Dynamic, Multi-faceted & has a Far-
reaching consequences.
It is therefore crucial for any organization
to understand the environmental influences
on its business.
Various Environmental Components.1) Market Environment: Client‟s needs,
preferences, perceptions, attitudes, values,
buying behavior, satisfaction.
Product factors like demand, image,
features, utility, design, life cycle, price,
promotion, distribution, differentiation etc
Competitor factors like different types of
competitors, nature of competition.
2) Technological Environment : Sources of
Technology; Technological development, R&D,
Cost of Technology; Effects of technology on
environment, human beings.
Components contd..3) Supplier Environment:
• Cost, availability, and continuity of supply of raw
material, components, parts.
• Infrastructural support and ease of availability of the
different factors of production.
4) Economic Environment:
• The economic stage at which the country exists at a
given point of time.
• The economic structure adopted, capitalistic,
socialistic or mixed.
• Economic policies, industrial, fiscal.
• Per capita income, balance of payments etc.
Components contd..
5) Legal or Regulatory Environment:
• Policies related licensing, monopolies, FDI,
• Policies related to distribution and pricing.
• Policies related to sick industries, public sector,
backward areas, consumer protection etc.
6) Political Environment:
• The political system and its features,
ideological forces, coalition compulsions.
• Political stability.
• Political funding of elections.
• Government‟s role in business.
Components contd..
7) Socio-Cultural Environment:
• Demographics like population, its density
and distribution, age composition, inter
state migration, income distribution etc.
• Socio-cultural concerns like
environmental pollution, consumerism,
corruption etc.
• Family structure changes.
Components contd..
8) International or Global Environment:
• Globalization process.
• Global economic forces.
• Global trade and commerce.
• Global financial system.
• Global markets and competitiveness.
• Global communication
• Global technology and quality systems.
Macro Environmental Analysis : PEST Analysis
71
PEST Analysis• Political Environment : Legislations / Govt. Rules /
Pollution Control & Environmental Laws / Taxes & Duties / Pricing Policies / Consumer Protection Laws / Impex Policies FDI / Patent Laws / Labour Laws / Subsidies, etc
• Economic Environment : Interest & Exchange Rates / Inflation / GDP / Per Capita Income / Demand-Supply Situation / Economic Trend (BC) , etc
• Social Environment : Values & Beliefs / Life Styles / Culture & Tradition / Religion & Language / Demographic -Factors ( Age, Gender, Income, Education, etc )
• Technological Environment : Quality of Materials & Machinery / Innovations / Mktg Research / e- Commerce ,etc
72
BLUNDERS IN ADVERTISING DUE TO LANGUAGE
& CULTURAL DIFFERENCES
73
Micro Environmental Analysis
•Consumer Analysis
•Competitors Analysis
•Market Analysis
•Company Analysis - (SWOT Analysis)
SWOT AnalysisSWOT analysis is a tool for analysing a
business - organization and its environment.
It is the first stage of planning and helps
marketers to focus on key issues.
SWOT stands for Strengths, Weaknesses,
Opportunities & Threats.
Strengths & Weaknesses are Internal factors.
Opportunities & Threats are External factors.
75
Strengths could be:
1. Your specialist marketing expertise.
2. A new, innovative product or service.
3. Location of your business.
4. Quality processes and procedures.
5. Any other aspect of your business that adds value to
your product or service.
Weakness could be:
1. Lack of marketing expertise.
2. Undifferentiated products/services
3. Location of your business.
4. Poor quality goods or services.
5. Damaged reputation.76
Opportunity could be:
1. A developing market such as the Internet.
2. Mergers, joint ventures or strategic alliances.
3. Moving into new market segments that offer better profits.
4. A new international market.
5. A market vacated by an ineffective competitor.
Threat could be:
1. A new competitor in your home market.
2. Price wars with competitors.
3. A competitor has a new, innovative product or service.
4. Competitors have superior access to channels of distribution.
5. Taxation is introduced on your product or service.
77
Simple Rules for successful SWOT Analysis :
1. Be realistic about the strengths and weaknesses of
your organization when conducting SWOT analysis.
2. SWOT analysis should distinguish between where your
organization is today, and where it could be in the future.
3. SWOT should always be specific. Avoid grey areas.
4. Always apply SWOT in relation to your competition
i.e. better than or worse than your competition.
5. Keep your SWOT short and simple. Avoid complexity and
over-analysis
6. SWOT is subjective.
78
Example : Wal-Mart SWOT Analysis.
Strengths : Wal-Mart is a powerful retail brand. It
has a reputation for value for money, convenience
and a wide range of products all in one store.
Weaknesses : Wal-Mart is the World's largest
grocery retailer and control of its empire, despite its
IT advantages, could leave it weak in some areas
due to the huge span of control.
Opportunities : To take over, merge with, or form
strategic alliances with other global retailers,
focusing on specific markets such as Europe or the
Asia Pacific Region.
Threats : Being number one means that you are
the target of competition, locally and globally.79
Student Activity
Undertake SWOT Analysis
of atleast two companies,
each in : IT, Telecom, Retail,
Automobile, Petroleum,
Consumer Electronics,
FMCG, Power, Steel,
Infrastructure & Service
Sectors.
What is e-Business?e-business is the continuous
optimization of a firm‟s business activities
through digital technology. [Digital or
Information Technologies are things like computers
& the Internet, that allow the storage & transmission
of data in digital formats]
The booming growth of e-business, has
led to many solid successes today and
exciting new growth areas will soon
emerge.
Key Questions for Corporations:
• How to use information technology profitably ?
• How to understand what technology means for their business strategies?
• How time-tested concepts by marketers can be enhanced by the Internet, databases, wireless mobile devices, and other technologies?
• What‟s next after the rapid growth of the Internet and the dot-com bubble has marketers wondering ?
• How can we use technology to build new business models that add customer value and/or increase customer satisfaction ?
What is E-Marketing?E-Marketing is the application of a broad
range of information technologies for :
Transforming marketing strategies to create
more customer value (more effective segmentation,
targeting, differentiation and positioning strategies),
More efficiently planning & executing the
conception, distribution, promotion and pricing
of goods / services / ideas.
Creating exchanges that satisfy individual
consumer and organizational customers‟
objectives.
E - Marketing Implications
• Marketers who grasp what Internet technologies
can do will be better poised to capitalize on
information technology.
• Internet : creates opportunities beyond those
possible with the telephone, television, postal mail,
or other communication media. It leads to more
effective & efficient implementation of the
marketing strategies.
• Corporates & Customers can have easy, & quick
access to information & can transact business in an
inexpensive way. The market reach can be
extended to the entire world.
E-marketing Implications…..
• E-marketing is the result of information technology applied to traditional marketing.
• Increases efficiency in traditional marketing functions.
• The technology of e-marketing transforms many marketing strategies.
• New trends such as Integrated & Collaboration Software, Web services, Data Security, Wireless Technologies, Portable-Computing, etc will help businesses move forward with e-marketing.
Modern Trends in Marketing
• Green Marketing
• Cause Marketing
• Buzz Marketing
• Mobile Marketing
• Network Marketing
• E - mail Marketing
• C R M
• Event Marketing
• Niche Marketing
• Social Marketing
• Viral Marketing
• WOM Marketing
• Social Networking Media
• Online Search Ads
• Sports Marketing
• Grey Marketing
Modern Marketing Trends....
• Increased use of digital media and a decrease in radio & print media.
• Increased use of internet & e-mail to reach out to prospects and customers more frequently at a very low cost.
• Increased use of quality, targeted content (textual / video) that tells a company's story & engages the prospective customer.
• Increased use of blogs, social networking, & other social media to create dialog and relationships with customers / prospects.
• Increased use of analytics tools (e.g., Google Analytics) to spot ways to improve ROI.
• Increased focus on Search Engine Optimization (SEO) content targeting & other trackable paid marketing techniques such as pay-per-click and other.
• Increased use of online webinars & decreased use of large trade shows.
• Increased use of outsourced marketing functions, especially specialised functions such as Marketing Research & Advertising.
Modern Marketing Trends....
89
Types of E-Markets
E-marketplace is a marketplace in
which sellers & buyers exchange goods
& services for money using electronic
medium such as computers & phones.
E-marketplace is an online market,
usually B2B, in which buyers and sellers
exchange goods or services.
The three types of e-marketplaces are :
Private, Public & Consortia.
1. Private e-marketplaces: Online markets owned by
a single company; can be either Sell-side or Buy-side
market-places• Sell-side e-marketplace: A private e-market in which a
company sells either standard or customized products to
qualified companies
• Buy-side e-marketplace: A private e-market in which a
company makes purchases from invited suppliers.
2. Public e-marketplaces: B2B markets, usually
owned and/or managed by an independent third
party, that include many sellers and many buyers;
also known as exchanges
3. Consortia: E-marketplaces owned by a small group
of large vendors, usually in a single industry
Types of Internet Advertising / Marketing
Banner Ads: most popular, different sizes and
styles
Pop-up ads: popular, another type is Pop-
Behind or Pop-Under Ads :
E-mail Marketing: powerful, economical, legal
implications, spam.
Affiliate marketing: commission-based,
benefit of the selling site‟s brand in exchange
for the referral.
Search Engine Positioning
Potential customers find web sites in
many different ways :
• Some site visitors will be referred by a friend,
others by affiliates, some will see the site‟s
URL in a print advertisement or on television
• Many site visitors will be directed to the site
by a search engine, such as „Google Search‟.
Student Activity
Write down the Definitions,
with suitable examples, of all
the terms listed-out under the :
“Modern Trends in Marketing”
94
95
The Importance of Information
• Companies need information about their :
Customer Needs
Competition
Marketing Environment
• Managers need timely, accurate, relevant ( TAR ) &
up-to-date information, for better decision-making.
•According to AMA, Marketing Information System
(MkIS or MIS) is a set of procedures & methods for the
regular, planned collection, analysis & presentation of
information for use in marketing decisions.
• Information for use in MkIS is gathered from
customers, competitors & from the market itself.
96
Philip Kotler„s definition says, an MkIS is more than a system of data collection or a set of information technologies:
"A Marketing Information System is a continuing and interacting structure of people, equipment & procedures to gather, sort, analyse, evaluate and distribute pertinent, timely & accurate information for use by marketing-decision makers to improve their marketing planning, implementation & control".
MkIS helps Marketing Managers to :
1. Assess Information Needs,2. Develop Needed Information,3. Distribute Information.
Assessing
Information
Needs
Developing Information
Internal
Records
Marketing
Intelligence
Marketing
Research
Decision
Support
Marketing Information System
Marketing Decisions & Communications
Distributing
Information
Kotler‟s Model of MkISM
ark
eti
ng
Ma
na
ge
rsA
nal
ysis
, Pla
nn
ing
,
Imp
lem
enta
tio
n, C
on
tro
l
Ma
rke
ting
En
viro
nm
en
tTarg
et Markets, M
arketing
Ch
ann
els, Su
pp
liers,
Co
mp
etitors, P
ub
lics, Macro
enviro
nm
ent F
orces
98
The three main constituent parts of an MkIS in developing information are :
1. The Internal Reporting Systems
2. Marketing Intelligence System &
3. Marketing Research System
Information needed by Managers can be obtained from:
Internal DataComputerized Collection of Information from Data Sources (i.e. Accounting) within the Company.
MarketingResearch
Design, Collection, Analysis & Reporting of Data about a Specific Marketing Situation Facing the Organization.
MarketingIntelligence
Collection and Analysis of Publicly available Information about Competitors & the Marketing Environment
99
Marketing Info. System
• Internal data is gathered
via customer databases,
financial records, and
operations reports.
• Advantages of internal
data include quick/easy
access to information.
• Disadvantages stem
from the incompleteness
or inappropriateness of
data to a particular
situation.
• Internal Data
• Marketing
Intelligence
• Marketing
Research
Developing Information
100
Marketing Info. System
• Marketing Intelligence is the systematic collection and analysis of publicly available information about competitors and trends in the marketing environment.
• Competitive intelligence gathering activities have grown dramatically.
• Many sources of competitive information exist.
• Internal Data
• Marketing
Intelligence
• Marketing
Research
Developing Information
101
Sources of
Competitive Intelligence
• Company Employees
• Internet
• Published Information
• Other Sources
• Competitor‟s Employees
• Trade Shows
• Benchmarking
• Channel Members & Key Customers
102
Marketing Info. System
• Marketing Research
is the systematic
design, collection,
analysis & reporting
of data relevant to a
specific marketing
situation facing an
organization.
• Marketing Research
Process.
• Internal Data
• Marketing
Intelligence
• Marketing
Research
Developing Information
Definition of Research RE-SEARCH means ‘To Search Again’. It is the systematic investigation & study of material and sources in order to establish new facts and reach new conclusions.Research is defined as human activity based
on intellectual application in the investigation
of nature & matter.
The primary purpose of research is discovering,
interpreting & development of methods & systems
for the advancement of human knowledge on a
wide variety of matters of our world. 103
Types of Research :1. Basic Research: (also called Fundamental
or Pure Research) is primarily concerned with the advancement of knowledge and the theoretical understanding of the relations among variables. It is often driven by the researcher’s curiosity, interest & intuition.
2. Applied Research: is research accessing and using some part of the research communities' accumulated theories, knowledge, methods, and techniques, for a specific or client driven purpose.
MARKETING RESEARCH
Marketing Research is the
systematic & objective
identification, collection,
analysis, dissemination & use
of information for the purpose
of improving decision making
related to the identification &
solution of problems &
opportunities in Marketing. 105
Types of Marketing Research( I ) Exploratory Research: to gather preliminary
information that will help define problems and
suggest hypotheses. ( uses Secondary Data & Focus
Groups )
( II ) Conclusive Research :
( a ) Descriptive Research : to describe things,
such as the market potential for a product or the
demographics & attitudes of consumers who buy
the product.(Hypotheses Testing)
( b ) Experimental Research : (Causal Research)
to establish the cause-and-effect relationships.
106
Qualitative Research & Quantitative Research
Qualitative Research explores attitudes,
behaviour & experiences through such methods
as Interviews & Focus Groups with the idea of
getting an in-depth opinion from participants.
Quantitative Research involves analysis of
numerical data. It involves the generation of
statistics through the use of large-scale survey
research, using methods such as questionnaires
or structured interviews.
The Quantitative approach views human phenomena as
being amenable to objective study i.e. able to be measured.107
The Marketing Research Process
1. Defining of the Research Problem
2. Cost vs Value Analysis of the Information
3. Selecting the Research Design
4. Selection of the Data Collection Method
5. Selection of the Sample
6. Selection of the Method of Data Analysis
7. Estimate the Resources required
8. Data Collection / Analysis
9. Interpretation of Results / Conclusions
10. Report Writing / Presentation. 108
The 3 R‟s of Marketing
In the process of Marketing Research,
companies collect a lot of different types
of information. David G. Bakken is of the
opinion that it is easy to think of all these
in terms of Three Rs of Marketing:
1. Recruiting New Customers.
2. Retaining Current Customers.
3. Regaining Lost Customers.
To Recruit New Customers, the
researchers study different market
segments to develop the right products &
services consumers need & want.
To Retain Existing Customers, the
marketer may conduct customer satisfaction
studies. Marketers realise that good
relationship with customers is important for
long-term positive sales results.
Regaining Lost Customers can be a
formidable problem. It needs innovative
marketing & outstanding communications.
Many companies face the dilemma of deciding
for or against Marketing Research Firms. That
is why it is advisable for you to know the needs
of your concern well before making any
decisions; as Market Research is a highly
important for a good marketing strategy.
In-house Market Research divisions can only
yield results when people with thorough
knowledge of research techniques are employed.
Major business houses, usually have a vast in-
house Marketing Research Division.
Outsourcing makes good business sense, especially
when the firm lacks expertise or time in a particular area
of business. Many companies prefer to off-load
Advertising & Marketing Research to specialized
companies, who have the expertise & experience to do
a much more effective & efficient job.
Market Research Companies are concerns, which
help their clients scan & understand their consumers
thus helping them to successfully promote and sell their
product. Companies that fulfill market research needs,
specialize in data analysis i.e. their employees are
specifically trained for gathering and analyzing
information.
Student Activity
List out the top ten Indian &
top ten Global :
1. Market Research Companies.
2. Advertising Companies
114
What is Strategy ?
The word “Strategy” has been derived from the Greek
word stratēgos, which derives from two words: Stratos
(Army) & Ago (ancient Greek for Leading). i.e.
Stratēgos referred to a 'Military Commander' during
the age of Athenia Democracy.
“Strategy” is a set of key or crucial
decisions taken or a grand design or a
comprehensive master-plan or a specific
course of action which a person or an
organisation chooses to achieve the
primary or long term goals & objectives.
Simply put by Edward de Bono :
• Strategy means putting things in
place carefully, and with a great deal
of thought. It is the opposite of just
waiting for things to happen.
• In a changing environment one of the
most difficult things in business is to
know when to stick to your strategy
and when to change it.
Basic Definitions:• Plan : is a future course of action where in we select
our goals & determine the means to achieve it.
• Policy : is an understanding by a group of
people that makes action of each member more
predictable to the other members. It is essentially
a guide for taking action.
• Procedure : is a system that describes in detail
the specific steps to be taken in order to
accomplish a job.
• Principle : is a universal & enduring statement
which remains true in all circumstances & is
always followed. 117
Strategic Management : is a process of
designing & implementing an effective set of
strategies with an overall approach to deal
with both internal & external agencies by
taking appropriate decisions & actions in
order to achieve pre-determined goals &
objectives.
It was Igor Ansoff (popularly known as the
“Father of Strategic Management”), who
pioneered the concept of “Strategy” during
1950s & 60s. Later, Henry Mintzberg, Michael
Porter & Peter Drucker enriched the concept
with their original contributions to the field of
Strategic Management. 118
5 P‟s
Plan
Position Pattern
Perspective Ploy
Henry Mintzberg’s 5P’s of Strategy
Henry Mintzberg, in his book, The
Rise & Fall of Strategic Planning in
1994, points out that "Strategy" is used in
several different ways, the most common
being :
1. Strategy is a PLAN, a "how," a means of
getting from here to there.
2. Strategy is a PATTERN in actions over
time; for example, a company that
regularly markets very expensive
products is using a "high end" strategy.
3. Strategy is POSITION; that is, it reflects
decisions to offer particular products or
services in particular markets.
4. Strategy is PERSPECTIVE, that is,
vision and direction.
5. Strategy is a PLOY, i.e. It is a specific
manoeuvre intended to outwit an opponent
or competitor.
Student Activity( I ) Write down the history & -------
- contributions of :
1. Igor Ansoff
2. Henry Mintzberg,
3. Michael Porter &
4. Peter Drucker
( II ) Read at least one book, each,
written by these eminent
“Management Gurus”.
Corporate Planning : includes all
functional aspects of management such as
setting up of objectives, decision making,
organizing work, resources / people /
systems/, budgeting, directing, motivating
& controlling in a economical way so as to
achieve the organisational goals &
objectives. It can be classified into :
• Strategic Planning &
• Operational Planning 122
Definition : Strategic Planning is the
process of identifying an organization's
long-term goals & objectives and then
determining the best approach for
achieving those goals and objectives.
The Objective of Strategic Planning is :
• To guide the company successfully through all
changes in the environment.
• To create competitive advantage, so that the
company can outperform the competitors in
order to have dominance over the market.
Need for Strategic Planning :
1. It encourages management to think ahead .
2. It forces managers to clarify objectives & -------
-- policies.
3. It leads to better coordination of company --
- efforts.
4. It provides clearer performance standards for -
- control.
5. It is useful for a fast-changing environment ----
- since strategic planning helps the company ---
- anticipate & respond quickly to changes & --
- sudden developments in the environment. 124
New Advertisement by Parle
to Attack Brittania
Characteristics of Strategic Decisions :
Strategic issues require top management
decision.
Strategic issues involve the allocation of large
amount of company resources.
Strategic issues are likely to have a significant
impact on the long term prosperity of the firm.
Strategic issues are future oriented
Strategic issues usually have major multi -
functional or multi-business consequences.
Strategic issues necessitate considering
factors in the firm's external environment.
Components of Strategic Management
or Steps in Strategic Planning :
1. Company Vision & Mission
2. Situational Analysis (Envrmtal. Scanning)
3. Long Term & Short Term Objectives
4. Corporate Strategy (Grand Design)
5. Designing the Business Portfolio
5. Functional or Operational Strategies
6. Implementation (Organising)
7. Evaluation (Measuring Results)
8. Control (Taking Corrective Action)127
Mission and Vision Statements are
written mainly for the customers and the
employees of companies or corporations.
Mission Statements are sentences or
short paragraphs written by companies,
corporations or businesses which reflects
their core purpose, identity, values
and principle business aims.
The Vision Statement is a sentence or a
short paragraph providing a broad and
inspirational image of the future. 128
Vision A Vision articulates the position that an
organization would like to attain in the distant
future.
Vision therefore is future aspirations that lead
to an inspiration to be the best in one‟s field of
activity.
The Company‟s Vision is should provide a
description of what the organization is
trying to do & to become. It gives a view of
the organization‟s future direction & course
of business activity.
Why should organizations have a “Vision”
Good visions are inspiring & exhilarating.
It creates a common identity and a shared
sense of purpose.
They are competitive, unique and simple.
Good visions foster risk-taking and
experimentation.
They represent integrity.
COMPANY MISSION : is a statement of the
organization's purpose. Mission is what an
organization is and why it exists. It should
be realistic, specific & motivating.
Mission should define the essential purpose of the
organization, concerning philosophical questions
like What is our business, the nature of business
it is in, who are our customers it looks to satisfy”.
The Mission of a company should identify the scope
of the company‟s operations, describe the company‟s
products, markets, technological areas of thrust &
should reflect the values & priorities of its strategic
decision makers. It should also set apart a company
from its competitors. 131
Mission StatementsThey should be feasible: Though mission should
aim high, it should be realistic & achievable.
It should be precise: It should not be very narrow nor should it be too broad. It should be clear enough to lead to action.
It should be motivating: It should motivate employees to achieve its mission.
• It should be unique and distinctive: unique
because an organization should be seen by
market and customers as “different”.
• It should indicate the strategic direction for
the organization.
General Motors Mission Statement :
"G.M. is a multinational corporation engaged in
socially responsible operations, worldwide. It is
dedicated to provide products and services of such
quality that our customers will receive superior value
while our employees and business partners will
share in our success and our stock-holders will
receive a sustained superior return on their
investment."
General Motors Vision Statement :
"Over the past 100 years, GM has been a leader in
the global automotive industry. And the next 100
years will be no different. GM is committed to leading
the industry in alternative fuel propulsion."133
Ford Motor Mission Statement:
"We are a global family with a proud heritage
passionately committed to providing personal mobility
for people around the world.“
Wal-Mart Stores Mission Statement:
"Wal-Mart’s mission is to help people save money so
they can live better.“<,
INFOSYS :
Vision : "To be a globally respected corporation that
provides best-of-breed business solutions, leveraging
technology, delivered by best-in-class people.“
Mission : "To achieve our objectives in an environment
of fairness, honesty, and courtesy towards our clients,
employees, vendors and society at large."134
Student Activity
Write down the Vision
& Mission statements
of atleast ten Indian
Companies & ten
Global Companies.
Setting-up of Goals & Objectives
The second step in the Strategic Planning
process requires the manager to set company
goals & objectives and be responsible for
achieving them.
• The mission leads to a hierarchy of objectives
including business & marketing objectives.
• Objectives should be as specific as possible.
• Objectives are an organisation's performance
targets - the results and outcomes it wants to
achieve.
• The Goals & Objectives function as
yardsticks for tracking an organisation's
performance and progress.
• Strategic objectives relate to outcomes
that strengthen an organisation's overall
business position and competitive vitality.
• Objectives are open-ended attributes
that denote the future state or outcomes,
whereas Goals are close-ended
attributes, which are precise & expressed
in specific terms.
Role of Objectives :
Objectives define the organisation's
relationship with its environment.
Objectives help an organisation pursue
its mission and purpose.
Objectives provide the basis for
strategic decision making.
Objectives provide the standards for
performance appraisal.
Characteristics of Objectives
1. Objectives should be understandable
2. Objectives should be concrete and specific
3. Objectives should be related to a time frame
4. Objectives should be measurable and ------
-- controllable
5. Objectives should be challenging
6. Different objectives should correlate with ----
-- each other
7. Objectives should be set within constraints
Strategic Management Model
Identify current mission,
objectives, and strategies
Perform internal analysis to identify key strengths & weaknesses
SWOT,Strategic choice
Perform external
analysis to identify key
opportunities & threats
Match strategy, structure, and
controls
Designcontrol systems
Designorganization
structure
Managestrategicchange
Corporate-LevelStrategy
Business-Level Strategy
Functional-Level Strategy
Global Strategy
Levels at which Strategy operates
For many companies, a single strategy is not enough.
There is a need for multiple strategies at different
levels.
Many companies are organized on the basis of
operating divisions. These divisions are known as
“Strategic Business Units” (SBU) or Profit Centers.
Levels of Strategy Planning :
1. Corporate Level – Long Term
2. Business Level – Medium Term
3. Functional Level – Medium & Short Term
4. Operational Level – Short Term
Strategy at Different Levels
Corporate Office
SBUA
SBUB
Finance Marketing Operations Personnel
SBUC
Corporate & SBU Level Strategies.
• CLS is a master-plan of action, covering the
various functions performed by different SBU‟s.
• The Corporate Level Strategies deal with the
objectives of the company, allocation of
resources and coordination of the S B U‟s for
optimal performance.
• SBU Level Strategies is a comprehensive plan
providing objectives for SBU‟s, allocation of
resources among functional areas, and
coordination between them for making an
optimal contribution to the achievement of
corporate level objectives.
Functional & Operational Strategies• Functional Level Strategies deal with a
relatively restricted plan providing objectives for
a specific function, allocation of resources
among different operations within that functional
area, and coordination between them for
optimal contribution to the achievement of SBU
and corporate level objectives.
• Operational Strategies are also needed to be
set at lower levels, one step below the
functional level. Eg : A Functional Strategy such as
in Marketing could be sub divided into Operational
Strategies such as Sales, Distribution, Pricing, Product
& Advertising Strategies.
Strategic Decision Making “Successful business strategies result not from
rigorous analysis but from a particular state of mind”. The people at the “Helm of Affairs” or Top Management, such as Chairman, CEO, MD, BoD, Entrepreneurs, Management Consultants, etc are involved in the Strategic Decision making process, implementation & control.
