MARKETING MANAGEMENT

For MBA I Semester Students Under Osmania university

Dr. C. V. Krishna MBA, PhD
Associate Professor Suprabhath Institute for Management & Computer Studies

CONTENTS

Contents UNIT I UNIT II UNIT III UNIT IV UNIT V Important Questions OU Q Paper Jan 2011

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UNIT I Definition: Marketing Management The American Marketing Association offers this managerial definition: Marketing (management) is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals Definition: Marketing Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and exchanging products and services of value freely with others. Marketing Tasks A recent book, Radical Marketing, praises companies such as Harley-Davidson for succeeding by breaking all of the rules of marketing. Instead of commissioning expensive marketing research, spending huge sums on advertising, and operating large marketing departments, these companies stretch their limited resources, live close to their customers, and create more satisfying solutions to customers’ needs. They form buyers clubs, use creative public relations, and focus on delivering quality products to win long-term customer loyalty. It seems that not all marketing must follow the P&G model. In fact, we can distinguish three stages through which marketing practice might pass: 1. Entrepreneurial marketing: Most companies are started by individuals who visualize an opportunity and knock on every door to gain attention. Jim Koch, founder of Boston Beer Company, whose Samuel Adams beer has become a top-selling “craft” beer, started out in 1984 carrying bottles of Samuel Adams from bar to bar to persuade bartenders to carry it. For 10 years, he sold his beer through direct selling and grassroots public relations. Today his business pulls in nearly $200 million, making it the leader in the U.S. craft beer market. 2. Formulated marketing: As small companies achieve success, they inevitably move toward more formulated marketing. Boston Beer recently began a $15 million television advertising campaign. The company now employs more that 175 salespeople and has a marketing department that carries on market research, adopting some of the tools used in professionally run marketing companies. 3. Intrepreneurial marketing: Many large companies get stuck in formulated marketing, poring over the latest ratings, scanning research reports, trying to fine-tune dealer relations and advertising messages. These companies lack the creativity and passion of the guerrilla marketers in the entrepreneurial stage. Their brand and product managers need to start living with their customers and visualizing new ways to add value to their customers’ lives. The bottom line is that effective marketing can take many forms. Although it is easier to learn the formulated side (which will occupy most of our attention in this book), we will also see how creativity and passion can be used by today’s and tomorrow’s marketing managers.

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A Broadened View of Marketing Tasks Marketers are skilled in stimulating demand for their products. However, this is too limited a view of the tasks that marketers perform. Just as production and logistics professionals are responsible for supply management, marketers are responsible for demand management. They may have to manage negative demand (avoidance of a product), no demand (lack of awareness or interest in a product), latent demand (a strong need that cannot be satisfied by existing products), declining demand (lower demand), irregular demand (demand varying by season, day, or hour), full demand (a satisfying level of demand), overfull demand (more demand than can be handled), or unwholesome demand (demand for unhealthy or dangerous products). To meet the organization’s objectives, marketing managers seek to influence the level, timing, and composition of these various demand states. The Decisions That Marketers Make Marketing managers face a host of decisions in handling marketing tasks. These range from major decisions such as what product features to design into a new product, how many salespeople to hire, or how much to spend on advertising, to minor decisions such as the wording or color for new packaging. Among the questions that marketers ask (and will be addressed in this text) are: How can we spot and choose the right market segment(s)? How can we differentiate our offering? How should we respond to customers who press for a lower price? How can we compete against lower-cost, lower-price rivals? How far can we go in customizing our offering for each customer? How can we grow our business? How can we build stronger brands? How can we reduce the cost of customer acquisition and keep customers loyal? How can we tell which customers are more important? How can we measure the payback from marketing communications? How can we improve sales-force productivity? How can we manage channel conflict? How can we get other departments to be more customeroriented? MARKETING PHILOSOPHIES The Production Concept The production concept, one of the oldest in business, holds that consumers prefer products that are widely available and inexpensive. Managers of production-oriented businesses concentrate on achieving high production efficiency, low costs, and mass distribution. This orientation makes sense in developing countries, where consumers are more interested in obtaining the product than in its features. It is also used when a company wants to expand the market. Texas Instruments is a leading exponent of this concept. It concentrates on building production volume and upgrading technology in order to bring costs down, leading to lower prices and expansion of the market. This orientation has also been a key strategy of many Japanese companies.

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The Product Concept Other businesses are guided by the product concept, which holds that consumers favor those products that offer the most quality, performance, or innovative features. Managers in these organizations focus on making superior products and improving them over time, assuming that buyers can appraise quality and performance. Product-oriented companies often design their products with little or no customer input, trusting that their engineers can design exceptional products. A General Motors executive said years ago: “How can the public know what kind of car they want until they see what is available?” GM today asks customers what they value in a car and includes marketing people in the very beginning stages of design. However, the product concept can lead to marketing myopia.16 Railroad management thought that travelers wanted trains rather than transportation and overlooked the growing competition from airlines, buses, trucks, and automobiles. Colleges, department stores, and the post office all assume that they are offering the public the right product and wonder why their sales slip. These organizations too often are looking into a mirror when they should be looking out of the window. The Selling Concept The selling concept, another common business orientation, holds that consumers and businesses, if left alone, will ordinarily not buy enough of the organization’s products. The organization must, therefore, undertake an aggressive selling and promotion effort. This concept assumes that consumers must be coaxed into buying, so the company has a battery of selling and promotion tools to stimulate buying. The selling concept is practiced most aggressively with unsought goods—goodsthat buyers normally do not think of buying, such as insurance and funeral plots. The selling concept is also practiced in the nonprofit area by fund-raisers, college admissions offices, and political parties. Most firms practice the selling concept when they have overcapacity. Their aim is to sell what they make rather than make what the market wants. In modern industrial economies, productive capacity has been built up to a point where most markets are buyer markets (the buyers are dominant) and sellers have to scramble for customers. Prospects are bombarded with sales messages. As a result, the public often identifies marketing with hard selling and advertising. But marketing based on hard selling carries high risks. It assumes that customers who are coaxed into buying a product will like it; and if they don’t, that they won’t bad-mouth it or complain to consumer organizations and will forget their disappointment and buy it again. These are indefensible assumptions. In fact, one study showed that dissatisfied customers may bad-mouth the product to 10 or more acquaintances; bad news travels fast, something marketers that use hard selling should bear in mind. The Marketing Concept The marketing concept, based on central tenets crystallized in the mid-1950s, challenges the three business orientations we just discussed.18 The marketing concept holds that the key to achieving organizational goals consists of the company being more effective than its competitors in creating, delivering, and communicating customer value to its chosen target markets. Theodore Levitt of Harvard drew a perceptive contrast between the selling and marketing concepts: “Selling focuses on the needs of the seller; marketing on the needs of the buyer. Selling is preoccupied with the seller’s need to convert his product into cash; marketing with the idea of satisfying the needs of the customer by means of the product and the whole cluster of things associated with creating, delivering and finally consuming it.”

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The marketing concept rests on four pillars: target market, customer needs, integrated marketing, and profitability. The selling concept takes an inside-out perspective. It starts with the factory, focuses on existing products, and calls for heavy selling and promoting to produce profitable sales. The marketing concept takes an outside-in perspective. It starts with a welldefined market, focuses on customer needs, coordinates activities that affect customers, and produces profits by satisfying customers The Societal Marketing Concept Societal marketing concept, holds that the organization’s task is to determine the needs, wants, and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the consumer’s and the society’s well-being. The societal marketing concept calls upon marketers to build social and ethical considerations into their marketing practices. They must balance and juggle the often conflicting criteria of company profits, consumer want satisfaction, and public interest. Yet a number of companies have achieved notable sales and profit gains by adopting and practicing the societal marketing concept. Some companies practice a form of the societal marketing concept called cause related marketing. Pringle and Thompson define this as “activity by which a company with an image, product, or service to market builds a relationship or partnership with a ‘cause,’ or a number of ‘causes,’ for mutual benefit.

Marketing Mix Marketers use numerous tools to elicit the desired responses from their target markets. These tools constitute a marketing mix: Marketing mix is the set of marketing tools that the firm uses to pursue its marketing objectives in the target market. As shown in Figure 1-3, McCarthy classified these tools into four broad groups that he called the four Ps of marketing: product, price, place, and promotion. Marketing-mix decisions must be made to influence the trade channels as well as the final consumers. Typically, the firm can change its price, sales-force size, and advertising expenditures in the short run. However, it can develop new products and modify its distribution channels only in the long run. Thus, the firm typically makes fewer period-toperiod marketing-mix changes in the short run than the number of marketing-mix decision variables might suggest. Robert Lauterborn suggested that the sellers’ four Ps correspond to the customers’four Cs. Four Ps Four Cs Product Customer solution Price Customer cost Place Convenience Promotion Communication Winning companies are those that meet customer needs economically and conveniently and with effective communication

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PRODUCT A product is anything that can be offered to a market to satisfy a want or need. Products include physical goods, services, experiences, events, persons, places, properties, organizations, information, and ideas. The customer will judge the offering by three basic elements: product features and quality, services mix and quality, and price appropriateness (Figure 4-1). As a result, marketers must carefully think through the level at which they set each product’s features, benefits, and quality.

Product Mix A product mix (also called product assortment) is the set of all products and items that a particular marketer offers for sale. At Kodak, the product mix consists of two strong product lines: information products and image products. At NEC (Japan), the product mix consists of communication products and computer products. The product mix of an individual company can be described in terms of width, length, depth, and consistency. The width refers to how many
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different product lines the company carries. The length refers to the total number of items in the mix. The depth of a product mix refers to how many variants of each product are offered. The consistency of the product mix refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way. These four product-mix dimensions permit the company to expand its business by (1) adding new product lines, thus widening its product mix; (2) lengthening each product line; (3) deepening the product mix by adding more variants; and (4) pursuing more product-line consistency. PRICE Price is the only one of the four Ps that produces revenue. In setting prices, a company follows a six-step procedure: (1) Select the pricing objective, (2) determine demand, (3) estimate costs, (4) analyze competitors’ costs, prices, and offers, (5) select a pricing method, and (6) select the final price. Companies do not usually set a single price, but rather a pricing structure that reflects variations in geographical demand and costs, market-segment requirements, purchase timing, order levels, and other factors. Several price-adaptation strategies are available: (1) geographical pricing; (2) price discounts and allowances; (3) promotional pricing; (4) discriminatory pricing, in which the company sells a product at different prices to different market segments; and (5) product-mix pricing, which includes setting prices for product lines, optional features, captive products, twopart items, by-products, and product bundles. After developing pricing strategies, firms often face situations in which they need to change prices by initiating price cuts or price increases. In these situations, companies need to consider how stakeholders will react to price changes. In addition, marketers must develop strategies for responding to competitors’ price changes. The firm’s strategy often depends on whether it is producing homogeneous or non homogeneous products. Market leaders who are attacked by lower-priced competitors can choose to maintain price, raise the perceived quality of their product, reduce price, increase price and improve quality, or launch a low-price fighter line. PROMOTION MIX Each promotional tool has its own unique characteristics and costs.12 Advertising. Advertising can be used to build up a long-term image for a product (Coca-Cola ads) or trigger quick sales (a Sears ad for a weekend sale). Advertising can reach geographically dispersed buyers efficiently. Certain forms of advertising (TV advertising) typically require a large budget, whereas other forms (newspaper advertising) can be done on a small budget. We discuss advertising in more detail later in this chapter. Sales promotion. Although sales-promotion tools—coupons, contests, premiums, and the like—are highly diverse, they offer three distinctive benefits: (1) communication (they gain attention and usually provide information that may lead the consumer to the product); (2) incentive (they incorporate some concession or inducement that gives value to the consumer); and (3) invitation (they include a distinct invitation to engage in the transaction now). Sales promotion can be used for short-run effects such as dramatizing product offers and boosting sales. Later in this chapter we discuss sales promotion in more detail.

