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MARKETING MANAGEMENTFor

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, MarketingEnvironment, Adapting Marketing to new

liberalised economy.• Digitalisation, Customisation, ChangingMarketing Practices, e-business : setting-

up web sites.• Marketing Information System, StrategicMarketing 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 regionor a place which facilitatesinteraction & exchange between

Buyers & Sellers. It can be an

actual or conceptual place, where

in forces of demand & supplyoperate.



Types of MarketsOn Geographic or Area basis• 1. Local market

• 2. National market• 3. International market or Global marketOn Economic basis-• 1. Perfect market• 2. Imperfect marketOn the basis of Business• 1. Wholesale market

• 2.Retail marketOn 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 needsprofitably, 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

http://images.google.co.in/imgres?imgurl=http://www.kabmurungraya.net/wp-content/uploads/2009/08/modern-indian-house-design-4.jpg&imgrefurl=http://www.kabmurungraya.net/2009/08/31/modern-house-design-of-indian-architecture-by-dada/&usg=__Ag50lmz9Xx-dn1bYmtTYXhIE468=&h=353&w=530&sz=32&hl=en&start=46&tbnid=DMTbUH50uScRxM:&tbnh=88&tbnw=132&prev=/images?q=indian+house&gbv=2&ndsp=20&hl=en&sa=N&start=40

http://images.google.co.in/imgres?imgurl=http://www.sparebusiness.co.in/images/bunglow.jpg&imgrefurl=http://www.sparebusiness.co.in/MainPages/MarketingPlan.aspx&usg=__2We0MBPbTGGm8gRXuUXeuyCBkO4=&h=768&w=1024&sz=201&hl=en&start=1&tbnid=r9VyYrl8tknTgM:&tbnh=113&tbnw=150&prev=/images?q=bunglow&gbv=2&hl=en

http://images.google.co.in/imgres?imgurl=http://mysite.verizon.net/imagelib/sitebuilder/pictures/qpics/household/house_icon.gif&imgrefurl=http://mysite.verizon.net/resoqpqa/id18.html&usg=__FzsZtLvCVdp1d1KxBkHNB6ibhdM=&h=113&w=135&sz=2&hl=en&start=17&tbnid=fvTKBisf9Rdr-M:&tbnh=77&tbnw=92&prev=/images?q=simple+house&gbv=2&hl=en



Needs, Wants & Demands

Needs: are the basic humanrequirements, 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 orsatisfaction.

•Marketers cannot create basic ‘Needs’, but

constantly try to create specific ‘Wants’



Wants

• Wants: “Needs” become “Wants” whenthey are directed to specific objectsthat 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.





14

Customer Needs & Wants are fulfilledthrough a Marketing offering, which may

be products, services, information orexperiences or a combination thereof,offered to a market to satisfy a need or want.

The American Marketing Association(AMA) defines Marketing as “Theprocess of planning & executing the

conception, pricing, promotion anddistribution of ideas / goods / servicesto create exchanges that satisfy

individual & organizational goals.”



15

Marketing starts with identifying customer needsand wants and ends with satisfying them througha coordinated set of activities that also allows afirm 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

CostSatisfaction

Exchanges

Transactions

Relationships

Markets

Marketing

Marketers

1

2

3

4

5

6



Marketing Management

“Marketing Management is abusiness discipline which is

focused on the practicalapplication of marketing-

techniques & the managementof a firm's marketing

resources & activities.”



Functions of Marketing

I t f M k ti



Importance of Marketing(A) Importance of marketing to society1. Delivery of standard of living2. Provides Employment3. Decrease in distribution cost4. Increase in national income

(B) Importance of marketing to the Firm1. Helpful in business planning & decision-making

2. Helpful in increasing profits3. 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 Profitabilityiii. Functional Integration

iv. CRM / SCM / BPO / e-C / BM & RE



Production Concept

Product Concept

Selling Concept

Marketing Concept

Consumers prefer products that arewidely available and inexpensive

Consumers favor products thatoffer the most quality, performance,or innovative features

Consumers will buy products only if

the company aggressivelypromotes/sells these products

Focuses on needs/ wants of target -markets & delivering valuebetter than competitors

Company Orientations Towardsthe Marketplace

M k ti M i



Marketing Myopia• Short sighted & inward looking approach to

marketing that focuses on the needs of the

firm instead of defining the firm and itsproducts in terms of the customer' needsand wants.

• Such self-centered firms fail to see andadjust to the rapid changes in their marketsand, despite their previous eminence, falter,fall, and disappear.

• This concept was discussed in an article (titled 'MarketingMyopia,' in July-August 1960 issue of Harvard BusinessReview) by Professor of Marketing, Theodore C. Levitt ,who suggests that firms get trapped in this bind becausethey omit to ask the vital question, "What business are wein?"

Diff b t M k ti & S lli



Difference between Marketing & Selling

Marketing Selling

1. Marketing focuses oncustomer needs

1.Selling focuses on theneeds of the seller

2.Customer enjoyssupreme importance

2.Product enjoyssupreme importance

3.Integrated approachto achieve long termgoals

3.Fragmented approachto achieve immediategoals

4.Converting customers

needs into products

4.Converting customer

needs into profits5.Cavet Vendor (Let theseller beware)

5.Cavet Emptor (Let thebuyer beware)

6. Profits through

customer satisfaction

6.Profits through sales

volume



DIFFERENCE BETWEEN SELLING & MARKETING

SELLING MARKETINGEmphasis on product Emphasis on consumer needs and wants

Company manufactures the productfirst and then decides to sell it

Company first determines customerneeds and wants and then decides howto deliver a product to satisfy these wants

Management is sales volume

oriented

Management is profit oriented

Planning is short-term oriented interms of today‟s products and

markets

Planning is long-term oriented in terms ofnew products, tomorrow‟s products and

future products

Stresses needs of a seller Stresses needs and wants of a buyerViews business as a goodsproducing process

Views business as a consumer satisfyingprocess

Emphasis on staying with existing

technology and reducing cost

Emphasis on innovation in every sphere,

on providing better value to customers byadopting a superior technology




SELLING MARKETING

Different departmentswork as highly separatewatertightcompartments

All departments of a businessoperate in an integratedmanner, the sole purposebeing generation of consumersatisfaction

Cost determines price Consumers determine price,price determines cost

Selling viewscustomers as the last

link in business

Marketing views thecustomers as the very

beginning of a business




The Marketing Concept holds that the key toachieving organizational goals consists of the

company being more effective than itscompetitors in creating, delivering &communicating customer value to its targetmarkets.

The Marketing Concept rests on four pillars:Target Market, Customer Needs, Integrated Marketing & Profitability.

Relationship Marketing aims to build long-term mutuallysatisfying 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 anetwork with individual customers & other parties( employees & suppliers ) & continuously strengthenthe network for the mutual benefits of all the parties

concerned.Transactional Marketing is one in which a Companyor its employees communicate & offer their products or

services to the customers only when they approachthe firm. Gaining Customer-Loyalty is not a priority.There is clear lack of personal touch / focus on thecustomers‟ requirements.

Egs: Govt. Services, Public Sector Banks, etc. 28



Relationship Marketing

• is a philosophy of doing business that

focuses on keeping current customers andimproving 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 onretention and enhancement of customerrelationships.

C t G l f R l ti hi M k ti



Customer Goals of Relationship Marketing

C O



A Loyal Customer is One Who...

• Shows Behavioral Commitmentbuys from only one supplier, even though

other options exist

increasingly buys more and more from a

particular supplierprovides 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 RetentionBenefits to the Organization

Customer Retention &Increased Profits

Employee Loyalty

Quality ofProducts/Service

Customer Satisfaction



Benefits of Relationship Marketing :( I ) Benefits for the Firm :

1. Customer Loyalty2. Reduced threat from Competitors

3. Increased revenues from existing customers

4. Positive Word-Of-Mouth Publicity5. 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 deliverthe desired satisfactions more effectively andefficiently than competitors in a way thatpreserves 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 ofintegrating the : value exploration,

value creation & value deliveryactivities, with the purpose of buildinglong-term, mutually satisfying

relationships and co-prosperity amongkey stakeholders.

H li i M k i Di i



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 & customerquality.

In the first four steps, we create value for customers andbuild customer relationships. In the fifth step, we capturevalue 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 area 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.

PRODUCT



ProductExperiences

Places

Persons

ServicesGoods

Events

Ideas Information

Properties Organizations

PRODUCT

Cl ifi ti f P d t



15

Classification of Products

PRODUCTS

GOODS SERVICES

INDUSTRIAL

GOODSCONSUMER GOODS( Durables & Non-Durables )

1. RAW MATERIALS

Egs: Steel, Wood,Cotton ,etc

2. COMPONENTSEgs: Tyres, SpareParts, Gear Box, etc

3. CAPITAL GOODS

Egs: Machinery,

Equipments, etc

1. CONVENIENCE GOODSEgs: Tea, Chocolates, Soap

2. SHOPPING GOODS

Egs: 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

P d t & S i Cl ifi ti



41

Product & Service Classifications:Products fall into two classes based on howconsumers use them :

1. Consumer Products & 2. Industrial Products

Consumer Products are the products bought by finalconsumers 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.

( ) S i l P d Th d i h



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 forfurther processing for use inconducting 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.

The Marketing Mix



44

The Marketing MixMarketing Mix refers to the tools available to anorganization 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. Price3. 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 createa suitable mix to the particular situation in hand.

Elements of the Marketing Mix



Elements of the Marketing Mix

45

PRODUCT PRICE PROMOTION PLACE[Physical Distribution ]

DesignQualityFeaturesPLCBrandingProduct LineProduct Mix

PackagingLabellingWarranties

Pricing -------- StrategiesDiscountsAllowancesPayment -TermsCredit Period

AdvertisingSales PromotionPersonal SellingPublicity / PRDirect Marketing

Channels ofDistribution( Wholesalers& Retailers )

&Logistics ofDistribution

(AssortmentsLocationsInventoryTransport )

The Marketing Mix



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

PromotionCommunication

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



Segmentation, Targeting & Positioning

1. Identifysegmentationvariables andsegment themarket

2. Developprofiles ofresultingsegments

MarketSegmentation

3. Evaluateattractivenessof eachsegment

4. Select the

targetsegment(s)

MarketTargeting

5. Identifypossible

positioningconcepts foreach target

segment

6. Select,develop, andcommunicate

the chosenpositioning

concept

MarketPositioning

D fi i & D li i C t



Defining & Delivering CustomerValue & Satisfaction

Customer Value is the ratio of the perceivedbenefits & costs that the customer has to incurin acquiring a product or a service.

Value for Customers includes different types ofbenefits 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



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 onhow a firm or a region can build a competitiveadvantage & 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 competencefor regional economic development & theDiamond model.

52

VALUE CHAIN



VALUE CHAINThe VALUE CHAIN, also known as Value Chain

Analysis, is a concept from business managementthat was first described and popularized by MichaelPorter in his 1985 best-seller, Competitive - Advantage: Creating & Sustaining Superior Performance .

He suggested that activities within the organisationadd value to the products & services that theorganisation produces, and all these activities should

be run at optimum level if the organisation is to gainany real competitive advantage. If they are runefficiently the value obtained should exceed thecosts of running them.

Porter‟s Generic Value Chain



Porter‟s Generic Value Chain



Primary Value Chain activities are :

Inbound Logistics: the receiving & ware -housing of raw materials, and their distributionto 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 ofcustomer needs and the generation of sales.

Service: the support of customers after theproducts and services are sold to them.

These Primary Activities are supported by



These Primary Activities are supported bya 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 : technologiesto 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 onits effectiveness in performing theseactivities efficiently, so that the amount that

the customer is willing to pay for the products,exceeds the cost of the activities in the valuechain.

• A competitive advantage may be achieved byreconfiguring the value chain to provide lowercost or better differentiation.



58

MARKETING PLAN



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 factorswhich cannot be directly controlled by an

or anization.

Factors Affecting Mktg. Environment



g gMicro / Internal

Company

Employees

Market / Customers

Suppliers

Share-Holders

Financers

Competitors Media

Intermediaries &

Public.

Macro / External

Demographic

Economic

Government

Political / LegalCultural

Technological

&Global Environment

Environmental Scanning




The major components ofEnvironmental Scanning are :

1. External Environmental Scanning2. Customer Analysis

3. Competitor Analysis

4. Market Analysis

5. Company Analysis





The major components ofEnvironmental Scanning are :

1. External Environmental Scanning

2. Customer Analysis

3. Competitor Analysis

4. Market Analysis

5. Company Analysis

E i t l A i l



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 organizationto understand the environmental influenceson its business.

Various Environmental Components.



p1) 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 ofcompetitors, nature of competition.

2) Technological Environment : Sources ofTechnology; Technological development, R&D,Cost of Technology; Effects of technology on

environment, human beings.

Components contd..



p3) Supplier Environment:

• Cost, availability, and continuity of supply of rawmaterial, components, parts.

• Infrastructural support and ease of availability of thedifferent 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..



p

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



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..



p

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



Macro Environmental Analysis : PEST Analysis

71

PEST Analysis



PEST Analysis• Political Environment : Legislations / Govt. Rules /

Pollution Control & Environmental Laws / Taxes & Duties / Pricing Policies / Consumer Protection Laws / Impex PoliciesFDI / Patent Laws / Labour Laws / Subsidies, etc

• Economic Environment : Interest & Exchange Rates /

Inflation / GDP / Per Capita Income / Demand-SupplySituation / 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



BLUNDERS IN ADVERTISING DUE TO LANGUAGE& CULTURAL DIFFERENCES

73

Micro Environmental Analysis



Micro Environmental Analysis

•Consumer Analysis

•Competitors Analysis•Market Analysis

•Company Analysis

- (SWOT 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:



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/services3. Location of your business.

4. Poor quality goods or services.

5. Damaged reputation.76

Opportunity could be:



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 ofyour organization when conducting SWOT analysis.