Strategists do not reject analysis, but they use it only to stimulate the creative process, to test the ideas that emerge, to work out their strategic implications, or to ensure successful execution of high potential “wild” ides that might otherwise never be implemented”
Read “The Mind of The Strategist” by Kenichi Ohmae
Grand Strategies
1. Survival Strategy or -----
Stability Strategy
2. Expansion Strategy or ---
Growth Strategy.
3. Retrenchment Strategy.
4. Combination Strategy.
Stability Strategy
• Is adopted by on organization when it
attempts at an incremental improvement
of its functional performance by
marginally changing one or more of its
business.
• Eg: A copier machine company provides
better after sales service to improve its
image and product image too.
Expansion or Growth Strategy
• This strategy is followed when
a company aims at high growth
by increasing the scope of one
or more of its businesses in
terms of their respective
customer groups, functions
and technology.
Retrenchment Strategy
• This is followed when a company aims at
contraction of its activities through
substantial reduction or elimination of its
business.
• E.g. A pharmaceutical company may
withdraw from its retail operations so that it
can focus on institutional sales.
Combination Strategy
• This is followed when a company
adopts a mixture of all the
strategies either at the same time
in its different businesses, or at
different times in the same
business with the aim of improving
its performance.
TargetConsumers
Product
Place Price
Promotion
Competitors
MarketingChannels
PublicsSuppliers
Demographic -Economic
Environment
Technological -Natural
Environment
Political -Legal
Environment
Social -Cultural
Environment
Marketing Strategy
Marketing Strategies for
Competitive Advantage
Market Nicher
Market Follower
MarketChallenger
Market Leader
STRATEGY A COMPANY ADOPTSDEPENDS ON ITS
INDUSTRY POSITION
153
Depending upon their market shares in a
particular market, companies can be
classified as :
1. Leaders
2. Challengers &
3. Followers
4. Nichers
The Challenger companies have to attack the
Leader, other comparable firms & smaller firms
in their bid to gain market share. Attack has a
greater probability of success when there is
customer dissatisfaction with the current leader.
Market Structure
Depending upon their market shares in a
market, companies can be classified as :
• Market Leader : the firm with the largest market
share.
• Market Challenger : a runner-up firm that is
fighting hard for an increased market share.
• Market Follower : another runner-up firm that is
willing to maintain its market share and not rock the
boat.
• Market Nicher : firms that serve small market
segments not being served by larger firms.
Strategic Analysis
1. Company Level :
i. SWOT ( Strength, Weakness, Opportunities & Threats )
ii. ETOP ( Environmental Threat & Opportunities Profile )
iii. PIMS ( Profit Impact of Marketing Strategies )
iv. VA ( Vulnerability Analysis )
2. Corporate Level : ( Portfolio Analysis )
i. BCG Growth - Share Matrix
ii. GE Nine Cell Planning Grid ( GE Spot Light Grid )
iii. ADL Life Cycle Approach
iv. Ansoff Product - Market Matrix.
155
The Ansoff Product - Market Growth Matrix is a
marketing tool created by Igor Ansoff and first published
in his article "Strategies for Diversification" in the
Harvard Business Review (1957). The matrix allows
marketers to consider ways to grow the business via
existing and/or new products, in existing and/or new
markets – there are four possible product/market
combinations. This matrix helps companies decide what
course of action should be taken given current
performance. The matrix consists of four strategies :
1. Market Penetration (existing markets, existing products)
2. Product Development (existing markets, new products)
3. Market Development (new markets, existing products)
4. Diversification (new markets, new products). 156
158
1. Market Penetration: This involves increasing sales of an existing product & penetrating the market further by either promoting the product heavily or reducing prices to increase sales.
2. Product Development: The organisation develops new products to aim within their existing market, in the hope that they will gain more custom & market share. Eg : Sony launching the Play-Station2 to replace their existing model.
3. Market Development: The organisation here adopts a strategy of selling existing products to new markets. This can be done either by a better understanding of segmentation, i.e who else can possibly purchase the product or selling the product to new markets, overseas.
4. Diversification: Moving away from what you are selling (your core activities) to providing something new. Eg : Moving over from selling foods to selling cars.
Business Portfolio & PA
A Business Portfolio is the collection of
businesses &/or products that make up
the company.
Four basic questions to be answered:
• Which SBUs need to be Built ?
• Which SBU to be Maintained ?
• Which SBU to be Harvested ?
• Which SBU to be Divested ?
Tools for Portfolio Analysis
Most Portfolio Analyses evaluate the
SBUs of a firm on two important
dimensions: the Attractiveness of the
SBU‟s market & the Strength of the
SBU‟s position in the market.
The best known Portfolio-planning &
analysis methods / tools are :
BCG Matrix & GE Nine Cell Grid.
B C G MATRIX
The BCG Matrix ( Boston Consulting Group ) is a
matrix / model that was created by Bruce Henderson
for the Boston Consulting Group in 1970 to assist
Corporations with analyzing their Strategic Business
Units or Product Lines.
This helps the company allocate resources and is
used as an analytical tool in brand marketing, product
management, strategic management, and portfolio
analysis. Companies that are large enough to be
organized into strategic business units face the
challenge of allocating resources among those units.
161
B C G MATRIX
162
Resources are allocated to business units according to
where they are situated on the grid as follows:
1. Cash Cow - a business unit that has a large market share in a mature,
slow growing industry. Cash cows require little investment and generate
cash that can be used to invest in other business units.
2. Star - a business unit that has a large market share in a fast growing
industry. Stars may generate cash, but because the market is growing
rapidly they require investment to maintain their lead. If successful, a star
will become a cash cow when its industry matures.
3. Question Mark (or Problem Child) - a business unit that has a small
market share in a high growth market. These business units require
resources to grow market share, but whether they will succeed and
become stars is unknown.
4. Dog - a business unit that has a small market share in a mature industry.
A dog may not require substantial cash, but it ties up capital that could
better be deployed elsewhere. Unless a dog has some other strategic
purpose, it should be liquidated if there is little prospect for it to gain
market share.
163
Four strategies suggested by the BCG Matrix :
Build, Hold, Harvest or Divest
• BUILD : Invest more in the business unit in
order to build (increase) its share.
• HOLD : Invest just enough to hold (keep) the
SBU‟s share at the current level [ i.e. Preserve
SBU‟s market share ]
• HARVEST : The Company can harvest the
SBU, milking its short-term cash flow
regardless of the long-term effect .
• DIVEST : ( Sell or Liquidate ) Get rid of the
SBU by selling it or phasing it out and using
the resources elsewhere.
Porter's Generic Competitive Strategies ( Ways of Competing )
A firm's relative position within its industry determines
whether a firm's profitability is above or below the
industry average.
Michael Porter developed three generic strategies that can be
used to create a defendable position & to outperform competitors,
whether they are within an industry or across nations. These
strategies are generic because they are applicable to a large
variety of situations and contexts. The strategies are :
(1) Overall Cost Leadership,
(2) Differentiation, &
(3) Focus [ on a particular Market Niche ] 165
Porter's Generic Competitive Strategies
166
167
1. Cost Leadership :
The low cost leader in any market gains competitive
advantage from being able to many to produce at the
lowest cost. Factories are built & maintained, labor is
recruited and trained to deliver the lowest possible
costs of production. „Cost Advantage' is the focus.
Costs of every element of the value chain are reduced.
Products tend to be 'no frills.' However, low cost does
not always lead to low price. Producers could price at
competitive parity, exploiting the benefits of a bigger
margin than competitors. Eg : Toyota is very good not only at producing high quality autos at a low
price but have the brand & marketing skills to use a premium pricing policy.
2. Differentiation :
Differentiating the product or service, requires
a firm to create something about its product
or service that is perceived as unique
throughout the industry. Customers must
perceive the product as having desirable
features not commonly found in competing
products. The customers also must be
relatively price-insensitive. Adding product
features means that the production or
distribution costs of a differentiated product
may be somewhat higher than the price of a
generic, non-differentiated product. 168
Differentiation may be attained through
many features that make the product or
service appear unique. Possible strategies
for achieving differentiation may include:
• Warranties ( Khaitan Fans, Whirlpool )
• Brand image ( Nike Shoes )
• Technology (Hewlett-Packard Printers, I Pods)
• Features ( Nokia Mobile Hand sets )
• Quality / Value ( Sony )
• Service / Dealer Network ( Maruti Cars )
169
Differentiation makes a firm's products less
susceptible to cost pressures from
competitors because customers see the
product as unique and are willing to pay extra
to have the product with the desirable
features. Differentiation may lead to customer
brand loyalty and result in reduced price
elasticity. Differentiation may also lead to
higher profit margins and reduce the need to
be a low-cost producer.
170
A Niche Market refers to that small segment of the
overall market base, which if targeted in a focused
manner, results in higher yields rather than focusing
on all the market segments. It is such focused and
targetable group of potential customers, which if
targeted, will result in higher yield due to its unique
value proposition (UVP).
Features Of Niche Marketing:
a) The customers in the niche have a distinct set of needs
b) They will pay a premium to the firm that best satisfies their
needs.
c) The niche is not likely to attract other competitors
d) The niche gains certain economies through specialization.
e) The niche has size, profit and growth potential.171
3. Focus Strategy : (also called Niche Strategy or
Segmentation Strategy) involves concentrating on a
particular customer, product line, geographical
area, channel of distribution or a market niche.
The underlying premise of the Focus Strategy,
is that a firm is better able to serve a limited
segment more efficiently than competitors can
serve a broader range of customers. Focus
strategies are most effective when customers
have distinctive preferences or specialized
needs.
172
A Focus Strategy is often appropriate for small,
aggressive businesses that do not have the ability or
resources to engage in a nationwide marketing
effort. Such a strategy may also be appropriate if the
target market is too small to support a large-scale
operation. Many firms start small and expand into a
national-organization. –
A firm following the Focus Strategy concentrates on
meeting the specialized needs of its customers.
Products and services can be designed to meet the
needs of buyers. Firms utilizing a focus strategy may
also be better able to tailor advertising and
promotional efforts to a particular market niche.
173
Unit - II
Buyer Behaviour, Market Segmentation & Targeting, Positioning & Differentiation Strategies
Product Life Cycle strategies, New Product Development, Product Mix & Product Line Decisions, Branding & Packaging.
Price Setting: Objectives, Factors & Methods,
Price Adapting Policies, Initiating & responding to Price changes.
174
175
CONSUMERBEHAVIOUR
A “Customer” is any person or group or
organization who buy or purchase
products /services, but a “Consumer" is
the one who consumes the products or
services.
Definition : Consumer is an
individual (or a group) who buys
products or services for personal
use (or house-hold use) and not for
manufacture or resale.
Behavior or Behaviour refers to the
actions of a system or organisms or
people, usually in relation to its
environment. i.e. Behaviour is the
response of the system or people
to various stimuli or inputs, whether
internal or external, conscious or
subconscious, overt or covert & voluntary
or involuntary. Generally, human-beings
have a greater capacity to learn new
responses and thus adjust their behavior.
Human Behavior (and that of other organisms &
mechanisms) can be common, unusual, acceptable
or unacceptable. Humans evaluate the acceptability
of behavior using social norms and regulate behavior
by means of social control. Buyers or Consumers,
at any given time, are generally influenced by a set
of motives, which may vary at different times &
occasions.
Consumer Behaviour is the acts of
'individuals' which are directly involved in
making decisions to spend their available
resources (time, money, energy) in obtaining
and using goods / services.
Definition of Consumer Behaviour
Consumer Behaviour is the study of
individuals / groups / organizations
& the processes they use to select,
secure, use & dispose products
(goods, services, experiences or ideas) to
satisfy needs and the impacts that
these processes have on the
consumer & society.
Consumer Behaviour deals with the study of
various aspects of purchase & consumption
& disposal of products / services by individuals,
families & organisations, keeping the personal
social, environmental, psychological & factors in
mind.
The study of Consumer Behaviour is an
inter-disciplinary approach. i.e. It uses concepts
from a variety of fields such as Anthropology,
Sociology, Psychology, Economics &
Marketing.180
Marketers need to study the potential / existing
customers‟ needs, perceptions, attitudes,
preferences, buying behaviour & buying patterns
in order to develop their marketing plans.
Studying Consumer Behaviour is absolutely
essential in:
a) Market Analysis
b) Market Segmentation
c) Product Positioning
d) Developing Marketing Strategies
e) Designing the Marketing Mix &
f) Social Marketing. 181
182
Consumer Buying Role
Buying
Decision
Influencer
Initiator
User
Buyer Decider
Different Roles played by Buyers/Consumers:
Consumers often play different roles in the
purchase process, such as :
1. Initiator: the person who first suggests or thinks
of the idea of buying a particular product or service.
2. Influencer: a person whose views or advice ----
carry weight in making the final buying decision.
3. Decider: the person who ultimately makes the --
-- final buying decision or any part of it.
4. Buyer: the person who makes the actual purchase.
5. User: the person who consumes the product or
service. 183
Consumer Buying &
Decision-Making Process
Post-PurchaseBehavior
Purchase
Evaluation ofAlternatives
Information Search
Need Recognition
Cultural, Social, Individual and Psychological Factors affect all these steps
The Buyer Decision ProcessStep 1. Need Recognition
External Stimuli
• TV advertising
• Magazine ad
• Radio slogan
•Stimuli in the
environment
Internal Stimuli
• Hunger
• Thirst
• A person‟s normal needs
Need RecognitionDifference between an actual state and a desired state
The Buyer Decision Process
Step 2. Information Search
•Family, friends, neighbors•Most influential source ofinformation
•Advertising, salespeople•Receives most information from these sources
•Mass Media•Consumer-rating groups
•Handling the product•Examining the product•Using the product
Personal Sources
Commercial Sources
Public Sources
Experiential Sources
The Buyer Decision ProcessStep 3. Evaluation of Alternatives
Product AttributesEvaluation of Quality, Price, & Features
Degree of ImportanceWhich attributes matter most to me?
Brand BeliefsWhat do I believe about each available brand?
Total Product SatisfactionBased on what I‟m looking for, how satisfied
would I be with each product?
Evaluation ProceduresChoosing a product (and brand) based on one
or more attributes.
The Buyer Decision Process
Step 4. Purchase Decision
Purchase IntentionDesire to buy the most preferred brand
Purchase Decision
Attitudes
of others
Unexpected
situational
factors
Types of Consumer DecisionsBased on the level of involvement, Consumers may
exhibit three types of problem-solving behavior :
1. Extensive Problem Solving occurs when buyers
purchase more expensive, less frequently purchased
products in an unfamiliar product category requiring
information search & evaluation.
2. Limited Problem Solving occurs when buyers are
confronted with an unfamiliar brand in a familiar
product category.
3. Routinised Response Behavior occurs when
buyers purchase low cost, low risk, brand loyal,
frequently purchased or items with which they are
familiar.189
The Buyer Decision ProcessStep 5. Post-Purchase Behavior
Consumer‟s Expectations of
Product‟s Performance
Dissatisfied
CustomerSatisfied
Customer !
Product‟s Perceived
Performance
Cognitive Dissonance
Post-Purchase Dissonance
Post-purchase Dissonance : is a
consumer reaction after making a difficult
decision that involves doubt and anxiety.
Probability of experiencing dissonance
increases based on: Degree of commitment
or irrevocability
Importance of the decision
Difficulty in choosing
Individual‟s tendency to experience anxiety
191
Model of Consumer Buying BehaviorMarketing
Stimuli
ProductPricePlacePromotion
Other Stimuli
EconomicTechnologicalPoliticalCultural
Buyer‟sCharacteristics
CulturalSocialPersonalPsychological
Buyer‟s Decision Process
Problem Recognition
Information Search
Evaluation
Decision
Post-Purchase Behavior
Buyer‟s Decisions
Product ChoiceBrand ChoiceDealer ChoicePurchase TimingPurchase Amount
Consumer purchases are highly
influenced by two factors.
Internal
Psychological
Personal
External
Cultural
Social
Factors Influencing Buying Decisions
Social Factors
Personal Factors
Psycho-logical Factors
Cultural Factors CONSUMER
DECISION-MAKING
PROCESS
BUY /
DON‟T BUY
Cultural
Culture
Subculture
Social
Class
Social
Reference
Groups.
Family
Role and
Status
Personal
Age & Life
cycle stage
Occupation
Economic sit.
Lifestyle
Personality &
Self Concept
Psychological
Motivation
Perception
Learning
Beliefs &
Attitudes
Cultural Factors Affecting Consumer Behavior:
Social Class
• People within a social class tend to exhibit similar buying behavior.
• Occupation
• Income
• Education
• Wealth
• Most basic cause of a person's wants & behavior.
• 1. Values
• 2. Perceptions
Subculture
• Groups of people with shared value systems based on common life experiences.
• Hispanic Consumers
• African American Consumers
• Asian American Consumers
• Mature Consumers
Social InfluencesCulture Behavior is learned so the traditions,
values, attitudes of society all
influence it
Social
Class
Has a major influence on consumer‟s
behavior
Reference
Groups
Formal or Informal Groups to which
we belong or would like to be
associated with.
Family Key group in terms of attitudes,
beliefs & learned behavior
Personal
Influences
Personal characteristics such as age,
occupation, family lifestyle, etc
197
1. CULTURE : The sum total of learned beliefs, values, and
customs that serve to regulate the behavior of members of a
particular society. Culture offers order, direction & guidance in all
phases of human problem solving.
2. SOCIAL CLASS : Relatively permanent & ordered divisions in a society whose members share similar values, interests and behavior. It is the division of members of a society into a hierarchy of distinct status classes, generally based on wealth, power & prestige. Egs : Working Class, Middle Class, Upper Class, Rich Class, etc
3. REFERENCE GROUP : Any person or Group (actual or imaginary) that serves as a point of comparison for an individual in the formation of either general or specific values, attitudes, or behavior. These are people whom consumers tend to look to for influence or advice. The more important a Group is in our lives, the greater our desire to accept & conform to its norms.
Psychological Factors Affecting Consumer Behavior:
Psychological Factors
Motivation
Perception
Learning
Beliefs and Attitudes
199
1. Motivation : Human drive to attain a goal
object.Drive : Energy that impels us to act
Goal Object : Something we seek, with the assumption
that it will bring us comfort / value.
2. Learning : A process by which individuals
acquire the purchase-and- consumption knowledge &
experience that they apply to future related behavior.
3. Perception : The process by which people
become aware of & interpret a stimulus.
4. Attitude : A learned predisposition to respond to
an object in a consistently favorable/unfavorable way.
Personal Factors Affecting Consumer Behavior
Personal Influences
Age and Family Life CycleStage
Occupation
Economic Situation
Lifestyle Identification
Activities Opinions
Interests
Personality & Self-Concept
Personality is a particular combination of
emotional, attitudinal & behavioral response
patterns of an individual. It is the inner
psychological characteristics (psyche or
mental make-up) that both determine &
reflect how a person responds to his or her
environment.
Thus Personality depends upon unique
psychological traits such as: Sociability,
Self confidence, Dominance, Autonomy,
Adaptability, Defensiveness, etc
Activities, Interests & Opinions (AIO)
are characteristics of an individual used by
researchers to create a psychographic
profile of the individual.
When combined with quantifiable characteristics
such as age, income, or education level, an AIO -
Profile provides great insight into an
individual's likes & dislikes as a consumer.
Product-specific AIOs, may be used in new
product development or copyrighting to predict
consumer response.
Theories of Personality
Freudian Theory : Unconscious needs or drives are at the heart of human motivation
Neo-Freudian Personality Theory : Social relationships are fundamental to the formation and development of personality
Trait Theory : Quantitative approach to personality as a set of psychological traits
Family Stages in Consumer‟s Life Cycle
204
Some of the important Theories of
Motivation are:
1. Maslow‟s Hierarchy of Needs.
2. Herzberg's Two Factors Theory Of Motivation
3. Mc Clelland‟s Trio of Needs Theory.
4. McGregor's Theory X and Theory Y
5. Victor Vroom‟s Expectancy Theory, etc205
Maslow‟s Hierarchy of Needs
206
Maslow‟s Hierarchy of Needs : The most basic
or pre-potent needs are shown at the bottom of
the pyramid, with prepotency decreasing as one
progresses upwards.
5. SELF - ACTUALISATION : reaching your maximum potential,
doing your own best thing, realising your inner-most self,
4. ESTEEM : respect from others, self-respect, recognition
3. BELONGING ( Social Needs ) : affiliation, acceptance, love,
friendship, being part of something
2. SAFETY & SECURITY : physical safety, psychological security
1. PHYSIOLOGICAL : ( Biological Needs ) hunger, thirst, sleep, sex207
Abraham Maslow's Theory of Hierarchy of Needs is one of the most widely discussed theories of
motivation. The theory can be summarized as follows:
1.Human beings have wants and desires which
influence their behavior. Only unsatisfied needs
influence behavior, satisfied needs do not.
2.Since needs are many, they are arranged in order of
importance, from the basic to the complex.
3.The person advances to the next level of needs only
after the lower level need is satisfied.
4.The further the progress up the hierarchy, the more
individuality, humane & psychological health a person
will demonstrate. 208
Frederick Herzberg‟s Two - Factor Theory of
( Intrinsic / Extrinsic ) motivation, concludes that
certain factors in the workplace result in job
satisfaction, but if absent, lead to dissatisfaction.
The factors that motivate people can change over their
lifetime, but "respect for me as a person" is one of the
top motivating factors at any stage of life.
He distinguished between: Motivators (egs: challenging
work, recognition, responsibility, status) which give positive
satisfaction & Hygiene factors; (egs: job security, salary,
fringe benefits, etc) that do not motivate if present, but, if
absent, result in demotivation.The name Hygiene Factors is used because, the presence will not make you
healthier, but absence can cause health deterioration.209
3. McClelland‟s Theory of Needs : David McClelland
developed a theory on three types of motivating needs : [ Trio of Needs ]
i. Need for Power : McClelland noticed that many of those who reach the
top of organisations and are rated as highly effective in their positions, demonstrate a
concern for influencing people. Power motivation refers to a need to have some
impact, to be influential and effective in achieving organisational goals.
ii. Need for Affiliation : The individual with a high need for affiliation will
reflect sensitivity to the feelings of others, a desire for friendly relationships & a
reference to situations which involve human interactions. The need for affiliation is
similar to Maslow's need for Belonging or Social need.
iii. Need for Achievement : Individuals with a high need for achievement,
have a number of distinctive characteristics which separate them from their peers.
First of all, they like situations where they can take personal responsibility for finding
solutions to problems. This allows them to gain personal satisfaction from their
achievements. They do not like situations where success or failure results from
chance. The important thing is that the outcome be the result of their own skill and
effort.210
211
Segmentation, Targeting & Positioning
212
Market Segmentation Market Segmentation is the process by which a
Market is divided into distinct buyer groups.
Market Segmentation is defined as the process of
defining & sub-dividing a large heterogeneous
market into clearly identifiable segments having
similar needs / wants or demand characteristics.
Its objective is to design a marketing mix that
precisely matches the expectations of customers in
the targeted segment.
Once the market is segmented the company has to
select those segments that they find profitable to
cater to & these selected segments constitute the
“Target Market”. 213
214
WHY MARKET SEGMENTATION ?
By segmenting the market, the
marketer is attempting to break the
market into more strategically
manageable parts, which can then
be targeted and satisfied far more
precisely by developing product and
marketing program tailored to each
segment.
Factors considered for Market Segmentation :
1. Needs / Benefits sought
2. Importance attached to Attributes/Feature
3. Usage Rate
4. Brand Loyalty
5. Purchase Influencers
6. Product Adoption Stage
7. Geographic Location
8. Channel Type
9. Life Style / Status / Personality. 215
216
Requirements for Effective Segmentation
Requirements for Effective Segmentation
1. Accessibility : The firm should be able to reach
out to the market segments through various
distribution & promotion channels economically.
2. Measurability : The variables used for market
segmentation should be easily understandable &
assessable.
3. Substantiability : The ROI from the selected
segments should be attractive & profitable.
4. Actionability : The chosen segments should exhibit
variations in their market behaviour & respond
differently to marketing mixes that are designed on
an individual basis.217
Benefits of Market Segmentation
1. Understand potential customers
2. Pay proper attention to particular areas
3. Formulate effective marketing programs
4. Select channels of distribution
5. Understand competition
6. Use marketing resources efficiently
7. Efficient & Customized design of the
marketing mix : i.e Product , Price,
Promotion & Place
219
SEGMENTATION BASES
The first step in Segmentation of
customers, in a heterogeneous market
is to select a set of variables or
characteristics (called Segmentation
Bases) to assign potential-customers
to homogeneous groups.
These variables should be related to
some aspect of potential customer‟s
needs or wants and should reflect
differences between customers.
Bases for SegmentationA Segmentation Variable is a characteristic of
individuals, groups or organisations that marketers
use to divide and create segments of the total market.
Segmentation Descriptors fall under four major
categories : Geographic, Demographic,
Psychographic & Behaviouristic Variables.
Geographic : focus on where the customers are located.
Demographic : identify who the target customers are.
Psychographic : refer to lifestyle & values.
Behaviouristic : identify benefits customers seek &
product usage rates.
221
Types of Market Segmentation
Types of Market Segmentation
222
Demographic Segmentation
Demographic Segmentation consists of
dividing the market into groups based on
measurable population characteristics such
as age, gender family size, income, occupation,
education, religion, race, nationality, etc.
It considers a number of potential influences on
buying behaviour, including attitudes, activities
& expectations of consumers. If these are known,
then products and marketing campaigns can be
customized so that they appeal more specifically
to customer motivations.223
224
Demographic variables are the most popular bases for distinguishing customer groups.
One reason is that consumer wants, preferences and usage rates are often associated with demographic variables.
Another is that demographic variables are easier to measure.
Consumer wants and abilities change with
age. Persons in the same part of the life
cycle may differ in their life stage.
DEMOGRAPHIC SEGMENTATION
225
Men & Women tend to have different
attitudinal and behavioral orientations,
based partly on their genetic makeup &
partly on socialization practices.
Income is a popular demographic variable
for segmenting customers because income
level influences consumers‟ wants and
determines their buying power.
Occupation & Education have also very
important bearing on consumers‟
purchasing behaviour.
DEMOGRAPHIC SEGMENTATION
226
DEMOGRAPHIC SEGMENTATION….
The Demographic approach assumes that
customers differ according to some criteria
about themselves.
Demographic information on its own doesn't
define the consumer needs, it doesn't define
the product or service required, or the
promotional stance to take.
The role demographic plays is to help you
identify for each segment a profile of the
typical customer to be found in each
segment. This in turn will help you
understand how to reach each segment.