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Public relations and publicity. The appeal of public relations and publicity is based on three distinctive qualities: (1) high credibility (news stories and features are more authentic and credible than ads); (2) ability to catch buyers off guard (reach prospects who prefer to avoid salespeople and advertisements); and (3) dramatization (the potential for dramatizing a company or product). This underused technique is examined later in this chapter. Personal selling. Personal selling has three distinctive qualities: (1) personal confrontation (it involves an immediate and interactive relationship between two or more persons); (2) cultivation (it permits all kinds of relationships to spring up, ranging from a matter-of-fact selling relationship to a deep personal friendship); and (3) response (it makes the buyer feel under some obligation for having listened to the sales talk). Direct marketing. All forms of direct marketing—direct mail, telemarketing, Internet marketing—share four distinctive characteristics: They are (1) nonpublic (the message is normally addressed to a specific person); (2) customized (the message can be prepared to appeal to the addressed individual); (3) up-to-date (a message can be prepared very quickly); and (4) interactive (the message can be changed depending on the person’s response). PLACE/DISTRIBUTION: Marketing channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption. Why would a producer delegate some of the selling job to intermediaries? Although delegation means relinquishing some control over how and to whom the products are sold, producers gain several advantages by using channel intermediaries: Many producers lack the financial resources to carry out direct marketing. For example, General Motors sells its cars through more than 8,100 dealer outlets in North America alone. Even General Motors would be hard-pressed to raise the cash to buy out its dealers. Direct marketing simply is not feasible for some products. The William Wrigley Jr. Company would not find it practical to establish retail gum shops or sell gum by mail order. It would have to sell gum along with many other small products, and would end up in the drugstore and grocery store business. Wrigley finds it easier to work through a network of privately owned distribution organizations. Producers who do establish their own channels can often earn a greater return by increasing their investment in their main business. If a company earns a 20 percent rate of return on manufacturing and only a 10 percent return on retailing, it does not make sense to undertake its own retailing. PEOPLE In Booms and Bitner’s 7Ps services marketing framework, people are all people directly or indirectly involved in the service encounter, namely the firm's contact employees, personnel and other customers. Due to the inseparability of production and consumption for services which involves the simultaneous production and consumption of services, service firms depend heavily on the ability of contact employees to deliver the service. Contact employees contribute to service quality by creating a favorable image for the firm, and by providing better service than the competitions. Service providers (such as hair stylists, personal trainers, nurses, counselors and call centre personnel) are involved in real time production of the service. They are the “service”. Much of what makes a service
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special derives from the fact that it is a lived-through event. Service firms must find ways in which they can effectively manage the contact employees to ensure that their attitudes and behaviors are conducive to the delivery of service quality. This is especially important in services because employees tend to be variable in their performance, which can lead to variable quality i.e. heterogeneity in the performance of services. The quality of a service (a visit to a hospital for medical check-up, having a meal at the restaurant, accountancy and consulting services) can vary from service providers and customers among many other factors. This lack of homogeneity in services creates difficulties for the service firms. As delivery of services occurs during interaction between contact employees and customers, attitudes and behaviors of the service providers can significantly affect customers' perceptions of the service. This is important, because customers' perceptions of service quality and its value can influence customer satisfaction, and in turn, purchase intentions. PROCESS Process is referred to the procedures, mechanisms and flow of activities by which the service is delivered i.e. the service delivery and operating systems. The process of travelling with a budget airline, is very different from that with a full-fledged premium airline. Because services are performances or actions done for or with the customers, they typically involve a sequence of steps and activities. The combination of these steps consitute a service process which is evaluated by the customers. Furthermore, in a service situation customers are likely to have to queue before they can be served and the service delivery itself is likely to take a certain length of waiting time. It helps if marketers ensure that customers understand the process of acquiring a service and the acceptable delivery times. Creating and managing effective service processes are essential tasks for service firms. PHYSICAL EVIDENCE Physical evidence refers to the environment in which the service is assembled and in which the seller and customer interact, combined with tangible commodities that facilitate performance or communication of the service. The physical evidence of service includes all the tangible representations of service such as brochures, letterhead, business cards, reports, signage, internet presence and equipment. For example, in the hotel industry, the design, furnishing, lighting, layout and decoration of the hotel as well as the appearance and attitudes of its employees will influence customer perceptions of the service quality and experiences. Because of the simultaneous production and consumption of most services, the physical facility i.e. its servicescape can play an important role in the service experience. For theme park, restaurant, health club, hospital or school, its servicescape is critical in communicating about the service and making the entire customer experience positive.

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UNIT II LEVELS OF MARKET SEGMENTATION Segment Marketing A market segment consists of a large identifiable group within a market, with similar wants, purchasing power, geographical location, buying attitudes, or buying habits. For example, an automaker may identify four broad segments in the car market: buyers who are primarily seeking (1) basic transportation, (2) high performance, (3) luxury, or (4) safety. Niche Marketing A niche is a more narrowly defined group, typically a small market whose needs are not being well served. Marketers usually identify niches by dividing a segment into subseg tobacco company might identify two subsegments of heavy smokers: those who are trying to stop smoking, and those who don’t care. Local Marketing Target marketing is leading to some marketing programs that are tailored to the needs and wants of local customer groups (trading areas, neighborhoods, even individual stores). Citibank, for instance, adjusts its banking services in each branch depending on neighborhood demographics; Kraft helps supermarket chains identify the cheese assortment and shelf positioning that will optimize cheese sales in low-, middle-, and high-income stores and in different ethnic neighborhoods. Individual Marketing The ultimate level of segmentation leads to “segments of one,” “customized marketing,” or “oneto-one marketing.”6 For centuries, consumers were served as individuals: The tailor made the suit and the cobbler designed shoes for the individual. Much business-to-business marketing today is customized, in that a manufacturer will customize the offer, logistics, communications, and financial terms for each major account. Now technologies such as computers, databases, robotic production, intranets and extranets, e-mail, and fax communication are permitting companies to return to customized marketing, also called “mass customization.”7 Mass customization is the ability to prepare individually designed products and communications on a mass basis to meet each customer’s requirements Bases for Segmenting Consumer Markets Geographic Segmentation Geographic segmentation calls for dividing the market into different geographical units such as nations, states, regions, counties, cities, or neighborhoods. The company can operate in one or a few geographic areas or operate in all but pay attention to local variations. Some marketers even segment down to a specific zip code. Consider Blockbuster, which has databases to track the video preferences of its 85 million members and buys additional demographic data about each store’s local area. As a result of this segmentation, it stocks its San Francisco stores with more gay-oriented videos, reflecting the city’s large gay population, while it stocks Chicago stores with more family-oriented videos. Blockbuster can even distinguish between patterns of East Dallas and South Dallas customers
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Demographic segmentation The market is divided into groups on the basis of age and the other variables in Table 3.5. One reason this is the most popular consumer segmentation method is that consumer wants, preferences, and usage rates are often associated with demographic variables. Another reason is that demographic variables are easier to measure. Even when the target market is described in non-demographic terms (say, a personality type), the link back to demographic characteristics is needed in order to estimate the size of the target market and the media that should be used to reach it efficiently. Here is how certain demographic variables have been used to segment consumer markets: Age and life-cycle stage. Consumer wants and abilities change with age, as Gerber realized when it decided to expand beyond its traditional baby foods line because the market was growing more slowly due to lower birthrates, babies staying on formula longer, and children moving to solid foods sooner. The company hopes that parents who buy its baby food will go on to buy its Graduates foods for 1- to 3-year olds.13 However, age and life cycle can be tricky variables. For example, Ford originally designed its Mustang automobile to appeal to young people who wanted an inexpensive sport car. But when Ford found that the car was being purchased by all age groups, it recognized that the target market was not the chronologically young, but the psychologically young. Gender. Gender segmentation has long been applied in clothing, hairstyling, cosmetics, and magazines. Occasionally other marketers notice an opportunity for gender segmentation. The Internet portal iVillage.com reaped the benefits of gender segmentation after initially trying to appeal to a broader market of baby boomers. Noticing that Parent Soup and other offerings for women were the most popular, iVillage soon evolved into the leading women’s on-line community. Its home page entreats visitors to “Join our community of smart, compassionate, real women. Income. Income segmentation is a long-standing practice in such categories as automobiles, boats, clothing, cosmetics, and travel. However, income does not always predict the best customers for a given product. The most economical cars are not bought by the really poor, but rather by those who think of themselves as poor relative to their status aspirations; medium-price and expensive cars tend to be purchased by the overprivileged segments of each social class. Generation. Each generation is profoundly influenced by the times in which it grows up—the music, movies, politics, and events of that period. Some marketers target Generation Xers (those born between 1964 and 1984), while others target Baby Boomers (those born between 1946 and 1964).15 Meredith and Schewe have proposed a more focused concept they call cohort segmentation.16 Cohorts are groups of people who share experiences of major external events (such as World War II) that have deeply affected their attitudes and preferences. Because members of a cohort group feel a bond with each other for having shared these experiences, effective marketing appeals use the icons and images that are prominent in the targeted cohort group’s experience. Social class. Social class strongly influences preference in cars, clothing, home furnishings, leisure activities, reading habits, and retailers, which is why many firms design products for specific social classes. However, the tastes of social classes can change over time. The 1980s were about greed and ostentation for the upper classes, but the 1990s were more about values

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and self-fulfillment. Affluent tastes now run toward more utilitarian rather than ostentatious products Psychographic Segmentation In psychographic segmentation, buyers are divided into different groups on the basis of lifestyle or personality and values. People within the same demographic group can exhibit very different psychographic profiles. Lifestyle. People exhibit many more lifestyles than are suggested by the seven social classes, and the goods they consume express their lifestyles. Meat seems an unlikely product for lifestyle segmentation, but one Kroger supermarket in Nashville found that segmenting self-service meat products by lifestyle, not by type of meat, had a big payoff. This store grouped meats by lifestyle, creating such sections as “Meals in Minutes” and “Kids Love This Stuff” (hot dogs, hamburger patties, and the like). By focusing on lifestyle needs, not protein categories, Kroger’s encouraged habitual beef and pork buyers to consider lamb and veal as well—boosting sales and profits.18 But lifestyle segmentation does not always work: Nestlé introduced a special brand of decaffeinated coffee for “late nighters,” and it failed, presumably because people saw no need for such a specialized product. Personality. Marketers can endow their products with brand personalities that correspond to consumer personalities. Apple Computer’s iMac computers, for example, have a friendly, stylish personality that appeals to buyers who do not want boring, ordinary personal computers. Values. Core values are the belief systems that underlie consumer attitudes and behaviors. Core values go much deeper than behavior or attitude, and determine, at a basic level, people’s choices and desires over the long term. Marketers who use this segmentation variable believe that by appealing to people’s inner selves, it is possible to influence purchase behavior. Although values often differ from culture to culture, Roper Reports has identified six values segments stretching across countries: strivers (who focus more on material and professional goals), devouts (who consider tradition and duty very important), altruists (who are interested in social issues), intimates (who value close personal relationships and family highly), fun seekers (who tend to be younger and usually male), and creatives (who are interested in education, knowledge, and technology). Behavioral Segmentation In behavioral segmentation, buyers are divided into groups on the basis of their knowledge of, attitude toward, use of, or response to a product. Many marketers believe that behavioral variables—occasions, benefits, user status, usage rate, loyalty status, buyer-readiness stage, and attitude—are the best starting points for constructing market segments. Occasions. Buyers can be distinguished according to the occasions on which they develop a need, purchase a product, or use a product. For example, air travel is triggered by occasions related to business, vacation, or family, so an airline can specialize in one of these occasions. Thus, charter airlines serve groups of people who fly to a vacation destination. Occasion segmentation can help firms expand product usage, as the Curtis Candy Company did when it promoted trick-or-treating at Halloween and urged consumers to buy candy for the eager little callers. A company can also consider critical life events to see whether they are accompanied by certain needs. This kind of analysis has led to service providers such as marriage, employment, and bereavement counselors.

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Benefits. Buyers can be classified according to the benefits they seek. One study of travelers uncovered three benefit segments: those who travel to be with family, those who travel for adventure or education, and those who enjoy the “gambling” and “fun” aspects of travel. User status. Markets can be segmented into nonusers, ex-users, potential users, first time users, and regular users of a product. The company’s market position also influences its focus. Market leaders (such as America Online) focus on attracting potential users, whereas smaller firms (such as Earthlink, a fast-growing Internet service provider) try to lure users away from the leader. Usage rate. Markets can be segmented into light, medium, and heavy product users. Heavy users are often a small percentage of the market but account for a high percentage of total consumption. Marketers usually prefer to attract one heavy user rather than several light users, and they vary their promotional efforts accordingly. Repp’s Big & Tall Stores, which operates 200 stores and a catalog business, has identified 12 segments by analyzing customer response rates, average sales, and so on. Some segments get up to eight mailings a year, while some get only one to three mailings. The chain tries to steer lowvolume catalog shoppers into nearby stores, and it offers infrequent customers an incentive such as 15 percent off to buy during a particular period. Repp gets a 6 percent response to these segmented mailings, far more than the typical 0.5 response rate for nonsegmented mailings. Loyalty status. Buyers can be divided into four groups according to brand loyalty status: (1) hard-core loyals (who always buy one brand), (2) split loyals (who are loyal to two or three brands), (3) shifting loyals (who shift from one brand to another, and (4) switchers (who show no loyalty to any brand).23 Each market consists of different numbers of these four types of buyers; thus, a brand-loyal market has a high percentage of hard-core loyals. Companies that sell in such a market have a hard time gaining more market share, and new competitors have a hard time breaking in. One caution: What appears to be brand loyalty may actually reflect habit, indifference, a low price, a high switching cost, or the nonavailability of other brands. For this reason, marketers must carefully interpret what is behind observed purchasing patterns. Buyer-readiness stage. A market consists of people in different stages of readiness to buy a product: Some are unaware of the product, some are aware, some are informed, some are interested, some desire the product, and some intend to buy. The relative numbers make a big difference in designing the marketing program. Attitude. Five attitude groups can be found in a market: (1) enthusiastic, (2) positive, (3) indifferent, (4) negative, and (5) hostile. So, for example, workers in a political campaign use the voter’s attitude to determine how much time to spend with that voter. They may thank enthusiastic voters and remind them to vote, reinforce those who are positively disposed, try to win the votes of indifferent voters, and spend no time trying to change the attitudes of negative and hostile voters.