2. SWOT analysis should distinguish between where yourorganization 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 competitioni.e. better than or worse than your competition.

5. Keep your SWOT short and simple. Avoid complexity andover-analysis

6. SWOT is subjective.

78

Example : Wal-Mart SWOT Analysis



Example : Wal-Mart SWOT Analysis.

Strengths : Wal-Mart is a powerful retail brand. It

has a reputation for value for money, convenienceand a wide range of products all in one store.Weaknesses : Wal-Mart is the World's largestgrocery retailer and control of its empire, despite its

IT advantages, could leave it weak in some areasdue to the huge span of control.Opportunities : To take over, merge with, or formstrategic alliances with other global retailers,

focusing on specific markets such as Europe or theAsia Pacific Region.Threats : Being number one means that you arethe target of competition, locally and globally.

79

Student Activity



Student ActivityUndertake SWOT Analysisof atleast two companies,each in : IT, Telecom, Retail,

Automobile, Petroleum,Consumer Electronics,

FMCG, Power, Steel,Infrastructure & Service

Sectors

What is e-Business?



What is e Business?e-business is the continuous

optimization of a firm‟s business activitiesthrough digital technology. [Digital or

Information Technologies are things like computers

& the Internet, that allow the storage & transmissionof data in digital formats]

The booming growth of e-business, hasled to many solid successes today andexciting new growth areas will soonemerge.

Key Questions for Corporations:



y p

• How to use information technology profitably ?

• How to understand what technology means fortheir business strategies?

• How time-tested concepts by marketers can beenhanced by the Internet, databases, wirelessmobile devices, and other technologies?

• What‟s next after the rapid growth of theInternet 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?



at s a et gE-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



g p• Marketers who grasp what Internet technologies

can do will be better poised to capitalize oninformation technology.

• Internet : creates opportunities beyond thosepossible with the telephone, television, postal mail,

or other communication media. It leads to moreeffective & efficient implementation of themarketing strategies.

• Corporates & Customers can have easy, & quickaccess to information & can transact business in aninexpensive way. The market reach can beextended to the entire world.

E-marketing Implications



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 transformsmany marketing strategies.• New trends such as Integrated &

Collaboration Software, Web services,

Data Security, Wireless Technologies,Portable-Computing, etc will helpbusinesses move forward with e-marketing.

Modern Trends in Marketing



g

• 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

Modern Marketing Trends....



• Increased use of analytics tools (e.g., Google

Analytics) to spot ways to improve ROI.• Increased focus on Search Engine

Optimization (SEO) content targeting & othertrackable paid marketing techniques such aspay-per-click and other.

• Increased use of online webinars &decreased use of large trade shows.

• Increased use of outsourced marketingfunctions, especially specialised functionssuch as Marketing Research & Advertising.

Types of E-Markets



89

yp

E-marketplace is a marketplace in

which sellers & buyers exchange goods& services for money using electronicmedium 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-sidemarket-places

• Sell-side e-marketplace: A private e-market in which acompany sells either standard or customized products toqualified companies

• Buy-side e-marketplace: A private e-market in which acompany makes purchases from invited suppliers.

2. Public e-marketplaces: B2B markets, usuallyowned and/or managed by an independent thirdparty, that include many sellers and many buyers;

also known as exchanges

3. Consortia: E-marketplaces owned by a small groupof large vendors, usually in a single industry

Types of Internet Advertising / Marketing



Types of Internet Advertising / Marketing

Banner Ads: most popular, different sizes and

stylesPop-up ads: popular, another type is Pop-

Behind or Pop-Under Ads :

E-mail Marketing: powerful, economical, legalimplications, spam.

Affiliate marketing: commission-based,

benefit of the selling site‟s brand in exchangefor 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



Student Activity

Write down the Definitions,with suitable examples, of allthe terms listed-out under the :

“Modern Trends in Marketing”



94

The Importance of Information• Companies need information about their :



95

• Companies need information about their :

Customer Needs

Competition


• 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 theregular, planned collection, analysis & presentation of

information for use in marketing decisions.

• Information for use in MkIS is gathered fromcustomers, competitors & from the market itself.

Philip Kotler„s definition says, an MkIS is more than asystem of data collection or a set of information



96

system of data collection or a set of informationtechnologies:

"A Marketing Information System is a continuingand interacting structure of people, equipment &procedures to gather, sort, analyse, evaluate anddistribute pertinent, timely & accurate

information for use by marketing-decisionmakers to improve their marketing planning,implementation & control".

MkIS helps Marketing Managers to :

1. Assess Information Needs,2. Develop Needed Information,3. Distribute Information.

Kotler‟s Model of MkIS



Assessing

Information

Needs

Developing Information

Internal

Records

Marketing

Intelligence

Marketing

Research

Decision

Support

Marketing Information System

Marketing Decisions & Communications

Distributing

Information

M a r k

e t i n g M a

n a g e r s

A n a l y s i s ,

P l a n n

i n g ,

I m

p l e m e n t a t i o n , C

o n t r o l

M ar k e t

i n gE nvi r o

nm en t

T a r g e t M a r k e t s ,M a r k e t i n g C h a n n e l s , S u p p l i e r s ,

C o m p e t i t o r s ,P u b

l i c s ,M a c r o e n v i r o n m e n t F o r c e s

The three main constituent parts of an MkIS ind l i i f ti



98

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 Informationfrom Data Sources (i.e. Accounting)within the Company.

MarketingResearch

Design, Collection, Analysis & Reportingof Data about a Specific MarketingSituation Facing the Organization.

MarketingIntelligence

Collection and Analysis of Publiclyavailable Information about Competitors& the Marketing Environment

Marketing Info. System



99

• Internal data is gatheredvia customer databases,financial records, andoperations reports.

• Advantages of internal

data include quick/easyaccess to information.

• Disadvantages stemfrom the incompletenessor inappropriateness ofdata to a particularsituation.

• Internal Data

• Marketing

Intelligence

• Marketing

Research

Developing

Information




100

• Marketing Intelligence isthe systematic collection

and analysis of publiclyavailable informationabout competitors andtrends in the marketing

environment.• Competitive intelligence

gathering activities havegrown dramatically.

• Many sources ofcompetitive informationexist.

• Internal Data

• Marketing

Intelligence • Marketing

Research

Developing

Information

Sources of



101

Competitive Intelligence

• CompanyEmployees

• Internet• Published

Information

• Other Sources

• Competitor‟sEmployees

• Trade Shows• Benchmarking• Channel Members &

Key Customers




102

• Marketing Research

is the systematicdesign, collection,analysis & reportingof data relevant to aspecific marketingsituation facing anorganization.

• Marketing ResearchProcess.

• 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 & systemsfor the advancement of human knowledge on a

wide variety of matters of our world. 103

Types of Research :1 Basic Research: (also called Fundamental



1. Basic Research: (also called Fundamentalor Pure Research) is primarily concerned

with the advancement of knowledge andthe theoretical understanding of therelations 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 researchcommunities' accumulated theories,knowledge, methods, and techniques, for a

specific or client driven purpose

MARKETING RESEARCHM k ti R h i th



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 Marketing105

Types of Marketing Research



( I ) Exploratory Research: to gather preliminaryinformation 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 thedemographics & 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



Qualitative Research explores attitudes,behaviour & experiences through such methods

as Interviews & Focus Groups with the idea ofgetting 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 Information3. 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 / Presentation108

The 3 R‟s of Marketing



g

In the process of Marketing Research,

companies collect a lot of different typesof information. David G. Bakken is of theopinion 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, theresearchers study different market



researchers study different marketsegments to develop the right products &

services consumers need & want.

To Retain Existing Customers, themarketer may conduct customer satisfaction

studies. Marketers realise that goodrelationship with customers is important forlong-term positive sales results.

Regaining Lost Customers can be aformidable problem. It needs innovativemarketing & outstanding communications.

Many companies face the dilemma of deciding



y p gfor or against Marketing Research Firms. That

is why it is advisable for you to know the needsof your concern well before making anydecisions; as Market Research is a highlyimportant for a good marketing strategy.

In-house Market Research divisions can onlyyield 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, especiallywhen the firm lacks expertise or time in a particular area



when the firm lacks expertise or time in a particular areaof business. Many companies prefer to off-load

Advertising & Marketing Research to specializedcompanies, who have the expertise & experience to doa much more effective & efficient job.

Market Research Companies are concerns, whichhelp their clients scan & understand their consumersthus helping them to successfully promote and sell theirproduct. Companies that fulfill market research needs,

specialize in data analysis i.e. their employees arespecifically trained for gathering and analyzinginformation.

Student Activity



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 crucialdecisions taken or a grand design or acomprehensive master-plan or a specific

course of action which a person or anorganisation chooses to achieve theprimary or long term goals & objectives.

Simply put by Edward de Bono :



• Strategy means putting things inplace carefully, and with a great dealof 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 toknow when to stick to your strategyand when to change it.

Basic Definitions:• Plan : is a future course of action where in we select



• Plan : is a future course of action where in we selectour goals & determine the means to achieve it.

• Policy : is an understanding by a group ofpeople that makes action of each member morepredictable 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 followed117

Strategic Management : is a process ofdesigning & implementing an effective set of



strategies with an overall approach to deal

with both internal & external agencies bytaking appropriate decisions & actions inorder 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, MichaelPorter & Peter Drucker enriched the conceptwith their original contributions to the field of

Strate ic Mana ement118

Henry Mintzberg’s 5P’s of Strategy



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



1994, points out that Strategy is used inseveral different ways, the most commonbeing :

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 expensiveproducts is using a "high end" strategy.

3. Strategy is POSITION; that is, it reflects

decisions to offer particular products orservices in particular markets.

4. Strategy is PERSPECTIVE, that is,vision and direction.

5. Strategy is a PLOY, i.e. It is a specificmanoeuvre intended to outwit an opponentor competitor.

Student Activity( I ) Write down the history &



( 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 toachieve the organisational goals &objectives. It can be classified into :

• Strategic Planning &

• Operational Planning122

Definition : Strategic Planning is theprocess of identifying an organization's



process of identifying an organization slong-term goals & objectives and thendetermining the best approach forachieving 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 thecompany can outperform the competitors inorder 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

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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 significantimpact 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 :



or Steps in Strategic Planning :

1. Company Vision & Mission2. Situational Analysis (Envrmtal. Scanning)

3. Long Term & Short Term Objectives

4. Corporate Strategy (Grand Design)5. Designing the Business Portfolio5. Functional or Operational Strategies

6. Implementation (Organising)7. Evaluation (Measuring Results)8. Control (Taking Corrective Action)

127

Mission and Vision Statements arewritten mainly for the customers and the



written mainly for the customers and the

employees of companies or corporations.Mission Statements are sentences orshort paragraphs written by companies,

corporations or businesses which reflectstheir core purpose, identity, valuesand principle business aims.

The Vision Statement is a sentence or ashort paragraph providing a broad andinspirational image of the future. 128

Vision A Vision articulates the position that an



A Vision articulates the position that anorganization would like to attain in the distantfuture.

Vision therefore is future aspirations that leadto 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 ofthe 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 sharedsense of purpose.

They are competitive, unique and simple.Good visions foster risk-taking and

experimentation.

They represent integrity.

COMPANY MISSION : is a statement of theorganization's purpose Mission is what an



organization s purpose. Mission is what an

organization is and why it exists. It shouldbe realistic, specific & motivating.Mission should define the essential purpose of the

organization, concerning philosophical questions

like What is our business, the nature of businessit 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‟sproducts, markets, technological areas of thrust &should reflect the values & priorities of its strategicdecision makers. It should also set apart a company

from its competitors131

Mission StatementsThey should be feasible: Though mission should



They should be feasible: Though mission shouldaim high, it should be realistic & achievable.

It should be precise: It should not be very narronor should it be too broad. It should be clearenough to lead to action.

It should be motivating: It should motivateemployees to achieve its mission.

• It should be unique and distinctive: unique

because an organization should be seen bymarket 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



p g gsocially 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 thatprovides best-of-breed business solutions, leveraging

technology, delivered by best-in-class people.“Mission : "To achieve our objectives in an environmentof fairness, honesty, and courtesy towards our clients,employees, vendors and society at large."

134

Student Activity



Student Activity

Write down the Vision& Mission statementsof atleast ten Indian

Companies & tenGlobal Companies.

Setting-up of Goals & Objectives



The second step in the Strategic Planning

process requires the manager to set companygoals & objectives and be responsible forachieving them.

• The mission leads to a hierarchy of objectivesincluding business & marketing objectives.

• Objectives should be as specific as possible.

• Objectives are an organisation's performancetargets - the results and outcomes it wants toachieve.

• The Goals & Objectives function asd ti k f t ki i ti '



yardsticks for tracking an organisation's

performance and progress.• Strategic objectives relate to outcomesthat strengthen an organisation's overall

business position and competitive vitality.• Objectives are open-ended attributesthat denote the future state or outcomes,

whereas Goals are close-endedattributes, which are precise & expressedin specific terms.

Role of Objectives :

Obj ti d fi th i ti '



Objectives define the organisation's

relationship with its environment. Objectives help an organisation pursue

its mission and purpose.

Objectives provide the basis forstrategic decision making.

Objectives provide the standards for

performance appraisal.

Characteristics of Objectives



1. Objectives should be understandable

2. Objectives should be concrete and specific3. Objectives should be related to a time frame4. Objectives should be measurable and ------

-- controllable5. Objectives should be challenging6. Different objectives should correlate with ----

-- each other7. Objectives should be set within constraints

Strategic Management Model



Identify current

mission,

objectives, and

strategies

Perform internal

analysis toidentify key

strengths &

weaknesses

SWOT,Strategic choice

Perform

externalanalysis to

identify key

opportunities &

threats

Match strategy,structure, and

controls

Design

control systems

Designorganization

structure

Managestrategic

change

Corporate-Level

Strategy

Business-Level

Strategy

Functional-Level

Strategy

Global Strategy

Levels at which Strategy operates For many companies, a single strategy is not enough.