Geographic SegmentationGeographic Segmentation tries to divide
markets into different geographical units, such as :
• Zones, Regions, States, Districts,
• City / Town / Village, etc
• Population: Urban, Suburban, Rural, Semi-Rural
• Climate: Coastal / Inland / Rainy, etc
Most MNCs & other large companies have
different regional and national marketing
programmes and need to alter their products,
advertising & promotion to meet the individual
needs of different geographic units. 227
228
GEOGRAPHIC SEGMENTATION
The Geographic approach assumes that
customers found within a particular
geographic zone would have common
preferences and therefore, can be
targeted with the same offer.
Like climate has strong impact on
resident‟s needs and purchasing
behaviour such as their clothing, air-
conditioning and heating system, foods,
sports and entertainments.
229
While there could be some common
preferences of people residing in same
geographic area, it does not mean that
everyone down a particular street buys
the same items.
Everyone in the northern regions of our
country (as individual consumers or as
businesses) does not have the same
buying criteria, or responds to only one
type of message.
GEOGRAPHIC SEGMENTATION
230
GEOGRAPHIC SEGMENTATION….
This approach on its own doesn't
define the consumer needs, it doesn't
define the product or service required,
or the promotional stance to take.
It can, however, play a role in
segmentation by providing further
help in identifying how to reach the
customers found in particular
segments.
Psychographic Segmentation :divides
the market into Customers‟ Groups according to
Lifestyles, Personalities & Values.
It considers a number of potential influences
on buying behaviour, including attitudes,
expectations & activities of consumers.
If these are known, then products &
marketing campaigns can be customized so
that they appeal more specifically to
customer motivations.Eg: Recent examples include the growth of demand for organic foods
or products that are ( “perceived” to be) environmentally friendly.231
232
People within the same demographic group can
exhibit very different psychographic profiles.
Although this approach on its own does not
define the product or service required, by
identifying the internal drivers of decision
makers it can help define the most appropriate
promotional stance to take for different
segments.
The opinions that consumers hold & the
activities they engage in will have a huge
impact on the products they buy & marketers
need to be aware of any changes.
PSYCHOGRAPHIC SEGMENTATION…..
Psychographic Factors for Segmentation
1. Lifestyle : Culture, Sports,
Outdoor, Page 3, etc
2. Personality : Introvert,
Extrovert, Compulsive,
Ambitious, Authoritarian, etc
Behaviouristic Segmentation
Dividing the market on the basis of
such variables as use occasion,
benefits sought, user status, usage
- rate, loyalty status, buyer
readiness stage & attitude is termed
as Behaviouristic Segmentation.
Behavioral Factors for Segmentation
1. Occasions : Regular, Special
2. Benefits : Utility, Durability
3. User Status : Non User, Regular
4. Usage Rate : Light, Heavy
5. Loyalty Status : Medium, Strong
6. Readiness Stage : Unaware, Aware
7. Attitude Toward Product : Positive,
Negative, Indifferent
Consumer & Business Markets
Markets can be broadly divided into : Consumer
Markets (B2C) & Business Markets (B2B).
Ultimate Consumers buy goods or services for
their own personal or household uses that are
satisfying strictly non-business ones. That constitutes
what is called a Consumer Market.
Business Users are business, industrial or
institutional organizations that buy goods or
services to use in their own organizations, to resell or
to make other products. Business Users constitute the
Business Market.
Some of the bases for segmenting the
consumer market are also useful for
segmenting the business market for example,
geographic basis, business demographics like
size, etc., business market generally can be
segmented by:
Type of customer
Size of the customer
Type of buying situation
Segmenting Business
Markets
Steps in Segmentation & Targeting
IdentifyBases forSegmentingthe Market
STEP 1:
DevelopProfiles ofResultingSegments
STEP 2:
DevelopMeasuresof SegmentAttractive-ness
STEP 3:
Select theTargetSegments
STEP4:
Ensure thatSegmentsAre Compatible
STEP 5:
The Marketing Segmentation Process
Take marketing actions to reach target segments
Select the product segments toward which the firm will direct its marketing actions
Develop a market/product grid to relate the market segments to the firm‟s products and actions
Find ways to group marketing actions available to the organization
Find ways to group consumers
according to their needs
240
SEGMENTATION TOOLS
Three important Statistical tools
commonly used for Market –
Segmentation are:
Conjoint Analysis
Cluster Analysis
Factor Analysis
Undifferentiated Multi-Segment Concentrated
Market Coverage Strategies based
on Segmentation
Market Coverage Strategies based on
Segmentation :
1.Undifferentiated Marketing Approach :[ Mass Market Approach ] : aims at serving all the
customers by offering a single marketing mix. Eg : Fire Insurance or Health Insurance.
2.Differentiated Marketing Approach : aims at
targeting customers of various segments by offering
different products / services for each segment. Eg : Travel Agencies approach to Domestic Travelers, Business
Travelers & International Travelers.
3.Concentrated Marketing Approach : or Single
Segment Strategy aims at serve a single or just a few
segments in the total market.242
Targeting Market Segments
Instead of aiming a single product & a
single marketing programme at the mass
market, most companies identify relatively
homogeneous segments and accordingly
develop suitable products & marketing
programmes by matching the wants and
preferences of each segment.
The chosen segments ( Target Market ) should
be the most profitable for the company &
should help in delivering superior value to
the chosen customer base.
Factors for Targeting include :
1. Segment Size & Growth Potential
2. Structural Attractiveness : analysing present
& potential competitors, substitute products /
services & the relative power of suppliers &
buyers.
3. Company‟s Objectives & Resources
244
The Target Marketing Process
Position through marketing strategies
Select market to target
Determine market segmentation
Identify markets with unfulfilled needs
Product Positioning: Developing a
marketing program in such a way that the
product is perceived to be very different
from competitors products.
246
PRODUCT POSITIONING
Positioning in Marketing is a process by which
marketers try to create an image or identity in the
minds of their target market for its product, brand or
organization.
Re-positioning involves changing the identity of a
product, relative to the identity of competing products,
in the collective minds of the target market.
De-positioning involves attempting to change the
identity of competing products, relative to the identity of
your own product, in the collective minds of the target
market.
247
Product Positioning is a decision reached by a marketer to try
to achieve a defined brand image relative to competition within a
market segment. Product positioning decisions are strategic
decisions and have an impact on long-term success of the brand.
Process of Determining the Positioning Strategy :
The following steps need to be taken to reach a decision about
Positioning :
Identify Competitors
Assessment of Consumers‟ Perceptions of Competition
Determining Competitor‟s Position
Analysing the Consumers‟ Preferences
Making the Positioning Decision.
Product Differentiation (also known simply as
“Differentiation") is the process of distinguishing
a product or offering from others, to make it
more attractive to a particular target market.
This involves differentiating it from competitors'
products as well as a firm's own product
offerings. Differentiation can be a source of
competitive advantage. This is done in order to
demonstrate the unique aspects of a firm's
product and create a sense of value. The
term Unique Selling Proposition refers to
advertising to communicate a product's
differentiation
UNIQUE SELLING PROPOSITION (USP)
A company must decide how many ideas
(benefits, features, etc) to convey in its
positioning to its target customers. Many
marketers advocate promoting only one
central benefit, which is called as the Unique
Selling Proposition or “USP” for each brand
and stick to it. i.e. companies should favour one consistent
positioning message. The brand should tout itself as
"number one" on the benefit it selects. Number one
positioning includes 'best quality', 'best performance',
'best service', 'lowest price', 'safest', 'fastest' etc.
UNIQUE VALUE PROPOSITION (UVP) :
It may so happen that single benefit
positioning i.e. USP may not be able to
overpower competition, in which case a
company should try to offer a unique
combination of multiple benefit positioning
known as Unique Value Proposition
(UVP) in order to be successful. For Eg : An Automobile can be positioned as a
most fuel efficient, cheapest in its category, and
providing best service.
Common bases used for Positioning include:
Features
Benefits
Usage
Manufacturing Process
Ingredients
Endorsements
Comparison
Product Class
Price/Quality
Country or Geographic Area
Positioning Statement or a Value Proposition :
It is a statement expressed clearly in few words that
identifies the target market for which the product is
intended. It also specifies the product category in which
it competes and highlights the unique benefit it offers.
How Many Differences to Promote ?
Successful positioning depends on effectively
communicating the brand‟s differential advantage.
A USP is an outstanding advantage and the best
strategy to create a product‟s position, provided it is not
only persuasive for the consumers but also sustainable.
Some popular positioning approaches are:
Positioning by Corporate Identity
Positioning by Brand Endorsement
Positioning by Product Attributes and/or Benefits
Positioning by Use Occasion & Time
Positioning by Price-Quality
Positioning by Product Category
Positioning by Product User
Positioning by Competitor
Repositioning
Developing a Positioning Strategy
What position do we have now?
Do we have the money to do the job?
What position do we want to own?
From whom must we win this position?
Do we have the tenacity to stay with it?
Does our creative strategymatch it?
The
Position
Positioning StrategiesAttributes and Benefits?
Price or Quality?
Use or Application?
Product Class?
Product User ?
Competitor ?
Cultural Symbols?
How should
we position ?
Developing a Positioning Platform
6. Monitor the position
5. Make the positioning decision
4. Analyze consumer preferences
3. Determine their positions
2. Assess perceptions of them
1. Identify the competitors
Positioning Errors
1. Under Positioning : When the
brand’s position is so vague that it is
seen as just another entry in a
crowded marketplace.
2. Over Positioning : Buyers may
have too narrow an image of the
brand and they may think it to be
unaffordable for them.
3. Confused Positioning : Buyers
might have a confused image of a
brand resulting from company's making
too many claims or changing the brand's
positioning too frequently.
4. Doubtful Positioning : Buyers may
find it hard to believe the brand claims
in view of the product's features, price or
manufacture.
Positioning Errors…….
Differentiation is the process of creating a
different and distinguished offering by a
company through a number of available tools,
which adds meaningful value to the offering.
Criteria for Differentiation :
All products can be differentiated to some
extent, but not all brand differences are
meaningful or worthwhile for which it should
satisfy one or more of the following criteria :
Important, Distinctive, Superior, Preemptive
Affordable, Profitable, etc.
Differentiation
Differentiation may be attained through many
features that make the product or service
appear unique. Possible strategies for
achieving differentiation may include:
Warranties ( Khaitan Fans, Whirlpool )
Brand image ( Nike Shoes )
Technology (Hewlett-Packard Printers, I Pods)
Features ( Nokia Mobile Hand sets )
Quality / Value ( Sony )
Service / Dealer Network ( Maruti Cars )261
Types of Differentiation
1. Product Differentiation
2. Service Differentiation
3. Personnel Differentiation
4. Image Differentiation
There are several variables through which a
company can differentiate its market offerings
such as :
1. Product Differentiation : A product can be
differentiated in many ways such as : by
changing the form and by varying the features
or by setting a superior performance quality or
by having a unique and superior design or by
having a high degree of reliability or higher
durability or simply by having a unique style.
Eg : I-Pod, I-Phone, etc
Differentiation….
2. Service Differentiation : When the physical
product cannot be easily differentiated, the key to
competitive success may lie in adding valued services &
improving their quality. A company does so by providing
miscellaneous Services, offering an improved product
warranty or maintenance contract; it can also offer
rewards, provide customer training, etc. Eg: Maruti Cars
3. Personnel Differentiation : Companies can gain a
strong competitive advantage through having better
trained people. Better trained personnel exhibit six
characteristics: Knowledge & Competence, Courtesy towards
Customer, Individual Credibility, Reliability, l Responsiveness
towards Customers, & l Communication Skills.
Differentiation….
4. Image Differentiation: Brand
Identity & Brand Image need to be
distinguished. Identity comprises the
ways that a company aims to identify
or position itself or its products.
Image is the way the public perceives
the company or its product.
Eg : Nike Sports wear, Sony, etc
Differentiation….
Positioning is the result of differentiation
decisions. It is the act of designing the
company's offering and identity (that will
create a planned image) so that they occupy a
meaningful and distinct competitive position in
the target customer's minds.
The end result of Positioning is the creation of a
market-focused value proposition, a simple clear
statement of why the target market should buy
the product. Once the company has developed a
clear positioning strategy, the company must choose
various signs and cues that buyers use to confirm
that the product delivers the promise made by the
company.
267
268
Product Product is anything that can be offered to
a market, such goods, services, places,
ideas, information, etc, for attention,
acquisition, use, or consumption that
might satisfy a need. It is considered to
be a bundle of benefits / utilities.
A Brand is an offering from a known source.
Value and Satisfaction : In terms of Marketing,
the Product or Offering will be successful, if it
delivers value & satisfaction to the target buyer.
269
Types of Products
ConsumerProducts
IndustrialProducts
PRODUCTS
Services
270
Unsought Goods
New innovations Products consumers don’t want to think about Require much advertising &personal sellingi.e Life insurance, blood donation
Product Classification: Consumer Goods
Specialty Goods
Special purchase efforts High price Unique characteristics Brand identification Few purchase locationsi.e Lamborghini, Rolex
Shopping Goods
Buy less frequently Higher price Fewer purchase locations Comparison shop i.e Clothing, cars, appliances
Convenience Goods
Buy frequently & immediately Low priced Mass advertising Many purchase locationsi.e Candy, newspapers
271
Supplies and Services
Operating supplies, repair/maintenance items
Materials and Parts
Raw materials, manufacturedmaterials, and parts
Capital Items
Industrial products that aid inbuyer’s production or operations
Product Classification: Industrial Goods
272
Product Item / Line / Mix
Product Item
Product Line
Product Mix
A specific version of a product that can be designated as a distinct offering among an organization‟s products.
A group of closely-related product items.
All products that an organization sells.
273
Product Mix
Width : No. of Product Lines a company has
Length : No. of Products in a Product Line
Depth : No. of variants of each product within
a Product Line.
Consistency : How closely related the
Product Lines are in end use
274
Eg -1 : Gillette’s Product Lines & Mix
Blades & WritingRazors Toiletries Instruments Lighters
Fusion – 5 bladeMach 3 TurboMach 3 Series Paper Mate CricketSensor Adorn Flair S.T. Dupont Trac II Toni S.T. DupontAtra Right GuardSwivel Silkience Double-Edge Soft and Dri Lady Gillette Foamy Super Speed Dry LookTwin Injector Dry Idea Techmatic Brush Plus
Width of the Product Mix
Dep
th o
f th
e P
rod
uct
Lin
es
Line Stretching : Line stretching occurs
when the company lengthens its product
line beyond its current length.
Down Market Stretch: A company position in
the middle market may want to introduce
a lower price line for any of three reasons:1. The company may notice strong growth
opportunities down the line.
2. The company may wish to tie up lower end
competitors who may otherwise try to move up market
and thus offer low priced offering.
3. The company may find that the middle market is
stagnating or declining.
Up Market Stretch : Companies may wish
to enter the high end of the market for more
growth, higher margins or simply to position
themselves as full-line manufacturers.
Two Way Stretch: A company serving the
middle market might decide to stretch their
line in both directions.
Line Filling : A product line can be also be
lengthened by adding more items within the
present range. Eg: Maruti introduces Alto in
between Zen & 800
THE PRODUCT LIFE CYCLEPLC concept is concerned with the courses that a
product‟s sales and profits take over its life time.
The concept holds that these two parameters (sales &
profits) change over time in a predictable way, and that
products go through a series of five distinct stages:
1. New Product Development or Pre-Introduction
2. Introduction
3. Growth
4. Maturity
5. Decline
Each of these stages provide distinct opportunities and threats,
thereby affecting the firm‟s strategies and marketing programmes.
Time
New Product
Develop-ment
Introduction
Profits
Sales
Growth Maturity Decline
Sales &
Profits in Rs.
Sales & Profits Over the Product’s Life From Inception to Demise
Product Life Cycle Curve
Features of Each Stage of the PLC Curve
T i m e →
Sa
le
s
↑ Decline
Declining sales
Declining profit
or losses
Exit of
competitors
Reduced
promotional
expenditure
Reduced price
IntroductionLow sales
Low growth
Profit is zero
Few
competitors
High
promotional
expenditure
GrowthHigh & Increasing
sales / profits
Entry of
competitors
Stable price
Stable promotional
expenditure
MaturityStatic but high
sales and profits
Emphasis on low
costs
Fight for market
share with
established
competitors
Competition is
the peak
PLC STAGESProduct Life Cycle has five distinct stages:-1. New Product Development : Begins when the
company finds and develops a new product idea. At this stage sales are zero, company’s investment costs mount.
2. Introduction : A period of slow sales growth as product is
introduced in the market. Profits are non existent at this stage because product introduction cost are high.
3. Growth : A period of rapid market acceptance & increasing
profits.
4. Maturity : A period of slowdown in sales growth as product
gets acceptance by almost all potential buyers. Profits level off or decline because of increased marketing outlay to defend the product against competition.
5. Decline : A period when sales fall off and profits drop .
PRODUCT LIFE CYCLE STRATEGIES
THE INTRODUCTION STAGE Starts when the product is first launched .
Takes time and the sales growth is slow.
Profits are negative or low as sales are low and distribution and promotion expenses are high.
As market is not ready to accept product refinement at this stage the firm produces a basic version of the product.
Selling is focused on those buyers who are ready to buy.
The market pioneer must choose a launch strategy consistent with the intended product positioning.
It should realize that it is the first step in the total marketing plan for the PLC.
If pioneer uses launch strategy to make a killing it sacrifices long revenue for short term gain.
As pioneer moves to later stages it will have to continually formulate new pricing , promotion and other marketing strategies.
PRODUCT LIFE CYCLE STRATEGIES
THE GROWTH STAGE If the new product satisfies the market, it will enter he growth stage.
Sales will start climbing quickly.
Early adopters will continue to buy, later buyers will start following their lead especially if they hear favourable word of mouth
New competitors may now make an entry attracted by the profit opportunities by adding new features
Market will now expand
Increasing competition leads to an increase in number of distribution outlets
Prices remain where they are or fall only slightly
Promotion spending may be the same or slightly higher
Goal is educating the customers and meeting competition
Profits increase as promotion costs are over large volumes and unit manufacturing costs fall
PRODUCT LIFE CYCLE STRATEGIES
THE GROWTH STAGE ( Cont’d … ) The firm uses several strategies to sustain rapid growth as long as
possible
It improves product quality and adds new product features and models
It enters new market segments and develops new distribution channels
Shifts some advertising from building product awareness to product conviction and purchase
It lowers product prices to at the right time to attract more buyers
At his stage the firm faces a trade off between high market share and high current profit
By spending a lot of money on product improvement, promotion, and distribution the firm can capture a dominant position
In doing so it gives up maximum current profit which it hopes to make up in the next stage
PRODUCT LIFE CYCLE STRATEGIES
THE MATURITY STAGE At some point of time the product’s sales growth slows down and the
product enters the maturity stage
This stage lasts longer than the previous stages
The slowdown in sales growth results in many producers with many products to sell
The overcapacity in the market leads to greater competition
Competitors begin marking down prices, increasing their advertising and sales promotion
The R&D budgets are increased to find better versions of the product
These steps lead to a drop in profit
Weaker competitors start dropping out (decline)
The market eventually contains only well established competitors
Most successful products are in a stage of continuous evolution to meet changing customer needs and preferences
PRODUCT LIFE CYCLE STRATEGIES
THE MATURITY STAGE ( Cont’d … ) At this stage firms may also chose to modify he market , the product or
he marketing mix
In modifying the market the firm tries to increase the consumption of the current market
It looks for new users and market segments. Looks for ways to increase usage among present customers
The firm may also try modifying the product by changing the characteristics such as quality, features, or style to attract the new users and inspire more usage
It may improve the product’s quality and performance, its durability, reliability, speed and taste
The firm can also try modifying the marketing mix to improve sales by changing one or more marketing mix elements. Can cut prices to attract new users and competitor’s customers. Better ad campaigns, aggressive sales promotion, trade deals. New and improved services.
PRODUCT LIFE CYCLE STRATEGIES
THE DECLINE STAGE At this stage sales of most product forms and brands eventually dip.
Decline may be slow or rapid
Sales may plunge to zero or they may drop to a low level where they continue for many years
Sales decline may be due to technological advances, shifts in consumer tastes, and increased competition
As sales and profits decline some firms withdraw from the market
Those remaining prune their product offering, drop smaller market segments and marginal trade channels
Some firms cut the promotion budget and reduce the prices further
Carrying a weak product is costly for a firm
Product’s failing reputation can cause customer concerns about firm and its other products
Keeping a weak product delays the search for replacements, creates a lopsided product mix, hurts current profits, weakens company’s foothold on the future.
PRODUCT LIFE CYCLE STRATEGIES
THE DECLINE STAGE ( Cont’d … ) At this stage a firm needs to pay more attention to the ageing products .
The firm’s task is to identify those products in the decline stage by regularly reviewing sales, market share, costs and profit trends
The firms has to decide whether to maintain, harvest or drop each of these declining products
Firm may decide to maintain the brand in the hope that competitors will leave the industry
May also decide to reposition or reformulate the brand in the hope of moving it back to the growth stage
Firm may decide to harvest the product, which means reducing various costs (plant and equipment, maintenance, R&D, advertising, sales force) and hoping that sales hold up.
Harvesting, if successful, increases firm’s profit in the short run
Firm may also decide to drop the product from its line
May sell it to another firm or liquidate it at salvage value
New Product Development
In Business, New Product Development (NPD)
is used to describe the complete process of
bringing a new product or service to market. There are two parallel paths involved in the NPD
process: one involves the idea generation, product
design & detail engineering; the other involves market
research and marketing analysis.
Companies typically see new product development as
the first stage in generating & commercializing new
products within the overall strategic process of Product
Life Cycle management used to maintain or grow their
market share.288
Causes of New Product Failures
• Overestimation of Market Size
• Product Design Problems
• Product Incorrectly Positioned, Priced or Advertised
• Costs of Product Development
• Competitive Actions
To create successful new products, the company must :
a. understand it‟s customers, markets and competitors.
b. develop products that deliver superior value to customers.
New Product Development Process
290
New Product Development Process
• Idea Generation
• Idea Screening
• Conceptual Testing
• Business Analysis
• Product Development
• Test Marketing
• Commercialization
Idea Generation & Screening
Idea Generation stage includes alternative
specifications for product concepts utilizing
end user analysis or problem analysis.
Focus groups and direct observation
provide insights for product development.
Brainstorming is used for Idea Generation
of new product or service
The Idea Screening Stage begins to confirm
the new product concept. Product candidates
are evaluated on initial estimates of potential
demand & the chances/barriers to success.
NPD Process : 1. Idea Generation
Systematic Search for New Product Ideas
• Internal sources
• Customers
• Competitors
• Distributors
• Suppliers
• Lab Experiments
2. Idea Screening : The object is to eliminate
unsound concepts prior to devoting resources
to them.
The screeners must ask at least these questions:
i. Will the customer in the target market benefit from
the product?
ii. What is the size and growth forecasts of the
market segment/target market?
iii. What is the current or expected competitive
pressure for the product idea?
iv. What are the industry sales and market trends the
product idea is based on?
v. Is it technically feasible to manufacture the
product?294
3. Concept Development & Testing :
Develop the Marketing & Engineering details :
i. Who is the target market and who is the decision
maker in the purchasing process?
ii. What product features must the product
incorporate?
iii. What benefits will the product provide?
iv. How will consumers react to the product?
v. How will the product be produced most cost
effectively?
vi. Prove feasibility through virtual computer aided
rendering, and rapid prototyping.
vii. What will it cost to produce it? 295
4. Business Analysis :
Estimate likely selling price
based upon competition
and customer feedback :
a. Estimate sales volume based
upon size of market
b. Estimate profitability and
breakeven point296
5. Product Development : ( Technical Implementation ) :
a) New program initiation
b) Resource estimation
c) Requirement publication
d) Engineering operations planning
e) Department scheduling
f) Supplier collaboration
g) Logistics plan
h) Resource plan publication
i) Program review and monitoring
j) Contingencies planning297
6. Market Testing :
i. Produce a physical prototype & test
the product in typical usage situations.
ii. Conduct focus group customer
interviews or introduce at trade show.
iii.Make adjustments where necessary.
iv.Produce an initial run of the product
and sell it in a test market area to
determine customer acceptance.
7. Commercialization :(often considered post-NPD)
• Launch the product
• Produce & place advertisements
& other promotions
• Fill the distribution pipeline with
product
299
Stages in the Consumer Adoption Process
Awareness
Interest
Evaluation
Trial
Adoption
Adopter CategoriesP
erc
en
tag
e o
f A
do
pte
rs
Time of Adoption
Early Late
Inn
ova
tors
Early Adopters
Early Majority
2.5%
13.5%
34% 34%
16%
Laggards
Late Majority
The Diffusion of Innovations Theory :
1. Innovators : Risk Takers, Variety Seekers, High
Product Interest, Less Well Integrated, More Individualistic.
2. Early Adopters : Independent, Quick to Assess
Social Leaders, Popular, Educated;
3. Early Majority : Deliberative, Adopt only if they see
No Risk, Many informal social contacts;
4. Late Majority : Skeptical, Traditional, Lower Socio-
Economic Status, Extremely Risk Averse.
5. Laggards : Resist / Postpone / Avoid Spending,
Neighbours & Friends are main info sources, Fear of Debt.
302
DivisibilityCan the innovation
be used on a trial basis?
CompatibilityDoes the innovation
fit the values and experience of the
target market?
ComplexityIs the innovation
difficult tounderstand or use?
Relative AdvantageIs the innovation
superior to existing products?
Communicability Can results be easily
observed or described to others?
ProductCharacteristics
Influence of Product Characteristics
on the Rate of Adoption
Brand ManagementA Brand is an identifying name, term, symbol,
word/s, design or mark or a combination of
these that distinguishes a product or a
company from its competitors.
Usually Brands are registered (trade-marked) with a
regulatory authority and so cannot be used freely by
other parties. Branding is an essential part of marketing.
Brand Management is the application of marketing
techniques to a specific product, product line or brand.
It seeks to increase the perceived value to the customer
and thereby Increase brand image & brand equity.
Brand Name
Brand Name refers to Words, Letters or Symbols
that make up a name used to identify and
distinguish the firm‟s offerings from those of its
competitors.
Brand Identity refers to a unique set of brand
associations that the brand strategist aspires to
create or maintain.
Brands Marks or Logos
Trade Mark is a Brand that has
been given legal protection and has
been granted solely to its owner.
Trademark is a Registered Brand Name / Mark
Most Valuable Global Brands
Coca Cola $ 36 Billion
Nescafe $ 11 Billion
Kodak $ 10 Billion
Microsoft $ 9.8Billion
Budweiser $ 9.7 Billion
Kellogg's $ 9.3 Billion
Brands Brand value
Motorola $ 9.2 Billion
Gillette $ 8.2 Billion
Bacardi $ 7.1 Billion
Marlboro $ 33 Billion
Source: Financial World
What is a Brand ? It‟s the company‟s definition of what they have
to offer.