MARKET TARGETING Evaluating Market Segments In evaluating different market segments, the firm must look at two factors: (1) the segment’s overall attractiveness, and (2) the company’s objectives and resources. First, the firm must ask whether a potential segment has the characteristics that make it generally attractive, such as size, growth, profitability, scale economies, and low risk. Second, the firm must consider whether
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investing in the segment makes sense given the firm’s objectives and resources. Some attractive segments could be dismissed because they do not mesh with the company’s long-run objectives; some should be dismissed if the company lacks one or more of the competences needed to offer superior value. Selecting and Entering Market Segments Having evaluated different segments, the company can consider five patterns of target market selection, as shown in Figure 3-7. Single-Segment Concentration Many companies concentrate on a single segment: Volkswagen, for example, concentrates on the small-car market, while Porsche concentrates on the sports car market. Through concentrated marketing, the firm gains a thorough understanding of the segment’s needs and achieves a strong market presence. Furthermore, the firm enjoys operating economies by specializing its production, distribution, and promotion; if it attains segment leadership, it can earn a high return on its investment. However, concentrated marketing involves higher than normal risks if the segment turns sour because of changes in buying patterns or new competition. For these reasons, many companies prefer to operate in more than one segment. Selective Specialization Here the firm selects a number of segments, each objectively attractive and appropriate. There may be little or no synergy among the segments, but each segment promises to be a moneymaker. This multi-segment coverage strategy has the advantage of diversifying the firm’s risk. Consider a radio broadcaster that wants to appeal to both younger and older listeners using selective specialization. Emmis Communications owns New York’s WRKSRM, which describes itself as “smooth R&B [rhythm and blues] and classic soul” and appeals to older listeners, as well as WQHT-FM, which plays hip-hop (urban street music) for under-25 listeners.

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PRODUCT DIFFERENTIATION Product Form Products can be differentiated based on their form i.e. size, shape and other physical attributes of the product. Product form is the sum total of the physical attributes of a product. For example, a medicine can be in the form of a tablet or a syrup or an injection. Marketers differentiate their products by changing the forms of products. HLL changed the form of its Lux toilet soap from bar form to a liquid form and marketed it as a separate product. Similarly, Godrej’s Fair Glow cream, which used to come in the form of a cream, is now offered in the form of a bar. Design A good product design takes care of the aspect of functionality or usefulness. Customers usually look for functionality, apart from the design or shape of the product. For example, Sony products are known for their excellent design. They incorporate new features; they are easy to use; and require little or no maintenance. Sony revolutionized the audio equipment market when it designed the Walkman in 1979. The design of a product should be functional and aesthetically pleasing. Apple Computers differentiated its PC line, iMac, on the basis of its aesthetically appealing design. Features Product features are the characteristics that allow a product to perform certain functions. A firm can differentiate its product from that of the competitor by adding or removing certain features. It is generally found that adding new features enhances the value of the product and helps a company gain competitive advantage. For example, when Tata Engineering and Locomotive Company launched Tata Indigo, it added a number of features to the product like independent three-link suspension shock absorbers, new front seats that gave additional lumbar and thigh support, 14-inch wheels, fire preventing inertia switch to minimize fuel leakage and a steel monochrome frame that met the European standards of full frontal and offset frontal crash tests as well as endurance safety tests. A company that offers more features often charges a higher price, which consumers are willing to pay as they perceive the product as being of a superior quality. Size of Package Firms also differentiate their products on the basis of the size and weight of the pack. e.g., Pepsi captured a major part of Cola market in India by bringing about a change in the packaging of its product. Through market research, Pepsi discovered that customers purchase only the amount of the product that they find convenient to carry. So Pepsi introduced a new style of packaging – the plastic bottle. The plastic bottle held more of the beverage, but was light to carry. Though the cost of producing plastic bottles was fairly high at that time, the move worked to Pepsi’s advantage and the company captured a sizable market share, as Coke was not able to enter the market immediately with its own version of the product. Product Quality Quality of a product refers to the characteristics of the product that enable it to perform according to the expectations of customers and meet customers’ needs. According to the findings of ‘The Strategic Planning Institute,’ there is a positive correlation between product quality and a
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firm’s return on investment. Firms that produce premium quality products, such as Sony Corp, often charge premium prices for their offerings. For example, Sony Corporation enjoys a competitive edge over its rival firms because it is reputed for manufacturing products of excellent quality. Companies spend huge amounts of money to maintain the quality of the products. Many of them are trying to achieve the ‘six sigma’ level in quality so that product defects can be totally eliminated. They are also encouraging their employees to identify problems or defects in the product and rewarding them suitably. Durability Products are expected to perform satisfactorily during their useful life. If a product is durable, customers are ready to pay a premium. However, the extra amount customers will pay for the durability of a product is not known with certainty. If the technology used in a product becomes obsolete fast, the advantage derived by the marketer from its durability also gets reduced. In such a case, customers do not pay a premium for the durability of the product. SERVICE DIFFERENTIATION In order to differentiate itself from its competitors on the basis of the service related with its product, a company must segment its customers on the basis of how they prefer to make the purchase. In such cases, both the tangible and the intangible attributes of the product form a source of differentiation for the company. Customer service can include anything from ease of ordering, delivery, installation, ease of payment, financial arrangements, customer training, guarantees, maintenance, repair and disposal. These aspects of customer service are discussed in detail below:
• Ordering ease: Ordering ease refers to the ease with which the customer can place the order for the product. Dell Computers has made the ordering of computers so simple that customers who are not aware of new developments in the field can find various options (which include the latest components) to select from, and the computer system will be delivered at the place they want. Similarly, ordering books has become so simple after Amazon.com introduced the concept of ordering online. Earlier, it was difficult for customers to know which were the latest books on a topic and where they could obtain them. But, now, they can obtain all this information at the click of the mouse and order them as well. • Delivery: This refers to how well the product has been delivered to the customer. It includes speed and care in delivering the products, e.g., the courier services, Federal Express Corporation (FedEx) and United Parcel Service (UPS) are known worldwide for their speed and efficiency in delivering and handling the products. Domino’s Pizza had been known for the fastest and the most reliable delivery of pizza in the world. • Installation: Differentiation on the basis of installation plays a vital role in industrial markets in which heavy equipment is purchased. Customers prefer the company to send its personnel to install the equipment. Ease of installation can help a company capture a significant share of the market, especially when the target market is new to the technology.

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Guarantees: Guarantees can often be used as a differentiator and can be leveraged as a competitive advantage. Guarantees are most often given for products such as household appliances, automobiles, electronic devices, etc. How can a company differentiate itself on the basis of guarantees?

Financial arrangement: Some companies tie up with financial institutions that offer loans to help customers purchase new products through easy installment schemes, e.g. Maruti Udyog Ltd. has tied up with eight financial institutions, Citicorp Maruti, Maruti Countrywide, ICICI, HDFC Bank, Standard Chartered, ABN-AMRO, Kotak Mahindra and Sundaram Finance to help its customers with car finance. Customer training: Some companies also train their customers or the customer's employees to use the equipment. For example, HPCL trains its dealers’ employees regarding handling of the equipment and in the necessary soft skills to serve customers more efficiently. Some firms also provide a hot line or a toll-free number for customer assistance and for further information about new products and services. Maintenance and repair: Companies provide after-sales maintenance and repair services for their products. Subsequent business from the customer depends to a large extent on whether his experience of maintenance and repair services from the company has been good or bad. For example, LG provides free service and replacement of accessories for its hand sets up to one year to customers of Reliance India Mobile. Disposal: Companies can also differentiate their products on the basis of disposability of the product after use. For instance, some companies use plastic containers or wrappers to pack their product. They invite the customer to return the empty packs to the company in exchange for another pack of the same product. This strategy helps the firm in increasing its sales as well as establishing itself as an environment-friendly organization. For example, Hewlett Packard asks its customers to send back empty cartridges, which it claims it will reuse. PERSONNEL DIFFERENTIATION In a market of cutthroat competition, companies try to identify unique differentiation platforms and strategies to differentiate themselves against their competitors. Companies have realized that technology cannot provide much competitive advantage because the cost of acquiring it has reduced significantly. They need to depend on innovation in products, strategies, processes, etc. People are an integral part of an innovation. Without them, innovation is simply not possible. Therefore, it is the people or employees in an organization alone who can provide sustainable advantage. For example, British Airways differentiates itself from other airways on the basis of its personnel. In a service business, the people are the product, and the people at BA have made a significant contribution to the airline's success. Its customer service has been the backbone of its

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success. And its people provide high quality services. Its staff knows the job. Its people understand the responsibility for customer satisfaction. CHANNEL DIFFERENTIATION Companies can achieve a distinct differentiation for their products on the basis of the distribution channels they use. A firm’s choice of distribution channel, its coverage, expertise and performance helps it to differentiate itself from its competitors. A firm can add value to its product on the basis of the channels that carry its product. Differentiating through the channels of distribution involves making the product available to customers in places where competitors have not entered. The availability of the product everywhere makes the customer’s search process less complicated, less expensive and more habitual. Thus, by managing its distribution channels, a firm can bring about a significant improvement in its business. Many firms have realized this and are focusing on managing their distribution channels effectively, e.g., India’s largest car maker, Maruti Udyog Limited (MUL), makes its cars available to customers through several different distribution channels. The company realized that there is a huge market for second hand cars and that this market has been dominated by unorganized players. To cater to this need, it established a separate distribution channel. MUL opened ‘True Value’ outlets where the company acts an intermediary to bring sellers and buyers together. IMAGE DIFFERENTIATION The brand and image of a company evokes different reactions in different customers. Some customers base their purchase decision on the brand name whereas some base the decision on the image of the company. Over the years, firms have shifted their strategy from overemphasizing cost management to creating and promoting features that foster a unique image or value for their products. Image is an important aspect not only to large companies but to smaller companies too as the latter may eventually grow and even go public or may be sold to another companies later at higher prices. Thus, creating a positive image in market is important for every company. Symbols: A firm can enhance its image or the image of its product by associating it with some symbol. The symbol helps differentiate the company from its competitors on the basis of its image and may be in the form of (a) a physical symbol like the Alsatian dog which represents Syndicate bank, Apple which represents Apple Computers, Gattu (a small kid) for Asian Paints, and the symbol of a sailor for Captain Cook salt. (b) a famous personality like Michael Jordan for Nike, Liz Taylor for Passion brand of perfume, Cindy Crawford for Omega watches, Pierce Brosnan for Reid & Taylor suitings, etc. (c) a color like yellow for Kodak, navy blue for HDFC Bank, or (d) a musical piece which acts as a signature tune, for example, Britannia biscuits, Titan and Airtel tunes. Logos: A logo is an emblem, a graphic picture or a sign that represents and conveys an image of a company. By displaying its logo widely on its brochures, annual reports, letterheads, business cards, as well as advertisements in the audio-visual or print media, a company projects a certain public image.
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Atmosphere: A company also creates the desired image by creating the right atmosphere at its premises or headquarters in terms of ambience, color and lighting, material and furnishings, and the building architecture. Companies have come to realize the importance of creating an atmosphere that is consistent with the image they wish to portray to their customers. This has resulted in an emphasis on the use of the physical space or atmosphere in the premises appropriately. The physical space or atmosphere thus acts as an image generator for a company. Events: A firm can also build its image based on the type of events it sponsors. For example, the United Breweries group and The Hindu newspaper group sponsor many horse races and motor sports, the ITC Group and the Taj Group usually sponsor tourism and food festivals. Beverage companies such as Pepsi and Coca Cola sponsor cultural programs and other youth-centered events to convey a youthful image. Samsung recently sponsored the cricket series between India and Pakistan in Pakistan. POSITIONING The word ‘positioning’ dates back to 1972, and was coined by Al Ries and Jack Trout. According to them, positioning is not what you do to a product; rather it is what you do to the mind of the customer. In other words, product positioning refers to all the activities undertaken by a marketer to create and maintain the concept of value regarding its brand in the minds of customers as against competitors’ brands. This concept soon caught the attention of marketers and advertisers who began developing positioning strategies for their products and services. Exhibit 12.2 describes how positioning effects the sale of products in a retail scenario. Marketers try to position the product in such a manner, that it seems to possess all the desired characteristics. Creating a position for its products in the market helps a company develop a competitive advantage. Al Ries and Jack Trout, in their book Positioning: The Battle for your Mind, have elaborated upon the positioning strategies that need to be devised by companies to reach the target customers in a marketplace that is swamped by competitors. Various positioning strategies suggested by Al Ries and Jack Trout are discussed below. Getting into the mind of the consumer Getting into the mind of the customer is easier if the product or service happens to be the first in the market. It is very easy to remember who is first but very difficult to remember who is second. For instance, if you were asked to name the first man to land on moon, you would immediately say "Neil Armstrong" but if you were asked to name the second person to land on the moon, would you be able to confidently give the right answer – “Buzz Aldrin.” Similarly, in the marketplace, customers find it easy to remember products that were introduced first in the market. Subsequent products in that category, however good they may be, are difficult to bring to mind.