For many companies, a single strategy is not enough.

There is a need for multiple strategies at differentlevels.

Many companies are organized on the basis ofoperating 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



p , gvarious functions performed by different SBU‟s.

• The Corporate Level Strategies deal with theobjectives of the company, allocation ofresources and coordination of the S B U‟s for

optimal performance.

• SBU Level Strategies is a comprehensive planproviding objectives for SBU‟s, allocation of

resources among functional areas, andcoordination between them for making anoptimal contribution to the achievement of

corporate level objectives

Functional & Operational Strategies• Functional Level Strategies deal with a

l ti l t i t d l idi bj ti f



relatively restricted plan providing objectives for

a specific function, allocation of resourcesamong different operations within that functionalarea, and coordination between them for

optimal contribution to the achievement of SBUand corporate level objectives.

• Operational Strategies are also needed to beset at lower levels, one step below thefunctional 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



Successful business strategies result not fromrigorous analysis but from a particular state of

mind”. The people at the “Helm of Affairs” or TopManagement, such as Chairman, CEO, MD, BoD,Entrepreneurs, Management Consultants, etc areinvolved 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 ideasthat emerge, to work out their strategic implications,

or to ensure successful execution of high potential“wild” ides that might otherwise never beimplemented”

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

I d d b i i h i



• Is adopted by on organization when it

attempts at an incremental improvementof its functional performance bymarginally changing one or more of its

business.• Eg: A copier machine company provides

better after sales service to improve itsimage and product image too.

Expansion or Growth Strategy



• This strategy is followed whena company aims at high growthby increasing the scope of oneor more of its businesses interms of their respective

customer groups, functionsand technology.

Retrenchment Strategy



• This is followed when a company aims atcontraction of its activities throughsubstantial 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 companyadopts a mixture of all thestrategies either at the same time

in its different businesses, or atdifferent times in the samebusiness with the aim of improvingits performance.

Marketing Strategy



TargetConsumers

Product

Place Price

Promotion

Competitors

MarketingChannels

PublicsSuppliers

Demographic -Economic

Environment

Technological -Natural

Environment

Political -Legal

Environment

Social -Cultural

Environment

Marketing Strategies forCompetitive Advantage



p g

MarketNicher

MarketFollower

MarketChallenger

MarketLeader

STRATEGY A COMPANY ADOPTSDEPENDS ON ITS

INDUSTRY POSITION

Depending upon their market shares in aparticular market, companies can be



153

p , pclassified as :1. Leaders2. Challengers &

3. Followers4. Nichers

The Challenger companies have to attack the

Leader, other comparable firms & smaller firmsin their bid to gain market share. Attack has agreater probability of success when there is

customer dissatisfaction with the current leader

Market Structure

Depending upon their market shares in a



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 isfighting hard for an increased market share.

• Market Follower : another runner-up firm that is

willing to maintain its market share and not rock theboat.

• Market Nicher : firms that serve small marketsegments not being served by larger firms.

Strategic Analysis

1 C L l



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 Matrixii. GE Nine Cell Planning Grid ( GE Spot Light Grid )

iii. ADL Life Cycle Approachiv. Ansoff Product - Market Matrix.

155

The Ansoff Product - Market Growth Matrix is amarketing tool created by Igor Ansoff and first publishedin his article "Strategies for Diversification" in the



gHarvard Business Review (1957). The matrix allows

marketers to consider ways to grow the business viaexisting and/or new products, in existing and/or newmarkets – there are four possible product/market

combinations. This matrix helps companies decide whatcourse of action should be taken given currentperformance. 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

Ansoff‟s Product - Market Growth Matrix

http://en.wikipedia.org/wiki/File:AnsoffMatrix.jpg



157

1. Market Penetration: This involves increasing sales of an existingproduct & penetrating the market further by either promoting the

product heavily or reducing prices to increase sales.

http://en.wikipedia.org/wiki/File:AnsoffMatrix.jpg



158

2. Product Development: The organisation develops new

products to aim within their existing market, in the hope that they willgain 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 doneeither 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 coreactivities) 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 upthe 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



Most Portfolio Analyses evaluate the

SBUs of a firm on two importantdimensions: the Attractiveness of theSBU‟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



The BCG Matrix ( Boston Consulting Group ) is a

matrix / model that was created by Bruce Hendersonfor the Boston Consulting Group in 1970 to assistCorporations with analyzing their Strategic BusinessUnits or Product Lines.

This helps the company allocate resources and isused as an analytical tool in brand marketing, productmanagement, strategic management, and portfolio

analysis. Companies that are large enough to beorganized into strategic business units face thechallenge of allocating resources among those units.

161

B C G MATRIX



162

Resources are allocated to business units according towhere they are situated on the grid as follows:

1. Cash Cow - a business unit that has a large market share in a mature,



Cas Co a bus ess u t t at as a a ge a et s a e a atu e,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 growingrapidly they require investment to maintain their lead. If successful, a starwill become a cash cow when its industry matures.

3. Question Mark (or Problem Child) - a business unit that has a smallmarket share in a high growth market. These business units requireresources to grow market share, but whether they will succeed andbecome 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 couldbetter be deployed elsewhere. Unless a dog has some other strategicpurpose, it should be liquidated if there is little prospect for it to gainmarket share.

163

Four strategies suggested by the BCG Matrix :Build, Hold, Harvest or Divest

• BUILD : Invest more in the business unit in



• 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 fi l i i i i hi i i d d i



A firm's relative position within its industry determines

whether a firm's profitability is above or below theindustry 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

1. Cost Leadership :

The low cost leader in any market gains competitive



167

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 biggermargin 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, requiresfi t t thi b t it d t



a firm to create something about its product

or service that is perceived as uniquethroughout the industry. Customers mustperceive the product as having desirable

features not commonly found in competingproducts. The customers also must berelatively price-insensitive. Adding product

features means that the production ordistribution costs of a differentiated productmay be somewhat higher than the price of ageneric, non-differentiated product. 168

Differentiation may be attained throughmany features that make the product or

i i P ibl i



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 lesssusceptible to cost pressures from

tit b t th



competitors because customers see the

product as unique and are willing to pay extrato have the product with the desirablefeatures. Differentiation may lead to customer

brand loyalty and result in reduced priceelasticity. Differentiation may also lead tohigher profit margins and reduce the need to

be a low-cost producer.

170

A Niche Market refers to that small segment of theoverall market base, which if targeted in a focusedmanner results in higher yields rather than focusing



manner, results in higher yields rather than focusing

on all the market segments. It is such focused andtargetable group of potential customers, which iftargeted, will result in higher yield due to its uniquevalue 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 theirneeds.

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, geographicalarea, 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 canserve a broader range of customers. Focusstrategies are most effective when customers

have distinctive preferences or specializedneeds.

172

A Focus Strategy is often appropriate for small,aggressive businesses that do not have the ability orresources to engage in a nationwide marketing



resources to engage in a nationwide marketing

effort. Such a strategy may also be appropriate if thetarget market is too small to support a large-scaleoperation. Many firms start small and expand into anational-organization. –

A firm following the Focus Strategy concentrates onmeeting the specialized needs of its customers.Products and services can be designed to meet the

needs of buyers. Firms utilizing a focus strategy mayalso be better able to tailor advertising andpromotional efforts to a particular market niche.

173

Unit - II

Buyer Behaviour,



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 ororganization who buy or purchase



organization who buy or purchase

products /services, but a “Consumer" isthe one who consumes the products orservices.

Definition : Consumer is anindividual (or a group) who buys

products or services for personaluse (or house-hold use) and not formanufacture or resale.

Behavior or Behaviour refers to theactions of a system or organisms or



people, usually in relation to itsenvironment. i.e. Behaviour is theresponse of the system or people

to various stimuli or inputs, whetherinternal or external, conscious orsubconscious, overt or covert & voluntary

or involuntary. Generally, human-beingshave a greater capacity to learn newresponses and thus adjust their behavior.

Human Behavior (and that of other organisms &mechanisms) can be common, unusual, acceptableor unacceptable Humans evaluate the acceptability



or unacceptable. Humans evaluate the acceptability

of behavior using social norms and regulate behaviorby means of social control. Buyers or Consumers,at any given time, are generally influenced by a setof 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 availableresources (time, money, energy) in obtainingand using goods / services.

Definition of Consumer Behaviour

Consumer Behaviour is the study of



Consumer Behaviour is the study of

individuals / groups / organizations& the processes they use to select,

secure, use & dispose products(goods, services, experiences or ideas) tosatisfy needs and the impacts that

these processes have on theconsumer & society.

Consumer Behaviour deals with the study of

various aspects of purchase & consumption& di l f d t / i b i di id l



& disposal of products / services by individuals,

families & organisations, keeping the personalsocial, environmental, psychological & factors inmind.

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 / existingcustomers‟ needs, perceptions, attitudes,

preferences buying behaviour & buying patterns



preferences, buying behaviour & buying patterns

in order to develop their marketing plans.Studying Consumer Behaviour is absolutelyessential in:

a) Market Analysisb) Market Segmentation

c) Product Positioning

d) Developing Marketing Strategies

e) Designing the Marketing Mix &

f) Social Marketing. 181

Consumer Buying Role



182

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 andPsychologicalFactors affectall these steps

The Buyer Decision Process Step 1. Need Recognition



External Stimuli

• TV advertising

• Magazine ad

• Radio slogan

•Stimuli in theenvironment

Internal Stimuli

• Hunger

• Thirst

• A person‟s normalneeds

Need RecognitionDifference between an actual state and a desired state

The Buyer Decision ProcessStep 2. Information Search



•Family, friends, neighbors•Most influential source ofinformation

•Advertising, salespeople•Receives most informationfrom 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 Process Step 3. Evaluation of Alternatives

Product Attributes



Product Attributes

Evaluation of Quality, Price, & Features

Degree of Importance Which attributes matter most to me?

Brand Beliefs What do I believe about each available brand?

Total Product Satisfaction Based on what I‟m looking for, how satisfied

would I be with each product?

Evaluation Procedures Choosing a product (and brand) based on one

or more attributes.

The Buyer Decision ProcessStep 4. Purchase Decision



Purchase IntentionDesire to buy the most preferred brand

Purchase Decision

Attitudesof others

Unexpectedsituationalfactors

Types of Consumer DecisionsBased on the level of involvement, Consumers mayexhibit three types of problem-solving behavior :



yp p g

1. Extensive Problem Solving occurs when buyerspurchase more expensive, less frequently purchasedproducts in an unfamiliar product category requiringinformation search & evaluation.

2. Limited Problem Solving occurs when buyers areconfronted with an unfamiliar brand in a familiarproduct category.

3. Routinised Response Behavior occurs whenbuyers purchase low cost, low risk, brand loyal,frequently purchased or items with which they arefamiliar.

189

The Buyer Decision Process Step 5. Post-Purchase Behavior

Consumer‟s Expectations of



Consumer‟s Expectations of

Product‟s Performance

DissatisfiedCustomer

SatisfiedCustomer !

Product‟s Perceived

Performance

Cognitive Dissonance

Post-Purchase DissonancePost-purchase Dissonance : is a



consumer reaction after making a difficultdecision that involves doubt and anxiety.

Probability of experiencing dissonance

increases based on: Degree of commitmentor irrevocability

Importance of the decision

Difficulty in choosing Individual‟s tendency to experience anxiety

191

Model of Consumer Buying Behavior

MarketingStimuli

Other StimuliBuyer‟sCh t i ti



Stimuli

ProductPricePlacePromotion

EconomicTechnologicalPoliticalCultural

Characteristics

CulturalSocialPersonalPsychological

Buyer‟s Decision Process

Problem RecognitionInformation SearchEvaluationDecisionPost-Purchase Behavior

Buyer‟s Decisions

Product ChoiceBrand ChoiceDealer ChoicePurchase TimingPurchase Amount

Consumer purchases are highly



p g y

influenced by two factors.

Internal

Psychological

Personal

External

Cultural

Social

Factors Influencing Buying Decisions

SocialF t

CulturalF t



Factors

PersonalFactors

Psycho-logical

Factors

FactorsCONSUMERDECISION-

MAKINGPROCESS

BUY /

DON‟T BUY

Cultural

Culture

Subculture

SocialClass

Social

ReferenceGroups.

Family

Role andStatus

Personal

Age & Lifecycle stage

Occupation

Economic sit.

Lifestyle

Personality &Self Concept

Psychological

Motivation

Perception

Learning

Beliefs &

Attitudes

Cultural Factors Affecting Consumer Behavior:

• Most basic cause of a person's wants & behavior.

• 1. Values



Social Class• People within a social classtend to exhibit similar buyingbehavior.

• Occupation

• Income

• Education

• Wealth

• 2. Perceptions

Subculture• Groups of people with sharedvalue systems based on commonlife experiences.

• Hispanic Consumers

• African American Consumers

• Asian American Consumers

• Mature Consumers

Social InfluencesCulture Behavior is learned so the traditions,

values, attitudes of society alli fl it



influence it

SocialClass

Has a major influence on consumer‟s

behavior

ReferenceGroups

Formal or Informal Groups to whichwe belong or would like to beassociated with.

Family Key group in terms of attitudes,

beliefs & learned behavior

PersonalInfluences

Personal characteristics such as age,occupation, family lifestyle, etc

1. CULTURE : The sum total of learned beliefs, values, andcustoms that serve to regulate the behavior of members of aparticular society. Culture offers order, direction & guidance in allphases of human problem solving.



197

phases of human problem solving.

2. SOCIAL CLASS : Relatively permanent & ordereddivisions in a society whose members share similar values,interests and behavior. It is the division of members of a societyinto 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 orimaginary) that serves as a point of comparison for an individual

in the formation of either general or specific values, attitudes, orbehavior. These are people whom consumers tend to look to forinfluence 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:



PsychologicalFactors

Motivation

Perception

Learning

Beliefs andAttitudes

1. Motivation : Human drive to attain a goal

object.D i E th t i l t t



199

Drive : Energy that impels us to actGoal Object : Something we seek, with the assumptionthat 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 ofemotional, attitudinal & behavioral response



patterns of an individual. It is the innerpsychological characteristics (psyche ormental make-up) that both determine &reflect how a person responds to his or herenvironment.