A brand is a product that has a personality.
A promise to the customer, but it must be backed up by performance.
What the customer knows about your specific product. It‟s your image.
A brand signifies a relationship with the customer.
It is the company‟s most valuable asset.It‟s also the main differentiator, the best defense against price competition & the key to customer loyalty.
Meanings conveyed by a Brand
Attributes
Benefits
Values
Culture
Personality
Satisfaction
Advantages of Branding :
• Easy Selling
• Legal Protection
• Customer Loyalty
• Easy Market Segmentation
• Image Building
According to Jean-Noel Kepferer, a brand is complex symbol
and capable of conveying up to six dimensions or meanings:
1. Physique: Physique dimension refers to the tangible,
physical aspects. The physical dimensions are usually
included in the product such as name, features, colours, logos
& packaging. Eg : The physique of IBM brand would be,
Servers, Desktop / Notebook - PCs & Service, Etc.
2. Personality: Marketers deliberately may try to assign the
brand a personality; or people on their own may attribute a
personality to a brand. It is not surprising that people often
describe some brands by using adjectives such as “young,”
“masculine,” “feminine,” exciting,” “rugged,” “rebel,” “energetic,”
etc., as if they are living persons. Brands usually acquire
personalities because of deliberate communications from
marketers and use of endorsers. Bajaj Pulsar ads communicate
“Definitely male.” The personality of Boost is seen as young,
dynamic, energetic and an achiever.
3. Culture: Culture includes knowledge, belief, rites and
rituals, capabilities, habits & values. A brand reflects its
various aspects and values that drive it. Culture manifests
various aspects of a brand. For instance, Apple computers
reflect its culture. It is a symbol of simplicity, and friendliness.
Its symbol (munched Apple) connotes being different from
others and not following the beaten path. Mercedes
symbolises disciplined, efficient, high quality German
Engineering.
4. Relationship: Brands are often at the heart of transactions
and exchanges between marketers and customers.
The brand name Nike is Greek and relates to Olympics &
suggests glorification of human body. “Just Do It” is all about
winning, the unimportance of age, and encourages us to let
loose. Apple conveys emotional relationship based on
friendliness. Relationship is essentially important in service
products.
5. Reflection: This refers to defining the kind of
people who use it. It is reflected in the image of its
consumers: young, old, rich, modern and so on. For
example, Pepsi reflects young, fun loving, carefree
people. The reflection of Allen Solly‟s brand is a
typical young executive. However, it does not by any
chance mean that they are the only users. The
concept of target market is broader than reflection.
6. Self-Image: This means how a customer relates
herself / himself to the brand. Self-Image is how a
customer sees herself / himself. The self-image of
users of Bajaj Pulsar
motorcycle is believed to that of be tough, young
males. Users of Nike see their inner reflection in the
brand‟s personality.
315
Major Branding Decisions
316
Characteristics of a Brand : At the time of choosing a
brand name, various aspects require careful consideration. Very
often, manufacturers invite brand names from the consumers, &
Distributors.
General Considerations in Branding :1. The name should be easy to read, pronounce,
understand & recall. Eg : Pepsi, Dettol, Tide, etc
2. The name should be appropriate for the product.
Eg: All Clear, Head & Shoulders, Close Up, etc
3. It should be short & easy to remember like Vim,
Lux, Zen, Gems, Wheel, Dove, Ikon, Alto, etc.
4. It should not have any negative meanings
associated in the local language. Eg : NOVA, HENKO,
5. As far as possible, it should be descriptive in
nature. Eg : Fair & Lovely, First Flight Courier, DTDC,
Types of Brands :(Brand Sponsor Decisions)
Manufacturer‟s Brand
Private Brand (Distributor‟s Brand)
Generic Brand
Licensed Brand
Manufacturer Brands : are initiated by
manufacturers & identify the producer.
This type of brand generally requires the
initiator involvement in its distribution,
promotion & pricing decisions.
The brand quality is assured / guaranteed
& the aim of promotion-mix is to build
company and / or Brand Image and
encourage Brand Loyalty.
Private Brands are resellers initiated brands
& the manufacturers are not identified on the
products. Wholesalers & Retailers use
Private Brands to develop more efficient
promotions to build store image & generate
higher gross margins.
The Resellers have the freedom and advantage of
buying specified quality at an agreed upon cost from
the manufacturer without disclosing manufacturer
identity. Nearly 20% of he consumer goods sold in most
of the Supermarkets / Hypermarkets in developed
countries are Private Brands.
Egs : Wal-Mart, Shoppers Stop, Food World, Nilgiris
Generic Brands are those, which
indicate only the product category, such
as Aluminium-Foil, Cellophane-Tape, Granite,
Tissue-Paper, Teak-Wood, Medicated-Cotton, etc .
Only the generic name of the product is mentioned &
the manufacturing company‟s name is written just to
conform to legal requirements, such as DDT, Urea,
Paracetamol, Tetracycline, etc. They do not include
any other identifying marks. Generic Brands are
usually sold at lower prices than their branded
versions.
Generic Brands are fairly common in the Agro-
Industry, Pharmaceutical Industry, Industrial
Raw -Materials, Pesticides, etc
Licensed Brand is a relatively new trend &
involves licensing of trademarks. Entering into a
licensing agreement, a company allows
approved manufacturers to use its trademark for
a mutually agreed fee. The royalties may range
anywhere between 2 % to10 %.
The company obtaining the license would be
responsible for all production and promotional activities,
& would bear the costs in case the licensed product
fails. The benefits of this arrangement can bring extra
revenues, free -publicity, new images & protection of
trademark.
Eg : P&G licensed its Camay brand of soap in India to
Godrej for a few years.
Methods of Branding( Brand Name Decisions)
1. Individual Branding : Separate Names
for all Products of one company.
Eg : HUL Soaps : Lux, Rexona, Dove,
Life Bouy, Pears, Liril, Breeze, etc
2. Umbrella or Family Branding : Blanket
Family Name for all Products or separate
Family Names for separate Product Lines
Eg : Lakme, Ponds, Maggie, Nescafe, etc
Methods of Branding……..
3.Corporate Branding : Also known as
“Endorsement Branding” is using Company‟s
Trade Name combined with individual product names.
Eg : TATA STEEL, TATA SALT, SONY, GODREJ, BAJAJ,
HONDA, TOYOTA, etc.
4.Co - Branding : Associating & promoting
two brands together. Co-branding, also called
Brand Partnership, is when two companies
form an alliance to work together, creating
marketing synergy.
Eg : HP & Intel, Citibank & Indian Oil,
Maruti Auto Card & SBI Credit Card, etc
Co-Branding is an arrangement that associates a
single product or service with more than one brand
name, or otherwise associates a product with someone
other than the principal producer.
The typical co-branding agreement involves two or
more companies acting in cooperation to associate any
of various logos, color schemes, or brand identifiers to
a specific product that is contractually designated for
this purpose.
The object for this is to combine the strength of two
brands, in order to increase the premium consumers
are willing to pay, make the product or service more
resistant to copying by private label manufacturers, or
to combine the different perceived properties
associated with these brands with a single product.
List of HUL‟s Famous Brands:
Product Category : Household Care, Fabric Cleaning, Skin Cleansing, Skin Care, Oral Care, Hair Care, Personal Grooming & Tea-based Beverages, under following famous Brands:
Lux, Lifebuoy, Dove, Pears, Hamam, Breeze, Liril, Rexona, Vaseline, Fair & Lovely, Ayush, Ponds, CloseUp, Surf, Sunsilk, Lipton, Bru, Vim, Surf, Pepsodent, All Clear, Wheel, Lakme, Kissan, Kwality Walls, etc
326
Line Extension
Multibrands
Brand Extension
New Brands
Bra
nd N
am
e
Existing NewProduct Category
Existing
New
Four Brand Strategies
327
Brand StrategyLine Extension : Existing brand names
extended to new forms, sizes & flavors of an existing product category.
Brand Extension : Existing brand names extended to new or modified product categories.
Multibrands : New brand names introduced in the same product category.
New Brands : New brand names in new product categories.
Brands have equity because they have
high awareness, many loyal consumers,
a high reputation for perceived quality,
proprietary assets such as access to
distribution channels or to patents, or the
kind of brand associations (such as
personality associations)
Brand Equity is defined in terms of
marketing effects uniquely attributed
to the brands.
Brands Equity
Brand Equity
329
Brand Equity is the difference
between the expected future sales
of a branded product & an
unbranded product.
i.e. Brand Equity is the value of a
brand built up over a period of time. It
is composed of four major components
namely : Image, Perception,
Awareness and Loyalty.330
BRAND AWARENESS: is the ability of prospective
customers to recall a brand & its product category.
BRAND ASSOCIATION : conveys the meaning of the
product in terms of how it fulfills a customer need.
Brand Associations create positive feelings which
create a sense of uniqueness in favour of the Brand.
Companies & people who behave in a socially
responsible manner are much more likely to enjoy
ultimate success than those whose actions are
motivated solely by profits.
BRAND LOYALTY : is the physical / emotional relationship
between a company / product & its customers.
Brand Loyalty is the biased behavioural response
expressed over time by some decision-making unit,
with respect to one or more alternative brand out
of a set of such brands, and is a function of
psychological processes.
Advantages of Brand Loyalty :
1. Generates higher sales volume / profits
2. Gives flexibility in pricing & in the introduction of new
products
3. Lower cost for the company
4. Publicity & WOM recommendations attract new
customers
5. Greater Trade advantages.
Walfried Lasser. Banwari Mittal & Arun Sharma identified 5 dimensions of
Customer Based Brand Equity:1. Performance: The aspect of brand equity focuses on the physical
and functional attributes of a brand. Customers are concerned about
how fault free and durable the brand is, based on their judgement.
2. Social image: This focuses on what social image the brand holds in
terms of its esteem for customer‟s social and reference groups.
3. Value: This refers to the customer‟s value perception of the brand.
This is the ratio between what are the involved costs and the
perceived delivered value.
4. Trustworthiness: This means the customer‟s extent of faith in the
brand‟s performance, quality, and service. This reflects reliability of
the brand, that it would always take care of customer‟s interest and
the people behind the brand can be trusted.
5. Identification: To what extent customers feel emotionally attached to
the brand. Their association with the brand is important because it
matches their self-concept & aspirations. This means psychological
association with what the brand stands for in the customer‟s
perceptions.
PACKAGINGPackaging is the science, art & technology of enclosing or protecting products for storage, distribution, sale & use.
Packaging also refers to the process of design, evaluation & production of packages. Packaging can be described as a coordinated system of preparing goods for transport, warehousing, logistics, sale & end use.
Purpose of Packaging :- To :contain, protect, preserves, transport, inform & sell a Product
334
Packaging & Labelling
Steps in developing a good package: Develop specific elements of the package,
Elements must support product‟s position and marketing strategy.
335
Packaging is the art &
science of designing
& producing the
container or wrapper
for a product. It has
become extremely important
& is often referred to as the
5th „P‟ of the Marketing Mix
336
Labeling : Package Labelling or a
Label is any written, electronic or graphic
communications on the packaging or on a
separate associated Label.
Label performs several functions:
Identifies product or brand
Describes several things about the product
Promotes the product through attractive graphics
Purposes of Packaging & Labels
Packaging & Package Labeling have several
objectives, namely :
1.Physical Protection : The objects enclosed in the
package may require protection from, shock, vibration,
compression, temperature, etc.
2. Barrier Protection : A barrier from oxygen, water
vapour, dust, etc., is often required in order to keep
the contents clean, fresh, sterile and safe for the
intended shelf life .
3. Containment or Agglomeration : Small objects
are typically grouped together in one package for
reasons of convenience & efficiency. 337
338
4. Information transmission : Packages & Labels
communicate how to use, transport, recycle, or dispose
of the package or product. For certain items like
pharmaceuticals, food, medical & chemical products,
some types of information are statutatory requirements.
Some packages and labels also are used for track &
trace purposes.
5. Marketing : The packaging and Labels can be used
by marketers to encourage potential buyers to purchase
the product. Package graphic design and Marketing
communications are applied to the surface of the
package and (in many cases) the point of sale display.
6. Security : Packaging can play an important role in reducing
the security risks of shipment. Packages can be made with
improved tamper resistance to deter tampering and also can
have tamper-evident features to help indicate tampering.
339
7. Convenience : Packages can have
features that add convenience in distribution,
handling, stacking, display, sale, opening,
reclosing, use, dispensing, and reuse.
8. Portion Control : Single serving or
single dosage packaging has a precise
amount of contents to control usage. Bulk
commodities (such as salt) can be divided into
packages that are a more suitable size for
individual households. It is also aids the
control of inventory. Eg: selling sealed one - litre -
bottles or packets of milk, rather than having people
bring their own bottles to fill themselves.
340
341
Price Has Many Names
• Rent
• Fee
• Rate
• Commission
• Assessment
• Tuition
• Fare
• Toll
• Premium
• Retainer
• Bribe
• Salary
• Wage
• Interest
• Tax
What is Price ?
342
Definition of PricePrice is the amount of money charged for a
product or service, or the sum of the values that
consumers exchange for the benefits of having
or using the product or service. It is the only
element in the Mktg. Mix that generates revenues.
Pricing refers to the process of setting a specific
price for a product or service offered. Pricing allows
Sellers to :
Charge lower prices & / or reap higher margins.
Monitor customer behavior & tailor offers.
Alter prices to adjust for changes in demand / costs.
Negotiate prices in online auctions and exchanges.
343
Pricing Process
1. Set Pricing Objectives
2. Analyze demand
3. Draw conclusions from competitive intelligence
4. Select pricing strategy appropriate to the P, E, S, T Environment.
5. Determine specific prices
PRICING OBJECTIVES
1. SURVIVAL (short-term objective, i.e. due to
heavy competition, changing customer needs,
too much production, not enough sales )
2. RETURN ON INVESTMENT
3. PROFIT MAXIMIZATION
4. MARKET STABILISATION
5. MARKET SHARE LEADERSHIP (lower price
due to economy of scale)
6. MEETING / FOLLOWING COMPETITION
344
Pricing Objectives (Cont‟d ….)
6. PRODUCT DIFFERENTIATED (i.e.
car manufacturing -add on purchases)
7. MARKET SKIMMING (enter market with
high price, lower as market matures)
8. MARKET PENETRATION (enter market
with low price, increase as market stabilizes)
9. EARLY CASH RECOVERY
10. PREVENTING NEW ENTRY (Low price
may prevent new entrants)345
346
Factors to Consider in Pricing :
• Marketing
Objectives
• Marketing Mix
Strategies
• Costs
• Organizational
considerations
Internal Factors External Factors
• Nature of market and
demand
• Competitors’ costs,
prices & offers
• Other Environmental
elements
347
Factors to Consider in Pricing :
• Marketing Objectives
• Marketing Mix
Strategies
• Costs
• Organizational
considerations
• Market positioning
influences pricing strategy
• Other pricing objectives:
– Survival
– Current profit maximization
– Market share leadership
– Product quality leadership
• Not-for-profit objectives:
– Partial or full cost recovery
– Social pricing
Internal Factors
348
Factors to Consider in Pricing :
• Marketing objectives
• Marketing Mix
strategies
• Costs
• Organizational
considerations
• Pricing must be carefully
coordinated with the
other marketing mix
elements
• Target costing is often
used to support product
positioning strategies
based on price
• Non-Price positioning
can also be used
Internal Factors
349
Factors to Consider in Pricing :
• Marketing objectives
• Marketing mix
strategies
• Costs
• Organizational
considerations
• Types of costs:
– Variable
– Fixed
– Total costs
• How costs vary at different
production levels will
influence price setting
Internal Factors
350
Factors to Consider in Pricing :
• Marketing objectives
• Marketing Mix
strategies
• Costs
• Organizational
Considerations
• Who sets the price?
– Small companies: CEO or
Top Management
– Large companies:
Divisional or Product Line
Managers
• Price negotiation is
common in Industrial
settings
• Some Industries have
Pricing Departments
Internal Factors
351
Factors to Consider in Pricing :
• Nature of Market
& Demand
• Competitors’ costs,
prices & offers
• Other environmental
elements
• Types of markets
– Pure competition
– Monopolistic competition
– Oligopolistic competition
– Pure monopoly
• Consumer perceptions of
price and value
• Price-demand
relationship
– Demand curve
– Price elasticity of demand
External Factors
352
Factors to Consider in Pricing :
• Nature of market and
demand
• Competitors’ costs,
prices & offers
• Other environmental
elements
• Consider competitors‟ costs,
prices, and possible reactions
when developing a pricing
strategy
• Pricing strategy influences the
nature of competition
– Low-price low-margin
strategies inhibit competition
– High-price high-margin
strategies attract competition
• Benchmarking costs against
the competition is
recommended
External Factors
353
Factors to Consider in Pricing :
• Nature of market and
demand
• Competitors’ costs, prices,
and offers
• Other Environmental
elements
• Economic conditions
– Affect production costs
– Affect buyer perceptions of
price and value
• Reseller reactions to
prices must be
considered
• Government may restrict
or limit pricing options
• Social considerations
may be taken into
account
External Factors
Pricing Methods (Approaches to Pricing)
1. Cost Based Pricing
2. Value Based Pricing
3. Competition Based Pricing.
4. Market Based Pricing
PRICING STRATEGIES
1. Skimming Price
2. Penetration Price
3. Loss Leader Price
4. Psychological Price 354
For Introducing New Products
355
( I ) Cost-Based Pricing :
1. Cost-Plus Pricing : Adding a standard markup to cost
Price = Cost of Production + Margin of Profit.
Ignores demand and competition
Popular Pricing technique because:• It simplifies the pricing process
• Price competition may be minimized
• It is perceived as more fair to both buyers & sellers
General Pricing Approaches
356
( I ) Cost-Based Pricing :
2 ) Break-Even Analysis & Target Profit
Pricing
Break-even charts show total cost and total
revenues at different levels of unit volume.
The intersection of the total revenue and
total cost curves is the break-even point.
Companies wishing to make a profit must
exceed the break-even unit volume.
General Pricing Approaches :
357
( II ) Value-Based Pricing:
Uses buyers‟ perceptions of value rather
than seller‟s costs to set price.
Measuring perceived value can be
difficult.
Consumer attitudes toward price and
quality have shifted during the last
decade.
• Introduction of less expensive versions of
established brands has become common.
General Pricing Approaches…..
358
( III ) Competition-Based Pricing :
Also called Going-Rate Pricing
May price at the same level, above, or
below the competition
Sealed - bid Pricing : Bidding for work
is another variation of competition-
based pricing
General Pricing Approaches…..
359
Pricing Strategies
• Market-Skimming Pricing :
Setting a high price for a new product to skim maximum revenues layer by layer from segments willing to pay the high price.
• Market-Penetration Pricing :
Setting a low price for a new product in order to attract a large number of buyers and a large market share.
3. Loss Leader Pricing :
Loss Leaders are goods or services
offered at steep discounts (generally
below cost) in order to attract new
customers to a store.
It is a time-honored practice that has been
met with much success, especially by
large discount retailers. The intent of
this pricing strategy is to not only have the
customer buy the (Loss Leader) sale item,
but other products that are not discounted.360
When to Use Loss Leader Pricing ?• Move Overstock: If you have inventory that isn't
moving or if you're overstocked on a particular item, a
Loss Leader can move it. By cutting the price of such
an item, you'll not only free up the shelf space and
reduce inventory, but you'll also increase cash flow.
• Brand Awareness: If you would like to be known for
having low prices then the loss leader pricing strategy
will help associate your business with that belief. Keep
in mind that people want good quality merchandise for
less money and not junk.
• Increased Traffic: Using loss leaders as a marketing
tool can help gain new customers & increase return
visits. People are likely come back to shop, when they
like a bargain . 361
PSYCHOLOGICAL PRICING
Psychological Pricing approach is suitable
when consumer purchases are based more on
feelings or emotional and factors such as love,
affection, prestige, self-image etc, rather than
rational factors. Price sometimes serves as a
surrogate indicator of quality.
Companies attempt to differentiate their offers
based on non-functional product attributes,
such as image and lifestyle etc.
Marketers set artificially high prices to
communicate a status or high quality
image. Psychological Pricing method is
appropriate for perfumes, jewellery, autos,
liquor, and ready-to-wear garments etc. and
is not appropriate for industrial products.
364
Initiating Price cuts is desirable
when a Firm :
Has excess capacity
Faces falling market share due
to price competition
Desires to be a market share
leader
Price Changes
365
Price Increases are desirable : If a firm can increase profit, faces cost
inflation, or faces greater demand than can be supplied.
Methods of Increasing Price
Alternatives to Increasing Price
Reducing product size, using less expensive materials, unbundling the product.
Price Changes…..
366
Buyer reactions to price changes
must be considered.
Competitors are more likely to react
to price changes under certain
conditions, such as :
– Number of firms is small
– Product is uniform
– Buyers are well informed
Price Changes………
Unit - III
Marketing Channel System :-Functions & flows; Channel Design.
Channel Management :- Selection,
Training, Motivation & Evaluation
of Channel Members;
Channel Dynamics:- VMS, HMS, MMS;
Market Logistics Decisions.367
368
CHANNEL
MANAGEMENT
&
DISTRIBUTION
PLACE or PHYSICAL DISTRIBUTIONis the third „P‟ of the Marketing Mix. It consists of
two parts, namely
( I ) Channels of Distribution &
( II ) Logistics of Distribution
Place is the market-place where the customer
buys / consumes the product /service. Place refers to how an organisation will distribute the product or
service they are offering to the end user. The organisation must
distribute the product to the user at the right place at the right
time. Efficient and effective distribution is important if the
organisation is to meet its overall marketing objectives.
Place is sometimes referred to as the Marketing Channels,
Physical Distribution, Logistics or Location. 369
DistributionDistribution: includes activities that make
products available to customers when and where they need them.
A Channel of Distribution or Marketing Channel is an organisation or a set of individuals that directs the flow of products from producers to the consumers.
Marketing Intermediaries : link producers to other intermediaries or to the ultimate users of the product. Operate between the producer or manufacturer and the final buyer.
370
Distribution Functions
Types of utilities Distribution offers:
TIME...when the customers want to purchase
the product.
PLACE...where the customers want to
purchase the product.
POSSESSION...facilitates customer ownership
of the product.
FORM...sometimes, if changes have been
made to the product in the distribution channel,
i.e. Pepsi/Coke, concentrate to bottlers.371
The Distribution Channel
Manufacturers
Wholesalers / Brokers / Agents
Retailers
Consumers372
Channels of Distribution……
Marketing Intermediary or Middleman is a
marketing organization that links a producer &
user within a marketing channel.
• Merchant Middleman : takes title to products
by buying them
• Functional Middleman : helps in the transfer
of ownership of products but does not take
title to the products
• Retailer: buys from producers or other
middlemen & sells to consumers
• Wholesaler : sells products to other firms373
A Channel of Distribution comprises of a set
of organizations which perform all of the
activities required to move a product & its title
from production to consumption.
Types of Channel Intermediaries : There are
many types of intermediaries such as
Wholesalers, Agents, Retailers, Internet,
Overseas Distributors, Direct Marketing
(from manufacturer to user without an
intermediary) etc.
Two types of Channel of Distribution methods
are commonly used : Indirect & Direct. 374
Indirect Distribution involves distributing
your product by the use of one or more
intermediaries such as : Manufacturer to
Wholesaler to Retailer to a Consumer.
Direct Distribution involves distributing
direct from a manufacturer to the
consumer. For Eg : Dell Computers selling directly
to its target customers.
The main advantage of Direct Distribution
is that it gives a manufacturer complete
control over their product.375
Why a Firm May Want to Use Direct Channels :
Greater Control
Lower Cost
Value added subsequent to
production process
Direct contact with
Customer Needs
Quicker Response or
Change in Marketing Mix
Suitable Middlemen Not
Available
Some
Reasons
for Choosing
Direct Channels
11-4
Information
Promotion
Contact
Matching
Negotiation
Physical
Gathering and distributing marketing research about the environment
Developing and spreading persuasive communications about an offer
Finding and communicating with prospective buyers
Shaping and fitting the offer to the buyer‟s need
Agreeing on price and terms of the offer so ownership or possession can be transferred
Distribution: transporting and storing goods
Financing Acquiring and using funds to cover the costs of channel work
Distribution Key Functions Channel
Risk Taking Assuming financial risks such as the inability to sell inventory at full margin
Distribution Channel Functions
Distribution StrategiesDepending on the type of product being distributed there are three common distribution strategies available:
1. Intensive Distribution: involves distribution through as many retail outlets as possible. It is mainly used to distribute low priced or impulse purchase products. Eg : Chocolates, Soft Drinks, etc.
2. Exclusive Distribution: Involves limiting distribution to a single outlet usually for is usually highly priced-products.
Eg : Sale of Vehicles thro‟ Exclusive Dealers.
378
379
3. Selective Distribution: A small
number of retail outlets are chosen to
distribute the product. Selective
Distribution is common with Consumer-
Electronics i.e. products such as
computers, televisions, washing-machines,
refrigerators, household -appliances, etc
where consumers are willing to shop
around & where manufacturers want a
large geographical spread.
Channels for Consumer Products (B2C)
A manufacturer may use multiple channels
To reach different market segments
To increase sales or capture a larger market
share
15 | 380
Channels for Industrial Products
Producer to Industrial User ( B2B )
Usually used for heavy machinery,
airplanes, major equipments, etc
Allows the producer to provide expert
and timely services to customers
381
Channels for Industrial Products (cont‟d)
Producer to Agent Middleman
to Industrial User
Usually used for operating supplies,
accessory equipment, small tools,
components, standardized parts, etc
382
Marketing Intermediaries
Justifications for marketing intermediaries :
Intermediaries perform essential
marketing services
Manufacturers would be burdened with
additional record keeping & maintaining
contact with numerous retailers
Costs for distribution would not decrease,
and could possibly increase due to the
marketing inefficiencies of producers 383
384
Intermediaries are specialists in the exchange
process, provide access to and control over
important resources for the proper functioning
of the marketing channel. ( Division of labour ).
Functions of Intermediaries : Primary role of middlemen is to transform the
assortment of products made by producers in
the assortments desired by consumers.
Producers make narrow assortments in large
quantities, consumers want broad assortments
in small quantities, discrepancy in quantity and
assortment .i.e. to match Supply and Demand.
Other functions of Marketing Intermediaries include:
Assuming Risk : Provide working capital by paying for goods before they are sold.