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Positioning of a leader It is traditionally believed that the number one brand in the market occupies twice the market share of number two brand. Likewise, the number two brand occupies twice the market share of number three brand. The success of a company is not just due to its successful marketing strategies, but a major reason is that it was first in the market. For instance, Xerox being the first in the plain-paper copier market was able to attain market leadership. However, the company failed several times to introduce products in other categories where it did not have market leadership. Another example is IBM, the market leader in manufacturing computers. When IBM tried to compete with Xerox in the copier market where it did not have first mover advantage, it failed. It is therefore important for a market leader to maintain its position by positioning its products intelligently. Most important of all, a market leader should not boast about its being number one in the market. The danger is that customers may believe that the insecurity of being number one in the market is forcing the company to do so. Positioning of a follower As already mentioned, if a brand is not the first that comes to mind, then it is better to identify an unoccupied position where the brand can be the first. For example, when large cars like Ambassador and Fiat were popular in India in the 80s, Maruti introduced a smaller car with an 800 cc capacity and it turned out to be immensely successful because it was the first in the small car segment. Repositioning the competition Marketers sometimes try to reposition their products. The reasons might be that competitors are also positioning for the same segment or that the market has become overcrowded or that the target segments do not turn out to be as attractive as forecasted. For example, When Tata Sumo of TELCO was introduced in the market, it was positioned on the “takes the rough with the smooth” and “the tough one” ideas. However, when Toyota’s Qualis was introduced in the market much earlier than expected and the rural market did not turn out to be as attractive as forecasted due to poor harvests in several states, TELCO had to reposition Sumo as a multi utility vehicle (MUV) suitable for the urban market. Before repositioning, it modified the design of Sumo. It redesigned the exterior, giving it a more urban look, took better care to soundproof the cabin, and added power steering and central locking to make the Sumo attractive for the urban segment. To communicate the change in the positioning, Tata Sumo came out with a teaser campaign in August 2001. Its advertisement in the leading newspapers said, “If you can identify the family vehicle shown here, don’t bother paying us for it.” Readers had to call a toll-free number to register their responses. Readers’ responses varied widely. In September 2001, the new look Sumo was unveiled and it received a favorable response in the market.

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The power of a name Creating a unique position for the brand in the mind of the customer becomes easy if the brand has a suitable name. Names like Uncle Chipps, Pepsodent, Close Up, Head & Shoulders, Clinic All Clear, Timex, Speed (branded petrol), etc reveal something about the product's utility and therefore have a large recall value for customers. These examples indicate the power of a name in positioning a product suitably. At the same time, condensing the company name into a series of initials may not help significantly because it tends to confuse the customer as to what business the company is involved in. This strategy may benefit large companies, but not small companies. DEMAND MEASUREMENT AND FORECAST A company conducts marketing research to find out the credibility of the product in the market, its sales patterns, buyer acceptance levels and, most importantly, to forecast future sales. Proper sales forecast results give the company an idea of various resource requirements such as finance to be acquired, the plant capacity, the human resource base, inventory levels, etc., which can then be planned for. Most of the time, sales forecasts are estimated on the basis of the market demand. Market demand may mean different things to different marketers, but the marketer needs to have a clear idea what it means to his company, and estimate it accordingly Market Classification The number of customers who are likely to become customers and buy a product represents the size of the market for a product. The concept of the market is understood in differing senses such as the potential market, the available market, the qualified available market, the target market and the penetrated market. A market, which represents the set of buyers interested in buying a product, constitutes a potential market. For example, all men aged above 18 years who shave regularly are potential customers for razors and other shaving accessories. The available market refers to the number of buyers who have an interest in the product as well as purchasing capacity and access to the market. When access to a product or a service is restricted to a certain group of customers, even though others have an interest in the product, purchasing capacity and access to the market, this restricted market is referred to as the qualified available market. For example, the government does not permit people below 21 years of age to enter pubs and bars. So, for bars or pubs, people above 21 constitute the qualified available market. The target market is the part of the available qualified market that a company is focusing its sales and promotional activities on. For example, if an educational institute starts a postgraduate program in Civil Engineering in Andhra Pradesh, all civil engineering graduates are the qualified available market. If the institute targets only civil engineers from Andhra Pradesh, they are its
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target customers. Similarly, when NIIT launched a computer course for housewives, all educated housewives became the target market for NIIT. The penetrated market is the market that comprises of customers who have already purchased the product. The Concept of Market Demand for Marketing The market demand for a product under a specified marketing activity is the sales volume of the product in the target market for a specified time period in a particular region. Market Potential The market potential refers to the optimum sales volume that can be reached where any further increase in marketing efforts will not have any significant impact in further increasing the sales in the given environment. A manager can assess the worldwide and countrywide market potential for pagers, for example, by using secondary and historical data on wireless telephone and paging service diffusion. To get an idea of the market potential for both paging and a related new service, he can use information such as the number of current subscribers, telephone infrastructure, population, gross national product, income distribution, travel patterns, occupations, and so forth. Company Demand Company demand is measured on the basis of its marketing efforts with respect to its competitors. The company's efforts such as effective promotional and advertising strategies, pricing patterns, distribution of the product and effective after sales service determine the company's market share of the product. If other factors remain constant, the market share of a company's product depends on the amount of expenditure spent on marketing relative to the competitors. Company Sales Forecast After determining the company demand, the firm must determine the level of marketing effort that is needed to generate an expected sales volume. The sales forecast refers to the amount of sales a firm expects to generate with a chosen marketing plan, in a given marketing environment. Here it is important to understand the interdependence between a company’s sales forecast and the marketing effort. It is often cited that a firm should develop its marketing plan on the basis of its sales forecast. However, this approach is effective only when company demand is non expansible i.e. market demand is not very much affected by the level of marketing expenditure. This method of developing a marketing plan should not be followed when the market demand is expansible or when the term “forecast” implies company sales. A company sales forecast as we have seen does not form a basis for determining the marketing expenditure. On the other hand, the company sales forecast is the result of a marketing plan.

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Sales Quota and Sales Budget The sales quota is the target that has been set for a particular marketing parameter; e.g. the parameter could be the marketing manager's sales in a region and/or the sales of a product range. The sales quota is normally defined in order to encourage efforts to push sales to the maximum possible limit. The sales budget is prepared on the basis of the estimations of sales forecasts and in general, a conservative estimate is used so that the expenditure involved in processing, sales and other related activities does not go out of control. Current Demand Estimation The current market demand can be estimated using environmental factors such as total market potential, area market potential, total industry sales, etc. The total market potential is the maximum market available to an industry under a given set of conditions. For example, the total market potential for a premium automobile product such as Mercedes Benz is the number of people in the highest income group not yet possessing the same car or any other equivalent car. We will look at examples of estimation of the current demand in consumer and industrial markets in the following paragraphs. For estimating the industrial market demand, let us take an example where we have to estimate the market potential of a product called SKO (Superior Kerosene Oil), which can be used as a substitute in large scale industrial generators. We have to first find out the list of all the industries, which are currently using diesel generators, then find out the potential customers who are willing to shift to a low cost substitute, then estimate the monthly or weekly requirement of the SKO in liters, and then finally analyze the capacity of the company to supply that quantity. Consumer markets are difficult to analyze, since the size of the market is huge compared to the industrial markets. Therefore, usually a marketer estimates the sales of a particular product in a specific region and then extrapolates it in proportion to the population of that area. For example, a laptop manufacturer wants to estimate the sales potential of laptops in India. He has the data for the sales potential of laptops in Karnataka. If this figure is 4% of the total population of Karnataka, he can extrapolate that the total market for laptops in India is around 4% of the total population of India. But unfortunately, we cannot estimate sales in this manner, as there are lots of other factors, which influence the sales of laptops. For instance, the maximum sales of laptops in India are in Bangalore, the capital city of Karnataka. Therefore, factors like computer literacy, number of technology savvy persons, etc. are some of the factors that affect the sales of such products. Future Demand Estimation Estimation of future demand is an essential part of any business activity. A good estimation gives a fair idea of the sales in the near future and helps in taking effective steps to realize the sales. Estimation for products which have fairly consistent sales, or which are frequently used
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products, is relatively easy compared to estimation for products whose sales keep fluctuating. The demand estimation techniques used for products with fluctuating sales should be highly effective and accurate, as estimating the future demand for such products carries immense significance to the marketer. The demand estimation process is generally carried out by research agencies, which observe environmental factors such as the effects of government regulations, population trends, etc. and then estimate the demand depending on the industry patterns for sales in the particular product range. Following this, the estimation depends on the firm’s performance on various parameters. These forecasts are made with the help of techniques such as the composite sales force opinion, survey of buyer intentions, expert opinions, etc. Composite sales force opinion Using the composite sales force opinion, the sales team is involved in estimating future demand patterns. The company asks its salespeople to estimate sales patterns in the near future depending upon their experience in the market. This method is reliable and advantageous, but does have certain inherent fallacies. A sales representative might underestimate demand, perhaps relying on some bad experiences he may have had in the immediate past. On the other hand, he/she might project the sales excessively high on the basis of positive experiences in the recent past. Different sales people project sales very differently on the basis of their intuition. However, the company must take measures to deal with this possibility by providing all the relevant and essential data about the market, competition and customers to the sales people. Providing incentives for proper projections also help motivate sales people, and make them more responsible. They will realize the importance of accurate estimation since the sales projections and targets that they have to achieve are being determined on this basis. Survey of buyer intentions Consumer behavior patterns are generally the most critical part of demand estimation. Consumers behave differently at different times, and therefore to forecast sales, it is essential to conduct consumer research surveys. These surveys are aimed at eliciting the factors, which will give an idea of the consumers’ demand patterns in the near future. For the launch of “New Coke” in 1985, Coca Cola conducted a customer survey as detailed in Exhibit 7.4. Though buyers reacted negatively to the new product it, Coca Cola went ahead with the launch, but it later had to withdraw the product from the market. Expert opinion The companies also sometimes seek the help of experts in the field to estimate sales on the basis of their experience and knowledge. These experts may be dealers, suppliers and consultants who can share their expertise in the projection of the future sales.
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Past sales analysis Companies also use past sales information for projecting future sales patterns. There are several techniques for this like time series projections. Exponential smoothing: This method looks at the weighted average of past sales giving a higher weightage to more recent sales. Statistical demand analysis: This method determines the effect of factors such as marketing expenditure and the price of the product on its sales. Econometric analysis: This type of analysis determines the sales system using statistical tools by developing sets of equations. Test marketing method Test marketing is nothing but testing the sales of the product in the market for a few days. Test marketing is employed for products where effective estimation is not possible, or where forecasting is not suitable for the products. For such products, directly testing the product in the market is preferred.

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UNIT III Product Levels Marketers plan their market offering at five levels, as shown in Figure 4-2. Each level adds more customer value, and together the five levels constitute a customer value hierarchy. The most fundamental level is the core benefit: the fundamental service or benefit that the customer is really buying. A hotel guest is buying “rest and sleep”; the purchaser of a drill is buying “holes.” Effective marketers therefore see themselves as providers of product benefits, not merely product features. At the second level, the marketer has to turn the core benefit into a basic product. Thus, a hotel room includes a bed, bathroom, towels, and closet. At the third level, the marketer prepares an expected product, a set of attributes and conditions that buyers normally expect when they buy the product. Hotel guests expect a clean bed, fresh towels, and so on. Because most hotels can meet this minimum expectation, the traveler normally will settle for whichever hotel is most convenient or least expensive. At the fourth level, the marketer prepares an augmented product that exceeds customer expectations. A hotel might include a remote-control television set, fresh flowers, and express check-in and checkout. Today’s competition essentially takes place at the product-augmentation level. (In less developed countries, competition takes place mostly at the expected product level.) Product augmentation leads the marketer to look at the user’s total consumption system: the way the user performs the tasks of getting, using, fixing, and disposing of the product. As Levitt notes: “The new competition is not between what companies produce in their factories, but between what they add to their factory output in the form of packaging, services, advertising,customer advice, financing, delivery arrangements, warehousing, and other things that people value.

