Set 1 Marketing Management New File

8/14/2019 Set 1 Marketing Management New File

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DINA BUSINESS SCHOOL

DINA INSTITUTE OF HOTEL AND BUSINESS

MANAGEMENT

PUNE 411 028

CENTRE CODE 02758

ASSIGNMENT SET 1 / SET 2

NAME : TAHA MOHAMMED DHILAWALA

ROLL.NO. : 520850852

PAPER / SUBJECT :Marketing Management

CODE : MB0030

SEMESTER : I / II / III / IV

SIKKIM MANIPAL UNIVERSITY

SET -1 MB0030 Page 1


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1. Analyze the existing business portfolio of any onecompany using BCG matrix, GE matrix, and Ansoff

model.

ANS.

BCG Matrix of KFC

The need for strategy, in order to expand its existing product in

very promising markets for KFC is very essential. KFC, along with

McDonalds, and other major fast food chains have dominated the

American continent as well as else where. Since the 1950s when the

founder of KFC had a dream, of building an empire in the fast food

market, the company has undergone lots of changes. The company has

changed ownership; it has taken over from Pepsi and passed over to

Tricon, which owns Pizza hut, Taco bell and others.

Nowadays, KFC, still dominates the chicken fast food industry

while has stores in more than 100 countries operating vast profits. (De

Witt 'et al.2004a) Although, due to increased conditions of life, and

differentiation of the life style of the population around the world, there

is still a lots of room for expansion, especially in countries with large

population, and high development rate. KFC using the BCG matrix and

SWOT analysis to analyze what is the current position of the company

and identify that the company has the potentials to growth in fast food

market.



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In the late 1960s the Boston Consulting Group, a leading

management consulting company, designed a four-cell matrix known as

BCG Growth/Share Matrix. This tool was developed to aid companies

in the measurement of all their company businesses according to

relative market share and market growth.

The BCG Matrix made a significant contribution to strategic

management and continues to be an important strategic tool used by

companies today. The matrix provides a composite picture of the

strategic position of each separate business within a company so that

the management can determine the strengths and the needs of allsectors of the firm. The development of the matrix requires the

assessment of a business portfolio, which include an organizations

autonomous divisions ( activities, or profit centers).

The BCG or growth- share matrix imposes a two- dimensional

analysis on management of Strategic Business Units: a comparative

analysis of business strength and an assessment of the environment.

The business strength measure is the business;s Relative Market share.

The environmental measure is the Market Growth Rate.

BCG Matrix: The market growth rate measures industry

attractiveness. Because for the case of YUM Brand, all SBUs ( KFC,

Taco Bell, Pizza Hut, Long John Silvers, A&W) are located in the

same fast- food industry, the referent standard is the industry growth

rate measured against the SBUs growth rate. The underlying theory for

examining market growth rate is the industry life cycle. The BCG

assumes that growth rates ( life cycle stages) affect a firms finances.



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Placing products in the BCG matrix results in 4 categories in a portfolio

of a company:

1. Stars (=high growth, high market share)

Use large amounts of cash and are leaders in the business so

they should also generate large amounts of cash.

Frequently roughly in balance on net cash flow. However if

needed any attempt should be made to hold share, because

the rewards will be a cash cow if market share is kept. So,

KFC Malaysia is under Star position.

2. Cash Cows (=low growth, high market share)


Asia

?EuropeUSA

Americas


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Profits and cash generation should be high, and because of

the low growth, investments needed should be low.

Keep profits high.

3. Dogs (=low growth, low market share)

Avoid and minimize the number of dogs in a company.

Beware of expensive turn around plans.

4. Question Marks (= high growth, low market share)

Have the worst cash characteristics of all, because high

demands and low returns due to low market share

If nothing is done to change the market share, questionmarks will simply absorb great amounts of cash and later, as

the growth stops, a dog.

The Characteristics of each SBU

Type SBU Strategy SBU

profits

Required

Investment

Net Cash

Flow

STAR Hold/ Increase High High -or+

Cash Cow Hold High Low High+Question

Mark

Increase/Divest 0 or - Very High or

Disinvest

High-or+

DOG Harvest or

Divest

Low

or-

Disinvest +

The analysis requires that both measures be calculated for each

SBU. The business strength dimension, relative market share, is

included to measure competitive advantage. The KFC is falling on cash

cow where a low growth and high market share is. So, the profit and

cash generation is high and because of low growth, investments needed

should be low. The funds received from cash cows are often used to



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help other businesses within the company, to allow the company to

purchase other businesses, or to return dividends to stockholders. So

the KFC should hold on what it has doing now.