Thus Personality depends upon uniquepsychological 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 psychographicprofile 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 newproduct development or copyrighting to predictconsumer response.

Theories of Personality



Freudian Theory : Unconscious needsor drives are at the heart of humanmotivation

Neo-Freudian Personality Theory :Social relationships are fundamental tothe 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 basicor pre-potent needs are shown at the bottom of



the pyramid, with prepotency decreasing as oneprogresses 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 something2. SAFETY & SECURITY : physical safety, psychological security

1. PHYSIOLOGICAL : ( Biological Needs ) hunger, thirst, sleep, sex207

Abraham Maslow's Theory of Hierarchy of Needsis 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 needsinfluence behavior, satisfied needs do not.

2.Since needs are many, they are arranged in order ofimportance, 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 personwill demonstrate. 208

Frederick Herzberg‟s Two - Factor Theory of( Intrinsic / Extrinsic ) motivation, concludes that



certain factors in the workplace result in jobsatisfaction, but if absent, lead to dissatisfaction.

The factors that motivate people can change over theirlifetime, 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, ifabsent, result in demotivation.The name Hygiene Factors is used because, the presence will not make youhealthier, 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 thetop of organisations and are rated as highly effective in their positions, demonstrate aconcern for influencing people. Power motivation refers to a need to have someimpact, 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 & areference to situations which involve human interactions. The need for affiliation issimilar 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 findingsolutions to problems. This allows them to gain personal satisfaction from theirachievements. They do not like situations where success or failure results fromchance. The important thing is that the outcome be the result of their own skill andeffort.

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 ofdefining & sub-dividing a large heterogeneousmarket into clearly identifiable segments havingsimilar 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 toselect those segments that they find profitable tocater to & these selected segments constitute the“Target Market”. 213

WHY MARKET SEGMENTATION ?



214

By segmenting the market, themarketer is attempting to break themarket into more strategically

manageable parts, which can thenbe targeted and satisfied far moreprecisely by developing product and

marketing program tailored to eachsegment.

Factors considered for Market Segmentation :

1. Needs / Benefits sought



2. Importance attached to Attributes/Feature3. Usage Rate

4. Brand Loyalty

5. Purchase Influencers

6. Product Adoption Stage

7. Geographic Location8. Channel Type

9. Life Style / Status / Personality. 215

Requirements for Effective Segmentation



216

Requirements for Effective Segmentation

1. Accessibility : The firm should be able to reachout to the market segments through various



distribution & promotion channels economically.

2. Measurability : The variables used for marketsegmentation should be easily understandable &

assessable.3. Substantiability : The ROI from the selected

segments should be attractive & profitable.

4. Actionability : The chosen segments should exhibitvariations in their market behaviour & responddifferently to marketing mixes that are designed onan individual basis.

217

Benefits of Market Segmentation1. Understand potential customers



2. Pay proper attention to particular areas3. Formulate effective marketing programs

4. Select channels of distribution

5. Understand competition

6. Use marketing resources efficiently

7. Efficient & Customized design of themarketing mix : i.e Product , Price,Promotion & Place

SEGMENTATION BASES The first step in Segmentation of

customers, in a heterogeneous market



219

customers, in a heterogeneous marketis to select a set of variables orcharacteristics (called SegmentationBases) to assign potential-customersto homogeneous groups.

These variables should be related to

some aspect of potential customer‟sneeds or wants and should reflectdifferences 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.

Types of Market Segmentation



221

Types of Market Segmentation



222

Demographic SegmentationDemographic Segmentation consists ofdividing the market into groups based on



g g p

measurable population characteristics suchas age, gender family size, income, occupation,education, religion, race, nationality, etc.

It considers a number of potential influences onbuying behaviour, including attitudes, activities& expectations of consumers. If these are known,

then products and marketing campaigns can becustomized so that they appeal more specificallyto customer motivations.

223

DEMOGRAPHIC SEGMENTATION



224

Demographic variables are the most popularbases for distinguishing customer groups.

One reason is that consumer wants,preferences and usage rates are oftenassociated with demographic variables.

Another is that demographic variables areeasier to measure.

Consumer wants and abilities change withage. Persons in the same part of the lifecycle may differ in their life stage.

Men & Women tend to have differentattitudinal and behavioral orientations,

DEMOGRAPHIC SEGMENTATION



225

att tud a a d be a o a o e tat o s,based partly on their genetic makeup &partly on socialization practices.

Income is a popular demographic variable

for segmenting customers because incomelevel influences consumers‟ wants and

determines their buying power.

Occupation & Education have also very

important bearing on consumers‟

purchasing behaviour.

DEMOGRAPHIC SEGMENTATION….The Demographic approach assumes that

customers differ according to some criteria



226

about themselves.Demographic information on its own doesn't

define the consumer needs, it doesn't define

the product or service required, or thepromotional stance to take.

The role demographic plays is to help you

identify for each segment a profile of thetypical customer to be found in eachsegment. This in turn will help youunderstand how to reach each segment.

Geographic SegmentationGeographic Segmentation tries to dividemarkets into different geographical units, such as :



g g p ,

• Zones, Regions, States, Districts,

• City / Town / Village, etc

• Population: Urban, Suburban, Rural, Semi-Rural

• Climate: Coastal / Inland / Rainy, etc

Most MNCs & other large companies havedifferent regional and national marketing

programmes and need to alter their products,advertising & promotion to meet the individualneeds of different geographic units. 227

GEOGRAPHIC SEGMENTATION The Geographic approach assumes that

customers found within a particular



228

pgeographic zone would have commonpreferences and therefore, can betargeted with the same offer.

Like climate has strong impact onresident‟s needs and purchasingbehaviour such as their clothing, air-

conditioning and heating system, foods,sports and entertainments.

While there could be some common

GEOGRAPHIC SEGMENTATION



229

preferences of people residing in samegeographic area, it does not mean thateveryone down a particular street buysthe same items.

Everyone in the northern regions of ourcountry (as individual consumers or asbusinesses) does not have the samebuying criteria, or responds to only onetype of message.

GEOGRAPHIC SEGMENTATION….

This approach on its own doesn't



230

define the consumer needs, it doesn'tdefine the product or service required,or the promotional stance to take.

It can, however, play a role insegmentation by providing furtherhelp in identifying how to reach the

customers found in particularsegments.

Psychographic Segmentation :dividesthe market into Customers‟ Groups according to

Lifestyles, Personalities & Values.



It considers a number of potential influenceson buying behaviour, including attitudes,expectations & activities of consumers.If these are known, then products &marketing campaigns can be customized sothat they appeal more specifically tocustomer motivations.Eg: Recent examples include the growth of demand for organic foods

or products that are ( “perceived” to be) environmentally friendly.231

People within the same demographic group canexhibit very different psychographic profiles.

PSYCHOGRAPHIC SEGMENTATION…..



232

Although this approach on its own does notdefine the product or service required, byidentifying the internal drivers of decision makers it can help define the most appropriatepromotional stance to take for differentsegments.

The opinions that consumers hold & theactivities they engage in will have a hugeimpact on the products they buy & marketersneed to be aware of any changes.

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 ofsuch 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, Special2. Benefits : Utility, Durability

3. User Status : Non User, Regular

4. Usage Rate : Light, Heavy

5. Loyalty Status : Medium, Strong

6. Readiness Stage : Unaware, Aware7. 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 fortheir own personal or household uses that aresatisfying strictly non-business ones. That constitutes

what is called a Consumer Market.

Business Users are business, industrial orinstitutional organizations that buy goods or

services to use in their own organizations, to resell orto make other products. Business Users constitute the

Business Market.

Some of the bases for segmenting the

Segmenting BusinessMarkets



consumer market are also useful forsegmenting the business market for example,geographic basis, business demographics like

size, etc., business market generally can besegmented by:

Type of customer

Size of the customer

Type of buying situation

Steps in Segmentation & Targeting



IdentifyBases forSegmenting the Market

STEP 1:

DevelopProfiles ofResulting Segments

STEP 2:

DevelopMeasuresof SegmentAttractive-ness

STEP 3:

Select theTargetSegments

STEP4:

Ensure thatSegmentsAreCompatible

STEP 5:

The Marketing Segmentation ProcessFind ways to group consumers

according to their needs



Take marketing actions to reach targetsegments

Select the product segments toward which thefirm will direct its marketing actions

Develop a market/product grid to relate the marketsegments to the firm‟s products and actions

Find ways to group marketing actionsavailable to the organization

SEGMENTATION TOOLS

Three important Statistical tools



240

commonly used for Market –Segmentation are:

Conjoint Analysis

Cluster Analysis

Factor Analysis

Market Coverage Strategies basedon Segmentation



Undifferentiated Multi-Segment Concentrated

Market Coverage Strategies based onSegmentation :

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 offeringdifferent products / services for each segment.Eg : Travel Agencies approach to Domestic Travelers, BusinessTravelers & International Travelers.

3.Concentrated Marketing Approach : or SingleSegment Strategy aims at serve a single or just a fewsegments in the total market.

242

Targeting Market Segments



Instead of aiming a single product & asingle marketing programme at the mass

market, most companies identify relatively

homogeneous segments and accordingly

develop suitable products & marketing

programmes by matching the wants andpreferences of each segment.

The chosen segments ( Target Market ) shouldbe 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

Identify markets with unfulfilled needs



Position through marketing strategies

Select market to target

Determine market segmentation

Product Positioning: Developing amarketing program in such a way that theproduct is perceived to be very differentfrom competitors products.



246

PRODUCT POSITIONINGPositioning in Marketing is a process by whichmarketers try to create an image or identity in the

i d f h i k f i d b d



minds of their target market for its product, brand ororganization.

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 theidentity of competing products, relative to the identity of

your own product, in the collective minds of the targetmarket.

247

Product Positioning is a decision reached by a marketer to tryto 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

i i l k



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 ofcompetitive advantage. This is done in order todemonstrate the unique aspects of a firm'sproduct and create a sense of value. Theterm Unique Selling Proposition refers toadvertising to communicate a product'sdifferentiation

UNIQUE SELLING PROPOSITION (USP)

A company must decide how many ideas(benefits, features, etc) to convey in its



positioning to its target customers. Manymarketers advocate promoting only onecentral benefit, which is called as the Unique

Selling Proposition or “USP” for each brandand 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

i i i i USP b bl



positioning i.e. USP may not be able tooverpower competition, in which case acompany should try to offer a unique

combination of multiple benefit positioningknown 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

U



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

i t d d It l ifi th d t t i hi h



intended. It also specifies the product category in whichit 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 beststrategy 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 positiondo we havenow?



Do we have themoney to do the

job?

What position dowe want to own?

From whommust we winthis position?

Do we have thetenacity to staywith it?

Does ourcreative strategymatch it?

ThePosition

Positioning Strategies

Attributes and Benefits?

P i Q lit ?

How should

iti ?



Price or Quality?

Use or Application?

Product Class?

Product User ?

Competitor ?

Cultural Symbols?

we position ?

Developing a Positioning Platform

2 A i f h

1. Identify the competitors



6. Monitor the position

5. Make the positioning decision

4. Analyze consumer preferences

3. Determine their positions

2. Assess perceptions of them

Positioning Errors

1. Under Positioning : When the

b d’ iti i th t it i



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 beunaffordable for them.

3. Confused Positioning : Buyers

might have a confused image of a

Positioning Errors…….



might have a confused image of a brand resulting from company's makingtoo 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 ormanufacture.

Differentiation is the process of creating adifferent and distinguished offering by a

company through a number of available tools

Differentiation



company through a number of available tools,which adds meaningful value to the offering.Criteria for Differentiation :

All products can be differentiated to someextent, but not all brand differences aremeaningful or worthwhile for which it should

satisfy one or more of the following criteria :Important, Distinctive, Superior, PreemptiveAffordable, Profitable, etc.

Differentiation may be attained through manyfeatures that make the product or service

appear unique Possible strategies for



appear unique. Possible strategies forachieving 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 P d t Diff ti ti



1. Product Differentiation

2. Service Differentiation

3. Personnel Differentiation

4. Image Differentiation

There are several variables through which acompany can differentiate its market offerings

such as :

Differentiation….



such as :1. Product Differentiation : A product can be differentiated in many ways such as : by

changing the form and by varying the featuresor by setting a superior performance quality orby having a unique and superior design or by

having a high degree of reliability or higherdurability or simply by having a unique style.Eg : I-Pod, I-Phone, etc

2. Service Differentiation : When the physical product cannot be easily differentiated, the key to

competitive success may lie in adding valued services &

Differentiation….



competitive success may lie in adding valued services &improving their quality. A company does so by providingmiscellaneous Services, offering an improved productwarranty or maintenance contract; it can also offerrewards, 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 sixcharacteristics: Knowledge & Competence, Courtesy towardsCustomer, Individual Credibility, Reliability, l Responsivenesstowards Customers, & l Communication Skills.

4. Image Differentiation: Brand

Identity & Brand Image need to be

Differentiation….



Identity & Brand Image need to be distinguished. Identity comprises theways that a company aims to identify

or position itself or its products.Image is the way the public perceivesthe company or its product.

Eg : Nike Sports wear, Sony, etc

Positioning is the result of differentiationdecisions. It is the act of designing thecompany's offering and identity (that will

create a planned image) so that they occupy ai f l d di ti t titi iti i



create a planned image) so that they occupy ameaningful and distinct competitive position inthe target customer's minds.

The end result of Positioning is the creation of amarket-focused value proposition, a simple clearstatement of why the target market should buythe 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

ProductProduct is anything that can be offered toa market, such goods, services, places,

ideas information etc for attention



268

ideas, information, etc, for attention,acquisition, use, or consumption thatmight 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 itdelivers value & satisfaction to the target buyer.