Product Classifications In addition to understanding a product’s position in the hierarchy, the marketer also must understand how to classify the product on the basis of three characteristics: durability,

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tangibility, and consumer or industrial use. Each product classification is associated with a different marketing-mix strategy Durability and tangibility. Nondurable goods are tangible goods that are normally consumed in one or a few uses (such as beer and soap). Because these goods are consumed quickly and purchased frequently, the appropriate strategy is to make them available in many locations, charge only a small markup, and advertise heavily to induce trial and build preference. Durable goods are tangible goods that normally survive many uses (such as refrigerators). These products normally require more personal selling and service, command a higher margin, and require more seller guarantees. Services are intangible, inseparable, variable, and perishable products (such as haircuts or cell phone service), so they normally require more quality control, supplier credibility, and adaptability. Consumer-goods classification. Classified according to consumer shopping habits, these products include: convenience goods that are usually purchased frequently, immediately, and with a minimum of effort, such as newspapers; shopping goods that the customer, in the process of selection and purchase, characteristically compares on the basis of suitability, quality, price, and style, such as furniture; specialty goods with unique characteristics or brand identification, such as cars, for which a sufficient number of buyers are willing to make a special purchasing effort; and unsought goods that consumers do not know about or do not normally think of buying, such as smoke detectors. Dealers that sell specialty goods need not be conveniently located but must communicate their locations to buyers; unsought goods require more advertising and personal sales support. Industrial-goods classification. Materials and parts are goods that enter the manufacturer’s product completely. Raw materials can be either farm products (e.g. wheat) or natural products (e.g., lumber). Farm products are sold through intermediaries; natural products are generally sold through long-term supply contracts, for which price and delivery reliability are key purchase factors. Manufactured materials and parts fall into two categories: component materials (iron) and component parts (small motors); again, price and supplier reliability are important considerations. Capital items are long-lasting goods that facilitate developing or managing the finished product. They include two groups: installations (such as factories) and equipment (such as trucks and computers), both sold through personal selling. Supplies and business services are short-lasting goods and services that facilitate developing or managing the finished product. Decisions involved in Branding Selection of a Brand Name Selection of a brand name is crucial for the success of a brand. There are several factors that have to be considered before the brand name is selected. It is necessary to ensure that the brand name is easy to remember. It should have an easy recall value and people should be able to spell and pronounce it easily. The brand name should be such that it arouses curiosity when heard. A brand name, which arouses curiosity, will attract the attention of the target audience. Brand Strategy Decision A brand signifies some value to the customers and a brand strategy decision involves the necessary steps that have to be taken to deliver this value to the customers.

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Steps: identification of the availability of resources for allocating budgets for brand building, the commitment of the company, and its capability to take an initiative that is required. These steps form part of a brand building exercise and if an organization is unable to take such steps, the brand becomes a liability to the organization rather than an asset. The strategic implication of building a brand is that it should help improve the business of the organization. Line Extension A line extension is the development of a product that is closely related to one or more products in the existing product line but is designed specifically to meet the somewhat different needs of customers. For example, Godrej had a face cream with the name Fair Glow Fairness cream and came out with the Fair Glow toilet soaps to cater to the people who wished to use soap bars rather than cream. Brand Extension Brand extensions are brand names extended to new product categories. Market dynamics throw up opportunities for extending a brand in three forms: Extending the brand to another form of the same product: The primary benefit derived from both the products is the same. For instance, the benefit derived from brushing the teeth with either Colgate toothpaste or toothpowder is the same. The efficacy levels of both forms are assumed to be similar. Several brands have grown in value through this route. For example, Colgate is available both as a toothpaste and toothpowder. Similarly 'Vim bar' has been extended to a powder form. In the pharma sector, a branded anti-allergy medication from Dr Reddy's Laboratories sells both in syrup as well as tablet form. By offering the same brand in different forms, the marketer enhances the scope of application of a brand and reaches a larger audience. Product line extensions: Adding related products to a brand that is well established. A marketer resorts to this when he wants a brand to cover different sub-segments within the same product category. HLL extended its Flora brand of sunflower oil to the gingelly oil subsegment of the edible oils category. Such a move is common in very competitive markets. Reaching out to a new category: When the brand has the potential of providing benefits in another category – either through a carefully chosen name or through its wide acceptance in a category, this form of extension is followed. Godrej Consumer Products extended its Fair Glow brand, having a presence in fairness creams, to soaps. By extending the brand to soaps, the assurance that Fair Glow promoted fairness was expected to easily flow to soaps as well. The brand enables this extension conveniently by standing for a product that promises fairness. Packaging Decisions Packaging Packaging is the process of developing a design and a container for a product. Packaging adds value to the product in the form of easier handling and secured usage. Packaging plays a prominent role in the sales of a product since a properly packaged product will result in repeat purchases by the customers. A secured, transparent and easy-to-use packaging will have better sales. A clear transparent packaging will help the customers view the contents of the product and will help them in their purchase decision-making.

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Labeling Labeling is the process of exhibiting important information on the product's package. Labeling has become increasingly important and legally essential. Manufacturers have to display the ingredients of the product on the package, with warnings and safety precautions along with instructions about the best possible utilisation of the product. The Government of India encourages the manufacture of products that are eco-friendly. One such step in this direction is to provide a labeling with the name 'ECOMARK' for those products that meet certain criteria. Such criteria could lead to effective reduction in the harm caused to the environment, when such products are disposed of. The Government of India issues this ECOMARK, when the products meet the set standards along with the requirements of the Indian Standards Institute. This process has been started to encourage the industries in India to contribute to the protection of the environment. Universal Product Codes Labeling many products is done by attaching a universal product code which consists of a unique sequence of lines that identifies a product with the help of an electronic scanner usually placed at the retail checkout counters. In India, the usage of the bar code started in the 1990's with the Indian Institutes of Technologies (IITs) using it for coding their library books. The concept was later introduced in retail outlets like Food World. Most of the logistics firms are increasingly using the bar coding technology in India. Bar codes, however cannot help a firm in effectively tackling piracy or imitations. But it has advantages like reducing the amount of data entry work. EAN (European Article Number), a Delhi-based organization, is responsible for issuing bar codes for products. The Government of India has made it compulsory for exporters to bar code their products. Product Mix Decisions The product mix is the set of all the products that an organization offers to its customers. For instance HLL offers detergents, shampoos, hair care products, cosmetics, beverages, health care products, ice creams, etc. A product mix consists of all the product mix lines and categories. It has a certain characteristic features like product width, length, depth and consistency. Width: This is the total number of product lines a company carries. In Table 11.1 we see that HLL's product mix width consists of 10 lines. Length: The length of the product mix is the total number of items in that mix. In our example of HLL (Table 11.1), it is 46. The average length of a line is obtained by dividing the total length by the number of lines i.e. 46/10 = 4.6 Depth: The depth of a product mix is the assortment of sizes, colors and variations offered for each product in the product line, for example, Lifebuoy Active Red comes in three sizes: 125gm, 100gm and 60gm cakes. Consistency: Consistency refers to the closeness exhibited by the products lines in production requirements, distribution, end usage, etc. For instance, most of the HLL product lines are consistent as they are consumer goods, distributed by the same channels of distribution and are produced in similar manufacturing facilities.

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Product Mix Strategies Manufacturers and middlemen use several strategies to manage their product mix effectively. We will discuss a few of these strategies here. Expansion of product mix: An organization may opt to expand its existing product mix by increasing its product lines and/or the depth within the line. New product lines may be either related or unrelated to the existing product lines. Table 11.1: Product Mix of HLL

Contraction of product mix: It has been noted that companies contract their product mix during economic slumps, and when the competition is intense. Organizations contract their product mix either by eliminating the entire product line or by simplifying the assortments within the lines. The product mix is contracted to eliminate low profit yielding products and to get a better profit margin from fewer products. Altering existing products: Companies should consider altering the existing products instead of adding new products to their product mix. Redesigning or adding new features to the existing product can prove to be less risky and more lucrative. Packaging is an equally important tool in altering the look and the usage of the product. Creative packaging has been found to increase the attractiveness of even mundane products like cheese, paper napkins, eggs, etc. For example, the tetra pack of milk/juices increases the ease of handling and storage. Colgate toothpaste's plastic packaging makes it easy to use and dispense the product.

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STAGES OF NEW PRODUCT DEVELOPMENT Before the introduction of a product into the market it goes through several stages of development. These stages of development usually include (a) idea generation, (b) screening, (c) concept testing and business analysis, (d) product development, (e) test marketing and (f) commercialization. Idea Generation Companies seek new ideas to enhance the performance of their existing products and/or to innovate new products. The act of searching for new ideas is called idea generation. New product ideas can come from customers, dealers, in-company resources, advertising agencies and the external research consultants. But the main source of ideas for generating new products or improving the existing product is the customers. Their complaints and grievances are a rich source of ideas. This is true in case of customer products as well as industrial products. Most companies prefer user stimulus strategies and announce attractive prizes for people who suggest ideas. Idea Screening The main purpose of idea generation is to collect a large number of ideas. However, not all ideas can be commercially viable. Therefore, companies filter the less viable ideas with the help of a systematic process. Companies can use various parameters to screen the ideas such as market size, technical capabilities, potential competition, compatibility with the known customer needs, etc. Addressing the following issues will also help companies analyze the attractiveness of ideas: The main purpose of idea screening is to reduce the number of ideas to a manageable few that deserve further attention for development. Screening calls for spotting good ideas and dropping poor ones as soon as possible. If poor ideas are not dropped at the appropriate time, the company will have to bear the expense of product development and disposal. Therefore, marketers must be prudent in selecting the ideas. Concept Testing and Analysis After passing the initial screening stage, the product idea proceeds to the next stage i.e. concept testing. Concept testing is one of the crucial stages of product development. But companies often do not take this stage seriously or omit it completely. As a result, many new products fail. They fail because they reflect only the preferences and capabilities of the company and not the customer needs or product benefits that significantly distinguish them from competitive offerings. Marketers use various tools to explain the product attributes, like drawings, sample designs, computer aided designs and virtual reality programs, etc. Companies use research like a focus group survey and/or broad market survey to collect the feedback about customer needs, perceived value, believability of the idea, comparison with competitive products, and purchase intentions. The results of concept testing help in understanding what attributes and benefits a customer is looking for in a product.
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Business analysis After testing the product concept, the firm makes a plan for developing, producing, and marketing the new product. This requires research on the market size, competitive structure and preliminary technical analysis for providing the basis for the design and production approach, and also the appropriate legal and patent search. Business analysis is the first in-depth financial evaluation of the new-product to be developed. It undergoes several revisions. Business analysis is considered as one of the important stages in the new product development process, as it involves estimating the total investment required in developing the product and the expected sales. Total sales estimation Total estimated sales are a sum of the estimated first-time sales, replacement sales and repeat sales. For one time purchased products, sales rise at the beginning, peak and later approach zero. For infrequently purchased products such as cars, replacement cycles are dictated by physical wearing out or by obsolescence. Sales forecasting calls for estimating first-time sales and replacement sales separately. In case of frequently purchased products, the number of first time buyers initially increases and then decreases. If repeat purchases occur soon after the first purchase, it indicates that the product satisfies some buyers. Estimating costs and profits The R&D, manufacturing, marketing and finance departments estimate the cost. The profitability of the new product is estimated through various financial tools. Break-even analysis is the simplest technique which estimates the number of units of a product a company would have to sell to break even with the given price and cost structure. Product Development After completing concept testing and business evaluation, the next stage involves the actual product development. In this stage, detailed technical analysis is conducted to know whether the product can be produced at costs low enough to make the final price attractive to the customers. A working model or a prototype is developed which reveals all the tangible and intangible attributes of the product. These prototypes are developed in limited numbers for customer testing purposes. Product use testing Marketers identify a sample of target customer group to test the functionality of the prototype and the final product. They can select the sample from either the employees of the company or volunteers who will test the product. The prototype developed is tested for its feasibility and functionality. Product testing is carried out to evaluate the product characteristics and examine
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the functional performance of the product. It gives useful information like customers’ first impression about the product and provides early use experiences of the customers and their further expectations. Product testing further helps in: Test Marketing Test marketing is the stage where the product is introduced in a few select cities. Test marketing comes with its own cost. The company bears the following expenses: i.High advertising costs considering the low volume, ii.High manufacturing costs because of lack of economies of scale, iii.High distribution costs, because of low volumes iv.Other costs like cost of distributing samples, coupons, etc. Commercialization The results of test marketing help marketers decide the changes that are needed in the marketing mix before entering the market. It also helps the marketers decide the amount of production, the distribution strategy, selling efforts and other issues like providing guarantees, warranties, post purchase repair and replacement services etc. PRODUCT LIFE CYCLE Product life cycle (PLC) analysis is a very valuable tool in the hands of a marketer. As shown in Figure 11.2, a typical product goes through four stages in its life, i.e. (a) introduction, (b) growth, (c) maturity and (d) decline. And it varies according to the type of product. Studying the patterns of PLC, from time to time, helps the business to prosper. It gives marketers a better understanding in managing their profitable products and eliminating the unprofitable ones. As the product moves from one stage of its life cycle to another, marketers try to evaluate and adjust strategies for promoting, pricing and distributing the product. We will explain the various stages below. Introduction In the introduction stage, the product is introduced to the customer. Introducing a new product is difficult because (a) only a few sellers can afford the technological know-how, marketing and other costs to launch the product and (b), the risk of new product failure is quite high. The introduction stage is marked by zero profits and negative or negligible sales. This is because initial revenues generated are low. Promotional expenses are at their highest because the company needs to (i) inform the customer about the product (ii) induce product trial and (iii) secure distribution in retail outlets. Advertising is one of the most effective tools at this stage of

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PLC because marketers must communicate their product's features, usage and advantages to potential customers.