Three Paths to Success (star-cash cow-question mark)

Continuously generate cash cows and use the cash throw-up by

the cash cows to invest in the question marks that are not self-

sustaining

Stars need a lot of reinvestments and as the market matures, stars

will degenerate into cash cows and the process will be repeated.

As fordogs, segment the markets and nurse the dogs to health ormanage for cash

Three Paths to Failure (star-question mark-dog, cash cow-dog)

Over invest in cash cows and under invest in question marks

Trade further opportunities for present cash flow

Under invest in the stars

Allow competitors to gain share in a high growth market

Over milked the cash cows

strategy - portfolio analysis - ge matrix

The business portfolio is the collection of businesses and products thatmake up the company. The best business portfolio is one that fits thecompany's strengths and helps exploit the most attractive opportunities.

The company must:

(1) Analyse its current business portfolio and decide which businessesshould receive more or less investment, and



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(2) Develop growth strategies for adding new products and businessesto the portfolio, whilst at the same time deciding when products and

businesses should no longer be retained.

The two best-known portfolio planning methods are the BostonConsulting Group Portfolio Matrix and the McKinsey / GeneralElectric Matrix (discussed in this revision note). In both methods, thefirst step is to identify the various Strategic Business Units ("SBU's") ina company portfolio. An SBU is a unit of the company that has aseparate mission and objectives and that can be planned independentlyfrom the other businesses. An SBU can be a company division, a

product line or even individual brands - it all depends on how thecompany is organised.

The McKinsey / General Electric Matrix

The McKinsey/GE Matrix overcomes a number of the disadvantages ofthe BCG Box. Firstly, market attractiveness replaces market growthas the dimension of industry attractiveness, and includes a broaderrange of factors other than just the market growth rate. Secondly,competitive strength replaces market share as the dimension bywhich the competitive position of each SBU is assessed.

The diagram below illustrates some of the possible elements that determine market attractivenessand competitive strength by applying the McKinsey/GE Matrix to the UK retailing market:

http://tutor2u.net/business/strategy/bcg_box.htmhttp://tutor2u.net/business/strategy/bcg_box.htmhttp://tutor2u.net/business/strategy/bcg_box.htmhttp://tutor2u.net/business/strategy/bcg_box.htm


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Factors that Affect Market Attractiveness

Whilst any assessment of market attractiveness is necessarily

subjective, there are several factors which can help determine

attractiveness. These are listed below:

- Market size

- Market growth

- Market profitability

- Pricing trends

- Competitive intensity / rivalry

- Overall risk of returns in the industry

- Opportunity to differentiate products and services

- Segmentation

- Distribution structure (e.g. retail , direct, wholesale)

Factors that Affect Competitive Strength



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Factors to consider include:

-Strength of assets and competencies

- Relative brand strength

- Market share

- Customer loyalty

- Relative cost position (cost structure compared with competitors)

- Distribution strength

- Record of technological or other innovation

- Access to financial and other investment resources

Ansoff's product / market matrix

Introduction

The Ansoff Growth matrix is a tool that helps businesses decide theirproduct and market growth strategy.

Ansoffs product/market growth matrix suggests that a businessattempts to grow depend on whether it markets new or existing

products in new or existing markets.



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The output from the Ansoff product/market matrix is a series ofsuggested growth strategies that set the direction for the businessstrategy. These are described below:

Market penetration

Market penetration is the name given to a growth strategy where thebusiness focuses on selling existing products into existing markets.

Market penetration seeks to achieve four main objectives:

Maintain or increase the market share of current products this can be achieved by a combination of competitive pricing strategies,

advertising, sales promotion and perhaps more resources dedicated topersonal selling

Secure dominance of growth markets



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Restructure a mature market by driving out competitors; this wouldrequire a much more aggressive promotional campaign, supported by a

pricing strategy designed to make the market unattractive forcompetitors

Increase usage by existing customers for example by introducingloyalty schemesA market penetration marketing strategy is very much about businessas usual. The business is focusing on markets and products it knowswell. It is likely to have good information on competitors and oncustomer needs. It is unlikely, therefore, that this strategy will requiremuch investment in new market research.