Types of Products

PRODUCTS



269

Consumer

Products

Industrial

Products

PRODUCTS

Services

Product Classification: Consumer Goods

Shopping Goods

Buy less frequently

Convenience Goods

Buy frequently & immediately



270

Unsought Goods

New innovations Products consumers don’t

want to think about Require much advertising & personal sellingi.e Life insurance, blood donation

Specialty Goods

Special purchase efforts High price

Unique characteristics Brand identification Few purchase locationsi.e Lamborghini, Rolex

Buy less frequently Higher price Fewer purchase locations Comparison shopi.e Clothing, cars, appliances

Buy frequently & immediately Low priced Mass advertising Many purchase locationsi.e Candy, newspapers

Product Classification: Industrial Goods



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 Item / Line / Mix

Product Item

A specific version of a productthat can be designated as a

distinct offering among an



272

Product Item

Product Line

Product Mix

distinct offering among anorganization‟s products.

A group of closely-relatedproduct items.

All products that anorganization sells.

Product Mix

Width : No of Product Lines a company has



273

Width : No. of Product Lines a company has Length : No. of Products in a Product Line

Depth : No. of variants of each product withina Product Line.

Consistency : How closely related the

Product Lines are in end use

Eg -1 : Gillette’s Product Lines & Mix

Width of the Product Mixn

e s



274

Blades & WritingRazors Toiletries Instruments Lighters

Fusion – 5 bladeMach 3 Turbo

Mach 3 Series Paper Mate CricketSensor Adorn Flair S.T. DupontTrac II Toni S.T. DupontAtra Right GuardSwivel SilkienceDouble-Edge Soft and DriLady Gillette FoamySuper Speed Dry Look

Twin Injector Dry IdeaTechmatic Brush Plus

D e p t h

o f t h e P r o d u c t L i n

Line Stretching : Line stretching occurs when the company lengthens its product line beyond its current length.

Down Market Stretch: A company position in



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 growthopportunities down the line.2. The company may wish to tie up lower endcompetitors who may otherwise try to move up market

and thus offer low priced offering.3. The company may find that the middle market isstagnating or declining.

Up Market Stretch : Companies may wish

to enter the high end of the market for more

growth higher margins or simply to positionh l f ll li f



growth, higher margins or simply to positionthemselves 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 belengthened 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 aproduct‟s sales and profits take over its life time.

The concept holds that these two parameters (sales &



The concept holds that these two parameters (sales &profits) change over time in a predictable way, and thatproducts 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.

SalesSales&

Profits

Product Life Cycle Curve



TimeNew

ProductDevelop-

ment

Introduction

Profits

Growth Maturity Decline

Profitsin Rs.

Sales & Profits Over the Product’s Life From Inception to Demise

Features of Each Stage of the PLC Curve

↑

DeclineIntroduction

Growth Maturity



T i m e → S

a

l e

s

↑ Decline

Declining sales

Declining profitor losses

Exit ofcompetitors

Reducedpromotionalexpenditure

Reduced price

IntroductionLow sales

Low growth

Profit is zero

Fewcompetitors

Highpromotionalexpenditure

GrowthHigh & Increasingsales / profits

Entry ofcompetitors

Stable price

Stable promotionalexpenditure

MaturityStatic but highsales and profits

Emphasis on lowcosts

Fight for marketshare withestablishedcompetitors

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.



a a o, o pa y o ou2. Introduction : A period of slow sales growth as product is

introduced in the market. Profits are non existent at this stagebecause 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 ordecline because of increased marketing outlay to defend theproduct against competition.

5. Decline : A period when sales fall off and profits drop .

PRODUCT LIFE CYCLE STRATEGIESTHE 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



g pexpenses are high.

As market is not ready to accept product refinement at this stage the firmproduces 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 theintended product positioning.

It should realize that it is the first step in the total marketing plan for thePLC.

If pioneer uses launch strategy to make a killing it sacrifices long revenuefor short term gain.

As pioneer moves to later stages it will have to continually formulate newpricing , promotion and other marketing strategies.

PRODUCT LIFE CYCLE STRATEGIESTHE 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 profitopportunities by adding new features

Market will now expand

Increasing competition leads to an increase in number of distributionoutlets

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 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



This stage lasts longer than the previous stages

The slowdown in sales growth results in many producers with manyproducts to sell

The overcapacity in the market leads to greater competition

Competitors begin marking down prices, increasing their advertising andsales 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 meetchanging 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



In modifying the market the firm tries to increase the consumption of thecurrent market

It looks for new users and market segments . Looks for ways to increaseusage among present customers

The firm may also try modifying the product by changing thecharacteristics such as quality, features, or style to attract the new usersand 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 bychanging one or more marketing mix elements. Can cut prices to attractnew users and competitor’s customers. Better ad campaigns, aggressivesales promotion, trade deals. New and improved services.

PRODUCT LIFE CYCLE STRATEGIESTHE 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 consumertastes, and increased competition

As sales and profits decline some firms withdraw from the market

Those remaining prune their product offering, drop smaller marketsegments 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 andits other products

Keeping a weak product delays the search for replacements, creates alopsided product mix, hurts current profits, weakens company’s footholdon the future.

PRODUCT LIFE CYCLE STRATEGIESTHE 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 trendsh f h d d h h h d h f



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 willleave 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 variouscosts (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 DevelopmentIn Business, New Product Development (NPD)is used to describe the complete process of

bringing a new product or service to market.



bringing a new product or service to market.There are two parallel paths involved in the NPDprocess: one involves the idea generation, productdesign & detail engineering; the other involves marketresearch and marketing analysis.Companies typically see new product development asthe first stage in generating & commercializing new

products within the overall strategic process of ProductLife Cycle management used to maintain or grow theirmarket share.

288

Causes of New Product Failures• Overestimation of Market Size

• Product Design Problems

• Product Incorrectly Positioned, Priced orAd ti d



Product Incorrectly Positioned, Priced orAdvertised

• Costs of Product Development

• Competitive ActionsTo 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



Idea Screening

• Conceptual Testing

• Business Analysis• Product Development

• Test Marketing

• Commercialization

Idea Generation & ScreeningIdea Generation stage includes alternative

specifications for product concepts utilizing

end user analysis or problem analysis.



e d use a a ys s o p ob e a a ys s Focus groups and direct observation

provide insights for product development.

Brainstorming is used for Idea Generationof new product or service

The Idea Screening Stage begins to confirm

the new product concept. Product candidatesare evaluated on initial estimates of potentialdemand & the chances/barriers to success.

NPD Process : 1. Idea Generation

Systematic Search for New Product Ideas

• Internal sources



Internal sources

• Customers

• Competitors

• Distributors

• Suppliers

• Lab Experiments

2. Idea Screening : The object is to eliminateunsound concepts prior to devoting resourcesto them.

The screeners must ask at least these questions:i Will the customer in the target market benefit from



qi. 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 competitivepressure for the product idea?

iv. What are the industry sales and market trends theproduct idea is based on?

v. Is it technically feasible to manufacture theroduct?

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 Wh t d t f t t th d t



p g pii. 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 costeffectively?

vi. Prove feasibility through virtual computer aidedrendering, and rapid prototyping.

vii. What will it cost to produce it? 295

4. Business Analysis :Estimate likely selling price

based upon competition



based upon competitionand customer feedback :

a. Estimate sales volume basedupon size of market

b. Estimate profitability andbreakeven point

296

5. Product Development :( Technical Implementation ) :

a) New program initiation

b) Resource estimation

c) Requirement publication



c) Requirement publication

d) Engineering operations planning

e)Department schedulingf) Supplier collaboration

g) Logistics plan

h)Resource plan publicationi) Program review and monitoring

j) Contingencies planning297

6. Market Testing :i. Produce a physical prototype & test

the product in typical usage situations.C d f



t e p oduct typ ca usage s tuat o sii. 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



• Launch the product

• Produce & place advertisements& other promotions

• Fill the distribution pipeline with

product

299

Stages in the Consumer Adoption Process

Awareness

Interest



Interest

Evaluation

Trial

Adoption

Adopter Categories

A d o p

t e r s



P e r c e n t a g e o f A

Time of Adoption

Early Late

I n n o

v a t o r s

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 AssessSocial Leaders Popular Educated;



y pSocial 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

Relative Advantage

Is the innovationsuperior to existingproducts?

Communicability

Can results be easilyobserved or describedto others?

Influence of Product Characteristicson the Rate of Adoption



DivisibilityCan the innovation

be used on atrial basis?

CompatibilityDoes the innovation

fit the values andexperience of the

target market?

ComplexityIs the innovation

difficult tounderstand or use?

products?to others?

ProductCharacteristics

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



g pcompany from its competitors.

Usually Brands are registered (trade-marked) with aregulatory authority and so cannot be used freely byother 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 customerand thereby Increase brand image & brand equity.

Brand Name



Brand Name refers to Words, Letters or Symbolsthat make up a name used to identify anddistinguish the firm‟s offerings from those of its

competitors.

Brand Identity refers to a unique set of brandassociations that the brand strategist aspires tocreate or maintain.

Brands Marks or Logos



Trade Mark is a Brand that has

been given legal protection and has

Trademark is a Registered Brand Name / Mark



been given legal protection and hasbeen granted solely to its owner.

Most Valuable Global Brands

Coca Cola $ 36 Billion

Brands Brand value

Marlboro $ 33 Billion



Nescafe $ 11 Billion

Kodak $ 10 Billion

Microsoft $ 9.8Billion

Budweiser $ 9.7 Billion

Kellogg's $ 9.3 Billion

Motorola $ 9.2 BillionGillette $ 8.2 Billion

Bacardi $ 7.1 Billion

a bo o $ 33 o

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 beb k d b f



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 bestdefense against price competition & the key tocustomer loyalty.

Meanings conveyed by a Brand

Attributes

Benefits



Benefits

Values

Culture

Personality

Satisfaction

Advantages of Branding :

• Easy SellingL l P t ti



y g• Legal Protection

• Customer Loyalty• Easy Market Segmentation

• Image Building

According to Jean-Noel Kepferer, a brand is complex symboland 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 oftendescribe 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 frommarketers 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 & v alues. A brand reflects itsvarious aspects and values that drive it. Culture manifestsvarious aspects of a brand. For instance, Apple computersreflect its culture. It is a symbol of simplicity, and friendliness.

Its symbol (munched Apple) connotes being different fromothers and not following the beaten path Mercedes



others and not following the beaten path. Mercedessymbolises disciplined, efficient, high quality GermanEngineering.

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 letloose. Apple conveys emotional relationship based onfriendliness. Relationship is essentially important in serviceproducts.

5. Reflection: This refers to defining the kind of people who use it. It is reflected in the image of itsconsumers: young, old, rich, modern and so on. Forexample, Pepsi reflects young, fun loving, carefree

people. The reflection of Allen Solly‟s brand is atypical young executive However it does not by any



typical young executive. However, it does not by anychance mean that they are the only users. Theconcept 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 acustomer sees herself / himself. The self-image of

users of Bajaj Pulsarmotorcycle is believed to that of be tough, youngmales. Users of Nike see their inner reflection in thebrand‟s personality.

Major Branding Decisions



315

Characteristics of a Brand : At the time of choosing a

brand name, various aspects require careful consideration. Veryoften, manufacturers invite brand names from the consumers, &

Distributors.

General Considerations in Branding :1. The name should be easy to read, pronounce,

d d & ll E P i D l Tid



316

understand & recall. Eg : Pepsi, Dettol, Tide, etc

2. The name should be appropriate for the product.

Eg: All Clear, Head & Shoulders, Close Up, etc3. 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 innature. Eg : Fair & Lovely, First Flight Courier, DTDC,

Types of Brands :(Brand Sponsor Decisions)

Manufacturer‟s BrandP i t B d



Private Brand (Distributor‟s Brand)

Generic Brand Licensed Brand

Manufacturer Brands : are initiated by

manufacturers & identify the producer.

This type of brand generally requires theinitiator involvement in its distribution



initiator involvement in its distribution,promotion & pricing decisions.

The brand quality is assured / guaranteed& the aim of promotion-mix is to buildcompany and / or Brand Image andencourage Brand Loyalty .

Private Brands are resellers initiated brands

& the manufacturers are not identified on theproducts. Wholesalers & Retailers use

Private Brands to develop more efficientpromotions to build store image & generate



promotions to build store image & generatehigher gross margins.

The Resellers have the freedom and advantage ofbuying specified quality at an agreed upon cost fromthe manufacturer without disclosing manufactureridentity. Nearly 20% of he consumer goods sold in most

of the Supermarkets / Hypermarkets in developedcountries are Private Brands .Egs : Wal-Mart, Shoppers Stop, Food World, Nilgiris

Generic Brands are those, whichindicate only the product category, suchas 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 includeany other identifying marks. Generic Brands areusually sold at lower prices than their brandedversions.

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 alicensing agreement, a company allowsapproved manufacturers to use its trademark fora mutually agreed fee. The royalties may range



anywhere between 2 % to10 %.

The company obtaining the license would beresponsible for all production and promotional activities,& would bear the costs in case the licensed productfails. The benefits of this arrangement can bring extra

revenues, free -publicity, new images & protection oftrademark.Eg : P&G licensed its Camay brand of soap in India toGodrej for a few years.

Methods of Branding( Brand Name Decisions)

1. Individual Branding : Separate Names

for all Products of one company.E HUL S L R D



Eg : HUL Soaps : Lux, Rexona, Dove,Life Bouy, Pears, Liril, Breeze, etc

2. Umbrella or Family Branding : BlanketFamily Name for all Products or separateFamily Names for separate Product LinesEg : 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



HONDA, TOYOTA, etc.

4.Co - Branding : Associating & promoting

two brands together. Co-branding, also calledBrand Partnership , is when two companiesform 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 asingle product or service with more than one brandname, or otherwise associates a product with someoneother than the principal producer.