Information flow
Financing
Payment & Title Flow.
Negotiation
Contacts
Promotion385
CHANNEL TERMS & CONDITIONS
The producer stipulates terms and
condition and responsibilities of
channel partners to develop better
mutual understanding and usually
include : Price Policy, Trade Margins,
Payment Terms, Territorial
Demarcation, Guarantee/Returns Policy,
& Mutual Responsibilities etc.
EVALUATION OF CHANNEL ALTERNATIVES :
In making a decision about channel alternatives, producers‟ evaluation criteria is generally based on some combination of the following factors:
• Product characteristics.
• Buyer behaviour and location.
• Severity of competition.
• Cost effectiveness and channel efficiency.
• Degree of desired control on intermediaries.
• Adaptability to dynamic market conditions.
• Customer needs :
• Attracting channel members : A
small chain hotel be advised to choose one travel agency chain or work in key cities that are likely to generate business.
• Evaluating major channel alternatives
1. Economic Criteria : MGM Hotel : Tour Operators vs. Travel Agencies.
2. Control Criteria : Franchise control / Quality control
Selecting Channel Members
CHANNEL SELECTION & TRAINING
After determining the most appropriate
Distribution Channel, the producer has
to select the most qualified parties and
arranges for their training. In case of Exclusive Dealerships & Franchisees
where personal contact with customers and
service delivery are important, company
appointed dealers play an important role. They
practically become the company for the
customers and any negative impressions may
severely damage company image & reputation.
MOTIVATING INTERMEDIARIES
Motivating channel intermediaries is a
challenging task for producers, but essential
to obtain best possible performance from
them. Motivation programmes for channel
intermediaries focus mainly on Financial &
Nonfinancial Rewards.
Financial Rewards usually include higher
margins, extended credit facilities, bonuses
and allowances, special deals, and sharing
intermediaries‟ promotional expenses.
MOTIVATING INTERMEDIARIES……
Non-financial Rewards include training programmes at company expenses in areas such as technical skills, service, selling territory -management, human resource, etc. Other Nonfinancial Rewards include sales and display contests, recognition for outstanding performance, company paid holidays, spending money on arranging lavish distributors/dealers‟ meet at exotic places, etc.
PERFORMANCE EVALUATION OF
INTERMEDIARIES :Producers must periodically evaluate
performance of dealers against laid down and
agreed upon parameters. The evaluation
criteria differ across industries and from one
company to another in the same industry.
Companies may use a set of criteria that may
include some combination of factors with
differing weight given to each element in order
of its importance, such as achievement of
sales targets, average inventory maintained,
performing promotional activities, customer
service & attending training programmes etc.
Types of Wholesale Intermediaries
There are 2 main types of Wholesalers:
1.Merchant Wholesalers : who buy
products from manufacturers & resell
them to other intermediaries.
2.Functional Wholesalers : who do
not take title, but only facilitate
exchanges among producers and
resellers, compensated by fees and/or
commission. 393
Types of Wholesalers ( Cont‟d … )
Merchant Wholesalers are of two types: ( 1 ). Full Service Wholesalers :- offer widest possible range of functions. Categorized as:
a) General Merchandise MW : wide mix (unrelated), limited depth.
b) Limited Line MW : only few products but an extensive assortment.
c) Specialty Line MW : narrowest range of products.
d) Rack Jobbers : are specialty line that own and maintain display racks, take back unsold products.
394
Types of Wholesalers ( Cont‟d … )
( 2 ) Limited Service Merchant Wholesalers :provide only some of the marketing functions.
a) Cash and Carry wholesaler : customers pay for and make their their own arrangements for transportation. No credit is extended. Mainly B2B.
b) Truck Jobbers : Operate rolling warehouses and sell a limited line of products directly from their trucks to their customers. Follow regular routes, primarily perishable
products. Egs : Vegetables, Fruits, Flowers
395
Types of Wholesalers ( Cont‟d … )
( 2 ) Limited Service Merchant --- Wholesalers :
c)Drop Shippers or Desk Jobbers : take title, negotiate sales but do not take possession.
d)Mail Order Wholesalers : use catalogues instead of sales force to sell.
396
Types of Wholesalers ( Cont‟d … )
Agents & Brokers :
Negotiate purchases, expedite sales but do not take title.
They are „Functional Middlemen‟ who bring buyers and sellers together.
Compensated with commission / brokerage.
Agents represent buyers and sellers on a long term basis.
Brokers represent buyers and sellers on a temporary basis.
397
Types of Agents & Brokers
1. Manufacturers Agent : Represent two or
more sellers and offer customers complete
lines. Handle non- competing or
complementary products & have written
agreements with the manufacturers.
2. Selling Agent : market either all specified
line or manufacturers entire output. Perform
every wholesaling activity except taking title
of the product. Used in place of a marketing
department. Represent non-competing
product lines. 398
Types of Agents & Brokers ( Cont‟d.. )
3. Commission Merchant : focus primarily
on the selling task. Receive goods on
consignment from local sellers and
negotiate sales in large central markets.
4. Auction Companies : provide storage for
inspection. Sales made to the highest
bidder.
5. Brokers : negotiate exchanges & perform
the fewest intermediary functions. Assume
no risk.399
Types of Wholesalers ( Cont‟d … )
Manufacturers Sales Branches &
Sales Offices : are manufacturer owned &
resemble merchant wholesalers operations.
Sales Branches : sell product & provide
support services to manufacturers sales forces.
Sales Office : are normally associated
with Agents. Like Sales Branches, they are
located away from a manufacturing plant & do
not carry any inventory.
400
Wholesalers‟ Responsibilities Buy in large quantities and
then sell in smaller quantities
Deliver goods
Stock in one place a variety of goods
Promote products to retailers
Provide market information for both producers and retailers
Provide financial aid to Retailers in the form of delayed billing, loans, inventory management, etc
15 | 401
Wholesalers‟ Services to Manufacturers
• Provide instant sales forces to manufacturers
• Reduce manufacturers‟ inventory costs by purchasing finished goods in sizable quantities
• Assume the credit risks associated with selling to retailers
• Furnish vital market information to the manufacturers
15 | 402
HIERARCHY OF MARKETING SYSTEM
With the passage of time and changes in
business environment and strategies,
marketing channel systems evolve and new
Wholesaling & Retailing Institutions appear.
The traditional marketing channels include
members who are independent entities and
no party has complete control over others
in the channel system. Each seeks to
maximise its own profit goals without much
concern for others in the same system.
VMS, HMS & MMSSome recent changes in channel
systems that have emerged include:
1. Vertical Marketing Systems (VMS),
2. Horizontal Marketing Systems (HMS),
and
3. Multichannel Marketing Systems(MMS)
{ or Hybrid Systems }
VerticalMarketingChannel
Manufacturer
Retailer
ConventionalMarketingChannel
Consumer
Manufacturer
Consumer
Retailer
Wholesaler
Wh
ole
sa
ler
Conventional Distribution Channel Vs.
Vertical Marketing Systems
Vertical Marketing Systems (VMS)
Vertical Marketing System refers
to an arrangement in which the
whole channel focuses on the
same target market at the end of
the channel.
This includes Producer, Distributors,
Wholesalers, & Retailers acting in an
integrated manner.
Vertical Marketing Systems (VMS)
In a VMS, any channel member, a Manufacturer, Distributor, Wholesaler, or a Retailer can become a Channel Captain, who helps direct the activities of the entire channel and tries to eliminate or resolve conflict.
The Channel Captain assumes the leadership role because the captain is either the owner, a franchisee, or wields so much power that all others cooperate.
1. CORPORATECommon Ownership at Different
Levels of the Channel
2. CONTRACTUALContractual Agreements Among
Channel Members
3. ADMINISTEREDLeadership is Assumed by One or
a Few Dominant Members
Degree of Direct Control
Types of Vertical Marketing Systems
Corporate VMSCorporate VMS refers to the producer’s
ownership of the entire channel, right
from manufacturing to wholesaling &
Retailing.Egs : Vimal Fabrics, Titan Watches, Bata, etc
Manufacturer can accomplish this through
vertical integration (acquiring firms at different
levels of channel activity). This offers greater
buying power, stable sources of supplies, better
control of distribution and quality & lower
overheads.
Administered VMSAdministered VMS is achieved when
some members, because of their size,
position and power in the industry, are
in a commanding position to secure
cooperation and support from resellers
at different levels. Members informally agree to cooperate with
each other on matters like routine ordering,
sharing inventory & sales information over
networks, standardize accounting and integrate
their promotional activities.
Administered VMSThe agreement is informal and the
members retain some of the flexibility
of traditional distribution system.
Companies with strong brands
command substantial market power &
are able to get cooperation from
resellers at different levels of
distribution.
Egs: Hindustan Unilever Ltd., Procter & Gamble,
Maruti Udyog Ltd, ITC, IBM, Sony, TELCO etc.
Contractual VMSContractual VMS consists of independent
businesses at different levels in the channel
including production & distribution, and is
most popular. Members agree to cooperate
with each other by entering into contract that
spells each members‟ rights & obligations and
gain economies of size and sales impact.
Contractual VMS can be Franchiser,
Wholesaler or Retailer Sponsored, such
as Coke, Pepsi ,Body Shop, Shahnaz
Herbal,
Vertical Marketing Systems
Characteristics
Type of Channel
Little or
noneSome to
good
Fairly
good
to good
Complete
NoneEconomic
power and
leadershipContracts
One
company
ownership
Typical
IndependentsMcDonald‟s
FlorsheimGeneral
Electric
Amount of
cooperation
Traditional
Vertical Marketing Systems
AdministeredContractual Corporate
Control
maintained by
Examples
Franchising
• Formal contract governing :
Supply
Responsibilities
Division of profits
• Franchisors provide :
Use of trademark & Access to product
Co-operative advertising
Training & Standardized operating procedures
Site selection & Plant design
Financing, etc
•The franchisor permits the franchise to use its trademark,
name and advertising.
•In U.S.A. 700,000 franchise ~about $ 850 billion sales
Franchised hotels account ~ 65 percent of room supply.
Starting a new business: 20 percent chance for survival
Buying an existing business: a 70 percent chance for survival
Buying a franchise: a 90 percent chance for survival
Vertical Marketing System
Franchising
Hotel franchises:
Choice Hotels, Holiday Inns,
Sheraton Inns, Hilton inns
Restaurant franchises:
Mc Donalds, Burger King, KFC,
Pizza Hut, T.G.I. Franchises
Advantages Disadvantages
Franchisor1. Capital for growth
2. Faster growth
3. Additional management
4. Additional income
1. Lower potential profits
2. Controlling service quality
3. Controlling firm image
Franchisee
1. Lower risk
2. Established brand name
3. Successful business plan
4. Expert assistance
1. Franchisee fees
2. Lack of freedom
3. Controlled by franchisor
Vertical Marketing System
Franchising
Horizontal Marketing System
Horizontal marketing system occurs
when two or more related or unrelated
companies working at the same level
come together to exploit marketing
opportunities.
By coming together they have the option
to combine their capital, production
capabilities, marketing strengths to gain
substantial advantage than by each
company working alone.
Horizontal MS
In a Horizontal VMS, the arrangement
can be on a temporary or permanent
basis. Horizontal marketing system
particularly offers efficiencies & economies
of scale in promotion, marketing research,
and bringing together specialists. Egs : Credit Card Companies, Banks, Retail
Petrol businesses & Consumer Goods
companies have joined hands. Auto
manufacturers have joined hands with
finance institutions to finance customers.
Multi-Channel Marketing System
Companies use two or more channels to
distribute same products to the same target
market. Some companies use several
marketing channels simultaneously to
reach diverse target markets. Each channel
involves different group of intermediaries.
This system is also called Hybrid
Channels or Multi-Channels MS or Dual
Distribution.
Egs. of Hybrid Channels or MCMS :
1. LG sells its goods through retailers,
company shop, and online.
2. Coca Cola supplies direct to
McDonald‟s, and the fast food chain
sells no other soft drinks but Coca
Cola.
CHANNEL CONFLICTSThe goal of all channel members is to distribute
products profitably and efficiently. However, at times
they disagree about the methods to accomplish this
goal. It is fairly common among channel members to
make little or no effort to cooperate with each other.
Defn.: “Channel conflict is a situation in
which one channel member perceives another
channel member(s) to be engaged in behaviour
that prevents or impedes it from achieving its
goals. The amount of conflict is, to a large extent,
a function of goal incompatibility, domain and
differing perceptions of reality.”
Channel Conflict ManagementTo manage conflict, it is first of all necessary to
understand the type, cause & intensity of the
conflict.
Types of Channel Conflict :
1. Vertical Channel Conflict : conflict between the
producer & distributors, or between wholesalers & retailers.
2. Horizontal Channel Conflict : situation
developing between channel members at the same level, such
as when one stockiest starts price-cutting and others at the
same level start complaining,
3. Multichannel Conflict : results when the producer
has established two or more different channels to sell the
product to the same target market.
Causes of Channel Conflicts
Goal Incompatibility : Manufacturer wants to achieve rapid market growth via lower prices; Retailer interested in large margins
Unclear Roles & Rights : Territory boundaries, (who gets credit for sale)
Differences in Perception : Optimistic manufacturer, pessimistic retailer
Level of Dependence : of Retailer on Manufacturer or vice-versa
Intensity of Conflict
This refers to how serious is the conflict.
In some cases, the intensity of conflict
might be just minor and at other times, the
severity might demand immediate
attention from the producer otherwise the
consequences might be serious if it is not
resolved.
Eg : Managing incidences of price-cutting or
territory jumping can be handled relatively
easily.
Managing the Channel ConflictManaging conflict in certain cases may be
quite a demanding task. Conflict magnitude
can range from minor to serious leading to
termination, lawsuits, or company boycotts.
The frequency and seriousness of conflict
determines how speedily the situation must be
managed. Some of the common approaches
for effective conflict management are :
Regular Communication
Forming Dealer Councils
Arbitration & Mediation
Co-option
PHYSICAL DISTRIBUTIONPhysical Distribution or Outbound Logistics
refers to the forward movement of products,
services & information from a manufacturer to
Its customers, and involves defined network of
transportation links, warehousing / storage, and
finally delivery at the destination in a cost
effective manner within the desired time.
Terms such as Supply Chain Management &
Logistics Management are much broader
concepts than Physical Distribution.
Physical Distribution System includes
Warehouse Management
Transportation & Material Handling
Delivery & Storage
Transaction Processing
Cross Docking ( Re-Packing )
Ticketing & Marking ( Labels & Tags )
427
Inventory Management : involves building and maintaining enough product assortments to meet the customer demand. Investment in inventory forms a significant part of company assets and affects physical distribution costs in a major way.
Very little inventory can create shortages of products or out-of-stock situation. This is detrimental to company and can lead to brand switching, lower sales, and the most serious consequence of losing customers. When too much inventory of products is carried, particularly of slow moving products, costs and risks of product obsolescence, damage, or pilferage increase. To strike a balance, companies focus on determining when and how much to order.
Inventory Management ….
To find out when to order, the marketer must know the
order lead time, the usage rate, and the safety stocks
required. Order Lead-time refers to average time
lapse between placing the order and receiving
supplies. The usage rate represents the rate at which
the inventory of product gets sold during a specified
time period. Buffer Stock is the extra inventory that
is maintained to guard against out-of-stock situation
from increased demand or to cover longer lead-time
than expected. Following formula can be used to
calculate when to reorder:
Reorder Point = (Order Lead Time × Usage Rate) +
Buffer Stock
Inventory Management ….
EOQ : To determine how much to order, it‟s
necessary to examine inventory carrying costs
and order processing costs. Considering both
sets of costs determines Economic Order
Quantity (EOQ), which is the order size that
has the lowest total of both inventory
carrying and order processing costs.
However, the aim of minimising total inventory
costs must be weighed against meeting or
exceeding customer service level objectives.
Inventory Management ….
JIT : Just-in-Time approach is a system
where-in products arrive as and when they
are needed for use in production process or
for resale.
This allows companies to maintain very low
inventory levels and purchases at that time
are also in smaller quantities. JIT system
reduces physical distribution costs,
especially inventory and handling related
costs.
Physical Distribution (cont‟d)
Materials Handling : deals with the physical handling of goods, in warehousing & during transportation.
Physical handling of products is necessary
for efficient warehouse functions &
transportation from the point of manufacture
to final points of consumption. The nature of
product often influences how a product
should be moved and stored.
Materials Handling (cont‟d)
Techniques & procedures used for material
handling can increase warehouse capacity,
reduce the number of times a product is
handled, improve customer service and their
satisfaction.
Various activities such as packaging, loading,
movement, labelling systems must be
coordinated to reduce costs and increase
customer value . Equipments such as Cranes,
Conveyors, Fork-Lifts, Stackers, etc are used in
Factories & Warehouses for Material Handling.
WarehousingWarehousing is an important physical
distribution function and refers to the design
& operation of facilities for storing and
moving goods. Warehousing functions offer
time utility and help companies to adjust for
dissimilar production & consumption rates.
Especially, mass produced products create
a much greater stock of products than can
be sold in the market immediately and
companies store excess stocks till the time,
customers are ready to buy.
Warehousing
Warehousing activities include : Receiving, Identifying, Sorting, Dispatching, Goods to Storage, Holding Goods, Recalling, Picking & Assembling goods, etcTypes of Warehouses : Private Warehouses :- owned and operated by the manufacturer or by another company.Public Warehouses :- Third Party owners offer their services to all firms.
Choice of Warehouses : can
range between Company‟s Own
Dedicated Warehouses or shared
space with others in Third Party
Owned Warehouses. A company can
also decide to have some kind of
combination of both. By making the
right choices, a company may
minimise physical distribution costs.
TRANSPORTATIONCompanies are concerned with transportation
decisions because choices affect the pricing,
delivery time & condition of goods when they
arrive at destination. There are five main
transportation modes for moving goods that
include Railways, Roadways, Waterways,
Airways & Pipelines. Each of these offers
certain advantages & disadvantages. Some
companies prefer to use a combination of these
modes, depending on product nature, delivery
schedule, and geographic locations.
Student Activity
List out the Advantages &
Disadvantages of each
mode of Transportation.
438
Transportation (cont‟d)
Carrier : A firm that offers transportation services to producers.
Common Carriers : Services are available for hire to all shippers
Contract Carriers : available for hire by one or several shippers; not available to the general public
Private Carriers : owned and operated by the shipper
Freight Forwarders : Agents who facilitate the transportation process for shippers by handling the details of the process
Not in BhU Syllabus
A few Slides on “Retailing” have been included just for Students’ info - NP
Definition of Retailing
Retailing is the last stage in the distribution process & encompasses all the business activities involved in selling goods & services to Consumers for their personal, family or house-hold use.
441
Classification of Retailers
1. Store Based & Non-Store Based
Under Store Based (depending on
type of Ownership) :
1. Independent Store2. Chain Store3. Franchise Store4. Leased Store
5. Consumer Co-operatives442
Classification of Retailers
2. Food Oriented & General -Merchandise Retailer:
1. Convenience Store
2. Specialty Store
3. Conventional Supermarket
4. Departmental Store
5. Hypermarket443
Classification of Retailers (Cont‟d ….)
• Non - Store Based Retailers( I ) Traditional :1. Direct Marketing / Selling2. Telemarketing3. Tele-Shopping ( TV )4. Network Marketing5. Vending Machine
( II ) Non Traditional :
1. Internet ( On-Line Shopping )2. Video Kiosk / Catalog
444
Classes of In-Store Retailers
• Independent Retailer : A firm that operates only one retail outlet
• Chain Retailer : A company that operates more than one retail outlet
• Department Store : A retail store that (1) employs 25 or more persons and (2) sells at least home furnishing, appliances, family apparel, and household linens and dry goods, each in a different parts of the store.
• Discount Store : A self-service, general merchandise outlet that sells products at lower-than-usual prices
445
Classes of In-Store Retailers (cont‟d)
• Convenience Store : A small food store that sells a limited variety of products but remains open well beyond normal business hours.
• Catalog Showroom : A retail outlet that displays well-known brands and sells them at discount prices through catalogs within the store
• Warehouse Showroom : A retail facility in a large, low-cost building with large on-premises inventories and minimal service
446
Classes of In-Store Retailers (cont‟d)
• Supermarket : A large self-service store that sells primarily food and household products
• Superstore : A large retail store that carries not only food and nonfood products ordinarily found in supermarkets but also additional product lines
• Warehouse Club : A large-scale, members-only establishment that combines features of cash-and-carry wholesaling with discount retailing
447
Global Players in Retailing
Wal-Mart, Kmart, Target, Woolworth, Wendy, Tesco, Carrefour, Safeway, Home Depot, Costco, Toys „R Us, KFC, McDonalds, Pizza Hut, Starbucks, Metro, Barista, Sears, Burger King, Ikea, etc
448
Indian Retail Companies
HYPER MARKET : Big Bazaar, Spencers, Vishal Retail , Sparr, Magnet, Star India Bazaar, Shop Rite, etc
DEPARTMENT STORES : Shoppers‟ Stop, Pantaloons, Lifestyle, Globus, Westside, etc
CONVENIENCE STORES / SUPERMARKETS : Nilgiris, Food World, Subhishka, Reliance Fresh, Spencers
SPECIALITY STORES : Bata, Titan, Tanishq, etc
SPECIALITY FORMATS : Archies, Landmark, Planet M,
FURNITURE RETAILING : Concept, Living Room, Style- Spa,
CONSUMER DURABLE CHAINS : Viveks, E- Zone, Vijay Sales, etc
449
Unit - IV
Integrated Marketing Communication
Process & Mix; Advertising, Sales -
Promotion & Public Relation decisions.
Direct Marketing - Growth, Benefits &
Channels; Telemarketing;
Sales Force : Objectives, Structure,
Size And Compensation.
450
451
MARKETING
COMMUNICATION &
SALES MANAGEMENT
What is Communication ?It is the transfer & understanding of meaning.
• Transfer means the message was received in a
form that can be interpreted by the receiver.
• Understanding the message is not the same as the
receiver agreeing with the message.
Interpersonal Communication
• Communication between two or more people
Organizational Communication
• All the patterns, network, and systems of
communications within an organization
Marketing Communication Process
The Communication Process is a two-way
process involves the following elements :
1. Source or Sender
2. Encoding
3. Medium
4. Receiver
5. Decoding
6. Response or Feed back.
7. Noise or Disturbance.453
454
Components in the Communication Process
1. Source or Sender : Presumably a person who
creates a message.
2. Message : which is both sent by the information
source and received by the destination.
3. Transmitter : encompasses a wide range of
transmitters. The simplest transmission system, that
associated with face-to-face communication, has at
least two layers of transmission.
4. Signal : which flows through a channel.
5. Channel : or Medium of Communication includes air
(TV), electricity, radio, paper & postal systems.
6. Noise : secondary signals that obscure or
confuse the signal carried. Today we use
noise more as a metaphor for problems
associated with effective listening.
7. Destination or Receiver : is the person or
group who receive, understand and
processes the message.
8. Feed Back : is the acknowledgement or
reply or from the Receiver back to the
Sender, for having received & understood the
message.
Promotional DecisionsSL.
No.Promotion Decision Element in the
Comnctn. Model
1. Who is the target audience ? Receiver
2. What responses are sought ? Responses &
Decoding
3.What message should be
developed ?
Message &
Encoding
4.What media should be
selected ?Media
5.What source should be
chosen?Sender
6.What feedback should be
collected ?Feedback
The Promotion Mix
Promotion serves three essential roles : It
informs, persuades & reminds existing &
prospective customers about the company
and its products / services.
The Promotion-Mix is a specific mix of
Advertising, Personal Selling, Sales -
Promotion, Public Relations & Direct
Marketing tools that a company uses to
pursue its marketing objectives.
Promotion Mix
Main Elements of the Promotion Mix
1. Advertising : Any paid form of non-personal
presentation & promotion of ideas, goods or
services by an identified sponsor.
Different types of Media used in Advertising :
Print Media, Radio, Television, Billboards, Direct -
Mail, Brochures / Catalogs, Signs, Posters, In-store
Displays, Motion Pictures, Web Pages, Banner
Ads, E-mails, etc.
460
461
2. Personal Selling: Setting sales
appointments & meetings, home parties, making
presentations and any type of one-to-one
communication, to inform & persuade your
prospects / customers & strengthen your
relationship with them.
Personal Selling occurs where an individual
Salesperson sells a product, service or an idea to a
prospect / customer. Sales-People match the benefits
of their offering to the specific needs of a customer.
Today, Personal Selling involves the development of
longstanding customer relationships.
Egs : Sales Presentations / Meetings , Telemarketing, etc
462
3. Sales Promotions : Incentives designed
to stimulate the purchase or sale of a
product, usually in the short term. Egs: Coupons, Sweepstakes, Contests, Samples,
Rebates,, Trade Shows, Exhibitions, etc.
4. Public Relations : Paid form of presenting
the company or its products/services/ideas in a
positive light by planting significant news about it
or a favorable presentation of it in the media to
build trust and goodwill with its stake holders.
Egs: Articles/Reports in Newspapers, Magazines, TV &/or
Radio, Charitable Contributions, Event Sponsorship,
Issue advertising, Corporate Social Responsibilities, etc.
463
5. Publicity: is a form of non-personal,
mass communication involving the
organisation &/or its ideas / products &
services not paid for by the organisation. It
occurs usually in the form of Editorials,
News Story, TV Talk Shows, Films, etc.
6. Direct Marketing: is the use of mail / e-
mail, catalogs, etc in order to reach targeted
audiences to increase sales and test new
products &/or alternate marketing tactics.
464
Integrated Marketing Communicationsis a management concept that is designed to
make all aspects of marketing communication
such as advertising, sales promotion, public
relations, direct marketing, etc work together as
a unified force, rather than permitting each to
work in isolation.
IMC ensures that all forms of marketing
communications and messages are carefully
linked together, so that they work together in
harmony & convey the desired message to
the target customers.
Two major factors are changing the face of
today's marketing communications :
Mass markets have fragmented, which is why
marketers are shifting away from mass
marketing & moving toward focused programs.
Improvements in computer & IT are speeding
the movement toward segmented marketing.
New technologies have provided means to
reach smaller segments with tailored messages.
Factors Leading to IMC
Some of these changes include :• Changing technology, which has made it possible for
media organizations to identify, segment, select, and
attract smaller audiences for their respective vehicles.
• The trend toward de-regulation that has allowed for
increased competition within many industries, such as
air travel, banking, and utilities.
• Globalization of the marketplace, which causes
promotional efforts, including advertising, sales
promotion, public relations and personal selling, to be
implemented throughout a worldwide market.