Market development

Market development is the name given to a growth strategy where thebusiness seeks to sell its existing products into new markets.

There are many possible ways of approaching this strategy, including:

New geographical markets; for example exporting the product to anew country

New product dimensions or packaging: for example

New distribution channels

Different pricing policies to attract different customers or create newmarket segments

Product development

Product development is the name given to a growth strategy where abusiness aims to introduce new products into existing markets. This

strategy may require the development of new competencies andrequires the business to develop modified products which can appeal toexisting markets.

Diversification



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Diversification is the name given to the growth strategy where abusiness markets new products in new markets.

This is an inherently more risk strategy because the business is movinginto markets in which it has little or no experience.

For a business to adopt a diversification strategy, therefore, it musthave a clear idea about what it expects to gain from the strategy and anhonest assessment of the risks



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2. Discuss the Macro environment of a pharmaceutical

company

ANS. India has become an attractive destination for R&D, withopportunities emerging in this new market post- WTO (World TradeOrganization) accession. Indias industrial development has acceleratedand its pharmaceutical industry has become one of the most successful.Driving factors attracting international investment include:

1WTO accession

2 low labor costs

3 tax incentives from the Chinese government

4 R&D collaboration opportunities.

The Chinese pharmaceutical market is split almost equally betweenchemical and biotechnology products

at 70%, and TCM (traditional Chinese medicine) products at 30%. TheChinese government has changed the face of the industry dramatically

by:

implementing WTO guidelines and protection for intellectualproperty rights

shifting authority from the Ministry of Foreign Trade to the StateFood and Drug Administration (SFDA). The SFDA has imposed higherdrug registration requirements for imported as well as locallymanufactured products and promoted general compliance with theChinese Good Manufacturing Practice (GMP) standards fordomestically produced products. A number of domestic players could

not withstand this pressure from the governmentmany of them closedtheir businesses whilst others looked to upgrade their technologiesthrough tie-ups with foreigncompanies. The total value of the market inIndia was US$12.8 billion in 2005. Antibiotics have slowly decreasedin sales; however, they still represent one-third of the whole market.



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This is a large market share compared with the other therapeuticclasses. The three top therapeutic classes (antibiotics, circulatory andalimentary tract) represent around 60% of the whole market.

Indias TCM industry possesses great potential. The key issue ishow to inspire this, which requires government attention and enterpriseefforts. On one hand, the government must provide support with its

policies; on the other hand, the government should strengthen itsrecommendations on Chinese medicine planting. India possesses12,807 kinds of medicinal materials from natural sources out of which,11,146 are of plant origin, 1,581 are from animals, and 80 are fromminerals, including more than 5,000 clinically validated folk

medicines.Compared with the big global players, domestic vaccine producers have small-scale production, are backward in productiontechnology and have high operation costs. In India, clinical trials can beconducted at a much lower cost than in the West. India has a pool ofhighly educated doctors who are keen to participate in clinical trials.Although India is beginning to accept foreign clinical data, almost allnew drugs entering the country must conduct domestic testing in someform. At present, Class I, II and III drugs must undergo phase I, II andIII trials, although some Class III products are exempt from phase Itrials.

The major forces attracting foreign investors to India are:

quality of the clinical data

reasonable costs

ability to select patients rapidly.

Despite the huge growth potential, commercial health insurance

still plays a minor role in the local market,

covering only a meager 10% of local residents' total medicalexpenditures. Health insurance divides into



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two types in India:

Rural Health Protection System.

Urban Health Protection System

Government Insurance Schemecovers government employees

Labor Insurance Schemecovers enterprise employees.

In India, only 15% of the population has health insurance. Most ofthe rural population is not covered.

The Chinese R&D investment approach has been shifting fromtechnological alliances towards international mergers and acquisitions.