The typical co-branding agreement involves two ormore companies acting in cooperation to associate any



p g p yof various logos, color schemes, or brand identifiers toa specific product that is contractually designated for

this purpose.The object for this is to combine the strength of twobrands, in order to increase the premium consumersare willing to pay, make the product or service more

resistant to copying by private label manufacturers, orto combine the different perceived propertiesassociated 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, PersonalGrooming & Tea-based Beverages,d f ll i f B d



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

Existing NewProduct Category

Four Brand Strategies



326

Line Extension

Multibrands

Brand Extension

New Brands B r a n d N a m e

Existing

New

Brand StrategyLine Extension : Existing brand names

extended to new forms, sizes & flavors of

an existing product category.Brand Extension : Existing brand



327

Brand Extension : Existing brandnames extended to new or modified

product categories.Multibrands : New brand names

introduced in the same product category.

New Brands : New brand names in newproduct categories.

Brands have equity because they havehigh awareness, many loyal consumers,

a high reputation for perceived quality,proprietary assets such as access to

Brands Equity



proprietary assets such as access todistribution channels or to patents, or the

kind of brand associations (such aspersonality associations)

Brand Equity is defined in terms ofmarketing effects uniquely attributedto the brands.

Brand Equity



329

Brand Equity is the differencebetween the expected future salesof a branded product & anunbranded product.



p

i.e. Brand Equity is the value of a

brand built up over a period of time. Itis 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



p g

create a sense of uniqueness in favour of the Brand.

Companies & people who behave in a sociallyresponsible 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 uni 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 / profits2. Gives flexibility in pricing & in the introduction of new

products3. Lower cost for the company

4. Publicity & WOM recommendations attract newcustomers

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 abouthow fault free and durable the brand is, based on their judgement.

2. Social image: This focuses on what social image the brand holds interms of its esteem for customer‟s social and reference groups.

3. Value: This refers to the customer‟s value perception of the brand



3. Value: This refers to the customer s value perception of the brand.

This is the ratio between what are the involved costs and theperceived delivered value.

4. Trustworthiness: This means the customer‟s extent of faith in thebrand‟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 itmatches their self-concept & aspirations. This means psychologicalassociation 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 d i l i & d i f



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 & LabellingPackaging is the art &science of designing

& producing thecontainer or wrapper



Steps in developing a good package: Develop specific elements of the package,

Elements must support product‟s position andmarketing strategy.

ppfor a product. It has

become extremely important

& is often referred to as the

5 th ‘P’ of the Marketing Mix

Labeling : Package Labelling or aLabel is any written, electronic or graphiccommunications on the packaging or on a

separate associated Label.



336

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 severalobjectives, namely :

1.Physical Protection : The objects enclosed in thepackage may require protection from, shock, vibration,i



compression, temperature, etc.

2. Barrier Protection : A barrier from oxygen, water

vapour, dust, etc., is often required in order to keepthe contents clean, fresh, sterile and safe for theintended shelf life .

3. Containment or Agglomeration : Small objectsare typically grouped together in one package forreasons of convenience & efficiency.

337

4. Information transmission : Packages & Labels

communicate how to use, transport, recycle, or disposeof the package or product. For certain items likepharmaceuticals, food, medical & chemical products,some types of information are statutatory requirements.Some packages and labels also are used for track &trace purposes



338

trace purposes.5. Marketing : The packaging and Labels can be used

by marketers to encourage potential buyers to purchasethe product. Package graphic design and Marketingcommunications are applied to the surface of thepackage and (in many cases) the point of sale display.

6. Security : Packaging can play an important role in reducingthe security risks of shipment. Packages can be made withimproved tamper resistance to deter tampering and also canhave tamper-evident features to help indicate tampering.

7. Convenience : Packages can havefeatures that add convenience in distribution,handling, stacking, display, sale, opening,reclosing, use, dispensing, and reuse.8. Portion Control : Single serving orsingle dosage packaging has a precise



339

single dosage packaging has a preciseamount of contents to control usage. Bulk

commodities (such as salt) can be divided intopackages that are a more suitable size forindividual 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

Price Has Many Names

What is Price ?



341

ce as a y a es

• Rent

• Fee

• Rate

• Commission• Assessment

• Tuition

• Fare

• Toll

• Premium

• Retainer

• Bribe

• Salary

• Wage

• Interest• Tax

Definition of PricePrice is the amount of money charged for a

product or service, or the sum of the values thatconsumers exchange for the benefits of havingor using the product or service. It is the only

element in the Mktg Mix that generates revenues



342

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 allowsSellers 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.

Pricing Process1. Set Pricing Objectives

2. Analyze demand3. Draw conclusions from



343

competitive intelligence

4. Select pricing strategyappropriate to the P, E, S, TEnvironment.

5. Determine specific prices

PRICING OBJECTIVES1. SURVIVAL (short-term objective, i.e. due to

heavy competition, changing customer needs,

too much production, not enough sales )2. RETURN ON INVESTMENT



2. RETURN ON INVESTMENT

3. PROFIT MAXIMIZATION

4. MARKET STABILISATION

5. MARKET SHARE LEADERSHIP (lower pricedue 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 marketwith low price, increase as market stabilizes)

9. EARLY CASH RECOVERY

10. PREVENTING NEW ENTRY (Low pricemay prevent new entrants)

345

Factors to Consider in Pricing :

M k ti

Internal Factors External Factors



346

• Marketing Objectives

• Marketing Mix Strategies

• Costs

• Organizational considerations

• Nature of market and demand

• Competitors’ costs,

prices & offers

• Other Environmental elements


• Market positioning

Internal Factors



347

• Marketing Objectives

• Marketing Mix Strategies

• Costs


p ginfluences 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


• Pricing must be carefully

Internal Factors



348

• Marketing objectives

• Marketing Mix strategies

• Costs


coordinated with theother marketing mix

elements• Target costing is often

used to support productpositioning strategies

based on price• Non-Price positioning

can also be used


Internal Factors



349


• Marketing mix strategies

• Costs


• Types of costs: – Variable

– Fixed

– Total costs

• How costs vary at differentproduction levels will

influence price setting


• Who sets the price? – Small companies: CEO or

Internal Factors



350


• Marketing Mix strategies

• Costs

• Organizational Considerations

pTop Management

– Large companies:

Divisional or Product LineManagers

• Price negotiation iscommon in Industrialsettings

• Some Industries havePricing Departments


• Types of markets – Pure competition

External Factors



351

• Nature of Market

& Demand • Competitors’ costs,

prices & offers

• Other environmental elements

– Monopolistic competition

– Oligopolistic competition

– Pure monopoly

• Consumer perceptions ofprice and value

• Price-demand

relationship – Demand curve

– Price elasticity of demand


• Consider competitors‟ costs,

prices, and possible reactionswhen developing a pricing

External Factors



352

• Nature of market and

demand

• Competitors’ costs,

prices & offers

• Other environmental elements

when developing a pricingstrategy

• Pricing strategy influences the

nature of competition – Low-price low-margin

strategies inhibit competition

– High-price high-marginstrategies attract competition

• Benchmarking costs againstthe competition isrecommended


• Economic conditions – Affect production costs

Aff b i f

External Factors



353

• Nature of market and

demand

• Competitors’ costs, prices,

and offers

• Other Environmental elements

– Affect buyer perceptions ofprice and value

• Reseller reactions toprices must beconsidered

• Government may restrict

or limit pricing options• Social considerations

may be taken intoaccount

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

( I ) Cost-Based Pricing :

1. Cost-Plus Pricing : Adding a standard markup to cost

General Pricing Approaches



355

Adding a standard markup to costPrice = 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

( I ) Cost-Based Pricing :

2 ) Break-Even Analysis & Target Profit Pricing

Break even charts show total cost and total

General Pricing Approaches :



356

Break-even charts show total cost and totalrevenues at different levels of unit volume.

The intersection of the total revenue andtotal cost curves is the break-even point.

Companies wishing to make a profit mustexceed the break-even unit volume.

( II ) Value-Based Pricing:

Uses buyers‟ perceptions of value rather than seller‟s costs to set price.

General Pricing Approaches…..



357

Measuring perceived value can be

difficult. Consumer attitudes toward price and

quality have shifted during the last

decade.• Introduction of less expensive versions ofestablished brands has become common.

( III ) Competition-Based Pricing :

Also called Going-Rate Pricing May price at the same level, above, or

General Pricing Approaches…..



358

y p , ,below the competition

Sealed - bid Pricing : Bidding for workis another variation of competition-based pricing

Pricing Strategies• Market-Skimming Pricing :

Setting a high price for a new product toskim maximum revenues layer by layerfrom segments willing to pay the high price



359

from segments willing to pay the high price.

• Market-Penetration Pricing :Setting a low price for a new product inorder to attract a large number of buyers

and a large market share.

3. Loss Leader Pricing :Loss Leaders are goods or servicesoffered at steep discounts (generally

below cost) in order to attract newcustomers to a store



customers to a store.

It is a time-honored practice that has beenmet with much success, especially bylarge discount retailers. The intent of

this pricing strategy is to not only have thecustomer 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, aLoss Leader can move it. By cutting the price of such

an item, you'll not only free up the shelf space andreduce inventory, but you'll also increase cash flow.

• Brand Awareness: If you would like to be known for



• Brand Awareness: If you would like to be known forhaving low prices then the loss leader pricing strategy

will help associate your business with that belief. Keepin mind that people want good quality merchandise forless money and not junk.

• Increased Traffic: Using loss leaders as a marketingtool can help gain new customers & increase returnvisits. People are likely come back to shop, when theylike a bargain . 361

PSYCHOLOGICAL PRICINGPsychological Pricing approach is suitablewhen 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 offersbased on non-functional product attributes,

such as image and lifestyle etc.

Marketers set artificially high prices tocommunicate a status or high qualityimage. Psychological Pricing method is

appropriate for perfumes, jewellery, autos,liquor, and ready-to-wear garments etc. andis not appropriate for industrial products



is not appropriate for industrial products.

Initiating Price cuts is desirable

when a Firm : Has excess capacity

Price Changes



364

Has excess capacity

Faces falling market share dueto price competition

Desires to be a market shareleader

Price Increases are desirable :

If a firm can increase profit, faces costinflation, or faces greater demand than

b li d

Price Changes…..



365

can be supplied.

Methods of Increasing Price Alternatives to Increasing Price

Reducing product size, using less

expensive materials, unbundling theproduct.

Buyer reactions to price changesmust be considered.

Competitors are more likely to reactt i h d t i

Price Changes………



366

to price changes under certain

conditions, such as : – Number of firms is small

– Product is uniform – Buyers are well informed

Unit - III

Marketing Channel System :-Functions & flows; Channel Design.

Channel Management : Selection



Channel Management :- Selection,

Training, Motivation & Evaluationof Channel Members;

Channel Dynamics:- VMS, HMS, MMS;

Market Logistics Decisions.367

CHANNEL

MANAGEMENT



368

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

Pl i h k l h h



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 andwhere they need them.

A Channel of Distribution or MarketingChannel is an organisation or a set of



C a e s a o ga sat o o a set oindividuals 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 ormanufacturer and the final buyer.

370

Distribution FunctionsTypes of utilities Distribution offers:

TIME...when the customers want to purchase

the product.

PLACE...where the customers want to



PLACE...where the customers want topurchase the product.

POSSESSION...facilitates customer ownershipof the product.

FORM...sometimes, if changes have beenmade to the product in the distribution channel,i.e. Pepsi/Coke, concentrate to bottlers.

371

The Distribution Channel

Manufacturers

Wholesalers / Brokers / Agents



Wholesalers / Brokers / Agents

Retailers

Consumers372

Channels of Distribution……

Marketing Intermediary or Middleman is amarketing organization that links a producer &user within a marketing channel.

• Merchant Middleman : takes title to productsby buying them



y y g

• Functional Middleman : helps in the transfer

of ownership of products but does not taketitle 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 setof organizations which perform all of theactivities required to move a product & its titlefrom production to consumption.

Types of Channel Intermediaries : There aremany types of intermediaries such as



many types of intermediaries such asWholesalers, Agents, Retailers, Internet,

Overseas Distributors, Direct Marketing(from manufacturer to user without anintermediary) etc.

Two types of Channel of Distribution methodsare commonly used : Indirect & Direct.

374

Indirect Distribution involves distributingyour product by the use of one or moreintermediaries such as : Manufacturer to

Wholesaler to Retailer to a Consumer.Direct Distribution involves distributingdirect from a manufacturer to the



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 completecontrol over their product.

375

Why a Firm May Want to Use Direct Channels :

Greater Control

Lower Cost

Value added subsequent toproduction process



p p

Direct contact with

Customer Needs

Quicker Response orChange in Marketing Mix

Suitable Middlemen Not

Available

SomeReasonsfor Choosing

Direct Channels

11-4

Information

Promotion

Contact

Gathering and distributing marketing research

about the environmentDeveloping and spreading persuasivecommunications about an offer

Finding and communicating with prospective

Distribution Key FunctionsChannel

Distribution Channel Functions



Contact

Matching

Negotiation

Physical

d g a d co u cat g t p ospect ebuyers

Shaping and fitting the offer to the buyer‟s need

Agreeing on price and terms of the offer soownership or possession can be transferred

Distribution: transporting and storing goods

Financing Acquiring and using funds to cover the costs of

channel workRisk Taking Assuming financial risks such as the inability to

sell inventory at full margin

Distribution StrategiesDepending on the type of product beingdistributed there are three common distributionstrategies available:

1. Intensive Distribution : involves distributionthrough as many retail outlets as possible. It is



g y pmainly used to distribute low priced or impulse

purchase products. Eg : Chocolates, Soft Drinks, etc.

2. Exclusive Distribution: Involves limitingdistribution to a single outlet usually for is

usually highly priced-products.Eg : Sale of Vehicles thro’ Exclusive Dealers.