• Customisation for different cultures is key to
competing successfully in this arena. Changes in the
demographic & psychographic profiles of today's
consumers, that have paved the way for new product
category opportunities.
Advertising is the structural and composed non-
personal communication of information, usually
paid for and usually persuasive nature, in about
organization, products, services, ideas by
identified sponsors through various media. An ad
campaign includes a series of ads placed in
different media based on an analysis of
marketing and communications situations.Examples: Print Media, Radio, Television, Billboards, Direct Mail,
Brochures / Catalogs, Signs, In-store Displays, Posters, Motion
Pictures, Web Pages, Banner Ads, E-mails, etc. 467
Advertising
The Functions of Advertising
Builds awareness of products & brands
Provides product & brand information
Creates a brand image
Persuades people
Provides incentives to take action
Provides brand reminders
Reinforces past purchases and brand
experiences
How Advertising Works ?The marketer can also be seeking a cognitive, effective or
behavioural response from the consumer through the
process of advertising. The marketer has to study the
present state of the consumers' mind in terms of its
knowledge about the organisation and its products and
also the attitude towards them. The advertisement works
in the consumers mind in a Response Hierarchy Model. It
is assumed that the buyer, after being exposed to the
advertisement, passes through a cognitive, effective and
behavioural state in that order. Four best known
Response Hierarchy Models are :
1. AIDAS Model
2. Hierarchy of Effects Model
3. Innovation- Adoption Model
4. Communications Model
AIDA is an acronym used in marketing that describes a
common list of events that may be undergone when a
person is selling a product or service. { The term & approach
are attributed to American advertising & sales pioneer, E. St. Elmo Lewis.
According to Lewis, the most successful salespeople followed a hierarchical,
four layer process using the four cognitive phases that buyers follow when
accepting a new idea or purchasing a new product. }
A - Attention (Awareness): Attract the attention of the
customer.
I - Interest: Raise customer interest by focusing on and
demonstrating advantages and benefits (instead of
focusing on features, as in traditional advertising).
D - Desire: Convince customers that they want & desire
the product or service and that it will satisfy their needs.
A - Action: Lead customers towards taking action i.e.
purchasing.
Producing An Effective Advertisement
for Print, Broadcast or Electronic Media
• Copy : The Verbal Appeal
• Art : The Visual Appeal
• Auditory Appeal
BLENDED
TOGETHER ATTENTION
INTEREST
DESIRE
ACTION
I‟LL BUY
IT!
AIDA
Steps in Advertising - Planning
1. Identify the target audiences
2. Set Advertising Objectives
3. Decide on In-house Advertising or Agency.
4. Establish a tentative Advertising Budget.
5. Consider Co-operative Advertising (partnership).
6. Decide on Advertising Message Strategy:
Message Idea
Copy Platform
Message or Creative Format
Steps in Advertising - Planning…….
7. Select Advertising Media.
8. Decide on timing of advertisements.
9. Pretest Advertisements.
10. Prepare final Advertising Plan and
Budget.
11. Measure & evaluate Advertising
success.
ADVERTISING OBJECTIVES & PLANNING
Steps involved in a Advertising Plan :
1. Establishing Advertising Objectives
2. Selecting the Advertising Message
3. Setting the Advertising Budget
4. Developing a Media Strategy
5. Evaluating Advertising Effectiveness.
474
1. Establishing Advertising Objectives :
i. Creating Awareness & Encouraging Information Search
ii. Persuading & Prompting Direct Action
iii. Reminding or Reinforcing Attitudes
iv. Relating the Product to Needs
v. To Modify Attitudes
vi. To increase Sales / Market Share
2. Selecting the Advertising Message :I. Generic Strategy
II. Pre-emptive Strategy
III. Unique Selling Proposition or USP Strategy
IV. Brand Image Strategy
V. Positioning Strategy
VI. Resonance Strategy 475
3. Setting the Advertising Budget :( a ) Methods Used : Objectives. & Task Method / Percentage
of Sales Method / Competitive Parity Method / Affordable Method, Marginal Analysis Method, etc
( b ) Factors influencing the Advertising Budget are:i. Stage in the PLC
ii. Competition
iii. Product Differentiation
iv. Market Share
4. Developing a Media Strategy :
i. Determining the Target Audience
ii. Media Selection
iii.Media Scheduling
iv.Media Buying476
Categories of Advertising Objectives
Informative / Persuasive / Reminder Advertising
1. Informative Advertising:
To create awareness of the organization.
To explain the characteristics of the organization.
To correct false impressions about the organization.
To reduce peoples‟ apprehensions or fears about
visiting the organization.
To build (or enhance) the organization‟s image or position.
Advertising Objectives……..
2. Persuasive Advertising :
To increase customer preference for the
organization‟s services.
To increase customer loyalty to the
organization.
To encourage customers to switch from
using a competitive organization.
To convince customers to book at the
organization now or in the future.
To change customers‟ perceptions.
Advertising Objectives…..
3. Reminder Advertising :
To remind customers about where they can
book the organization‟s services.
To remind customers about facilities or
services that are unique to the sponsoring
organization.
To remind customers about when they
should book or reserve the organization‟s
services.
To remind customers of the existence of the
organization.
Difference between Consumer Ads &
Trade Advertising
Consumer Advertising : aimed at the
end-customers or consumers, who will
actually use products / services being
promoted.
Trade Advertising : aimed at the
marketing intermediaries, such as
Wholesalers & Retailers who will
distribute the products & influence
customers‟ buying decisions.
Advertising Message Strategy
The Advertising Message Strategy describes
what is to be communicated & how it is to be
communicated. It consists of the :
Message Idea : the main theme, appeal, or
benefit to be communicated in the message.
Copy Platform : a written statement that fully
describes the message idea.
Message or Creative Format : a broad
creative approach used to communicate the
message idea to the target audiences.
Advertising Appeals
• Appeal is the central idea of an
advertisement.
• An appeal is the earnest request or a
plea to the prospects.
• It is the approach to attract the
attention of the consumers
• To influence consumers‟ feeling
towards products, services or concepts
To influence consumer feelings toward a product, service or cause
To influence consumer feelings toward a product, service or a cause
The approach used to attract the
attention of consumers
The way an appeal is turned into an
advertising message
The way the message is presented to the consumer
The approach used to attract
the attention of consumers
The way an appeal is turned
into an advertising message
Appeals & Execution Style
Advertising
Appeals
Execution
Style
CREATIVE STRATEGY
The Creative Strategy must define the Target
Audience; Product Concept; Communications
Media & the Advertising Message which should
be relevant to the target-audience.
The “Advertising Appeal” is the manner in
which an advertising message is developed &
expressed, to derive a particular consumer-
response or influence decision-making. They
can be broadly classified into three categories :
1. Rational or Logical Appeal
2. Emotional Appeal
3. Other Appeals.484
Types of Advertising Appeals
Rational/Logical Appeal
• Price (Tide)
• Quality (BB Tea)
• Feature (Apple i-Fone)• Competitive Advantage
(Head & Shoulders)
• News (Matiz)
• Product / Service
Popularity ( Hero Honda)
Emotional Appeal
• Humor (Sprite)
• Fear (Saffola)
• Music (Airtel)
• Sex (Axe)
Additional Appeal
• Star (ThumsUp)
• Reminder Advt.(Vardhman Wools)
• Teaser Advt. (Ponds)
Creative Formats in Ads :
1. Animation
2. Slice - of - Life
3. Testimonial
4. Authoritative
5. Demonstration
6. Fantasy
7. Informative486
The Creation Stage :
1. Idea Generation : Orientation; Preparation; Analysis; Ideation; Incubation; Synthesis & Evaluation
2. Copywriting : Headline; Subhead; Body Copy; Slogan; Logo / Address; Visual
3. Illustration : Hand-made Paintings; Clip Art; Photographs; Computerised Visuals
4. Layout : Thumbnail / Preliminary Layout / Comprehensive Layout / etc
5. Copy Testing & Diagnosis : Pre-Testing & Post -Testing
487
PRE - TESTING :
1. Consumer Jury ( For ranking the various copies )
2. Rating Scales ( Dimensions such as relevancy, confusion,
entertainment, brand reinforcement etc are numerically rated by respondents &
weights are assigned for each dimensions )
3. Portfolio Tests ( Series of Ads are shown & responses are recorded )
4. Psychological Tests ( Projection Techniques for testing the
emotional content in the Ad such as Humour, Fear, Sex Appeal, Nostalgia )
5. Physiological Tests ( Lab Tests & Special Eqpmts are used.
Egs : Pupil Dilation, Galvanic Skin Response, )
POST - TESTING : ( To test the Effectiveness of the Ads )
1.Recall Tests ( Aided & Unaided )
2.Recognition Tests
488
Media Planning : is a process of designing a
Course of action that shows how advertising time &
space will be used to contribute to the achievement
of Advertising & Marketing Objectives. It consists
of four key steps :
1. Environmental Analysis
2. Setting up of Media ObjectivesReach (C/R) / Frequency / Continuity (C/P/D) / Costs
3. Developing the Media StrategyTarget Audience / Media Budgeting, Selection & Scheduling
4. Implementation & Follow-up
489
Advertising Media Selection
Considerations
Target markets and their reading, viewing, and
listening habits.
Positioning approach, promotional goals, and
advertising objectives.
Media evaluation criteria.
Relative strengths and weaknesses of each
media alternative.
Creative requirements.
Competitive media placements.
Approximate total advertising budget available.
Media Evaluation Criteria
Costs.
Reach.
Frequency.
Waste.
Lead time and flexibility.
Clutter and dominance.
Message permanence.
Persuasive impact and mood.
Sales Promotions
493
Sales Promotions: are incentives
designed to stimulate the purchase or sale
of a product, usually in the short term.
Egs: Coupons, Sweepstakes, Contests,
Product Samples, Rebates, Exhibitions,
Trade Shows, Trade-ins, Premiums, etc.
Sales Promotions are of two types :
1. Trade Promotions
2. Consumer Promotions
494
Trade Promotions are targeted at Channel -
members (Wholesalers & Retailers) to motivate them
to carry the company‟s products & promote
them more effectively / aggressively. Trade
Promotions assist in implementing the
company‟s “Push Strategy”.
Consumer Promotions are targeted at
consumers in order to motivate / induce them
to buy the company‟s products. Consumer
Promotions assist in implementing the
company‟s “Pull Strategy”.
495
496
Sales Promotion Tactics
Consumer-directed
• Samples
• Coupons
• Cash refund offers
• Price offs
• Premiums
• Prizes
• Patronage rewards
• Free trials
Trade-directed
• Price offs
• Allowances
• Free goods
• Sales contests
• Trade shows
• Specialty advertising
Sales Promotion Strategies : There are three
types of sales promotion strategies: Push, Pull, or
a Combination of the two.
A Push Strategy involves convincing & coaxing trade
intermediary channel members to "push" the product
through the distribution channels to the ultimate
consumer via promotions and personal selling efforts.The company promotes the product through a wholesaler who in
turn promotes it to another reseller or the final consumer. Trade-
promotion objectives are to persuade retailers or wholesalers to
carry a brand, give the brand shelf space, promote the brand in
advertising, and/or push a brand to final consumers. Typical
tactics employed in Push Strategy are: Trade Allowances,
Buy-back Guarantees, Trade Contests, Special Discounts,
Displays / Co-operative Advertising, Training, etc.497
A Pull Strategy attempts to get consumers to "pull"
the product from the manufacturer through the
marketing channel. The company focuses its
marketing communications efforts on consumers in
the hope that it stimulates interest and demand for
the product at the end-user level.
This strategy is often employed if distributors are
reluctant to carry a product. Consumer-Promotion
objectives are to entice consumers to try a new
product, lure customers away from competitors‟
products, get consumers to "load up" on a mature
product, hold & reward loyal customers, and build
consumer relationships.
498
Typical tactics employed in “Pull Strategy” are:
Samples, Coupons, Cash refunds, Rebates,
Loyalty Programs, Rewards, Bonus Packs,
Contests, Sweepstakes, Premiums, Point-of-
Purchase (POP) Displays, etc.
Car manufacturers / dealers often provide a
good example of a Combination Strategy.
If you pay attention to car dealers'
advertising, you will often hear them speak of
cash-back offers and dealer incentives.
499
Factors behind increasing Importance of
Sales Promotions :
1. Growth of organised Retail Sector
2. Increase in Competition
3. Maturing Markets
4. Introduction of Private Label Brands
5. Similarities in Competing Brands
6. Frequent Brand Switching
7. Decline in effectiveness of Advertising
8. Consumer Preference to Promotional Offers
9. Short - term focus of Companies
500
Objectives of Consumer Promotions :
1. To encourage trial by new customers.
2. To improve the sales of existing products.
3. To increase brand loyalty of the customers.
4. To build / enhance Brand-Equity.
Objectives of Trade Promotions :
1. To secure the support of channel-members for new product launch.
2. To ensure the support of channel-members for existing products.
3. To shift the inventory to the Wholesalers & Retailers.
501
PUBLIC RELATIONS„Public‟ are the stakeholders of an organization.
PR is proactive and future orientated & has the
goal of building and maintaining a positive
perception of an organisation in the mind of its
publics. This is often referred to as Goodwill.
502
PUBLIC RELATIONS PR activities are undertaken by big companies &
Corporate Houses to have a favourable public image
& to garner support for the various projects/programs
undertaken by them.
DEFN : Public Relations is the deliberate, planned
& sustained effort to establish & maintain mutual
understanding between an organization & its public.
Types of PR :
1. Corporate Public Relations
2. Marketing Public Relations 503
Functions of Public Relations
1. Press relations or press agentry.
2. Product publicity.
3. Public affairs.
4. Lobbying.
5. Investor relations.
Tools of Public Relationsi. News.
ii. Speeches.
iii. Special Events.
iv. Written Materials (such as annual reports, brochures, articles,
company newsletters & magazines).
v. Audiovisual Materials (such as films, slide-and-sound
programs, video and audio cassettes).
vi. Corporate Identity Materials (such as logos, stationery,
brochures, signs, business forms, business cards, buildings, uniforms,
and company cars / trucks).
vii. Companies also improve public relations by contributing
time and money to public service and other Corporate
Image Building activities.
Direct MarketingDirect Marketing is about business organisations
seeking a relationship with their customers without
going through an agent/consultant or a retail outlet.
It involves using marketing communications through
telemarketing, direct-mail & internet to inform & / or
persuade customers, with the aim of providing
customized services through direct interaction with the
customers & to obtain immediate & measurable
responses.
Direct Selling is the direct personal presentation, demonstration
& sale of products / services to consumers, usually in their
homes or at their jobs. Direct Selling is a retail channel for the
distribution of goods / services, by selling products, person-to-
person away from a fixed retail location. 506
Advantages of Direct Marketing :
1. Customization
2. Selective Reach
3. Response Driven
4. Effectiveness can be measured
5. Edge over Competitors
Disadvantages of Direct Marketing :
1. Rejected easily as Junk Mail / Spam
2. Can be Expensive507
Plan for Direct-Marketing
For successful implementation of
Direct-Marketing, marketers must :
• Establish Objectives,
• Specify Target Market,
• Select suitable DM - Strategies, &
• Set Evaluation Criteria.
DIRECT MARKETING OFFER & MEDIA
According to Edward L. Nash, there are five
important decision areas in Direct Marketing :
Product, offer, medium, distribution
method & creative strategy.
The common approaches are :
1. One-Step Approach
2. Two-Step Approach
3. Direct Mail
4. Catalogues
5. Use more of Broadcast Media & less of
Print Media
Tele - MarketingDirect Marketing through telephone is called
Telemarketing. It gives the marketer a better
chance of influencing the prospect and win a
customer or for screening process.
Typical Telemarketing Companies hire several telephone-callers,
mostly girls, or operate through hired agents. Call Centres have
become a real arena of telemarketing activity. Several teams of 5
to 6 members are formed and for each team there is a supervisor.
Individual team members sit in front of a computer terminal
wearing a headset. They call different telephone numbers from a
list and present the sales talk based on pre-tested script and
update information on the computer screen.
Activity Description
Customer Service
Companies provide customers with a number they can call if they have questions.
Prospecting and Lead Qualification
Firms are taking a proactive approach to prospecting by having telemarketers call prospects or qualify them for face-to-face selling.
Account Management
Selling secondary product lines or service small customers by phone, thereby freeing their salespeople to concentrate on larger customers & strategic product lines.
Promotion Support
Develop newspaper & magazine Ads. that feature either a local or an 800 number to get additional product information or place an order.
Scope of Telemarketing
Advantages :
• Low cost per sales call
• Profitably serve small to medium customers
• Speed/time saving of telephone ordering
Challenges :
Acceptance by field salespeople
Management
Role of the Internet
Telemarketing Advantages & Challenges
Personal Selling
Personal Selling is the process of
using personal communication to
inform & persuade people to buy
products / services.
All the other elements of the Promotion Mix
are targeted at the mass market, but
Personal Selling aims at specific customers
& allows a two way communication.
513
Objectives of Personal Selling
1. Building Product Awareness
2. Creating Interest
3. Providing Information
4. Stimulating Demand
5. Reinforcing the Brand.
514
Advantages of Personal Selling:
1. Most effective MC tool since it targets individual or a small group of customers.
2. Can be customized as per requirement
3. Highest Impact on customers preferences & attitudes. Helps in PR.
4. Highly interactive with customers
5. Most effective in building Long-term relationships with customers
6. Can get instant feed-back on company‟s products & lots of information about competitors marketing strategies.
515
Dis - Advantages of Personal Selling :
1. Most Expensive in terms of average cost
2. Very Limited Reach
3. Dependent on Sales Person‟s abilities &
approach. Hence Company has lesser
control
4. Chances of confusing / irritating the
customer. Hence can have negative impact
at times
5. Often creates conflicts between Sales &
Marketing / other departments516
The job description of the salesperson is
to create and keep customers. The
measure of effectiveness of a salesperson
is how many new customers he / she
creates or re-sales they generate, in any
given time period. Everything else that a
salesperson does is secondary. Therefore,
the only time a sales person is working is
when he is face-to-face with a prospect or
customer.
517
Types of Personal Selling :
a. Service Selling
b. Developmental Selling
Classification depending upon on the type of Customer :
1. Retail Selling
2. Trade Selling
3. Business to Business Selling
518
THE SELLING FUNCTION
Inside
order-
takers
Order- takers Order- creators Order- getters
THE SELLING
FUNCTION
Delivery
sales
people
Missionary
sales
people
Outside
order-
takers New
business
sales
people
Organisa-
tional
sales
people
Consum
er sales
peopleTech
support
sales
people
Merchan-
isers
Front-line
sales
peopleSales
support
people
Respond to already committed customers
Do not directly receive orders- talk to specifiers rather than buyers
Attempt to persuade customers to place an order
Roles & Responsibilities of Sales Personnel :
1. Order Taking [ Inside Order Taking / Outside Order Taking ]
2. Order Getting
3. Order Supporting [ Missionary Sales People & Technical Specialists ]
4. Various Other Roles :
i. CRM
ii. Market Intelligence
iii. Market / Business Analyst
iv. Sales Team Coordinator
v. Customer Support / Service Provider520
DUTIES & RESPONSIBILITIES OF
A SALES MANAGER
• Determining sales force objectives and goals
• Finalizing sales force organization, size, territory &
quota
• Forecasting & Budgeting sales
• Selecting, recruiting & training of the sales force
• Motivating & Leading the sales force
• Designing compensation-plan & control systems
• Designing career growth plans and building
relationship strategies with key customers
522
AIDA ( or AIDAS ) is an acronym used in marketing
that describes the stages thro‟ which a person goes
during the selling process of a product or service:
A - Attention : attract the attention of the customer.
I - Interest : raise customer interest by focusing on and
demonstrating advantages and benefits (instead of focusing on
features, as in traditional advertising).
D - Desire : convince customers that they want and desire the
product or service and that it will satisfy their needs.
A - Action : lead customers towards taking action of purchasing.
In recent years, another letter as been added to this model to form
AIDA(S):
S - Satisfaction : satisfy the customer so they become a
repeat customer and give positive WOM about the product.
AIDA Model
The Personal Selling Process
1. Prospecting
2. Pre - Approach
3. Approach
4. Presentation
5. Handling Objections
6. Closing the Sale
7. Post-Sale Follow-up.523
524
1. Prospecting
Prospecting refers to identifying anddeveloping a list of potential clients ( Leads ).Sales people can seek the names of prospectsfrom a variety of sources including tradeshows, commercially-available databases ormail lists, company sales records and in-housedatabases, website registrations, publicrecords, referrals, directories and a widevariety of other sources. Prospecting activitiesshould be structured so that they identify onlypotential clients who fit the profile and are able,willing and authorized to buy the product orservice.
525
2. Pre - Approach
During the Pre-approach phase of the Personal
Selling process, sales professionals try to
understand the prospect's current needs,
current use of brands and feelings about all
available brands, as well as identify key
decision makers, review account histories
(if any), assess product needs, plan/create a
sales presentation to address the identified and
likely concerns of the prospect and set call
objectives.
526
3. Approach
This is the point of the selling process
where the sales professional meets
and greets the prospect, provides an
introduction, establishes rapport that
sets the foundation of the
relationship, and asks open-ended
questions to learn more about the
prospect and his or her needs.
527
4. Presentation
During the presentation part of the sellingprocess, the sales professional tells thatproduct "story" in a way that speaks directly tothe identified needs and wants of the prospect.A highly customized presentation is the keycomponent of this step. At this point in theprocess, prospects are often allowed to holdand/or inspect the product and the salesprofessional may also actually demonstrate theproduct. Audio visual presentations and/or slidepresentations may be incorporated at thisstage and this is usually when sales brochuresor booklets are presented to the prospect.
528
5. Handling Objections
When prospects offer objections, it oftensignals that they need and want to hearmore in order to make a fully-informeddecision. Uncovering objections, askingclarifying questions, and overcomingobjections is a critical part of training forprofessional sellers and is a skill area thatmust be continually developed becausethere will always be objections.
529
6. Closing the SaleAlthough technically "closing" a sale happenswhen products or services are delivered to thecustomer's satisfaction and payment isreceived, but for practical purposes one candefine “Closing” as „Asking for the Order‟ andadequately addressing any final objections orobstacles.-------------------------------------------------.
Too many sales professionals are either weakor too aggressive when it comes to closing. Ifyou are closing a sale, be sure to ask for theorder. If the prospect gives an answer otherthan "yes", it may be a good opportunity toidentify new objections and continue selling.
530
7. Post-Sale Follow-up
After an order is received, it is in the bestinterest of everyone involved for the salesperson to follow-up with the prospect to makesure the product was received in the propercondition, at the right time, installed properly,proper training delivered, and that the entireprocess was acceptable to the customer.
This is a critical step in creating customersatisfaction and building long-termrelationships with customers.
531
Sales Tips
1. Plan your Sales Call diligently.
2. Be sincere with your prospects.
3. Listen to your prospects carefully.
Prospects are not really bothered
about what you think is important, they
want to know that you understand their
needs and their problems.
4. Ask a lot of questions tactfully & find
out what your prospects want.
5. You must be able to :a. Demonstrate to your prospects that you
understand their needs or problems.
b. Communicate the value of your product or
services to your prospect powerfully.
6. "Listen to understand, not to respond."
You should listen for information or clues the
customer is telling us, anything from their
successes & obstacles, to stories about their
children or hobbies. All this will help in the selling
process. You should also be listening for emotional
clues about how they feel about your product or
service or any fears they may have with moving
forward.532
7. Learn to empathize : Along with the ability to
listen to your prospects, you should also be able to
understand their needs and problems.
8. Show personal interest in the prospects
ideas. Help them find what they are looking for.
9. Answer your prospects‟ queries patiently
& honestly. Remember the Golden Rule
“KISS” ( Keep It Short & Straight ).
10. Never ever get into arguments & do not
mislead your prospects / customers.
11. Always keep your promises, and follow up on
your commitments. Walk the talk !533
534
Sales Tips ( Cont‟d …)
12.The close of the sale is not the end, but just the
beginning of the relationship.
13. Have a strong desire to learn something new in
sales and personal development. Please
understand that sales is always evolving and it is
extremely essential to constantly update your
knowledge / information & hone your
communication skills.
14.Never take it personally when someone
provides you with feedback or a better
approach. One should always be open to new
ideas & ways to improve your performance.
15. Put aside your fears and problems & sound
enthusiastic / energized. This will be attractive to your
prospects and encourage them to want to build a
relationship with you.
16. Have a positive attitude under all circumstances &
never give up.
17. Your job is to continue to find those businesses who
are the right customers. Also, spend most of your
time with the prospects that have the greatest chance
of becoming a customer.
18. Be enthusiastic / confident & get into the 20% Club !
Selling can be fun, if U have the right attitude !535
536
Designing Sales force Strategy & Structure
Recruiting & Selecting Salespeople
Training Salespeople
Compensating Salespeople
Leading & Motivating Salespeople
Evaluating Salespeople
Sales Force Management
SALES MANAGEMENT
1. Sales Planning : Forecasting & Budgeting
2. Organising Sales : Recruiting & Selecting
Sales Personnel, Territory Allocation, etc
3. Directing Sales : Training, Fixing Quotas &
Targets, Motivating & Leading.
4. Controlling the Sales Force : Incentive,
Compensation, Sales Meeting, etc
537
SALES FORECASTING
Sales Forecasting is the art & science that predicts the
likelihood of economic activity on the basis of certain
assumptions. The process of estimating the future sales,
based on past performance is referred to as „Sales
Forecasting‟.
The various steps in Sales Forecasting are :
• Defining the objectives to be achieved
• Dividing the market territory into homogenous groups
• Analysing the importance of various factors to be studied for
sales forecasting & selecting the Forecasting method
• Collecting, Analysing & Drawing conclusions from the related
information.
• Implementing the decision taken, Reviewing & Revising sales
forecasting techniques from time to time.
SALES FORECASTINGCHOOSING THE CORRECT FORECASTING TECHNIQUES
While planning for the future, the Sales Manager has to develop a baseline sales figure. The baseline sales figure is a forecast of future sales, and is derived from available past and present sales data or records. Certain assumptions are also incorporated in the forecast. Typical assumptions are that sales will follow historical trends, business cycles (booms or recessions), or rising & falling market shares.
SALES FORECASTING1. Sales Forecasting Techniques:
Some of the important & popularly used techniques of Sales Forecasting are :
a) Time Series Analysis : uses historical sales data
to predict future sales.
b) Quantitative or Statistical Methods : Least Squares Method; Correlation Analysis;
Regression Analysis; Statistical Demand Analysis
c) Test Marketing : short-term forecast for the markets - covered based on sample size
d) Composite Sales Force Opinion
e) Experts Opinion : Delphi Method
SALES BUDGETThe Sales Budget is a statement of projected sales revenue & selling expenses.