Overseas companies in India have established 700 R&D centers.Pharmaceutical regulation in India is based around the DrugAdministration Law. The government first implemented this law in1984, with the last major amendments taking place in 2001. In thisemerging market, intellectual property protection is a big challenge.When India became a member of the WTO in 2001, it promised touphold the Trade-Related Aspects of Intellectual Property Rights(TRIPS) Accord, which mandates that drugs receive at least 20 years of

patent protection.

Political and legal reluctance to uphold the patent rights of foreigninvestors is not the only issue. Intellectual theft comes in many forms,including small scale reverse engineering and copying, systematicreverse R&D and reverse engineering, and counterfeiting. The majordistribution channel in retail market is the hospitals, with 80% of

pharmacy products going to patients through hospitals. Biotechnologyglobally has experienced rapid growth in recent years and promisesenormous potential for future growth. In India, the biotechnologycompanies have developed more quickly than the pharmaceutical

companies have.



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3. Explain the components of Marketing information

systems

ANS. Components of a marketing information system

A marketing information system (MIS) is intended to bring togetherdisparate items of data into a coherent body of information. An MIS is,as will shortly be seen, more than raw data or information suitable forthe purposes of decision making. An MIS also provides methods forinterpreting the information the MIS provides. Moreover, as Kotler's1

definition says, an MIS is more than a system of data collection or a setof information technologies:

"A marketing information system is a continuing and interactingstructure of people, equipment and procedures to gather, sort, analyse,evaluate, and distribute pertinent, timely and accurate information foruse by marketing decision makers to improve their marketing planning,implementation, and control".

Figure .1. illustrates the major components of an MIS, the

environmental factors monitored by the system and the types ofmarketing decision which the MIS seeks to underpin.

Figure .1. The marketing information systems and its subsystems



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The explanation of this model of an MIS begins with a description ofeach of its four main constituent parts: the internal reporting systems,marketing research system, marketing intelligence system andmarketing models. It is suggested that whilst the MIS varies in its

degree of sophistication - with many in the industrialised countriesbeing computerised and few in the developing countries being so - afully fledged MIS should have these components, the methods (andtechnologies) of collection, storing, retrieving and processing datanotwithstanding.

Internal reporting systems: All enterprises which have been inoperation for any period of time nave a wealth of information.However, this information often remains under-utilised because it iscompartmentalised, either in the form of an individual entrepreneur or

in the functional departments of larger businesses. That is, informationis usually categorised according to its nature so that there are, forexample, financial, production, manpower, marketing, stockholdingand logistical data. Often the entrepreneur, or various personnelworking in the functional departments holding these pieces of data, donot see how it could help decision makers in other functional areas.Similarly, decision makers can fail to appreciate how information fromother functional areas might help them and therefore do not request it.The internal records that are of immediate value to marketing decisionsare: orders received, stockholdings and sales invoices. These are but a

few of the internal records that can be used by marketing managers, buteven this small set of records is capable of generating a great deal ofinformation. Below, is a list of some of the information that can bederived from sales invoices.

Product type, size and pack type by territory Product type, size and pack type by type of account Product type, size and pack type by industry Product type, size and pack type by customer

Average value and/or volume of sale by territory Average value and/or volume of sale by type of account Average value and/or volume of sale by industry Average value and/or volume of sale by sales person



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By comparing orders received with invoices an enterprise can establishthe extent to which it is providing an acceptable level of customerservice. In the same way, comparing stockholding records with ordersreceived helps anenterprise ascertain whether its stocks are in line with

current demand patterns.

Marketing research systems: The general topic of marketing researchhas been the prime ' subject of the textbook and only a little more needsto be added here. Marketing research is a proactive search forinformation. That is, the enterprise which commissions these studiesdoes so to solve a perceived marketing problem. In many cases, data iscollected in a purposeful way to address a well-defined problem (or a

problem which can be defined and solved within the course of thestudy). The other form of marketing research centres not around a

specific marketing problem but is an attempt to continuously monitorthe marketing environment. These monitoring or tracking exercises arecontinuous marketing research studies, often involving panels offarmers, consumers or distributors from which the same data iscollected at regular intervals. Whilst the ad hoc study and continuousmarketing research differs in the orientation, yet they are both

proactive.