378

3. Selective Distribution : A small

number of retail outlets are chosen todistribute the product. SelectiveDistribution is common with Consumer-Electronics i e products such as



379

Electronics i.e. products such as

computers, televisions, washing-machines,

refrigerators, household -appliances, etc

where consumers are willing to shop

around & where manufacturers want alarge 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 marketshare



15 | 380

Channels for Industrial Products

Producer to Industrial User ( B2B )

Usually used for heavy machinery,airplanes, major equipments, etc

All th d t id t



Allows the producer to provide expert

and timely services to customers

381

Channels for Industrial Products (cont‟d)

Producer to Agent Middleman

to Industrial UserUsually used for operating supplies,



accessory equipment, small tools,components, standardized parts, etc

382

Marketing IntermediariesJustifications for marketing intermediaries :

Intermediaries perform essentialmarketing services

Manufacturers would be burdened with



Manufacturers would be burdened with

additional record keeping & maintainingcontact with numerous retailers

Costs for distribution would not decrease,

and could possibly increase due to themarketing inefficiencies of producers 383

Intermediaries are specialists in the exchangeprocess, provide access to and control overimportant resources for the proper functioningof the marketing channel. ( Division of labour ).

Functions of Intermediaries : Primary role of middlemen is to transform the



384

Primary role of middlemen is to transform theassortment of products made by producers inthe assortments desired by consumers. Producers make narrow assortments in largequantities, consumers want broad assortments

in small quantities, discrepancy in quantity andassortment .i.e. to match Supply and Demand.

Other functions of MarketingIntermediaries include:

Assuming Risk : Provide working

capital by paying for goods before they are sold.

Information flow



Information flow

FinancingPayment & Title Flow.NegotiationContactsPromotion 385

CHANNEL TERMS & CONDITIONSThe producer stipulates terms and

condition and responsibilities ofchannel partners to develop bettermutual understanding and usually



mutual understanding and usually

include : Price Policy, Trade Margins,Payment Terms, TerritorialDemarcation, Guarantee/Returns Policy,

& Mutual Responsibilities etc.

EVALUATION OF CHANNEL ALTERNATIVES :

In making a decision about channel alternatives,producers‟ evaluation criteria is generally basedon some combination of the following factors:

• Product characteristics.

• Buyer behaviour and location.



y

• Severity of competition.

• Cost effectiveness and channel efficiency.

• Degree of desired control onintermediaries.

• Adaptability to dynamic market conditions.

• Customer needs :

• Attracting channel members : Asmall chain hotel be advised to choose one travelagency chain or work in key cities that are likely to

Selecting Channel Members



generate business.

• Evaluating major channel alternatives1. Economic Criteria : MGM Hotel : TourOperators vs. Travel Agencies.

2. Control Criteria : Franchise control / Qualitycontrol

CHANNEL SELECTION & TRAINING

After determining the most appropriateDistribution Channel, the producer has

to select the most qualified parties andarranges for their training.



In case of Exclusive Dealerships & Franchisees

where personal contact with customers andservice delivery are important, companyappointed dealers play an important role. They

practically become the company for thecustomers and any negative impressions mayseverely damage company image & reputation.

MOTIVATING INTERMEDIARIES

Motivating channel intermediaries is achallenging task for producers, but essential

to obtain best possible performance fromthem. Motivation programmes for channelintermediaries focus mainly on Financial &



intermediaries focus mainly on Financial &

Nonfinancial Rewards.Financial Rewards usually include highermargins, extended credit facilities, bonuses

and allowances, special deals, and sharingintermediaries‟ promotional expenses.

MOTIVATING INTERMEDIARIES……Non-financial Rewards include trainingprogrammes at company expenses in

areas such as technical skills, service,selling territory -management, humanresource etc Other Nonfinancial Rewards



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 evaluateperformance of dealers against laid down and

agreed upon parameters. The evaluationcriteria differ across industries and from onecompany to another in the same industry.



company to another in the same industry.Companies may use a set of criteria that mayinclude some combination of factors withdiffering weight given to each element in orderof its importance, such as achievement of

sales targets, average inventory maintained,performing promotional activities, customerservice & attendin trainin ro rammes etc.

Types of Wholesale Intermediaries

There are 2 main types of Wholesalers:

1.Merchant Wholesalers : who buyproducts from manufacturers & resellthem to other intermediaries



them to other intermediaries.

2.Functional Wholesalers : who donot take title, but only facilitateexchanges among producers andresellers, compensated by fees and/ocommission. 393

Types of Wholesalers ( Cont‟d … )

Merchant Wholesalers are of two types:( 1 ). Full Service Wholesalers : - offer widestpossible range of functions. Categorized as:

a) General Merchandise MW : wide mix(unrelated), limited depth.

Li i d Li MW l f d b



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 ownand maintain display racks, take back unsoldproducts.

394


( 2 ) Limited Service Merchant Wholesalers : provide only some of the marketing functions.

a) Cash and Carry wholesaler : customers

pay for and make their their ownarrangements for transportation. Nocredit is extended Mainly B2B



credit is extended. Mainly B2B.

b) Truck Jobbers : Operate rollingwarehouses and sell a limited line of productsdirectly from their trucks to their customers.Follow regular routes, primarily perishableproducts. Egs : Vegetables, Fruits, Flowers

395


( 2 ) Limited Service Merchant - -- Wholesalers :

c)Drop Shippers or DeskJobbers : take title negotiate



Jobbers : take title, negotiate

sales but do not take possession.d)Mail Order Wholesalers : use

catalogues instead of sales forceto 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.



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 & Brokers1. Manufacturers Agent : Represent two or

more sellers and offer customers complete

lines. Handle non- competing orcomplementary products & have writtenagreements with the manufacturers



agreements with the manufacturers.

2. Selling Agent : market either all specifiedline or manufacturers entire output. Performevery wholesaling activity except taking title

of the product. Used in place of a marketingdepartment. Represent non-competingproduct lines. 398

Types of Agents & Brokers ( Cont‟d.. )

3. Commission Merchant : focus primarilyon the selling task. Receive goods on

consignment from local sellers andnegotiate sales in large central markets.

4 Auction Companies pro ide storage for



4. Auction Companies : provide storage for

inspection. Sales made to the highestbidder.

5. Brokers : negotiate exchanges & perform

the fewest intermediary functions. Assumeno risk.

399


Manufacturers Sales Branches &

Sales Offices : are manufacturer owned &

resemble merchant wholesalers operations. Sales Branches : sell product & provide

support services to manufacturers sales forces



support services to manufacturers sales forces

Sales Office : are normally associatedwith Agents. Like Sales Branches, they arelocated away from a manufacturing plant & do

not carry any inventory.

400

Wholesalers‟ Responsibilities Buy in large quantities and

then sell in smaller quantitiesDeliver goods Stock in one place a variety of

goods Promote products to retailers



Promote products to retailers

Provide market information forboth 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



costs by purchasing finished goods in

sizable quantities• Assume the credit risks associatedwith selling to retailers

• Furnish vital market information to themanufacturers15 | 402

HIERARCHY OF MARKETING SYSTEM

With the passage of time and changes inbusiness environment and strategies,

marketing channel systems evolve and newWholesaling & Retailing Institutions appear.

The traditional marketing channels include



The traditional marketing channels include

members who are independent entities andno party has complete control over othersin the channel system. Each seeks to

maximise its own profit goals without muchconcern for others in the same system.

VMS, HMS & MMSSome recent changes in channelsystems that have emerged include:

1 V ti l M k ti S t (VMS)



1. Vertical Marketing Systems (VMS),

2. Horizontal Marketing Systems (HMS),and

3. Multichannel Marketing Systems (MMS)

{ or Hybrid Systems }

VerticalMarketingChannel

Manufacturer

ConventionalMarketingChannel

Manufacturer

Wholesaler o l e s a l e r

Conventional Distribution Channel Vs.Vertical Marketing Systems



Channel

Retailer

Channel

ConsumerConsumer

Retailer W

h o

Vertical Marketing Systems (VMS)Vertical Marketing System refers

to an arrangement in which thewhole channel focuses on the

t t k t t th d f



same target market at the end ofthe channel.

This includes Producer, Distributors,

Wholesalers, & Retailers acting in anintegrated manner.

Vertical Marketing Systems (VMS)In a VMS, any channel member, aManufacturer, Distributor, Wholesaler,

or a Retailer can become a Channel Captain, who helps direct the activities ofthe entire channel and tries to eliminate or



the entire channel and tries to eliminate or

resolve conflict.The Channel Captain assumes theleadership role because the captain is

either the owner, a franchisee, or wields somuch power that all others cooperate.

1. CORPORATECommon Ownership at Different

Levels of the Channel

2. CONTRACTUAL

Degreeof Direct

Types of Vertical Marketing Systems



2. CONTRACTUALContractual Agreements Among

Channel Members

3. ADMINISTERED

Leadership is Assumed by One ora Few Dominant Members

of DirectControl

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



Egs : Vimal Fabrics, Titan Watches, Bata, etc

Manufacturer can accomplish this throughvertical integration (acquiring firms at differentlevels of channel activity). This offers greater

buying power, stable sources of supplies, bettercontrol of distribution and quality & loweroverheads.

Administered VMSAdministered VMS is achieved whensome members, because of their size,

position and power in the industry, arein a commanding position to securecooperation and support from resellers



cooperation and support from resellers

at different levels.Members informally agree to cooperate witheach other on matters like routine ordering,

sharing inventory & sales information overnetworks, standardize accounting and integratetheir promotional activities.

Administered VMSThe agreement is informal and themembers retain some of the flexibility

of traditional distribution system.Companies with strong brandscommand substantial market power &



command substantial market power &

are able to get cooperation fromresellers at different levels ofdistribution.

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 cooperatewith each other by entering into contract that

ll h b ‟ i ht & bli ti d



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, ShahnazHerbal,

Vertical Marketing Systems

Characteristics

Type of Channel

Little or Some toFairly

d C l tAmount of

Traditional

Vertical Marketing Systems

AdministeredContractual Corporate



noneSome to

goodgood

to good

Complete

NoneEconomicpower andleadership

ContractsOne

companyownership

Typical

IndependentsMcDonald‟s

FlorsheimGeneralElectric

Amount ofcooperation

Controlmaintained by

Examples

Franchising

• Formal contract governing :

Supply

Responsibilities Division of profits

• Franchisors provide :



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 salesFranchised hotels account ~ 65 percent of room supply.

Vertical Marketing System

Franchising



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

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 growth2. Faster growth3 Additional management

1. Lower potential profits2. Controlling service quality3 Controlling firm image

Vertical Marketing System

Franchising



3. Additional management

4. Additional income

3. Controlling firm image

Franchisee

1. Lower risk2. Established brand name

3. Successful business plan4. Expert assistance

1. Franchisee fees2. Lack of freedom3. Controlled by franchisor

Horizontal Marketing System

Horizontal marketing system occurswhen two or more related or unrelated

companies working at the same levelcome together to exploit marketingopportunities.



opportunities.

By coming together they have the optionto combine their capital, productioncapabilities, marketing strengths to gain

substantial advantage than by eachcompany working alone.

Horizontal MS

In a Horizontal VMS, the arrangementcan be on a temporary or permanent

basis. Horizontal marketing systemparticularly offers efficiencies & economiesof scale in promotion, marketing research,



o sca e p o ot o , a et g esea c ,

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 todistribute same products to the same target

market. Some companies use severalmarketing channels simultaneously toreach diverse target markets. Each channel



g

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



2. Coca Cola supplies direct to

McDonald‟s, and the fast food chainsells no other soft drinks but Coca

Cola.

CHANNEL CONFLICTSThe goal of all channel members is to distributeproducts profitably and efficiently. However, at timesthey disagree about the methods to accomplish this

goal. It is fairly common among channel members tomake 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 Management

To manage conflict, it is first of all necessary tounderstand the type, cause & intensity of theconflict.

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, suchas when one stockiest starts price-cutting and others at thesame level start complaining,

3. Multichannel Conflict : results when the producer

has established two or more different channels to sell theproduct to the same target market.

Causes of Channel ConflictsGoal Incompatibility : Manufacturer

wants to achieve rapid market growth via

lower prices; Retailer interested in largemargins

Unclear Roles & Rights : Territoryb d i ( h t dit f l )



boundaries, (who gets credit for sale)

Differences in Perception : Optimisticmanufacturer, pessimistic retailer

Level of Dependence : of Retailer onManufacturer or vice-versa

Intensity of ConflictThis refers to how serious is the conflict.In some cases, the intensity of conflict

might be just minor and at other times, theseverity might demand immediateattention from the producer otherwise the



attention from the producer otherwise the

consequences might be serious if it is notresolved.

Eg : Managing incidences of price-cutting orterritory jumping can be handled relativelyeasily.

Managing the Channel ConflictManaging conflict in certain cases may bequite a demanding task. Conflict magnitudecan range from minor to serious leading to

termination, lawsuits, or company boycotts.The frequency and seriousness of conflictdetermines how speedily the situation must be



p y

managed. Some of the common approachesfor effective conflict management are : Regular Communication Forming Dealer Councils Arbitration & Mediation Co-option

PHYSICAL DISTRIBUTIONPhysical Distribution or Outbound Logisticsrefers to the forward movement of products,services & information from a manufacturer toIts customers, and involves defined network oftransportation links, warehousing / storage, andfinally delivery at the destination in a cost



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 HandlingDelivery & Storage



Transaction ProcessingCross Docking ( Re-Packing )

Ticketing & Marking ( Labels & Tags )

427

Inventory Management : involves building

and maintaining enough product assortmentsto meet the customer demand. Investment ininventory forms a significant part of companyassets and affects physical distribution costs ina major way.

Very little inventory can create shortages of productsor out-of-stock situation This is detrimental to



or out of stock situation. This is detrimental to

company and can lead to brand switching, lowersales, and the most serious consequence of losingcustomers. When too much inventory of products iscarried, particularly of slow moving products, costs

and risks of product obsolescence, damage, orpilferage increase. To strike a balance, companiesfocus on determining when and how much to order.

Inventory Management ….