Figure 11.2: The Four Stages of the Product Life Cycle

Strategies for introduction stage Marketers can set the price, promotion, distribution and quality of the product as either high or low, for the introduction of a new product. Keeping only price and promotion in mind, a marketer can adopt strategies like: Rapid skimming: Using this strategy, marketers launch the product at a higher price and higher promotional level to skim the market rapidly. This strategy is more successful when a large part of the potential market is unaware of the product. Using this strategy, the firm tries to build brand preferences. Slow skimming: This strategy calls for launching the new product at a higher price and a low promotional level. This strategy is feasible when the market is aware of the product, the market size is limited, competition is not intense and the customers are ready to pay a higher price for the product.
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Rapid penetration: Rapid penetration demands the launching of a product at a lower price and with heavy promotion. This strategy is applied when the market is large in size, customers are unaware of the product, they are more price sensitive, there is a strong competition among firms, and the unit manufacturing cost comes down with the company's scale of production. Slow penetration: Slow penetration calls for launching the new product at a lower price and a low level of promotion. Marketers resort to this strategy when the market is large in size, the customers are highly aware of the product, they are price sensitive, and there exists some potential competition in the market. Growth The introduction stage is followed by the growth stage. The growth stage is crucial for the product's survival in the market because the reactions of the competitors to the product's success will affect the product's life expectancy. This stage is characterised by increase in sales, heavy demand for the product and peaking of profits. New firms enter the market in the growth stage, attracted by the promising opportunities in the market. They introduce new product features and a wider distribution network. Companies increase their level of promotional expenditure to meet the competition. The profit of the firm increases initially as (a) promotional costs are spread over a larger volume and (b) the unit manufacturing cost falls. At a later phase in growth stage, the profits begin to decline as competition increases, forcing the lowering of prices and heavy spending on promotion. Strategies for the growth stage Firms use various strategies to cash in on the growth in the market, as quickly as possible. (a) They restore to aggressive pricing, including price cuts to attract price sensitive customers. (b) They emphasize the product's benefits in order to create a competitive niche in the market. (c) They try to improve product quality and add new features and models. Other changes brought about to the product include making the product available in different sizes, flavors, etc. (d) They may introduce new distribution channels. (e) They enter new markets.

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Maturity The maturity stage is marked by a steady decline in profits. The sales tend to (a) grow, (b) stabilise and (c) then start to decline (refer the sales curve in Figure 11.2). The sales growth rate slows down as the distribution channels get exhausted. Then the sales tend to flatten or stabilize on a per capita basis as the market reaches its saturation. And finally the sales start declining and customers try out new products and substitutes. Competition is fierce at this stage as many brands compete at the same time. Each competitor tries to improve his product and highlight the product benefits. Weaker competitors and smaller firms are squeezed out of the market. Strategies for the maturity stage Firms adapt various strategies to stimulate sales in the maturity stage, like: Abandon weaker products and concentrate more on profitable products. Increase advertising and sales promotion. Marketers resort to introducing fresh advertising campaigns, new packaging and even product re-launches during this stage. Invest more in R&D to bring about improvements in the product and product line extensions. Divest the business through disposal of assets. Limitations of PLC concept The PLC concept helps in making marketing decisions but it needs to be implemented with care. Managers need to be aware of the limitations of the PLC so that they are not misled by its prescriptions. The sales of some products rise quickly and may decline at the same rate. However, some products may continue at the same stage for long. For example, Cadbury's Dairy Milk chocolate has survived for decades in the mature stage of the PLC. Increase in marketing activities like promotion may alter the shape of the PLC's sales curve to a considerable extent. For example, an increase in advertising at the maturity and or decline stages may increase the length of these phases. The PLC outlines the phases but does not give any indication as regards to their duration i.e. duration of introduction, growth, maturity stages. This limits its use as a forecasting tool since it is not possible to predict when maturity/decline will begin.

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Pricing The Process of Setting Prices Setting the price involves the following steps:
• • • • •

Setting pricing objectives Factors affecting demand determination Analyzing the pricing of the competitors Selection of a pricing method The selection of pricing policy

Pricing Methods Mark-up pricing Firms fix a selling price on the products they produce, which normally exceeds the costs incurred in producing these products. In this type of pricing, a marketer adds a mark-up on its cost of the product. Mark-up pricing is most common in retailing, where a retailer buys a product for resale. For example, if a retailer incurs a cost of Rs.85 to buy a product, he might add a mark-up of Rs.15 and fix the selling price of the product at Rs.100. Mark-up is most normally expressed as a percentage of the cost or a percentage of the selling price. In the above example, the markup expressed as a percentage of the cost and as a percentage of the selling price is shown below.

Target return pricing The target return pricing is set by marketers to achieve a specified rate of return on their investments. The companies, which fix a return on their investment, are usually the leaders in their industry. General Motors, General Electric, Dupont are examples of companies, which have linked the prices of their products to this objective. A marketer can fix the prices of his products on the basis of target returns that he is expecting on the investment with the help of following formulae:

Suppose a marketer produces a product and the cost of each unit is Rs 200. He made an investment of Rs. 100,000 to set up his business. He expects that he will be able to sell 500 units of the product and obtain 15 percent return on his investment. He will price his product at
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Perceived value pricing In this type (perceived value) of pricing, marketers set the prices of the products on the basis of their perceived value in the minds of customers. Perceived value is calculated as a weighted average of the products’ perceived attribute scores. Marketers normally use advertising and sales promotional activities to enhance the perceived value of the product in the market. Firms may conduct market surveys to analyze customers’ perceptions about the value of the product. This will help marketers efficiently set the prices for their products. Dupont follows perceived value pricing for its products. However, there is an inherent risk in using this method. If the marketer underestimates the value of the product based on the customer’s belief of the perceived value of the product, he will charge less than what he actually can from the customers and he will not be able to maximize his profits. Similarly, if the marketer overestimates the value of the product, the customers will not buy the product and it will be difficult for him to survive in the market. Going rate pricing Going rate pricing is a simple method in which a company simply follows the prevailing pricing patterns in the market. The company adopts a pricing strategy similar to those adopted by the major players in the market or may slightly adjust its prices to suit the company’s systems and processes. Generally, in this method, marketers give importance to price changes made by the market leader and alter their own prices accordingly, rather than changing the prices according to the demand patterns of the company’s product in the market. Sealed bid pricing In some markets, business is carried out on the basis of sealed bids rather than on the basis of openly setting prices for products. This type of pricing is more suitable for industrial products. Many companies compete in this process, where the price of the product or service is usually quoted in a sealed cover. This method is adopted for the products that do not possess a market price or for products for which it is difficult to fix the price owing to attributes like varying levels of quality and specifications. The sealed bid method is usually followed in government organizations. Whenever a government organization needs to purchase a product or service, it is required to call for bids and several companies are invited to quote their prices in a sealed form. After receiving the sealed bids, the organization will normally purchase the product or service from the company, which has bid the least price. Differentiated pricing In differentiated pricing, marketers adopt different prices for the same product at different locations or for different types of customers. For instance, the cost of a 250 ml Pepsi may cost Rs.8 in a supermarket, Rs.10 in a cinema hall and Rs.12 in a restaurant. Thus, even though the
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product is the same, it is sold at different prices at different locations. This pricing method, if used effectively, will help a company increase its profits. Another example of differentiated pricing can be seen in the service provided by Andhra Pradesh State Road Transport Corporation (APSRTC), which offers tickets at a lower cost to regular travelers through various schemes, than to those who only travel occasionally. Similarly, at hill stations, hotels keep different prices for summer and winter seasons. Value pricing Value pricing is a method in which marketers offer low prices for high quality products or services. The idea of value pricing is to help the customers perceive that they are getting a high quality product at a low price. Value pricing is not implemented as a response to the pricing patterns of the competitors. On the contrary, it is an outcome of improved research and development that helps the company deliver high quality goods at low prices. For example, The Times of India started a revolution in the newspaper market by offering the daily newspaper for as less as Re.1 on some days of the week. Similarly, in the shampoo and detergent markets, HLL and P&G have recently reduced their prices by 15-20% in an attempt to send a message to customer that they are getting better value for their money. Market skimming Marketers usually adopt such an objective when they develop unique and innovative products or a breakthrough technology. Certain companies prefer to set high prices for their products and recover the costs incurred in developing and producing them as early as possible. It becomes necessary for a marketer to do this if he feels that the product being developed or the technology being utilized has a short life cycle. Intel, the chip producer, adopted this strategy. However, this strategy has an inherent disadvantage. If the competitor prices his products lower than the firm’s prices, it may result in the firm losing significant market share. Distribution Channels & Levels The producer and the final customer are part of every channel. We will use the number of intermediary levels to designate the length of a channel. Figure 5-3a illustrates several consumergoods marketing channels of different lengths, while Figure 5-3b illustrates industrial marketing channels. A zero-level channel (also called a direct-marketing channel) consists of a manufacturer selling directly to the final customer through Internet selling, door-to-door sales, home parties, mail order, telemarketing, TV selling, manufacturer-owned stores, and other methods. A one-level channel contains one selling intermediary, such as a retailer. A two-level channel contains two intermediaries; a three-level channel contains three intermediaries. From the producer’s point of view, obtaining information about end users and exercising control becomes more difficult as the number of channel levels increases. Channels normally describe a forward movement of products. One can also talk about backward channels, which recycle trash and old or obsolete products no longer used by customers. Several intermediaries play a role in backward channels, including manufacturers’ redemption centers,

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community groups, traditional intermediaries such as soft-drink intermediaries, trash-collection specialists, recycling centers, trash recycling brokers, and central-processing warehousing.

Channel Management Decisions Channel Member Selection Modern management practices suggest that organizations must focus their attention on developing their core competencies. The firms should try to outsource activities, if the outside agencies can perform those activities better than the firm itself. However, firms should not outsource their critical activities. A substantial amount of time should be invested in developing better relationships amongst the channel members. Recruiting and selecting the right channel partners is a crucial managerial aspect of any firm. Before actually recruiting the channel members, certain aspects of selection should be clearly defined. These include the exact role that each channel members will play, the expected qualifications of the channel members, and the duties and tasks of each channel member. Subsequently, a screening process eliminates incompatible channel partners. Finally, the selection of the channel partners is made on the basis of the evaluation of the channel member’s sales efficiency, product knowledge, experience, administrative ability and the risk factors involved in selecting a particular channel member.

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Channel Members’ Training The training of channel members is important for manufacturers, because it is the channel members who actually deal with the end customers and not the manufacturers. Most manufacturers offer distributor training programs to help channel members increase their efficiency in performing the various business activities. For instance, Ford offers training programs to its dealers through the satellite-based Fordstar network. Through this network, Ford provides online training to more than 6,000 dealers. Member Motivation and Evaluation After careful selection of the channel members and assigning them their responsibilities, it is very important for the manufacturers to motivate them continuously to improve their performance. One of the strategies used for motivating channel members is relationship marketing wherein the manufacturer tries to forge better and stronger relations with the distributors so that they perform to their best possible levels. A suitable reward structure also helps manufacturers motivate channel members. Manufacturers can have different tiers of rewards to motivate channel members. Those who bring the highest business should be given the maximum rewards. Similarly, manufacturers can call their channel members and give rewards and recognition in the presence of others. This will motivate the one who gets the reward and recognition and others as well to perform better. The company can also motivate the channel members by helping distributors improve their supply chain, reduce their capital employed, operating costs and risks involved, enhance customer finance schemes and adopt other measures like improving the sales promotional activities, and so on. The company can also motivate channel members by initiating cooperative programs, providing advertising allowances, training the distributor’s sales force, providing payments for displays, and providing commission on higher sales. The company can facilitate the setting up of distributor advisory councils that help distributors to regularly meet to discuss crucial issues and the problems faced by them and communicate the same to the top management of the company. Modifying Channel Arrangement Modifying channel arrangements becomes necessary when consumers’ purchase patterns change or when rapid expansion of the market takes place or when a new competitor comes into the market or when the existing channel technology becomes obsolete and is not sufficient to carry on the business. Promotion Mix Advertising Advertising is a paid form of non personal presentation of goods or services by an identified sponsor. It can be done using any form of media like television, radio, print media, etc. A firm
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has the flexibility of choosing the target market while advertising. It can advertise its product/service in the local newspaper to reach a small geographical area. If it is looking for national reach, the firm can advertise its product/service on the television through a national channel like Doordarshan or any other television channel depending on the target audience. Advertising allows firms to communicate with the intended audience in the most interesting format using actions and dramas. It helps in generating faster response in the form of increased sales. However, the interactivity with the audience is negligible and their feedback is indirect. Sales Promotion Sales promotion is a form of attracting the consumers by offering them various benefits in the form of incentives or by adding value to the products (Refer Exhibit 19.2). Sales promotions are generally aimed at resellers and final consumers. The various kinds of sales promotional tools include coupons, discounts, rebates, samples, etc. Most often organizations spend more money on sales promotions than on advertising. Although sales promotion is often considered a shortterm tool to achieve immediate benefits in the form of increased sales, sales promotional activities like event sponsorships, trade shows and such are used for attaining long-term benefits in the market. Publicity Publicity is a non-paid form of communicating information about the company or the product or both as a news article in newspapers or television or radio. Studies have shown that people attach a lot of importance to news articles and read them with greater attention as compared to advertisements in newspapers. Also, people give much more importance to the product or service details given in a news report than in an advertisement, because they perceive news report to be more credible. Efforts like generating repeated exposures will also help marketers effectively communicate the desired message. Therefore, managing the marketing communication mix with appropriate and timely publicity through newspaper articles, coupled with attractive public relation campaigns helps marketers to a great extent. Public Relations Public relations is essentially a function of an organization, where it tends to develop and manage its goodwill in the market. The primary aim is to create a suitable environment for the firm. Public relations helps organizations create a positive opinion about the firm in the market through appropriate communications. An organization can develop its public relations with several member groups such as suppliers, customers, employees, the government, shareholders, distributors, members of the public, etc. In the current market scenario, customers look forward to having business dealings with companies that are good corporate citizens. Therefore, companies should not neglect public relations because though it does not induce any immediate customer action, it produces positive results for an organization in the long-run. Exhibit 19.3 discusses the importance of public relations for an organization.
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Personal Selling Personal selling is the form of selling a product or a service directly to the consumer by explaining or demonstrating the features of the product to him/her. Personal selling is highly specific, with regard to the target audience. The costs involved are high as the salesperson has to personally meet every potential customer. Personal selling has a high impact on the consumers and the feedback is also almost immediate. This form of marketing is the most effective way of communicating a company’s marketing message, because it involves direct interaction between the marketer and the customer. It helps the marketer receive immediate feedback from the customer. Being a high cost marketing tool, personal selling is usually implemented for high cost products and services that need detailed demonstrations of product usage and have limited target markets. Personal selling is normally done for industrial products and is used as a support activity for advertising in consumer goods marketing. Direct Marketing In direct marketing, organizations communicate directly with the customers through mail or telemarketing or marketing through the Internet. This is a popular form of communication for certain types of services like real estate. Amway is the global giant in direct marketing with a product portfolio of 450 products and operations in over 80 countries. Amway’s direct marketing efforts are discussed in Exhibit 19.4. In direct marketing, there is a non face-to-face interaction with customers, to persuade them to immediately respond to the marketing effort and initiate an action. Direct marketing activities such as telemarketing, mailers, catalogs, etc. Have been gaining popularity over the years. The greatest advantage of direct marketing is that it is highly cost effective and gives the maximum mileage. Unlike other marketing tools like advertising, the response can be easily measured with accuracy in direct marketing since it persuades the customer to take immediate action. So, the success or failure of the marketing effort can be immediately known. Direct marketing tools are used to communicate with both consumer markets and industrial markets through telemarketing, mailers, catalogs, etc.