Marketing intelligence systems: Whereas marketing research isfocused, market intelligence is not. A marketing intelligence system is a

set of procedures and data sources used by marketing managers to siftinformation from the environment that they can use in their decisionmaking. This scanning of the economic and business environment can

be undertaken in a variety of ways, including2

Unfocusedscanning

The manager, by virtue of what he/she reads, hears and watchesexposes him/herself to information that may prove useful.Whilst the behaviour is unfocused and the manager has nospecific purpose in mind, it is not unintentional

Semi-focusedscanning

Again, the manager is not in search of particular pieces ofinformation that he/she is actively searching but does narrowthe range of media that is scanned. For instance, the managermay focus more on economic and business publications,



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broadcasts etc. and pay less attention to political, scientific ortechnological media.

Informal

search

This describes the situation where a fairly limited and

unstructured attempt is made to obtain information for aspecific purpose. For example, the marketing manager of a firmconsidering entering the business of importing frozen fish froma neighbouring country may make informal inquiries as to

prices and demand levels of frozen and fresh fish. There would be little structure to this search with the manager makinginquiries with traders he/she happens to encounter as well aswith other ad hoc contacts in ministries, international aidagencies, with trade associations, importers/exporters etc.

Formalsearch

This is a purposeful search after information in some systematicway. The information will be required to address a specificissue. Whilst this sort of activity may seem to share thecharacteristics of marketing research the manager him/herselfrather than a professional researcher, carry it out. Moreover, thescope of the search is likely to be narrow in scope and far lessintensive than marketing research

Marketing intelligence is the province of entrepreneurs and senior

managers within an agribusiness. It involves them in scanningnewspaper trade magazines, business journals and reports, economicforecasts and other media. In addition it involves management intalking to producers, suppliers and customers, as well as to competitors.

Nonetheless, it is a largely informal process of observing andconversing.

Some enterprises will approach marketing intelligence gathering in amore deliberate fashion and will train its sales force, after-sales

personnel and district/area managers to take cognizance of competitors'

actions, customer complaints and requests and distributor problems.Enterprises with vision will also encourage intermediaries, such ascollectors, retailers, traders and other intermediaries to be proactive inconveying market intelligence back to them.



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Marketing models: Within the MIS there has to be the means ofinterpreting information in order to give direction to decision. Thesemodels may be computerised or may not. Typical tools are:

Time series sales modes Brand switching models Linear programming Elasticity models (price, incomes, demand, supply, etc.) Regression and correlation models Analysis of Variance (ANOVA) models Sensitivity analysis Discounted cash flow Spreadsheet 'what if models

These and similar mathematical, statistical, econometric and financialmodels are the analytical subsystem of the MIS. A relatively modestinvestment in a desktop computer is enough to allow an enterprise toautomate the analysis of its data. Some of the models used arestochastic, i.e. those containing a probabilistic element whereas othersare deterministic models where chance plays no part. Brand switchingmodels are stochastic since these express brand choices in probabilitieswhereas linear programming is deterministic in that the relationships

between variables are expressed in exact mathematical terms.



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4. Explain the Henry assael model of buying decision

behavior.

ANS.

High involvement Low involvement

Significant difference

between brands

Complex buying

behavior

Variety seeking buying

behaviorFew differences

between brands

Dissonance reducing

buying behavior

Habitual buying

behavior.

Complex buying behavior :- customer who are representing this

behavior are highly involved in the purchase of the product or service.

The process became complex as difference between brands are very

high. For example, customer who wants to purchase refrigerator wouldlike to know the meanings of defrosting, door lock digital temperature

control etc. the price of the product usually high let me show you



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the comparison of three brands and significant difference between

them.

Lg ge t 282

gv/ge

Akai d186 tt

dx

Electrolux

kelvinator 386Defrost system

Door lock

Adjustable shelves

Moisture and

humidity control

Deodorizing

ability

Water dispenser Defrost system

From the above example it is clear that marketer should first develop

the belief about the brand, provide the information and differentiate the

company brand from others. In the above example you can see both

akai and lg dont have water dispenser while electrolux have. Both lg

and Electrolux have moisture and humidity control while akai lacks it.

Customer would like to know what these features are and how they add

value to the product.