The budget section on planned sales volume is presented in considerable detail. It shows total unit sales, unit sales of each product, unit sales by sales territory or region, unit sales by months or quarters, and unit sales by class of account. A systematic break-up of total unit sales by regions, quarter-wise, and by class of account is depicted in the figures.
PURPOSES OF THE SALES BUDGET
1. Mechanism of Control : The Sales Budget is a composite of sales, expenses, and profit goals for various sales units. It also measures the progress & performance of individual sales personnel, sales regions, products, marketing channels, and customers. These evaluations identify variances and weaknesses, thus enabling Sales Management to make revisions to correct and improve performance. The Sales Budget, therefore, acts as a control for sales volume, selling expenses & net profit.
PURPOSES OF THE SALES BUDGET
2. Instrument of planning : The Budgeting process requires a complex sequence of planning decisions by determining ways and means for the business to get from where it is, to where it wants to go.
It involves calculation of expenses for converting forecasted sales into actual sales. The sales budget further indicates how the targeted sales volume can be reached while keeping selling expenses at a level that permits achieving the targeted profits.
TRAINING THE SALES FORCE
Sales programs have several goals. For sales persons the most important are:
They need to know and identify with the company.
They need to know the company’s products.
They need to know customers’ and competitors’ characteristics.
They need to know how to make effective sales presentations
They need to understand field procedures and responsibilities.
SALES FORCE STRUCTUREThe Sales Force Strategy has implications for the sales force structure.1. Territorial: Each sales representative is assigned an exclusive territory. The allocation of territory could be according to (a) Size & (b) Shape
2. Product: The importance of sales reps knowing their products, developing product divisions, and product management, has led many companies
to structure their sales force along product lines
3. Market: Companies often specialize their sales force along industry or customer lines
4. Complex: Combinations of various sales force structures
546
Organization of the Sales Department
“ORGANIZING” is a management function which
involves grouping tasks, assigning duties, delegating
authority / responsibility and allocating resources so
that the Organization can carry out its plans in a
logical & efficient way. “DEPARTMENTATION” is the
process of dividing the Organization into manageable
sub-units.
The Marketing Department may be organized
according to Function, Geographic Area,
Products & Customer Markets. Global -
Organization is another consideration for firms
that market goods / services in other countries.
Key Elements of Organizational Designs
DepartmentalizationSpan of Control
Work
Specialization
Chain
of Command
Authority and
Responsibility
Centralization vs.
Decentralization
IMPORTANCE OF DEPARTMENTATION :
1. Advantages of Specialization
2. Fixation of Responsibility
3. Development of Managers
4. Facility in Appraisal
5. Feeling of Autonomy
BASES OF DEPARTMENTATION :
The most commonly used bases are:
1. Function
2. Product
3. Territory
4. Process
5. Customer
Geographic Organization
Geographic Organization : A company
selling in a national market often organizes
its sales force & marketing functions along
geographic lines. The National Sales
Manager may supervise four Regional
Sales Managers, who each supervise six
Zonal Managers, who in turn supervise
eight District Sales Managers, who
supervise 10 Sales People.549
Geographic Organization
550
VP Marketing
National Sales
Manager
Divisional Manager
(East)
Regional Sales Manager
District Sales Manager
Sales Staff (City wise)
Divisional Manager (West)
Regional Sales
Manager
District Sales Manager
Sales Staff (City wise)
Divisional Manager (North)
Regional Sales
Manager
District Sales Manager
Sales Staff (City wise)
Organisation by Geographic Area
Advantages
• Serve local needs
better
• Positive competition
• More effective
communication
between firm and
local customers
Disadvantages
Conflict between Local
& Central Management
Duplication of
resources and functions
Sales Force Organization: Product Specialists
Eastern RegionalSales Manager
National SalesManager
Northeast District Sales Manager
Southern District Sales Manager
DictationEquipment
Salesperson
Typewriter Salesperson
Minicomputer Salesperson
ProgrammableCalculator
Salesperson
CopierSalesperson
Large Computer
Salesperson
Western District Sales Manager
• Advantages :
Allows focusing of sales effort
Expertise developed in limited number of
products
• Disadvantages :
More expensive to operate
May result in duplication of sales calls to
clients
Product Specialist Organization:
Sales Force Organization : Customer Specialists
Eastern RegionalSales Manager
National SalesManager
Northeast District Sales Manager
Southern District Sales Manager
SalespersonFor Educational
Institutions
Salesperson for Manufacturers
Salesperson for Retail Customers
Salesperson for Government
Agencies
Salesperson for Bank Customers
Western District Sales Manager
National AccountsManager
Manager ofExport Sales
Salesperson for Wholesale Customers
• Advantages :
Consistent with market driven strategy
Salespeople become customer experts
Customer segments receive appropriate resources
• Disadvantages :
May conflict with marketing organization
Product expertise may be lacking
More expensive
Customer Specialist Organization
Sales Force Organization: Functional Specialists
DivisionMarketing Manager
SystemsManager
IndustrySales Manager
AdministrativeManager
System Reps(Technical Support)
Account Executives(Salespeople)
MarketAdministrative
(Training & Installation)
557
MATRIX--ORGANIZATION-:----A--Matrix
Organization would seem desirable in a
multiproduct, multimarket company. It is a
combination of the Product & Functional
Organization & is also known as „HYBRID‟
form of Organization. This system is costly and
often creates conflicts because of its system of
dual authority / responsibility. It is most suitable
for Project Management which requires the
skilled services of a Functional Manager as
well as the specialized knowledge of the
Product Manager.
6/14/2011
Matrix Structure :CEO
Vice President
Engineering
Vice President
Finance
Vice President
Purchasing
Vice President
Sales and
Marketing
Vice President
Research and
Development
Product A
Manager
Product B
Manager
Product C
Manager
Product D
Manager
Product Team
Two-boss employee 558
Matrix ( or Project-based) Organisations
A Matrix structure Organisation containsteams of people created from varioussections of the business. These teamswill be created for the purposes of aspecific project and will be led by aproject manager. Often the team will onlyexist for the duration of the project andmatrix structures are usually deployed todevelop new products and services.
Advantages of a Matrix Structure
1. Uses cross-functional teams.
2. Better communication between functional specialists, opportunity for learning, progress, innovation.
3. Enables organization to maximize its use of skilled professionals, who move from product to product as needed.
4. The dual functional and product focus promotes concern for both cost and quality.
560
1. Lacks the advantages of bureaucratic
structure – role ambiguity, role conflict
2. Conflict between function and product
teams over the use of resources, power.
3. Lack of coordination, stress, uncertainty.
4. Over a time, people experience a
vacuum of authority and responsibility.
561
Disadvantages of a Matrix Structure
Unit - V
Identifying & analysing competitors;Designing competitive strategies for Leaders, Challengers, Followers & Nichers.
Customer Relationship Marketing : Customer -Database, Data Warehousing & Data Mining. Attracting & Retaining Customers; Customerism in India,
Controlling of Marketing Efforts.
Global Target market selection, Standardization vs Adaptation, Product, Pricing, Distribution & Promotional Policy.
562
563
THE MARKETING PROCESSPlanning at the corporate, division and
business levels is an integral part of planning
for the marketing process.
The Marketing Process consists of
1. Analyzing Market Opportunities.
2. Researching & Selecting Target Markets,
3. Designing Marketing Strategies
4. Planning Marketing Programs
5. Organizing & Implementing
6. Controlling the Marketing Effort.
564
The four steps in the marketing process are:
1. Analyzing Market Opportunities : The marketer‟s
initial task is to identify potential long-run opportunities given
the company‟s market experience and core competencies.
a) To evaluate its various opportunities, assess buyer wants
and needs, and gauge market size, the firm needs a
marketing research and information system.
b) To study the markets to find out about buying behavior,
perceptions, wants, and needs. Smart firms also pay close
attention to competitors and look for major segments within
each market that they can profitably serve.
2. Developing Marketing Strategies : The marketer
prepares a positioning strategy for each new and existing
product‟s progress through the life cycle, makes decisions
about product lines / branding / designs / services.
565
3. Planning Marketing Programs : To
transform marketing strategy into marketing
programs, marketing managers must make
basic decisions on marketing expenditures,
marketing mix, and marketing allocation.
4. Managing the Marketing Effort : In this
step marketers organize the firm‟s marketing
resources to implement and control the
marketing plan. Because of surprises and
disappointments as marketing plans are
implemented, the company also needs
feedback and control.
TargetConsumers
Product
Place Price
Promotion
Competitors
MarketingChannels
PublicsSuppliers
Demographic -Economic
Environment
Technological -Natural
Environment
Political -Legal
Environment
Social -Cultural
Environment
Marketing Strategy
Marketing Strategies for
Competitive Advantage
Market Nicher
Market Follower
MarketChallenger
Market Leader
STRATEGY A COMPANY ADOPTSDEPENDS ON ITS
INDUSTRY POSITION
568
Depending upon their market shares in a
particular market, companies can be
classified as :
1. Leaders
2. Challengers &
3. Followers
4. Nichers
The Challenger companies have to attack the
Leader, other comparable firms & smaller firms
in their bid to gain market share. Attack has a
greater probability of success when there is
customer dissatisfaction with the current leader.
DESIGNING COMPETITIVE STRATEGIES
• Market Leader : the firm with the largest
market share.
• Market Challenger : a runner-up firm that
is fighting hard for an increased market share.
• Market Follower : another runner-up firm
that is willing to maintain its market share and
not rock the boat.
• Market Nicher : firms that serve small
market segments not being served by larger
firms.
Marketing Firepower
[ Strategies followed in Marketing Warfare: ]
1. Price Discounts: The challenger can sell a
comparable product at a lower price.
2. Cheaper Goods: The challenger can come out
with economy goods with lesser number of
features. The strategy will succeed when there
is significant number of buyers in need of lower
priced product.
3. Prestige Goods: A challenger can launch a
higher quality product with more features. 570
571
4. Product Proliferation: The challenger can offer a
greater product variety.
5. Product Innovation: The challenger can come out
with an improve product.
6. Service Innovation: Improvement in service offered
to the buyers.
7. Distribution Innovation: a new distribution outlet
that offers additional convenience to buyers.
8. Process Innovations: The challenger may have
done a process innovation that gives better quality or
lower cost and it is passed on to buyers.
9. Advertising Innovation: The challenger may have
innovative communications strategy that reaches &
motivates larger number of potential customers
resulting in higher sales.
Marketing Warfare Strategies
Fight for SurvivalMarketing Warfare Strategies are a type of
strategies used in marketing with a military
metaphor to craft a businesses strategy.
They try to draw parallels between Business
& Warfare, and then apply the principles of
military strategy to business situations.
Competing firms considered as analogous
to sides in a military conflict, and market
share considered as analogous to the
territory which is being fought over.5
7
3
Sustainable Competitive Advantage
• A good Strategist seeks not only to “win
the hill, but hold on to it.”
• Sustaining Competitive Advantage (SCA)
requires erecting barriers against the
competition.
• Competing Firms consider the following:
How you compete ?
Basis of competition ?
Where you compete ?
Whom you are competing against ?
Examples of SCA
• For many years, Singapore Airlines were riding on its SCA of having the best in-flight service
• As more airlines improved their service and narrowed the gap, SIA sought other competitive advantages among which are
The most modern fleet
Outstanding Service on the Ground
A super entertainment system in its cabins
Comfort in its First Class cabins at an unparallel level
“Do not assume the enemy will not come
but be prepared for his coming…
Do not presume he will not attack,
but instead make your own position unassailable.”
Which strategy to use?Depends on your answer to the
following:
• Is it worth fighting?
• Are you strong enough to fight?
• How strong is your defense?
• Do you have any choice but to
fight?
Hypothetical Market Structure
& Strategies
40%
Market
Leader
30%
Market
Challenger
20%
Market
follower
1.Expand Market
2. Defend Market Share
3.Expand Market Share
1. Attack Leader
2. Status Quo
Imitate
10%
Market
Nicher
Specialize
Specific Attack Strategies
• Price Discount
• Cheaper Goods
• Prestige Goods
• Product Proliferation
• Product Innovation
• Improved Services
• Distribution Innovation
• Manufacturing Cost Reduction
• Intensive Advertising Promotion
Fundamental Principles Assess the strength of the target competitor. Consider
the amount of support that the target might muster from allies. Choose only one target at a time.
Find a weakness in the target’s position. Attack at this point. Consider how long it will take for the target to realign their resources so as to reinforce this weak spot.
Launch the attack on as narrow a front as possible. Whereas a defender must defend all their borders, an attacker has the advantage of being able to concentrate their forces at one place.
Launch the attack quickly. The element of surprise is worth more than a thousand tanks. 57
9
Market Challenger‟s Attack Strategies1. Frontal Attack : Head on attack. Attacks the
opponents strengths rather than its weaknesses.
2. Flanking Attack : Attacking the Leader‟s weaknesses & unguarded territories.
3. Encirclement Attack : Attempt to capture a wide slice of the enemy‟s territory through a comprehensive „Blitz‟ attack.
4. Bypass Attack : Bypassing the main enemy and attacking easier markets (diversifying into unrelated products, new geographical markets, new technologies).
5. Guerrilla Attack : Attacking on different territories of the opponent, with the aim of harassing and demoralize the opponent.
Market Challenger‟s Attack Strategies
AttackerDefender
(3) Encirclement attack
(4) Bypass attack
(2) Flank attack
(5) Guerilla attack
(1) Frontal attack
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With each attack, the Challenger may hope to
gain a reasonable increase in its market share.
The following attack strategies are possible.
1. Frontal Attack : An attack is called a “Frontal
Attack” when the opponent‟s strength is challenged
head on. In marketing, the fight is done all fronts in
market segments and areas where the opponent is
currently strong. The general idea is that to win in a
frontal attack, the challenger requires three times the
fire power of the opposite side. The challenger must
be able to deploy superior fire power, such as Price of
the product, quality of the product, sales effort,
advertising effort, service effort etc. in the markets
they are challenging.
Frontal Attack This is a direct head-on assault. It usually involves
marshaling all the resources including a substantial financial commitment.
All parts of the company must be geared up for the assault from marketing to production.
It usually involves intensive advertising assaults and often entails developing a new product that is able to attack the target competitors’ line where it is strong.
It often involves an attempt to “liberate” a sizable portion of the target’s customer base.
58
3
Frontal Attacks are RareIn actuality, Frontal Attacks are rare. There are two reasons for this.
Firstly, they are expensive. Many valuable resources will be used and lost in the assault.
Secondly, Frontal Attacks are often unsuccessful. If defenders are able to re-deploy their resources in time, the attacker’s strategic advantage is lost.
You will be confronting strength rather than weakness. Also, there are many examples (in both business & warfare) of a dedicated defender being able to hold-off a larger attacker.
58
4
The Frontal Attack Strategy is suitable when :
• The market is relatively homogeneous
• Brand Equity is low
• Customer Loyalty is low
• Products are poorly differentiated
• The target competitor has relatively limited
resources
• The attacker has relatively strong resources
Egs of Frontal Attack :
a.COKE vs PEPSI
b.HLL vs NIRMA
c. AMUL vs HLL ( Quality Walls Ice Creams ) 585
2. Flank Attack : Attacking a weak
position in the opponent‟s force is
known as Flank Attack. Challenger
identifies the weak areas in the offering
as well as marketing territories of the
opponent and attacks those areas.
Market share gain in weak territories is
the objective, but the opponent is forced
to defend his share even in his strong
territories and products.
586
587
Advantages of Flanking Attack :
The target competitor will not be as concerned
about your activities if they occur in market
niches that it considers peripheral.
It usually involves subtle advertising campaigns
& other discrete promotional measures, like
personal selling & public relations.
It often entails customizing a product for that
particular niche. Rather than finding
uncontested market niches, the attacker could
also look for uncontested geographical areas.
588
Flank Strategy is designed to pressure the flank
of the enemy line so the flank turns inward.
You make gains while the enemy line is in
chaos. In doing so, you avoid a head-on
confrontation with the main force.
Flanking Strategies are a type of marketing
warfare strategy designed to minimize
confrontational losses.
Egs of Flanking Attack :
a.Woodland Shoes vs Bata
b.T-Series vs HMV
c.Cannon vs Xerox
3. Envelopment StrategyEnvelopment Strategy, also known as Encirclement Strategy, is a much broader but subtle offensive strategy. It involves encircling the target competitor. This can be done in two ways.
a) You could introduce a range of products that are similar to the target product.
b) Alternatively, the encirclement can be based on market niches rather than products. 58
9
590
3. Encirclement Attack or Envelopment
Attack : In this attack both strong areas
and weak areas attacked simultaneously.
This type of attack is more often done by
a Leader when challenged.
Egs of Encirclement Attack :
a.Titan vs HMT Watches
b. Seiko attacked on fashion, features, user
preferences & anything that might interest the
consumer
c.Sun vs Microsoft ( Java SW )
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The Envelopment Strategy is suitable when:
The market is loosely segmented
Some segments are relatively free of well
endowed competitors
The attacker has strong product
development resources
The attacker has enough resources to
operate in multiple segments
simultaneously
The attacker has a decentralized
organizational structure
Envelopment StrategySimilar Product Strategy:
Each product will liberate some market share from the target competitor’s product, leaving it weakened, demoralized, and in a state of siege. If it is done stealthily, a full scale confrontation can be avoided.
Market Niche Strategy:
The attacker expands the market niches that surround and encroach on the target competitor’s market. This encroachment liberates market share from the target.
59
2
593
4. Guerilla Attack : Guerilla attacks consist of
waging small, intermittent attacks on different
marketing territories of the opposing firm. The
aim is to harass and demoralize the opponent
initially before launching the main attack.
The concept of Guerrilla Marketing was
invented as an unconventional system of
promotions that relies on time, energy and
imagination rather than a big marketing budget.
Egs of Guerilla Attack :
a. Big Bazaar Vs Shoppers Stop / Westside / Lifestyle
b.Whirlpool vs Godrej (Refrigerators)
594
595
Public Service Ad (Don‟t Speed)
597
Typically, Guerrilla Marketing campaigns are
unexpected & unconventional; potentially
interactive.
Consumers are targeted in unexpected places.
The objective of Guerrilla attack is to create a
unique, engaging & thought-provoking concept
to generate Buzz, consequently turn Viral.
Guerrilla Marketing involves unusual
approaches such as intercept encounters in
public places, street giveaways of products, PR
stunts, any unconventional marketing intended
to get maximum results from minimal resources.
598
The term was coined & defined by Jay Conrad-Levinson in his book “Guerrilla Marketing”
Guerrilla Marketing is specifically geared for
the small business & entrepreneur.
It should be based on human psychology
rather than experience, judgment & guesswork.
Instead of money, the primary investments of
marketing should be time, energy, and
imagination.
The primary statistic to measure your business
is the amount of profits, not sales.
599
5. Bypass Attack : In order to gain market
share, a firm identifies segments not served
by the existing firms & makes efforts to gain
market share. Egs of Bypass Attack :
a.Pepsi launching “Aquafina” Mineral Water before
Kinley & purchasing “Tropicana” before Coke‟s Minute
Maid - Pulpy Orange.
b.Google vs Yahoo.
Technological Leapfrogging is a Bypass Strategy
followed in Hightech Industries. Hence this
strategy is also known as “Leapfrog Strategy”.
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“Leapfrog Strategy” involves bypassing the
enemy‟s forces altogether.
In the business arena, this involves either
developing new technologies or creating new
business models.
This is a revolutionary strategy that re-writes
the rules of the game.
This strategy is very effective when it can be
realized.
Eg : The introduction of compact disc technology
bypassed the established magnetic tape based
defenders. The attackers won the war without a
single costly battle.
MARKET LEADER STRATEGIESDominant firms want to remain number one. This calls for action on three fronts :
(1) The firm must find ways to expand its total market demand.
(2) The firm must protect its current market share through good defensive and offensive actions.
(3) The firm can try to increase its market share further, even if market size remains constant.
Offensive & Defensive Strategies :
• Offensive Strategies are more important than defensive ones. Market gains are made only by Offensive Strategies.
• Defensive Strategies are used when needed, but they could at best keep you from falling too far behind.
Offensive Strategies :
1. Expanding the Total Market : New Users / Uses , More Usage,
etc
2. Protecting Market Share : Innovation / Confrontation
3. Expanding Market Share : Product Innovation, Distribution /
Promotion Innovation, etc
Defensive Strategies :
1.Pre-emptive ( SBI opening several new branches & ATMs )
2.Counteroffensive ( Bajaj vs TVS Motorcycles )
3.Mobile ( Market Broadening & Diversification )
4.Contraction ( Strategic withdrawal : Hamam / Akai )
Market Leader Strategies
MARKET LEADER STRATEGIES
• The company can search for new
users
• Market penetration strategy ( who
might use it but do not )
• New market segment strategy
( those who have never used it )
• Geographical expansion strategy
( those who live somewhere else)
MARKET LEADER STRATEGIES
• Market Broadening: Company shifts its
focus from current product to the underlying
generic need. Eg : Petroleum companies sought to recast
themselves into energy companies. They are into coal, power, oil,
nuclear, and chemical industries
• Market Diversification : Diversification
into unrelated industries.
• Contraction Defense : It is strategic
withdrawal. Give up weaker territories and
reassign resources to stronger territories
MARKET LEADER STRATEGIES
3) Expanding Market Share : Market leaders can improve their profitability by expanding their market share .
• Identify the most important variables affecting profits (pursue new marketing strategies)
• Higher shares tend to produce higher profits under two conditions :
(a) unit costs fall with increased market share(b) company offers a superior quality product & charges a premium price, that more than covers the cost of offering higher quality
• Share gaining companies typically develop and add more new products to their line
MARKET LEADER STRATEGIES
(Expanding Market Share)
• Co. increase their product quality relative to competitors‟
• Increases in sales force expenditures
• Increased advertising may also produce share gains
• Co. that cut their prices more deeply than competitors do not achieve significant market-share gains generally. Presumably, enough rivals may meet the price cuts partly, and others may offer other values to the buyers, so that buyers do not switch to the price cutter.
Market Leader‟s Defense Strategies
Attacker
(3) Preemptivedefense
(4) Counter-offensivedefense
Defender
(1)Positiondefense
(5)Mobile
defense
(2) Flank defense
(6) Contractiondefense
MARKET LEADER STRATEGIES
The Market Leader has to use Defensive
strategies to reduce the probability of
attack, or divert the attacks.
• Position Defense: building superior
brand power
• Flank Defense: build outposts to
protect a weak front .( bring out new
products or products with less price )
MARKET LEADER‟S DEFENCE STRATEGIES
• Pre emptive Defense: attack before the
enemy starts its offense. i.e. have products of all
price types & categories.(Eg: Seiko Watches)
• Counter-Offensive Defense: attack the
competitor with same strategy as the
competitor.
• Mobile Defense: Leader stretches his
domain over new territories it spreads
through market broadening and market
diversification
Market Follower Strategies
Found Where :
Homogeneous Product
High Capital Intensity
Low Differentiation Options
High Price Sensitivity
Highly Competitive Industry
Strategy of Conscious Parallelism
MARKET FOLLOWER STRATEGIES
• A strategy of product imitation might be as profitable as a strategy of product innovation (Innovative Imitation)
• A market follower must know how to hold current customers and win a fair share of new customers. Each follower tries to bring distinctive advantages to its target market –location, services, financing etc.
• The follower is a major target of attack by challengers. Therefore, the market follower must keep its manufacturing costs low and its product quality and services high. It must also enter new markets as they open up.
MARKET - FOLLOWER STRATEGIES
Three broad followership strategies can be distinguished :
• Cloner : emulates the leaders‟ products, distribution, advertising and so on; (it doesn‟t originate anything).
• Imitator : copies some things from the leader but maintains differentiation in terms of packing, advertising, pricing and so on.
• Adapter : takes the leader‟s products and adapts and often improves them.
MARKET NICHER STRATEGIES
An alternative to being a follower in a
large market is to be a leader in a
small market or “Niche”. Smaller firms
normally avoid competing with larger
firms by targeting small markets of
little or no interest to the larger firms.
But increasingly, even large firms are
setting up Strategic Business Units,
or Companies, to serve Niches.
MARKET NICHER STRATEGIES
• The main point is, that firms with low shares of the total market can be highly profitable through smart niching.
• Niching is profitable, because the market nicher ends up knowing the target customer group so well that it meets their needs better than other firms that are casually selling to this niche. As a result, the nicher can charge a substantial mark-up over costs because of the added value.
• The nicher achieves high margin, whereas the mass marketer achieves high volume.
MARKET NICHER STRATEGIES
An ideal “Market Niche” would have the following characteristics :
• The Niche is of sufficient size and purchasing power to be profitable
• The Niche has growth potential
• The Niche is of negligible interest to major competitors
• The firm has the required skills and resources to serve the niche in a superior fashion
• The firm can defend itself against an attacking major competitor through the customer goodwill it has built up
MARKET NICHER STRATEGIES
Nichers have three tasks :
• Creating Niches (e.g. Nike, the athletic
shoe manufacturers)
• Expanding Niches
• Protecting Niches (Multiple Niching is
preferable to Single Niching)
Market Nicher Strategies
• End-user specialist• Vertical-level specialist• Customer-size specialist• Specific-customer specialist• Geographic specialist• Product or product-line specialist• Product-feature specialist• Job-shop specialist• Quality-price specialist• Service specialist• Channel specialist
CUSTOMER RELATIONSHIP MANAGEMENT
Customer Relationship Management
(CRM) is the process of carefully managing
detailed information about individual
customers and all customer “touch points”
to maximize customer loyalty.
It costs a company dramatically less to
retain and grow an existing client, than it
does to court new ones. It has been found
that “It is seven times more expensive to
acquire a new customer than to keep an
existing one.”
DATABASE MARKETING
• A Customer Database is an organised
collection of comprehensive information about
individual customers or prospects that is
current, accessible, and actionable for such
marketing purposes as lead generations, lead
qualifications, sale of a product or service, or
maintenance of customer relationship.
• Database Marketing is the process of
building, maintaining, and using customer
databases and other databases (products,
suppliers, resellers) to contact, transact, and
build customer relationship.
DATA MINING & CRM
• Data Mining is the principle of sorting
through large amounts of data & picking
out relevant information.
• Customer Relationship Management
forms a learning relationship with the
customers by noticing their needs &
preferences with the use of Data -
Warehouses and learn how to serve
them with the use of Data Mining.
What should be in the Database ?
• Demographics : How do you get people
to provide this?