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UNIT IV Model Of Consumer Behaviour (Stimulus-Response Model Of Buyer Behaviour) Consumers make many buying decisions every day. Most companies are interested to know what consumers buy, where they buy, how and how much they buy, when they buy, and why they buy. But learning about the consumer buying behavior is not easy task The central question for marketers is how consumers respond to various marketing stimuli The company that understands how consumers will respond to different product features, prices, and advertising appeals has a great advantage over its competitors. The starting point is the stimulus-response model of buyer behavior This figure shows that marketing and other stimuli enter the consumer’s “black box” and produce certain responses. Marketing stimuli consist of the four Ps: product, price, place, and promotion. Other stimuli include major forces and events in the buyer’s environment: economic, technological, political, and cultural. All these inputs enter the buyer’s black box, where they are turned into a set of observable buyer responses: product choice, brand choice, dealer choice, purchase timing, and purchase amount. The marketer wants to understand how the stimuli are changed into responses inside the consumer’s black box, which has two parts. First, the buyer’s characteristics influence how he or she perceives and reacts to the stimuli. Second, the buyer’s decision process itself affects the buyer’s behaviour. Stages of the consumption process: Pre-purchase: problem recognition & information search Purchase: mental evaluations & making of decision Post-purchase: The activities that the consumer undertakes after the purchase and includes; how he uses the product, his degree of satisfaction, and actions taken after the purchase is made. Participants in the buying process (The D.M.U.-Decision Making Unit) The marketer needs to know which people are involved in the buying decision. People might play any of several roles in the buying decision process; Initiator: the person who first suggests or thinks of an idea of buying a particular product or service i.e. who initiates the buying decision. Influencer: a person whose views or advices carries some weight in making the final decision. Decider: is the one who ultimately makes a buying decision or any part of it, i.e. whether to buy, what to buy, where to buy. One or more people may be a decider. Buyer: the person who makes the actual purchase. User: the person who uses or consumes the product. A company needs to identify who occupies these roles because they affect product design, promotion, and other marketing strategy

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7 O’S Framework of Understanding Consumer Behaviour: Who is the customer? Occupants what does the consumer buy? Objects why did they buy? Objectives Who participate in the process? Organisation When did they buy? Occasions Where do they buy/ Outlets How did they buy? Operations

Factors Affecting Consumer Buying Behaviour Internal Factors These are Needs, Motivation, Perception, Learning, Beliefs, and Attitudes. External Factors 1) Culture: It refers to the ways of life of a people. It is a set of socially transmited beliefs, attitudes, norms and customs. Culture is learned from parents, teachers, and society in general. Culture describes the prescribed acceptable behaviours and norms of a society. Marketers has to understand the changes in cultural shifts in a society in order to capture opportunities to serve them in a better manners. Any marketer must be familiar with the culture of the people they wish to sell to. 2) Social classes: It is the division of the society into groups. It is also known as social stratification. Social functions have to be performed by a society for it to survive. Stratification in the world is done on the bases of education, occupation, income or economic and political station. In some societies eight to nine strata were found but in most of the society three classes were found i.e Upper class, middle class and lower class. Reference groups: Reference group is a group of people who have direct or indirect influence on the individuals behaviour. It acts as point of comparison or refence point/frame of reference for an individual’s behaviour. Reference groups can be classified in to many Types; based on the degree of involvement we can classify into two groups i.e primary and secondary groups. Primary groups: - these are groups that are small and very close to the consumer. The consumer has direct contact with group members and often has face-to-face communication with them. They include the family, co-workers and those one spends his leisure time with.

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Secondary groups: - are larger rger an and less intimate than the primary group. The he consumer co contact with this group may not be as fre frequent as those of the primary groups. They hey include in religious organizations, professional organiz rganizations, clubs, unions, etc. Rationale groups; - these are m membership groups that a person may join. oin. They T engage in activities which interest the consum consumer to express his idea, be guided and influence luenced in the type of goods consumed. They include de YM YMCA, YWCA, scouting movement, etc. 4) Role of Opinion leaders: These are the pace setters or tre trend setters. They are the people who will ill first fir venture into sampling a new product before ore the others. They would then give information n to the th others before they commit themselves to buy uy the product or service. The opinion leaders or the pace setters are respected and serve as a source rce of advice to the rest. Characteristics of opinion ion leaders lea are; 5) The Family A Family comprises of two wo or more persons living together connected ed through thr blood or marriage or adoption and stay ay tog together. Different family structures were observed served in the socieity i.e married couples, nucle nuclear family (parents and children) n) and a extended family(parents+children+grandpar andparents+uncles). Members of a family have a role rol in the buying process and the roles will depend epend on the product purchased. There are three e important impo players in the family, they are husband, , wife and children. These roles may be grouped as; Wife dominated decisions. Husband dominated decisions

Stages in the adoption Process The Consumer Buying Decision cision Process It is made up of the following g five steps;

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STEPS IN CONSUMER BUYING DECISION PROCESS: 1)Problem recognition; It is the stage when the individual recognizes a need or problem to be satisfied or solved. The need can be triggered by either an internal stimulus (hunger, thirst, or sex), or externalstimulus (bread, car, or ad) 2)Information research; Of key interest to the marketer are the major information sources: Personal source- family neighbours, acquaintances Commercial sources- sales persons, dealers , packaging displays Public sources- mass media, consumer-rating organizations Experiential sources- handling, examining, or using the product The relative amount and influence of these information sources vary with the product category and buyer’s characteristics. 3) Evaluation of alternatives; The consumer develops a set of brand beliefs about a brand, which make up the brand image. The brand image will vary with his/her experiences as filtered by the effects ofselective perception, selective distortion and selective retention. The consumer may evaluate brands on the basis of price, product design, colour, packaging, aftersales service, etc. 4) Purchase decision; Having evaluated various solutions, the buyer may develop a predisposition to make a purchase. However, two factors can intervene between the purchase intention and the purchase decision that may change the purchase intention, e.g. The attitude of others Unanticipated situational factors In executing a purchase intention, the consumer may take up to five purchase sub-decisions; A brand decision (brand A) Vendor decision (dealer 2) Quantity decision (1 computer) Timng decision (weekend) Payment method decision (cash/credit) 5) Post purchase behaviour; The consumer will experience some level of satisfaction or dissatisfaction. Buyers do not follow the general decision sequence at all times. The procedure may vary depending upon; The time available Levels of perceived risk The degree of involvement a buyer has with a product. Marketers should provide after sales service and support to assure customer satisfaction.

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Organizational/ Industrial Buyer Behaviour Businesses ask themselves the same questions as consumer marketers i.e. who are our buyers and what are their needs. How do buyers make their buying decisions and what factors influence these decisions? What marketing programs will be most effective? Definition: industrial buying is the decision making process by which formal organizations establish the need to purchase products and identify, evaluate and choose among alternative brands and suppliers. Types of organizational markets; 1) The industrial market; It consists of all organizations acquiring goods and services that enter into the production of other goods and services that are sold or supplied to others. It is the largest organizational market. 2) Reseller market; It consists of all individuals and organizations that acquire goods for the purpose of reselling them to others for a profit. Resellers buy products for resale and for conducting their operations e.g. wholesalers. 3) Government market; It consists of government units from central and local government that purchase or rent goods and services for carrying out their main functions. 4) The institutional market; It is made up of hotels, hospitals, schools, colleges and other institutions that also buy goods and services. Differences between Organizational and Consumer markets In some ways organizational markets are similar to consumer markets- both involve people who assume buying roles and make purchase decisions to satisfy needs. But there are differences stemming from market structure, demand, product characteristics, promotion, distribution channels, price, nature of buying unit, and the decision process. 1. Market characteristics Size: usually industrial consumers are few in number but purchase larger volumes on a repeat basis. Geographic concentration: industrial consumers tend to concentrate in specific areas especially urban areas. Competition: industrial organizations are more directly involved in international purchasing. 2. Product characteristics; In industrial markets products are purchased as component parts of other products. More emphasis is given to the technical aspect of the product. Purchases of industrial products are usually governed by customer specifications. Buyer characteristics; Typical consumer buyers have little knowledge of the product they purchase as contrasted with industrial buyers who are professionally and technically trained. Many industrial purchases involve large sums of money; technically complex products and decisions to purchase take longer and involve several people. 4. Reciprocity; Industrial buyers often select suppliers who may also buy from them e.g. a paper company that buys needed chemicals from a chemical company that in turn buy’s the company’s paper.
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5. Channel characteristics; In industrial markets, channels are direct where buyers often buy from producers rather than through middlemen. 6. Promotional characteristics; Personal selling is the dominant mode of promotion in industrial markets and advertising may only be used to lay a foundation for personal selling. Sales people act as consultants. 7. Price; Generally in industrial buying, price takes less prominence. Factors of interest are quality, product consistency, certainty and timeless of delivery, service and technical support. 8. Demand; Demand for industrial products is derived demand. It ultimately comes from demand for consumer goods. A cloth manufacturer buys cotton because consumers buy cloth. If consumers demand for cloths declines, so will the demand for cotton and all other products used to make cloth. The demand is also inelastic in organizational markets i.e. total demand is not much affected by price changes especially in the short-run e.g. a drop in the price of leather will not cause shoe manufacturers to buy more leather unless it results in lower shoe prices that in turn would increase customer demand for shoes. Participants in the industrial buying process- The buying centre This is the group of people who make the buying decision. The group consists of all people who influence, whether positive or negative, at one or more stages of the purchasing process. The Decision Making Unit (D.M.U) has people playing the following roles; The gate keeper: he controls the flow of information, ideas and instructions. Such roles may be played by the receptionist/secretary who controls the buying organization’s diary. A gate keeper could also be a specialist who can feed relevant information to the rest of the D.M.U. Influencers: are people such as engineers, accountants or the board of directors. They help define product specifications and provide information for evaluating alternatives. Technical personnel are particularly important influencers. Users: are members of the organization who will use the product. In many cases they initiate the buying proposal and help define product specifications. Buyers: they are people with formal authority to select the supplier and arrange terms of purchase. They negotiate with the selected supplier on issues such as price, delivery time, mode of delivery, etc. Deciders: are people who have formal or informal power to select or approve the final suppliers. In routine or straight buying, the buyers are often the deciders. The buying centre concept presents a challenge to the industrial marketer who must learn the following; Who is involved in the decision? What decisions do they make? What is their relative degree of influence? What evaluative criteria does each participant use? Only when the above questions have been answered can the supplier plan the campaign to inform the key persons within the D.M.U. A multi-faceted attack may be necessary, involving direct mail, personal contact, as well as the use of advertising.
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1.

2.

3. 4.

5.