Dissonance reducing buying behavior:

The behavior exhibited by the customer when product purchase

requires high involvement but only few differences exits. For example,

customers who want to purchase ctv will not many differences between

the brands but the price of the product and its technically makes

customer to involve more. One of the major disadvantages of this type



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of behavior is customer will show post purchase dissonance which is

very difficult to control.

Variety seeking buying behavior

When there are significant difference between the brands existing but

customer will not involve more while purchasing, marketer identify this

behavior of the customer for biscuits. There are many varieties of

biscuits available. One can purchased salt biscuits, cream biscuits,

marie biscuits, and milk biscuits of Britannia, parle, itc sun feast and

other. The customer who purchased Britannia tiger earlier may

purchase sun feast cream biscuit next time. This doesnt mean thatquality of Britannia tiger is inferior to other brands but customer would

like to try the varieties available in the market. In this situation

marketer should undertake following steps

The market leader should encourage customers to buy

repeatedly.

Make the product available and visible to the customer in

the shopping places.

The firm who are not market leader should come out with

sales promotion techniques to encourage customer to

purchase the product .

Habitual buying behavior :-

The low involvement between the brands and few differences between

the brand leads to the habitual buying behavior. For example spice

powder marketed by mdh, everest or mtr have very feew differences

between them and customer do not search the information to purchase



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particular product. Marketers whose customer represent this category

should follow below listed strategies

Use price and sales promotion to stimulate product trial

Use more visual aspect than the wordings in the

advertisement

Television is the better media for this type of products.

Use classical conditioning theory to create

advertisements.

5. Discuss the segmentation strategy of a cement company

ANS. MARKET SEGMENTATIONMARKET SEGMENTATION

INTRODUCTION: -INTRODUCTION: - The market for any product is normally made upof several segments. A market after all is the aggregate of consumersof a given product. And, consumer (the end userthe end user), who makes a market,are of varying characteristics and buying behavior. There are differentfactors contributing for varying mind set of consumers. It is thusnatural that many differing segments occur within a market.In order to capture this heterogeneous market for any product,marketers usually divide or disintegrate the market into a number of

sub-markets/segments and the process is known as marketmarketsegmentationsegmentation.

Thus we can say that market segmentation is the segmentation ofmarkets into homogenous groups of customers, each of them reacting



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differently to promotion, communication, pricing and other variables ofthe marketing mix. Market segments should be formed in that way thatdifference between buyers within each segment is as small as possible.Thus, every segment can be addressed with an individually targeted

marketing mix.

The importance of market segmentation results from the fact that thebuyers of a product or a service are no homogenous group. Actually,every buyer has individual needs, preferences, resources and behaviors.Since it is virtually impossible to cater for every customers individualcharacteristics, marketers group customers to market segments byvariables they have in common. These common characteristics allowdeveloping a standardized marketing mix for all customers in thissegment.

Through segmentation, the marketer can look at the differences amongthe customer groups and decide on appropriate strategies/offers foreach group. This is precisely why some marketing gurus/experts havedescribed segmentation as a strategy of dividing the markets fordividing the markets forconquering them.conquering them.

MARKETING STRATEGY AND MARKET SEGMENTATION: -MARKETING STRATEGY AND MARKET SEGMENTATION: -When it comes to marketing strategies, most people spontaneously

think about the 4P (Product, Price, Place, Promotion) maybe extendedby three more Ps for marketing services (People, Processes, PhysicalEvidence).

Market segmentation and the identification of target markets, however,

are an important element of each marketing strategy. They are the basis

for determining any particular marketing mix. Basic steps in marketing

strategy are as follows:-



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ATTRIBUTES OF EFFECTIVE SEGMENTATIONATTRIBUTES OF EFFECTIVE SEGMENTATION

Market segmentation is resorted to for achieving certain practical purpose. For example, it has to be useful in developing andimplementing effective and practical marketing programmes. For thisto happen, the segments arrived at must meet certain criteria such:-

a. IdentifiableIdentifiable:: The differentiating attributes of the segments mustbe measurable so that they can be identified.

b. AccessibleAccessible:: The segments must be reachable throughcommunication and distribution channels.

c. SizeableSizeable: The segments should be sufficiently large to justify theresources required to target them. A very small segment may notserve commercial exploitation.

d.ProfitableProfitable:: - There is no use in locating segments that are

sizeable but not profitable.

e. Unique needsUnique needs: To justify separate offerings, the segments mustrespond differently to the different marketing mixes.

f. DurableDurable: The segments should be relatively stable to minimizethe cost of frequent changes.g. MeasurableMeasurable: The potential of the segments as well as the effect

of a specific marketing mix on them should be measurable.

h. Compatible:Compatible: - Segments must be compatible with firmsresources and capabilities.