• History of contacts
• Transaction history or summary
• Response to Marketing
Communications : How did you hear
about us (this offer?)
Customer Types
Platinum : Heavy, reliable users, not
price-sensitive, try new products, Loyal
Gold : Large users who push for price
breaks, shop around & not so loyal
Iron : Low volume or intermittent users;
cost to serve them is quite high
Lead : Demanding, want special
attention but don‟t buy much & show no
loyalty
Benefits of Implementing CRM
• Attracting new customers
• Quicker and more efficient response to
customer leads & customer information
• Simplification of marketing & sales
processes
• Understanding customer needs
• Better customer service
• Building customer loyalty
Drawbacks Of CRM
• Organizational wise change of priority to
customers
• Significant investment of time and money
• Threatens management‟s control/power
struggle
• Heightens people‟s resistance to change
• Inappropriate integration leads to
disaster
CRM : Business Strategy Perspective
625
Three Key Phases :
1. Customer Acquisition
2. Customer Retention
3. Customer Extension
Three Contextual Factors :
a. Marketing Orientation
b. Value Creation
c. Innovative IT.
CRM as Business Strategy
626
1. Customer Acquisition
627
Attracting our Customer :
For the first purchase
We have acquired our customer
Growth :
Market orientation, innovative IT & value
creation
Aim is to increase the number of
customers that purchase from us for the
FIRST TIME
2. Customer Retention
628
Re-purchase :
Our customer returns & buys for a second time
This is most likely to be the purchase of a similar
product or service, or the next level of product or
service.
Growth :
Market orientation, innovative IT & value creation
Aim is to increase the number of customers that
purchase from us REGULARLY
3. Customer Extension
629
Additional, Supplementary Purchases :
Our customers are regularly purchasing
We introduce products and services to our loyal
customers different from original purchase
Once purchased, our goal is to retain them as
customers for the extended products or services
Growth :
Market orientation, innovative IT & value creation
Aim is to increase the number of customers that
purchase ADDITIONAL products
4. Marketing Orientation
630
Focused upon the three levels of
needs of customers :
Actual, tangible product
Core product and its benefit
Also the augmented product such
as a warranty and customer service
Levels of a Product
631
632
Levels of Products and Services:
Product Planners need to think on three levels :
1. Core Product (Benefit) : This addresses the
question “What the buyer is really buying?”. At this level,
marketers must define the core: problem-solving benefits
or services that consumer seek. Eg: Buyers don’t buy
Sony Handycam rather they are buying a way to capture
moments and memories.
2. Actual Product : At this level, the core benefits
must be turned into actual products. Product planners
need to develop product and service features, design,
quality level, brand name and packaging.
3. Augmented Product : Finally at this level, the
product planners must bundle the products with services.
They must build an augmented product by offering
additional consumer services and benefits. Eg: Sony must
provide a warranty along with its Handycam.
Three Key Elements
633
1. Validation : (Correct Data ) Ensuring that the data
you have on your customers is not only correct. Also, in a
suitable state for targeting communications programs
2. Discovery : (Use of Data Mining Techniques) :
To find relationships that you did not know existed. Sometimes conventional
analysis is impaired by your own natural assumptions and prejudices.
Discovery techniques help to solve these issues by starting from ground
zero .They simply search for relationships in the database against a set of
objectives
3. Action : (Right Communication) : Your customers and
prospects need to have the right messages communicated to them This is
done with a Campaign Management tool that can automatically select the
right targets and the right messages via the right channels. The responses
are then fed back into the Validation process for evaluation and refinement
CRM : Processes & Systems
634
1. Understand & Differentiate
635
Understand :
Demographics, purchase patterns & channels
Segmentation to identify logical unique groups
Primary research to capture needs and attitudes
Customer valuation to understand profitability
Differentiate : Based on the value customers are expected to deliver
CRM : Processes & Systems Business starts with the acquisition of customers
However, any successful CRM initiative is highly dependent
on a solid understanding of customers
636
2. Develop & Customize
Develop : Products, services, channels and media can be customized
based on the needs of quantitative customer segments
Customize : Based on the potential value delivered by customer
segment
3. Interact & Deliver
Interact :
Not just through marketing, sales & media
Distribution, shipping, customer service & online
Deliver :
Delivering value is a cornerstone
Factors including quality, convenience, speed, ease of use, responsiveness
& service excellence
4. Acquire & Retain
637
Acquire : Learning about customers
makes it easy to identify those producing
the greatest value
Retain :
Maintain interaction;
Deliver on value
Customers change as they move through
differing life stages
Modify the service
Subconscious Expectations :
Pizza with specified toppings
Take 10 minutes
Come in a packed box
Remain warm till you reach home
Charges – standard and acceptable price
Pizza will taste reasonably good
You will come back is all the above are met !!!
Pizza Example
Pizza Example…….
If you go regularly :
Rapport with employees
You‟ll forgive if they mess up with one or two expectations
Degree of confidence determines tolerance : If its your first time & even one expectation is not met, you will
never go again
Exceeded Expectations :
• Deliver on all expectations
• Give you a garlic bread FREE !
You will tell everyone about it !!!
640
Marketing Control
Tool for ensuring that the marketing
programmes of the firm are always
directed towards its marketing objectives
It involves gathering information on
marketing performance and comparing it
with the planned / budgeted performance.
It provides feedback and exercises a
restraining or redirecting influence.
641
Marketing Control Speedy Feedback & speedy corrective
action are the two important factors towards better marketing control.
It should monitor all Key Result Areas of Marketing, such as :
1. Sales Volume
2. Market Share
3. Marketing Costs
4. Profitability
5. Productivity wrt channel / promotion / sales force
642
Tools for Marketing Control
Marketing Audit
Market Share Analysis
Marketing Cost Analysis
Credit Control
Profitability Analysis
Sales Force productivity Analysis
Sales Analysis
643
Marketing AuditMarketing Audit is a comprehensive, systematic, independent & periodic examination of the total marketing environment, objectives, strategies and activities of the firm with a view to determining the problem areas and recommending a plan of action to improve the company‟s marketing performance.
• What business are we in? Do we understand our business correctly?
• What business are we getting into?
• What change is required in our current direction?
• What are our marketing strategies & plans? Are they effective? Are they correct ?
• What are the emerging trends in competition and general business environment? What is its effect on us?
• Are the marketing activities measured periodically?
644
Marketing Audit - Characteristics
• Comprehensive
• Systematic
• Independent
• Periodic & not as a response to a problem situation.
• Marketing Audit covers :
1. Environment
2. Strategy
3. Systems- MIS
4. Marketing Organization structure & sales force
5. Audit of the 4 Ps
645
Marketing Cost Analysis MCA is a tool for Marketing Control
Containing marketing costs has become an imperative for optimizing profits.
Steps in MCA : 1. Comprehend the components of costs
• Distribution costs
• Channel costs
• Selling/Administration costs
• Promotion costs
• Cost of credit
• Cost of Marketing information and MR
2. Analyze the costs incurred vs the benefits obtained and wrt to standard costs. Standard costs to be worked out for each marketing function.
3. Determine what corrective action is to be taken.
646
Market Share Analysis Market Share is the company‟s sales
expressed as a percentage of total market
sales.
It should be accurately measured
Comparison over targeted shares to be
made
Shares can be worked out at the product
level, brand level, national level, regional
level.
Can be used as a tool for setting targets and
sales forecasting.
647
Credit Control
• Firms often extend credit to increase
sales.
• Proper credit policy to be framed else
bad debts will increase.
• Lack of credit control drains away profit.
• Credit rating of dealers/clients to be
done and accordingly only credit is to be
extended.
648
Profitability Analysis A few products may be profitable while a few
others may not be . Products not profitable
need to be analyzed and a decision to be
taken whether to continue or not.
Ratio Analysis :
Gross or Net Profit / Sale
Sales / Capital Employed
Distribution Expenses / Turnover
Promotion Expenses / Turnover
Bad Debts / Turnover Ratio
649
Sales Analysis
• Measuring actual sales in
relation to the goals.
• Micro sales analysis looks at
specific territories, products etc
that failed to produce expected
results.
650
Sales force Efficiency
• Average No. of calls per sales man per day
• Sales call time per contact
• Average revenue per sales call
• Average cost per sales call
• Entertainment cost per sales call
• Percentage of orders per 100 sales calls
• Number of new customers added in a period
• Sales force cost as a percentage of sales
651
Excellence Review
• Comparison to best practices
• Where the company stands
relatively.
• Good / Excellent / Poor rating is
assigned.
652
CSR / Ethics Review
• Review of ethical practices
• Review of CSR objectives
• Most admired companies abide by a code of serving the customers.
• Today through internet bad publicity about a company can be spread instantly by an unhappy customer.
• Microsoft has over 100 anti microsoft sites like Hate Microsoft Boycott microsoft.
653
Marketing Controller
• Expert position
• Analyses financially the marketing
functions
Meaning & Scope of Int. Marketing
International Marketing (IM) or Global
Marketing refers to the marketing activities
carried out by companies overseas or across
national borderlines. This strategy uses an
extension of the techniques used in the home
country of a firm.
Definition: International Marketing ( IM ) is the
performance of business activities that direct
the flow of a company's goods & services to
consumers or users in more than one nation,
profitably.654
What is International Trade ?
It is the sum total of the Exports & Imports of
all goods and services between countries.
If exports from a country are greater than
imports, it results in trade surplus
If exports from a country are lower than
imports, it results in trade deficit
Global linkages bind countries, institutions,
and individuals more closely than ever.
World trade opens up entirely new business
horizons.
Reasons For Marketing Abroad
Financial Gain : Existence of lucrative markets in foreign countries
Economies of scale & scope
Saturated domestic markets in the home country
High R & D costs
International Opportunities
Less Competition
New Trade Agreements
657
What is Globalization ?
“Globalization” is a process of interaction
& integration among the people, companies
& governments of different nations, which is
driven by international trade / investment
and aided by communication & technology.
This process has effects on the culture, on
environment, on political systems, on economic
development & prosperity and on human well-
being in societies around the world.
658
Difference between Domestic Marketing and
International Marketing
The main differences between Domestic Marketing &
International Marketing are in the following areas :
1. Different Political System
2. Trade Barriers ( Tariff & Non – Tariff )
3. Different Legal System
4. Different Monetary System & Banking
5. Differences in Economic & Market Conditions
6. Differences in Consumer Behaviour due to
differences in Culture, Religion, Language, etc
7. Differences in Mobility Factors of Production &
Distribution
8. Differences in Procedures & Documentation, etc
Liberalization, Privatization, Globalization
The new economic reforms brought changes in three broad areas, collectively known as Liberalization, Privatization & Globalization.
Liberalization did away with regulatory hurdles & minimized licensing requirements.
Privatization reduced the role of the state and public sector in business.
Globalization made it easier for the MNCs to operate in India.
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Generally, four distinctive approaches dominate strategic thinking in International Marketing:
Strategic Orientation: EPRG Schema
1. Ethnocentric or Domestic Marketing Extension Concept:
2. Polycentric or Multi-Domestic Marketing Concept:
Opposite of Ethnocentrism :Management of these multinational firms place importance on international operations as a source for profits Management believes that each country is unique & allows each to develop own marketing strategies locally
Home country marketing practices will succeed elsewhere without adaptation; however, International Marketing is viewed as secondary to domestic operations
Generally, four distinctive approaches dominate strategic thinking inInternational Marketing:
Strategic Orientation: EPRG Schema
3. Regiocentric :
4. Geocentric:Under Geocentrism, marketers see the world as one market & develops a standardized marketing strategy for the entire world. The uniform or standardized marketing strategy is used for several countries in the entire world
Under Regiocentric view, Company assess markets in terms of regions. A firm treats a region as a uniform market segment & adapts a similar marketing strategy within the region but not across the region.
Mode of Entry into Foreign Markets
After the decision to invest has been made, the
exact mode of operation has to be determined.
The risks concerning operating in foreign markets
is often dependent on the level of control a firm
has, coupled with the level of capital expenditure
outlaid.
The principal modes of entry into Foreign Markets are :
• Exporting ( Direct & Indirect Exporting)
• Joint Ventures
• Direct Investment ( Assembly & Manufacturing )66
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Reasons For Exporting
There are many reasons for Exporting :
Economies of Scale
Increased Revenue & Profit
Increased Productivity
Spread Risk-base of Business
Smoothing Effect on Order Booking
Offset lack of demand for seasonal products
New Product Ideas
Additional Markets
Tax Advantages
Exporting
• Indirect Exports : Export Houses
Buying Offices of Foreign Stores or Governments
Complementary Exporting
• Direct Exports : Sales to Final User
Overseas Agencies
Distributors & Stockists
Company Branch Offices Abroad
Direct ExportsDirect Exports involves a firm shipping goods directly
to a foreign market. A firm employing Indirect Exports
would utilise a export channel or an intermediary, who
in turn would disseminate the product in the foreign
market. From a company's standpoint, Exporting
consists of the least risk. This is so since no capital
expenditure, or outlay of company finances on new
non-current assets, has necessarily taken place. Thus,
the likelihood of sunk costs, or general barriers to exit,
is slim. Conversely, a company may possess less
control when exporting into a foreign market, due to
very little or no control over the supply of the goods
within the foreign market.
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The Advantages of Exporting are : manufacturing is home based thus, it is less
risky than overseas based
gives an opportunity to "learn" overseas
markets before making huge investments
reduces the potential risks of operating
overseas.
The Disadvantage is that one can be at the
"mercy" of overseas agents and so the lack
of control has to be weighed against the
advantages. Eg: In the exporting of African horticultural
products, the Agents & Dutch flower auctions are in a position
to dictate terms to the producers.
Methods of Overseas Production
• Licensing : Companies with strong brand or
know-how, such as P & G, Disney, etc
• Franchising : more of a „whole‟ package
Eg : Body Shop, KFC, Pizza Hut, etc
• Contract Manufacture: Bulk Items, Components
• Joint Ventures : Eg: TATA-Docomo in India
• Wholly Owned Overseas Subsidiaries
• Organic Growth (Organic Growth is that which
comes from a company's existing businesses, as opposed to
growth that comes from Mergers & Acquisitions)
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Licensing : is defined as “The method of
foreign operation whereby a firm in one
country agrees to permit a company in
another country to use the trademark,
manufacturing, processing, know-how or
some other skill provided by the Licensor".
Licensing is quite similar to “Franchising" operation.
Licensing is comparatively less expensive and has
lesser involvement. The only cost is signing the
agreement and policing its implementation.
Eg : In Bangalore, Hindustan Coca-Cola Beverages (P)
Ltd, have the License to bottle Coca Cola.
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Advantages of Licensing :
• Good way to start foreign operations and
open the door to low risk manufacturing
relationships.
• Linkage of parent and receiving partner
interests means both get most out of
marketing effort not tied up in foreign
operation.
• Options to buy into partner exist or
provision to take royalties in stock.
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Disadvantages of Licensing : Limited form of Participation : to length of
agreement, specific product, process or
trademark.
Potential returns from marketing and
manufacturing may be lost.
Partner develops know-how and so license
is short.
Licensees become competitors - overcome
by having cross technology transfer deals.
Requires considerable fact finding, planning,
investigation and interpretation.
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License Agreement is a business arrangement
where a licensor via a monopoly right such as a
Patent, a Trade Mark, a design or a copyright has to
exclusive right which prevents others from exploiting
the idea, design, name or logo commercially.
The License allows the licensee to use make and sell,
the product or name for a fee without censure.
In a Trade Mark License, for example, the licensee will
be granted full privilege to use the Trade Mark on
goods or services provided that the use is in
accordance with agreed signage protocols and quality
guidelines. There is usually no training component,
product development strategy & limited marketing
support.
Difference between Licensing & Franchising
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Franchise Agreement might be
considered to be a more robust
arrangement for new entrants into a line of
business. The Franchise Agreement
covers obligations on both parties and
includes a training, mentoring &
technical advise component for the
franchisee.
A Franchise Agreement is a specialised
License and will cover all aspects of
user obligations and use provisions.
Difference between Licensing & Franchising…
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Joint Ventures ( J V ) : can be defined
as “An enterprise in which two or more
investors share ownership and control
over property rights and operation".
A Joint Venture is a Business Agreement in
which parties agree to develop, for a finite time,
a new entity and new assets by contributing
equity. They exercise control over the
enterprise and consequently share revenues,
expenses & assets. JVs are a more extensive
form of participation than either Exporting or
Licensing. Eg : Sony-Ericsson, Tata-Docomo, etc
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Advantages of Joint Ventures :
Sharing of risk and ability to
combine the local in-depth
knowledge with a foreign partner
with know-how in technology or
process.
Joint financial strength
May be only means of entry and
may be the only source of supply
for a third country.
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Disadvantages of Joint Ventures :
Partners do not have full control of management.
May be impossible to recover capital if need be.
There may be serious disagreements on crucial
issues such as third party markets to serve.
Partners may have different & conflicting views
on expected benefits. However if the partners
carefully map out in advance what they expect to
achieve and how, then many problems can be
overcome.
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A ”Strategic Alliance” is a relationship
between two or more parties to pursue a set
of agreed upon goals or to meet a critical
business need while remaining independent
organizations.Partners may provide the strategic alliance with
resources such as products, distribution channels,
manufacturing capability, project funding, capital
equipment, knowledge, expertise, or intellectual
property. The Alliance is co-operation or collaboration
which aims for a synergy where each partner hopes
that the benefits from the alliance will be greater than
those from individual efforts. The alliance often
involves technology transfer, economic specialization,
shared expenses and shared risk.
Strategic AlliancesStrategic Alliances can range from loose networking relationships to very tight contractual relationships such as Joint Ventures. Eg : „Code Share‟ where airlines of a similar type sell each other‟s tickets. here is no co-ownership.
Types of Strategic Alliances :• Technology Swaps
• R&D Exchanges
• Distribution Relationships
Driving Forces or Reasons for Strategic Alliance :
• Insufficient Resources
• High R&D Costs
• Concentration of Firms in Mature Markets
• Market Access
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Direct InvestmentIn this mode of entry, a company would directly
construct a fixed asset within a foreign country, with
the aim of manufacturing a product within the
overseas market.
Assembly denotes the literal assembly of completed
parts, to build a completed product. Manufacturing
concerns the actual forging of a product from
scratch. Car manufacturers often construct all parts
within their plants. Direct investment has the most
control and the most risk attached. As with any
capital expenditure, the ROI ( Return on Investment )
has to be ascertained.
FUNCTIONS OF EXPORT MARKETING
• International Marketing Research
• Product Research and Development
• Export Financing
• Export Production
• Product Packaging
• Pricing
• Branding
• Advertising
• Sales Promotion
• Export Risks Management
PROBLEMS IN EXPORT MARKETING
• Problems of Trading Blocs
• Three-faced Competition
• Trade Barriers
• Different Currencies, Weights & Measures
• Custom Formalities
• Documentation Formalities
• Difficulties of Distance
• Diverse Languages, Customs & Traditions
• High Risks & Uncertainties
• Foreign Exchange Regulations
Designing the Product
Options available are :
• Product Standardization
• Product Adaptation
• Product Innovation
Product Standardization
Selling an identical product in all counties
“One Product, One Message – Worldwide”. Egs : Coca Cola, Rayban Sunglasses, Rolex Watches
Least expensive method & enables to earn
good name.
Economies of scale –both in production and
marketing
Possible if more or less same likes, dislikes,
preferences, habits and tastes of buyers in
different countries
Modification in product as per the needs of
local conditions, tastes, likes, dislikes
May change brand name from market to
market . Eg : Nestle has more than 100 varieties of Nescafe
Greater costs both in production and
marketing
May also result in greater profit
Suitable when product performs the same
function but use conditions are different
Product Adaptation
Product Innovation
New item introduced for foreign markets
Low cost item for developing countries;
high cost item for developed nations
Backward Invention or Forward Invention
Backward Invention is the reintroduction of
earlier product forms and
Forward Invention is developing a new
product
Standardization vs CustomizationA recurrent theme in Global Marketing is whether
companies should aim for a Standardized product
offer or Customized or country tailored product
strategy.Standardization means:
• Offering a uniform product on a regional or world wide basis.
• Minor alternations are usually made to meet local regulations or market conditions
• A standardized / uniform product capitalizes on the common platform requirements across countries.
Customization means
Under customization process management focuses on cross-
border differences in the needs and wants of the firms target
customers. Under customization, appropriate changes are
made to match local market conditions.
Standardization vs Customization
While the Standardization has a
Product Driven Orientation, it can
lower your costs via mass production.
Customization is inspired by a
Market Driven Orientation & can
increase customer satisfaction by
adapting the product to local needs.
SELECTION OF MARKETS
Determine Export Marketing Objectives
Collection of Information
Analysis of Information
Short Listing of Markets
Detailed Investigation of Short Listed Markets
Selection of Markets
Entry in Overseas Markets
Follow-up
International Marketing Mix: Price
Factors influencing Pricing Decisions
for International Marketing :
The cost of manufacturing, distributing &
marketing
The physical location of production plants
Fluctuations in foreign currencies affect pricing
The price that the international consumer is
willing to pay
Business objectives
The price that competitors in international
markets are already charging.
International Marketing Mix: Price
Price Discrimination: demand elasticity
Strategic Pricing : Predatory (quick share-of-
market focus)Start with lower prices to drive
competitors out, then raise prices
Multipoint Pricing: pricing in one market may have
an impact in another market; subsidize low pricing
in one market from profits in another
Experience Curve: use aggressive pricing to build
volume and move firm down experience curve
(lower marginal costs)
Regulatory Issues: antidumping, monopoly restriction
• Price Discrimination Strategy (to maximize
consumer demand) Eg : Coca Cola prices in
Mexico, Brazil & Eastern Europe are lower than
prices in Asia even though cost of concentrate is
same.
• Premium Pricing :Used where there is a
uniqueness about the product or service.
This approach is used where a a substantial
competitive advantage exists. Egs : Apple
Products such as I-Pod, I-Phone, I-Pad, Luxuries
such as Cunard Cruises, Savoy Hotel rooms, etc
International Pricing Strategies
• Economy Pricing : No frills low price.
The cost of marketing and manufacture
are kept at a minimum. Eg : Supermarkets have economy brands for
soups, spaghetti, EDLP by Wal-Mart, etc.
• Price Skimming : Charge a high price
because you have a substantial
competitive advantage. Egs : Manufacturers of Digital Watches used a
skimming approach in the 1970s ;
Apple Products such as I-Pod, I-Phone, I-Pad, etc
International Pricing Strategies
Other Pricing Strategies• Psychological Pricing : respond on an
emotional, than on rational basis Eg: Jewellery
• Product Line Pricing : Basic wash could be $2,
wash and wax $4, and the whole package $5.
• Optional Product Pricing : Eg : Airlines will
charge for optional extras such as guaranteeing a
window seat or reserving a row of seats next to
each other.
• Captive Product Pricing : Eg : Razor
manufacturer s charge a low price for the Razor
and recoup its margin from the sale of the only
design of blades which fit the razor.
• Product Bundle Pricing : This also serves to
move old stock. Eg : Videos & CDs are often sold
using the bundle approach.
• Promotional Pricing: BOGOF (Buy One Get One Free).
• Value Pricing : is used where external factors
such as recession or increased competition
force companies to provide 'value' products or
services to retain sales. Eg : Value Meals at
McDonalds.
Other Pricing Strategies
International Marketing Mix: Promotion
Promotion : success at home leads to interest from potential importers, licensors, joint venture partners
Local knowledge essential on initial entries. Key issues are :
Integrated Market Communications
Trade & Consumer Sales Promotions
Sales Management
Trade Shows
International Marketing Mix: Promotion
Its very important as to how the firm
communicates the product attributes /
benefits to customers. For Eg :
Citibank was formerly serving only the premium
segment in Indian market.
Minimum deposit required was Rs 3 Lakhs which
was reasonable in Dollar terms
The company soon realized that this shall not be a
successful strategy in India and hence changed it
strategy to serve the Mass Market.
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Egs : (Cont‟d….)
Suzuki Markets the same model of
“A-Star” Car under the A Star Brand-
Name in India & as “Alto” in Europe
When Ford launched “Escort” in
different markets in the world, in some
places it was positioned & promoted as
sports car and as a luxury car in some
other countries.
Barriers to International Communication
• Cultural Barriers : Eg : McDonalds Strategy : In India they can't
use Beef-Tallow to fry the fries and burger cutlets. (due to religious beliefs -
cows are sacred to Hindus). Similarly, no bacon in the middle east (pork is
prohibited by Islam)
• Design, Symbolism & Aesthetics sometimes are
important : Eg : Most of the Japanese small cars seem to have a
smiling face from the front.
• Source Effects (country of origin effects like
economic developments ) : Eg : In remote regions of Africa there
would be no means of electricity on which to run Radio or TVs
• Standardized Advertising Restrictions : (due to
Culture or Laws) Eg : Restrictions on Liquor/Cigarette Ads or It is not
acceptable to show naked legs in ads displayed in Muslim countries.
• Other Factors such as: Work Ethics, Target Population, etc
International Marketing Mix: Promotion
Push vs Pull Strategies
1. Push Strategy: personal selling emphasis
• Industrial products; complex new products
• Short distribution channels
• Few print or electronic media
2. Pull Strategy : mass media advertising emphasis
• Consumer goods
• Long distribution channels
• Marketing message may be carried via print / electronic media
Place or Distribution
Place (Distribution) is one of the most
important elements for International
Business entry :
Incoterms determine where title to goods
changes
Transportation to international freight carrier,
freight, insurance, documentation, customs
clearance, local transportation, logistic
management “in the market”, currency risk
Distribution
Companies use two principle Channels of
Distribution when marketing abroad :
1. Direct Distribution
2. Indirect Distribution
Types Of Intermediaries: Direct Channel
• Foreign Distributer
• Foreign Retailer
• State-Controlled Trading Company
• End User
Types of Intermediaries: Indirect Channel
Export Broker
Manufacturer's Export Agent
Export Management Company
Cooperative Exporter
Purchasing / Buying Agents
Country Controlled Buying Agents
Resident Buyer
Export Merchant
Export Drop Shipper
Export Distributor
Trading Company
Channel Decisions
As in any domestic market, the
international market requires a
marketers to make at least three
decision which is:
Channel Length
Channel Width
Number of Distribution Channels
Determinants of Channel TypesThere is no single across the board solution for all
manufacturers‟ channel decisions. Yet there are
certain factors that can assist a manufacturer in
making good decision which is as below:
Legal Regulations
Product Image
Product Characteristics
Middlemen‟s Loyality & Conflicts
Local Customs
Control
Types Of Documents
There are major two types of
documents which is as below :
Shipping Documents
Collection Documents
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