To find out when to order, the marketer must know theorder lead time, the usage rate, and the safety stocksrequired. Order Lead-time refers to average time

lapse between placing the order and receivingsupplies. The usage rate represents the rate at whichthe inventory of product gets sold during a specified



time period. Buffer Stock is the extra inventory thatis maintained to guard against out-of-stock situationfrom increased demand or to cover longer lead-timethan expected. Following formula can be used to

calculate when to reorder:Reorder Point = (Order Lead Time × Usage Rate) +Buffer Stock


EOQ : To determine how much to order, it‟s

necessary to examine inventory carrying costs

and order processing costs. Considering bothsets of costs determines Economic OrderQuantity (EOQ), which is the order size that



has the lowest total of both inventorycarrying and order processing costs.

However, the aim of minimising total inventory

costs must be weighed against meeting orexceeding customer service level objectives.


JIT : Just-in-Time approach is a systemwhere-in products arrive as and when they

are needed for use in production process orfor resale.

This allows companies to maintain very low



This allows companies to maintain very lowinventory levels and purchases at that timeare also in smaller quantities. JIT systemreduces physical distribution costs,especially inventory and handling relatedcosts.

Physical Distribution (cont‟d)

Materials Handling : deals with thephysical handling of goods, in

warehousing & during transportation.Physical handling of products is necessaryfor efficient warehouse functions &



for efficient warehouse functions &

transportation from the point of manufactureto final points of consumption. The nature ofproduct often influences how a product

should be moved and stored.

Materials Handling (cont‟d)

Techniques & procedures used for materialhandling can increase warehouse capacity,reduce the number of times a product is

handled, improve customer service and theirsatisfaction.Various activities such as packaging, loading,



movement, labelling systems must becoordinated to reduce costs and increasecustomer value . Equipments such as Cranes,Conveyors, Fork-Lifts, Stackers, etc are used inFactories & Warehouses for Material Handling.

WarehousingWarehousing is an important physicaldistribution function and refers to the design& operation of facilities for storing andmoving goods. Warehousing functions offertime utility and help companies to adjust for



dissimilar production & consumption rates.Especially, mass produced products createa much greater stock of products than can

be sold in the market immediately andcompanies store excess stocks till the time,customers are ready to buy.

Warehousing

Warehousing activities include :Receiving, Identifying, Sorting,Dispatching, Goods to Storage, HoldingGoods, Recalling, Picking &Assembling goods, etcTypes of Warehouses :



Types of Warehouses :

Private Warehouses :- owned andoperated by the manufacturer or by anothercompany.

Public Warehouses :- Third Party ownersoffer their services to all firms.

Choice of Warehouses : canrange between Company‟s Own

Dedicated Warehouses or shared

space with others in Third PartyOwned Warehouses. A company canalso decide to have some kind of



also decide to have some kind ofcombination of both. By making theright choices, a company may

minimise physical distribution costs.

TRANSPORTATIONCompanies are concerned with transportationdecisions because choices affect the pricing,delivery time & condition of goods when they

arrive at destination. There are five maintransportation modes for moving goods that include Railways, Roadways, Waterways,



include Railways, Roadways, Waterways,

Airways & Pipelines. Each of these offers certain advantages & disadvantages. Somecompanies prefer to use a combination of these

modes, depending on product nature, deliveryschedule, and geographic locations.

Student Activity

List out the Advantages &Disadvantages of each



Disadvantages of each

mode of Transportation.

438

Transportation (cont‟d)

Carrier : A firm that offerstransportation 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



Private Carriers : owned and operated by theshipper

Freight Forwarders : Agents whofacilitate the transportation process for

shippers by handling the details of theprocess

Not in BhU Syllabus

A few Slides on “Retailing” have



g

been included just for

Students’ info - NP

Definition of RetailingRetailing is the last stage in

the distribution process &encompasses all thebusiness activities involved



business activities involvedin selling goods & servicesto Consumers for their

personal, family or house-hold use.441

Classification of Retailers

1. Store Based & Non-Store Based

Under Store Based (depending ontype of Ownership) :1. Independent Store



p

2. Chain Store3. Franchise Store4. Leased Store

5. Consumer Co-operatives442

Classification of Retailers

2. Food Oriented & General -Merchandise Retailer:

1. Convenience Store2. Specialty Store



p y

3. Conventional Supermarket4. 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 Marketing



g

5. 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 operatesonly one retail outlet

• Chain Retailer : A company that operatesmore than one retail outlet• Department Store : A retail store that

(1) employs 25 or more persons and



( ) p y p

(2) sells at least home furnishing, appliances,family apparel, and household linens and drygoods, each in a different parts of the store.

• Discount Store : A self-service, general

merchandise outlet that sells products at lower-than-usual prices445

Classes of In-Store Retailers (cont‟d)

• Convenience Store : A small food storethat sells a limited variety of products butremains open well beyond normalbusiness hours.

• Catalog Showroom : A retail outlet thatdisplays well-known brands and sells



p y

them at discount prices through catalogswithin 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 storethat sells primarily food and householdproducts

• Superstore : A large retail store thatcarries not only food and nonfood productsordinarily found in supermarkets but alsoadditional product lines



additional product lines

• Warehouse Club : A large-scale,members-only establishment that combinesfeatures 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, etc448

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 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 - IVIntegrated Marketing Communication

Process & Mix; Advertising, Sales -Promotion & Public Relation decisions.



Direct Marketing - Growth, Benefits &Channels; Telemarketing;

Sales Force : Objectives, Structure,

Size And Compensation.450

MARKETING

COMMUNICATION&



451

SALES MANAGEMENT

What is Communication ?It is the transfer & understanding of meaning.

• Transfer means the message was received in aform that can be interpreted by the receiver.

• Understanding the message is not the same as thereceiver agreeing with the message.

Interpersonal Communication



Interpersonal Communication

• Communication between two or more people

Organizational Communication

• All the patterns, network, and systems ofcommunications within an organization

Marketing Communication ProcessThe Communication Process is a two-wayprocess involves the following elements :

1. Source or Sender2. 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 whocreates 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, thatassociated 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 orconfuse the signal carried. Today we usenoise more as a metaphor for problems

associated with effective listening.7. Destination or Receiver : is the person or

group who receive, understand andprocesses the message



processes the message.8. Feed Back : is the acknowledgement or

reply or from the Receiver back to theSender, 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 bedeveloped ?

Message &Encoding



4. What media should beselected ?

Media

5.What source should be

chosen?

Sender

6.What feedback should becollected ?

Feedback

The Promotion MixPromotion serves three essential roles : Itinforms, persuades & reminds existing &prospective customers about the companyand its products / services.

The Promotion-Mix is a specific mix of



Advertising, Personal Selling, Sales -Promotion, Public Relations & DirectMarketing 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-personalpresentation & promotion of ideas, goods or

services by an identified sponsor.

Different types of Media used in Advertising :

Print Media, Radio, Television, Billboards, Direct -



Print Media, Radio, Television, Billboards, Direct

Mail, Brochures / Catalogs, Signs, Posters, In-store

Displays, Motion Pictures, Web Pages, Banner

Ads, E-mails, etc.

460

2. Personal Selling: Setting sales

appointments & meetings, home parties, makingpresentations and any type of one-to-onecommunication, to inform & persuade your

prospects / customers & strengthen yourrelationship with them.

Personal Selling occurs where an individual



461

Salesperson sells a product, service or an idea to aprospect / customer. Sales-People match the benefitsof 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

3. Sales Promotions : Incentives designedto stimulate the purchase or sale of aproduct, usually in the short term.Egs: Coupons, Sweepstakes, Contests, Samples,

Rebates,, Trade Shows, Exhibitions, etc.

4. Public Relations : Paid form of presentingthe company or its products/services/ideas in a



462

p y ppositive light by planting significant news about itor a favorable presentation of it in the media tobuild 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.

5. Publicity: is a form of non-personal,mass communication involving the

organisation & / or its ideas / products &

services not paid for by the organisation. Itoccurs usually in the form of Editorials,News Story, TV Talk Shows, Films, etc.



463

6. Direct Marketing: is the use of mail / e-mail, catalogs, etc in order to reach targetedaudiences to increase sales and test new

products &/or alternate marketing tactics.

Integrated Marketing Communicationsis a management concept that is designed tomake all aspects of marketing communicationsuch as advertising, sales promotion, public

relations, direct marketing, etc work together asa unified force, rather than permitting each towork in isolation.



464

IMC ensures that all forms of marketingcommunications and messages are carefullylinked together, so that they work together in

harmony & convey the desired message tothe 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

Factors Leading to IMC



marketing & moving toward focused programs. Improvements in computer & IT are speeding

the movement toward segmented marketing.

New technologies have provided means toreach smaller segments with tailored messages.

Some of these changes include :•

Changing technology, which has made it possible formedia organizations to identify, segment, select, andattract smaller audiences for their respective vehicles.

• The trend toward de-regulation that has allowed for

increased competition within many industries, such asair travel, banking, and utilities.

• Globalization of the marketplace, which causespromotional efforts, including advertising, sales



promotion, public relations and personal selling, to beimplemented throughout a worldwide market.

• Customisation for different cultures is key tocompeting successfully in this arena. Changes in the

demographic & psychographic profiles of today'sconsumers, that have paved the way for new productcate or o ortunities.

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

Advertising



campaign includes a series of ads placed indifferent 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, MotionPictures, Web Pages, Banner Ads, E-mails, etc. 467

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 orbehavioural response from the consumer through theprocess of advertising. The marketer has to study thepresent state of the consumers' mind in terms of its

knowledge about the organisation and its products andalso the attitude towards them. The advertisement worksin the consumers mind in a Response Hierarchy Model. Itis assumed that the buyer, after being exposed to the



advertisement, passes through a cognitive, effective andbehavioural state in that order. Four best knownResponse Hierarchy Models are :1. AIDAS Model

2. Hierarchy of Effects Model3. Innovation- Adoption Model4. Communications Model

AIDA is an acronym used in marketing that describes a

common list of events that may be undergone when aperson 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 whenaccepting a new idea or purchasing a new product. }

A - Attention (Awareness): Attract the attention of thecustomer.



I - Interest: Raise customer interest by focusing on anddemonstrating 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 Advertisementfor Print, Broadcast or Electronic Media

• Copy : The Verbal Appeal

• Art : The Visual Appeal

• Auditory Appeal

ACTION

I‟LL BUY

IT!



BLENDEDTOGETHER ATTENTION

INTEREST

DESIRE

AIDA

Steps in Advertising - Planning1. 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 Advertisingsuccess.

ADVERTISING OBJECTIVES & PLANNING

Steps involved in a Advertising Plan :

1. Establishing Advertising Objectives2. Selecting the Advertising Message

3. Setting the Advertising Budget



g g g

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 / Percentageof Sales Method / Competitive Parity Method / Affordable Method,Marginal Analysis Method, etc

( b ) Factors influencing the Advertising Budget are:

i. Stage in the PLCii. Competitioniii. Product Differentiationiv. Market Share



4. Developing a Media Strategy :i. Determining the Target Audienceii. Media Selection

iii.Media Schedulingiv.Media Buying

476

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 theorganization.

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 canbook the organization‟s services.

To remind customers about facilities orservices that are unique to the sponsoringorganization.



To remind customers about when theyshould book or reserve the organization‟s

services.

To remind customers of the existence of theorganization.

Difference between Consumer Ads &

Trade Advertising

Consumer Advertising : aimed at the

end-customers or consumers, who willactually use products / services beingpromoted.



Trade Advertising : aimed at themarketing intermediaries, such asWholesalers & Retailers who will

distribute the products & influencecustomers‟ buying decisions.

Advertising Message Strategy

The Advertising Message Strategy describeswhat is to be communicated & how it is to becommunicated. It consists of the :

Message Idea : the main theme, appeal, orbenefit to be communicated in the message.



Copy Platform : a written statement that fullydescribes the message idea.

Message or Creative Format : a broad

creative approach used to communicate themessage idea to the target audiences.

Advertising Appeals

• Appeal is the central idea of anadvertisement.

• An appeal is the earnest request or aplea 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 feelingstoward a product,service or cause

To influence consumer feelingstoward a product, service or acause

The approach used to attract theattention of consumers

The approach used to attractthe attention of consumers

Appeals & Execution Style

Advertising

Appeals



The way an appeal is turned into anadvertising message

The way the message is

presented to the consumer

The way an appeal is turnedinto an advertising messageExecution

Style

CREATIVE STRATEGY

The Creative Strategy must define the TargetAudience; Product Concept; CommunicationsMedia & the Advertising Message which should

be relevant to the target-audience.The “Advertising Appeal” is the manner inwhich an advertising message is developed &expressed, to derive a particular consumer-



response or influence decision-making. Theycan be broadly classified into three categories :

1. Rational or Logical Appeal

2. Emotional Appeal3. Other Appeals.

484

Types of Advertising Appeals

Rational/Logical

Appeal

• Price (Tide)

• Quality (BB Tea)• Feature (Apple i-Fone)

Emotional

Appeal

• Humor (Sprite)

• Fear (Saffola)

Additional Appeal

• Star (ThumsUp)

• Reminder Advt.(Vardhman Wools)



• Competitive Advantage

(Head & Shoulders)• News (Matiz)• Product / Service

Popularity ( Hero Honda)

• Music (Airtel)• Sex (Axe)

• 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.

G S



Egs : Pupil Dilation, Galvanic Skin Response, )

POST - TESTING : ( To test the Effectiveness of the Ads )

1.Recall Tests ( Aided & Unaided )

2.Recognition Tests488

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, andadvertising objectives.

Media evaluation criteria.

R l i h d k f h



Relative strengths and weaknesses of eachmedia alternative.

Creative requirements.

Competitive media placements.

Approximate total advertising budget available.

Media Evaluation Criteria

Costs.

Reach.

Frequency. Waste.

L d ti d fl ibilit



Lead time and flexibility. Clutter and dominance.

Message permanence.

Persuasive impact and mood.

Documents

NP BhU SEM 2 MM 2nd Internal Portions 23May11