REASONS FOR MARKET SEGMENTATIONREASONS FOR MARKET SEGMENTATION

Segmentation is the basis for developing targeted and effectivemarketing plans. Furthermore, analysis of market segments enablesdecisions about intensity of marketing activities in particular segments.



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Example of Ford:Example of Ford: - Ford has gained useful insights throughsegmentation and adapted its offer to suit the Indian target market.For the Indian segment Ford made some changes in its cars incomparison to their European version. Modifications such as: -

a. Higher ground clearance to make the carground clearance to make the car compatible to thecompatible to the

rougher road surface in Indiarougher road surface in India..

b. Stiffer rear springs to enable negotiating the ubiquitous potholesb. Stiffer rear springs to enable negotiating the ubiquitous potholes

on Indian roads.on Indian roads.

c. Changes in cooling requirement, with greater airflow to the rear.c. Changes in cooling requirement, with greater airflow to the rear.

d. Higher resistance to dust.d. Higher resistance to dust.

e. Compatibility of engine with the quality of fuel available in India.e. Compatibility of engine with the quality of fuel available in India.

f. Location of horn buttons on the steering wheel. As Indianf. Location of horn buttons on the steering wheel. As Indian

motorists use horn far more frequently than the European where themotorists use horn far more frequently than the European where the

horns are located on the lever.horns are located on the lever.

4.4. Stimulating Innovation: -Stimulating Innovation: -

An undifferentiated marketing strategy that targets at all customersin the total market necessarily reduces customers preferences to thesmallest common basis. Segmentations provide information about

smaller units in the total market that share particular needs. Only theidentification of these needs enables a planned development of newor improved products that better meet the wishes of these customergroups. If a product meets and exceeds a customers expectations

by adding superior value, the customers normally is willing to pay ahigher price for that product. Thus, profit margins and profitabilityof the innovating organizations increase.

5.5. Makes the marketing effort more efficient and economic: -Makes the marketing effort more efficient and economic: -

Segmentation ensures that the marketing effort is concentrated onwell defined and carefully chosen segments. After all, the resourcesof any firm are limited and no firm can normally afford to attackand tap the entire market without any delimitation whatsoever. It



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would benefit the firm if the efforts were concentrated on segmentsthat are more profitable and productive ones.

Segmentation also helps the marketer assess as to what extendexisting offer from competitors match the needs of different

customer segments. The marketer can thus identify the relativelyless satisfied segments and succeed by concentrating on themand satisfying their needs.

6.6. Benefits the customer as well:Benefits the customer as well: -

Segmentation brings benefits not only to the marketer, but to thecustomer as well. When segmentation attains higher levels of

sophistication and perfection, customers and companies canconveniently settle down with each other, as at such a stage, theycan safely rely on each others discrimination. The firm cananticipate the wants of the customers and the customers cananticipate the capabilities of the firm.

7.7. Sustainable customer relationships in all phases of customer lifeSustainable customer relationships in all phases of customer life

cycle: -cycle: - Customers change their preferences and patterns of

behavior over time. Organizations that serve different segmentsalong a customers life cycle can guide their customers from stageto stage by always offering them a special solution for their

particular needs. For example, many car manufacturers offer aproduct range that caters for the needs of all phases of a customerlife cycle: first car for early teens, fun-car for young professionals,family car for young families, etc. Skin care cosmetics brands oftenoffer special series for babies, teens, normal skin, and elder skin.

8.8. Targeted communication: -Targeted communication: -



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It is necessary to communicate in a segment-specific way even if product features and brand identity are identical in all marketsegments. Such a targeted communications allows to stress thosecriteria that are most relevant for each particular segment (e.g. price

vs. reliability vs. prestige).