Dr. C.V.KRISHNA

Industrial Buying Situations ns (cla (classes): 1. Straight re-buy; it is where re the buyer knows his own requirements and the products pro on offer. The items tend to be regular r purc purchases and the process is in most cases repeate epeated frequently. A buyer would most likely purchase chase from the same supplier and it is often hard d for another a supplier to break into such a market. 2. Modified re-buy; in this catego category would fall the purchase of either a new product p from an existing or known supplier, or the purchase of an existing product from a new w supplier. sup It usually involves more decision participant icipants. 3. New task; involves the purch purchase of new unfamiliar products from previously previo unknown suppliers. In this situation the he buy buyer must obtain a lot of information about t alternative alter products and suppliers. He must determine rmine the following; Product specifications, price e limi limits, delivery times and terms, service terms, rms, payment p terms, order quantities, etc. The buyer makes the fewest t decis decisions in the straight re-buy and most in the he new task situation. The new task situation is the e mar marketer’s greatest opportunity. He tries to reach each as a many people with key buying influences as poss ossible, and providing useful product information. ation. Industrial Buyer Decision Makin Making Process In the industrial buyer decision ion ma making process, buyers facing a new task buyer yer situation si will usually go through all stages of the buying process and those making straight t or modified m rebuys may skip some of the stages. tages. They are;

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1.

2.

3. 4.

5.

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7. 8.

Problem recognition; The process begins when someone in the firm recognizes a problem or need that can be solved by acquiring a specific product. The company may decide to launch a new product and need new equipment and materials to produce it or a machine may break down and need new parts etc. General need description; This is description of the general characteristics and quantity of the needed item. Emphasis here is on reliability, durability, price and other attributes desired in the item. Product specification; The item’s product specifications are analyzed and the purchasing team(D.M.U.) decides on the best product characteristics and specify them accordingly. Supplier search; This is carried out to find the best suppliers. Some suppliers may not be considered because they are not large enough to supply the needed quantity or because they have poor reputation. The supplier’s task is to get listed in major directories and build reputation in the marketplace. Salespeople should watch for companies in the process of searching for suppliers and ensure their firm is considered. Proposal solicitation; The buyer invites qualified suppliers to submit proposals. When the item is complex or expensive, the buyer will need detailed written proposals from each potential supplier. Supplier selection; The buying centre (D.M.U.) reviews the proposals and selects a supplier. They will consider the technical competence of various suppliers, their ability to deliver the item on time and also deliver the necessary services. The following attributes have a strong influence on the relationship between the supplier and customer; Quality of products, on time delivery, competitive prices, and delivery terms. Order routine specification; This involves preparing the final order with the chosen supplier, listing the technical specifications, quantity needed, expected time of delivery, e.t.c. Performance review; Here the buyer reviews the performance of the supplier. The buyer may retain, modify, or drop the supplier in future hence the supplier should ensure that he is giving the expected satisfaction.

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UNIT-V MARKETING ORGANIZATION AND CONTROL

Organization is defined as a group of people working together to achieve common goals and objectives of the business. Marketing organization provides a vehicle for making decisions on products, marketing channels , physical distributions, promotions and prices. Marketing Organisation: Marketing organization is the framework for planning and making marketing decision that are essential to marketing success. It is the vehicle for making decision on all marketing areas such as product, price, place and promotion. Marketing organization is a group of marketing persons working together towards the attainment of certain common objectives. Marketing organization provides a system of relationships among various marketing functions to be performed by coordinating among marketing people. Need for the organization: to be competitive in the market where consumer is the king we need to satisfy the consumer. So a good marketing organization is required to satisfy the customers. Marketing organization is the pillar for success for many organizations and provides a framework for the following: a. b. c. d. e. f. Divide and fix authority among the sub ordinates TO locate responsibility To establish sales routines To enforce proper supervision of sales force To avoid repetitive duties To enable the top executives to devote more time for planning policy matters

FACTORS AFFECTING MARKETING ORGANIZATION Factors influencing marketing org can be categorized into internal and external factors . Internal: 1. Top Management Philosophy: Organizational planning and its working is greatly influenced by philosophy which can be good or bad eg: Centralization Vs Decentralization 2. Product policy: the width of product line of an org determines its size as the product offerings becomes increasingly diverse. Eg: There could be a need to move away from straight functional approach to product group approach. 3. People: The size of the organization is not an important factor in terms of number of people but it is important with respect to human values which are critical and correct decisions regarding people cannot be made unless taking into consideration • Number • Qualifications • Capabilities
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• • • • •

Personality Attitude Fear Suspicion Ambition

Are some of the above intangible factors which affect the marketing organization? External Factors: 1. Business Environment: With regards to business environment three points are important. a. The type of environment in which the firm is operating in terms of operations and size. b. The Nature of particular requirement for success in a given business which again determines the size. c. The rate of change in industries being served which again decides on its size and working. 2. Markets: This is the factor which again affects the marketing organization i.e. one should note about its a. Size b. Scope c. Nature d. Location Based on the above aspects we need to design the size of the organization. 3. Consumer requirements and expectations: Consumers have their own set of requirements and expectations from the organization. The more varied and vivid services they expect that the usual requirements. as a marketer we need to increase the workload depending upon the consumer requirements and expectations 4. Channels of distribution: It is the type of channel of distribution which a marketing firm selects based on its size. Egg : Incase the company opts for indirect channel or channels it depends on outside sales force and hence the organization gets thinner .When the organization selects direct channel its size is increased as it has its own sales force. TYPES OF MARKETING ORGANIZATION STRUCTURES Types of marketing organization structures: The marketing organization of a business can be structured on any of the following basis: a. Line and staff organization b. Functional Organization c. Product oriented marketing organization d. Customer oriented marketing organization
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e. f.

Geography oriented marketing organization Matrix form / Combined base

1. Line and Staff Organization: In most business forms especially medium size the marketing job is structured around few line functions and few staff functions i.e. Major staff functions is organized into separate department and the line function is responsible for sales department. The required coordination between the line and staff function is managed by the executive at higher level. Merits: 1. Provides expert advice from specialists 2. Relives line executes of routine, specialize functions 3. Enables young sales executive to acquire expertise 4. Helps in achieving effective coordination 5. Easy to operate 6. Less Expensive Demerits: 1. Produce confusions arriving from indeterminate authority relationships 2. Curbs the authority of experts 3. Too much is expected from executives 4. Decision making is taken by top management 2. Functional: Under the organization the departments are created on the basis of specified functions to be performed i.e. The Activities related to marketing, distribution etc Merits: 1. Division of work base on specialization 2. Relives line executives of routine and specialized functions 3. Promotes application of expert knowledge 4. Helps to increase overall efficiency Demerits: 1. Leads to complex relationships 2. Makes coordination ineffective 3. Promotes centralization 4. Lack of proper coordination 5. Delay in taking decisions 3. Product Oriented Marketing Organization: Organizations that produce wide variety of products often organize marketing, training and promotion with respect to a product. Merits: 1. The salesmen can render better customer service as they possess good knowledge of product and may have close contacts with customers.
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2. It makes individual departments responsible for the promotion of specific products. 3. It facilitates effective coordination Demerits: 1. It increases the employment of a number of managerial personal 2. Many salesmen of same enterprise attend same customer each representing a separate product which creates confusion in the minds of the customer. 3. There may be duplication of activities 4. Customer Oriented Marketing Organization: When the departmentation of sales organization is done on customer basis it is called customer oriented marketing organization. Deparmtnetation by customer may be done in enterprise engaged in providing specialized services to different classes of customers. Merits: 1. It takes into account needs of each class of customers. 2. IT provides specialization among the enterprise staff Demerits: 1. 2. 3. 4.

It makes coordination difficult It may lead to under utilization of resources in same department There may be duplication of activities These types of sales organizations are not suitable for small enterprises.

5. Geography/Territory: In a territory oriented marketing organization , the responsibilities for marketing of various products rests almost entirely with line executives .The territory managers are given varying nomenclatures like depot manager, district manager, area manager, zonal manager , divisional manager etc. Merits: 1. It leads to economy in terms of times and money 2. It helps in taking knowledge of local customers 3. It helps in effective control Demerits: 1. It requires employment of number of managerial personnel. 2. It dilutes control from head quarters

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Marketing Control: Marketing control is concerned with analyzing the performance of marketing decision, identifying the problem/opportunities and taking actions to take advantage of opportunities and resolving problems. It is the sequel to marketing planning. All manager need to exercise control over their decision and marketing operations. Specifically marketing performance is measured in terms of market share, sales, profits. Hence most control measures are designed with these parameters in mind. But today's marketing needs to measure the following. a) Market share b) Sales and profits c) Marketing effectiveness d) Customer satisfaction e) Customer perception of the firms and its brands There are four types of controls with different objectives and tools and exist with different levels of management. 1) Annual plan control: It is with top or middle level mgmt to evaluate actual performance with targeted to analyze differences or gaps. The tools used are sales analysis, market share analysis, sales and expense ratios, and financial analysis. 2) Profitability control: It is used by marketing department to examine profitability by product, territory, customer segment and trade channel. 3) Efficiency control: It is used to asses the effectiveness of money spend on sales force, advertising, sales promotion and distribution. It is used by both line and staff executives. 4) Strategic control: It is used by the top mgmt to examine wether the firm and marketing capable to cope with environment or not. The major tool used here is marketing audit. Marketing Control Process: Marketing Control Process includes monitoring, evaluating and improving the performance in each activity. There are six steps in this a) Decide the aspect of marketing operation to be evaluated: The first step in mcp is deciding about the marketing operation to evaluate. Eg: effectiveness of media for product advertisement, sales person performance, or performance of company product b) Establish measurement criterion In this stage performance standards are decided against which actual performance is evaluated. Eg: control sales person performance, in this one can measure new accounts obtained, call frequency ratio and order per call c) Establishing monitoring mechanism
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After setting the standards, the next step is to develop monitoring mechanism tools like marketing information system(MIS). MIS is used to record performance of all marketing areas like monthly sales volume for products. d) Compare actual results with standards of performance In this stage, results obtained through monitoring process are compared with pre established standards of performance. e) Analyze performance improvement If the results/performance are not up to the desired standards, a corrective action is to be taken to enhance the performance levels. For this performance improvement analysis is to be done.

Marketing Audit:
Definition: Marketing audit is systematic review and appraisal of the basic objectives and policies of marketing function and of the marketing organization methods, procedures and personal employed to implement those policies and to achieve those goals. Marketing audit is one of the important tool to asses the effectiveness of different marketing mix elements. Types of Marketing Audit: Marketing Environment Audit: It is divided into two groups i.e macro environment and task environment. Macro environment audit includes analysis of political, economical, technological and cultural aspects. Task environment audit covers customers,competitors, markets, dealer/distributors, suppliers, marketing firms and public. Marketing Strategy Audit: This audit reviews firms marketing mission, objectives, goals, and strategies and to appraise their adaptability to present and future environment. Marketing Organisation Audit: The audit evaluates the firms capability in implementing necessary strategies for the future environment. It also reviews formal organization structure and efficiency. Marketing Systems Audit: It evaluates the subsystems of a system such as marketing information system, marketing planning system, marketing control system and new product development system. Marketing productivity Audit: This audit critically examines the profitability of different marketing entities and cost effectiveness of different heads of marketing expenditure. Marketing Function Audit: It is a functional audit mainly covering marketing mix components namely product, price, place and promotion (advertising, sales promotion, sales force and publicity)
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Marketing Management-Important Questions Essay – 12 Marks Unit – I 1. What is Marketing Management? Briefly discuss the various tasks and philosophies of marketing. 2. What do you mean by marketing mix? Explain the expanded marketing mix with suitable examples. 3. Bring out the significance of marketing environment. Explain Company’s micro and macro environment and their interface with other functions. 4. Explain the importance of global marketing in today’s globally changing marketing environment. Unit – II 1. What are the levels and bases for segmentation? Explain segmenting consumer markets, business markets and international markets 2. What is market targeting? How selecting and evaluating of market segment is done? 3. Explain Positioning strategies. How product positioning is done? 4. Discuss the demand measurement and sales forecasting methods. How current and future demand is estimated? Unit – III 1. What is a product life cycle? How do you determine what stage a product is in? What strategies you adopt in each stage of PLC? 2. How is product mix pricing different from pricing an individual product? What are the product mix pricing strategies 3. Describe in detail the different stages of new product development 4. What is promotion mix? What is the basis of allocating the promotion task of a firm over different elements of promotion mix? Unit – IV 1. Discuss the model of consumer behaviour. Explain factors affecting consumer behaviour 2. Discuss the various stages involved in consumer adoption process. 3. What are the characteristics of industrial and services markets? Discuss the factors influencing industrial buyer behaviour Unit – V 1. Explain different types of marketing organisation structures. What are the factors affecting global marketing organisation?

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2. Discuss the marketing organization annual plan control. What is profitability control and strategic control? SHORT – 2 MARKS 1. Physical Evidence 2. Marketing Strategy Vs. Marketing Research 3. Competitive strategies 4. Differentiation 5. Marketing Research Vs. Customer value 6. Brand Equity Vs. Branding 7. Product line Vs. Product width 8. Distribution Channel 9. Online marketing 10. Packaging Vs. Personal Selling 11. Seven Os Structure 12. Industrial buyer 13. Marketing implementation 14. Marketing Audit 15. Efficiency control 16. Marketing myopia 17. Relationship marketing 18. Consumer Pull 19. Rural Marketing 20. Marketing Program Vs. Marketing Ethics

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ALL THE BEST

For feedback and doubts contact Dr. C. V. Krishna Ph: 9966417189 Email: krishna.cvkrishna@gmail.com

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