9.9. Higher market Shares:Higher market Shares: --

In contrast to an undifferentiated marketing strategy, segmentationsupports the development of niche strategies. Thus marketing

activities can be targeted at highly attractive market segments in the beginning. Market leadership in selected segments improves thecompetitive position of the whole organization in its relationshipwith suppliers, channel partners and customers. It strengthens the

brand and ensures profitability. On that basis, organizations havebetter chances to increase their market shares in the overall market.

BASES FOR SEGMENTATIONBASES FOR SEGMENTATION

Markets can be segmented using several relevant bases. There arehuge number of variables which leads to market segmentation. Theycomprise easy to determine demographic factors as well as variableson user behavior or customer preferences. Segmentation is done for

consumer marketconsumer marketand industrial market.industrial market.

6. Case study

Software pricing: issues of client billing



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Infosys, one of the major IT companies in India, has developed a new

method of pricing software maintenance project. The new method is

called as ticket based pricing. The customer payment will be based

on three types of client request or ticket. First, customer may request

for small enhancement in the software application. Second, customer

may request for big enhancement in the software application and third,

request may be for a bug fix. Earlier the methods used for pricing were

fixed price and time and material-based pricing. Under the time and

material based pricing, customers are billed based on the number of

man-hours spent on a project, while under the fixed price, the customerpays an agreed price that doesnt vary with the manpower deployed on

the project. Infosys developed this new pricing strategy after

examining the current pricing methods. Software application methods

become more stable after some time. If the client opted for fixed

pricing and his request for software maintenance reduced, still has to

pay fixed maintenance charges. Ticket based pricing will provide

flexibility to the client. Many IT majors have been trying to decrease

the dependence of revenue growth on manpower addition. But this is

for the first time such an attempt has been made to bring a transaction-

based pricing model. The new move is expected to increase the revenue

without a proportional increase in the number of employees. Contrary

to this view many industry observers still feel that fixed price or time

and material based pricing provide continuous revenue. The excess

revenue available from these two methods can be used for reserves or



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hedging. In case of ticket based pricing client has to negotiate with the

company every time.

a. Do you think ticket based pricing will provide continuous

revenue to Infosys in the long term? Commentb. Compare three pricing strategies discussed here and

choose any one as your choice

ANS:-A. yes, it should be provide continues revenues to infosys in

the long termB. Pricing strategies:-

1. Competition-based pricingSetting the price based upon prices of the similarcompetitorproducts.Competitive pricing is based on three types of competitive product:

Products have lasting distinctiveness from competitor's product.Here we can assume

o The product has low price elasticity.o The product has low cross elasticity.o The demand of the product will rise.

Products have perishable distinctiveness from competitor's product, assuming the product features are mediumdistinctiveness.

Products have little distinctiveness from competitor's product.assuming that:

o The product has high price elasticity.o The product has some cross elasticity.o No expectation that demand of the product will rise.

The pricing is done based on these three factors.

2.Cost-plus pricing

Cost-plus pricing is the simplest pricing method. The firm calculatesthe cost of producing the product and adds on a percentage (profit) tothat price to give the selling price. This method although simple hastwo flaws; it takes no account of demand and there is no way ofdetermining if potential customers will purchase the product at thecalculated price.

http://en.wikipedia.org/wiki/Competitorhttp://en.wikipedia.org/wiki/Competitor


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Price = Cost of Production + Margin of Profit

3. Limit pricing

A limit price is the price set by a monopolist to discourage economicentry into a market, and is illegal in many countries. The limit price isthe price that the entrant would face upon entering as long as theincumbent firm did not decrease output. The limit price is often lowerthan the average cost of production or just low enough to make entering

not profitable. The quantity produced by the incumbent firm to act as adeterrent to entry is usually larger than would be optimal for amonopolist, but might still produce higher economic profits than would

be earned under perfect competition. The problem with limit pricing asstrategic behavior is that once the entrant has entered the market, thequantity used as a threat to deter entry is no longer the incumbent firm's

best response. This means that for limit pricing to be an effectivedeterrent to entry, the threat must in some way be made credible. A wayto achieve this is for the incumbent firm to constrain itself to produce a

certain quantity whether entry occurs or not. An example of this wouldbe if the firm signed a union contract to employ a certain (high) level oflabor for a long period of time.


Documents

Set 1 Marketing Management New File