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Fundamentals of Marketing

Marketing is a social process by which individuals and groups obtain what they need and want through creating, offering and freely exchanging products and services of value with others. Marketing Strategy * Development of Product / Service * Stimulation of Demand * Determination of Price * Make up of Channels to reach Customers Marketer is one who seeks response to an offer he makes to a prospect. Prospect is a person who has a set of needs and wants which can be met by the offer of the Marketer. Consumer is a person who uses a product to derive satisfaction Needs represents the basic requirement of human. They represent lack of a thing, an inadequacy or a gap. One has needs like hunger, thirst, shelter, friendship, status etc Wants are description of tangible and intangible products and services, which satisfy human needs. A thirsty person wants tap water or mineral water or soft drink. Products or Services are those which have 4 characteristics 1.Utility : It is Want satisfying Power. It can be Time Utility, Place Utility, Form Utility, Possession Utility 2.Value : It is Value in use if it provides benefits when used. Value in exchange if it can be exchanged with money or a product. 3.Availability : Demand and Supply 4.Tangibility : Products and Services Demand is willingness to buy, supported by ability to pay. Buying intentions and disposable income together help determine demand. Market is a place where sellers and buyers meet and exchange products or services for money and mutual benefit. Competition denotes the existence of actual and potential rival companies, which manufacture perfect or close substitute product offerings to attract customers. Exchange is process of give and take -transacting. Transactions are negotiated. Negotiation is a process of sorting out differences and arriving acceptable to both parties. The five essential conditions of exchange are : 1. There are at least two parties 2. Each party has something of value for another party 3. Each party is capable of communication and delivery 4. Each party is free to accept or reject the exchange offer 5. There are mutual benefits making continuation of exchange desirable for both parties

Goals of Marketing
1. Profitability * Sales Revenue Maximization * Cost Minimization

2. Growth * Sales Growth Maximization Development

* Product Development * Market Penetration * Market

* Diversification 3. Market Standing * Innovation * Market Leadership * Customer Satisfaction 4. Image * Brand Image * Company Image

Marketing Trends
* Opening of Indian Economy to Foreign Companies * Increasing number of Foreign Corporate Alliances (ashok layland) * Growth of Global Brands in Indian Markets * Rapid dissemination of Global Life Styles * The emergence of attractive Rural Markets

Marketing Issues
1. Changing Consumption Patterns 2. Changing Consumer Psychographics 3. Markets in Transition(conversion of markets from small to big markets) 4. Market Fragmentation & Saturation 5. Inter-category Competition 6. Value Conscious Consumption 7. Offering Value for Money Proposition 8. Branding / De branding & Customization

Challenges to Indian Marketers
1. Reengineering 2. Bench Marking 3. Total Quality Management 4. Outsourcing 5. E-commerce 6. Alliances 7. Supply Chain 8. Marketing 9. Markets 1. Reengineering : From : Focus on functional departments To : Key process in organization and multi-discipline teams 2. Bench Marking : From : Reliance on self improvement To : Study world class performers and adopt best practices

3. Total Quality Management From : Quality control in select areas To : Total Quality is company wide program 4. Out-sourcing : From : A physical company making everything inside To : A virtual company making every thing outside 5. E-commerce From : Attracting customers to stores and selling standardized products To : Attracting customers to internet and delivering direct customized products 6. Alliances From : Playing alone To : Partnership teams 7. Supply Chain : From : Many retailers, loosely controlled, less reliable intermediaries To : Few retailers, closely controlled, highly reliable partners 8. Marketing From : Transaction Marketing, long range commercial relationship with focus on satisfaction To : Relationship Marketing, long range socio-commercial relationship with focus on delight and welfare 9. Markets From : National - Urban Markets and Exports To : National - Urban - Rural Markets and Global Markets All the above are company responses to environment

Marketers in Action
To Survive and Strategize 1. Clarify by Positioning - Modern Consumers want Variety Marketers to respond with a Profusion of Brands The Result - a bloated product portfolio, failure to differentiate the offer and a Confused Consumer. A better response is to develop sharper brand positioning. 2. Offering Value for Money Proposition (economical products / no frills) 3. Reviving old category magic (narrow product-centric definitions)

4. Finding new category values (more Customer-centric) 5. Facing inter-category competition 6. Positioning for different segments

Delivering Customer Value & Satisfaction
Value delivered is difference between benefits and costs. It indicates worthiness of product evaluated on perceived value of product. Customer Oriented Companies have Customer Satisfaction as the goal. Satisfied Customers * Stays loyal to brand makes repeat purchases * Talks favorably of brand * Buys new products introduced by Company * Underrates the offers of Competitors * Offers suggestions and new ideas In the era of Competition, Customer Satisfaction has become a central theme of Marketing.

Relationship Marketing
The reasons for Organization Existence is 1. To generate New Customers 2. Retain Existing Customers • Relationship Marketing Objectives are :

2. 3. 4. 5. 6.

1. Protect existing high profile customers Re-price expensive service based on Cost-to-serve Discount, if necessary, to gain business with low cost-to-serve customers Negotiate win-win relationship that lowers cost to serve with cooperative customers Concede permanent loss customers to competition Attempt to capture high profit Customers from Competitors

Relationships built up with every one in Value Chain - Consumers, Suppliers and Vendors results in Delivering Customer Value and Satisfaction.

In India Economic Transition, Heightened Competition, Fragmented Retail Structure, Extreme Consumer Price Sensitivity, Low levels of Product Differentiation led to CRM the Marketing Tool beyond 4 P’s. CRM Definition - Managing Relationships with Channel Partners, helping them reach out the End Consumer. • Demand Management

Marketing is primarily Demand Management. To meet the objectives of the company marketers have to influence three aspects of demand. *Nature of Demand*Level of Demand *Timing of Demand

Nature of Demand
1. Latent Demand Consumers may have a hidden desire to possess a product that satisfies a need, which cannot be satisfied with the existing products. Examples : low priced, fuel-efficient cars, painless surgery, overnight complexion changing skin creams 2. Unwholesome Demand Consumers are not hundred percent, health and social welfare oriented. They consume alcohol, smoke cigarettes. De-marketing campaigns are necessary to reduce the consumption. Social Marketing is to be employed to educate people on important social issues and create right social citizenship.

Levels of Demand
1. Negative Demand When consumers develop negative attitudes and beliefs about a product, the demand will be negative. Examples : Family Planning, Vaccinations, Literacy Campaigns, Tooth paste This requires Conversion Marketing. 2. No Demand There will be no demand for a product when people cannot afford to buy the product or when people are not aware of or convinced about product benefits. Examples : Products like Digital TV, Fax machines, Air Conditioners have no demand in rural areas. They cannot afford such products. Company need to do Stimulational Marketing or Developmental Marketing. 3. Full Demand Organizations face the situation of full or overfull demand. Examples : Cinema Halls on the day of release of a new movie, Entertainment Parks on Sundays, Leading Doctors, Lawyers, MBA programs of IIMs, Government Hospitals. Use Queuing / Reservation for cope the demand without dissatisfying the customer.

Timing of Demand
1. Regular Demand Even, steady, or regular demand for a product. Products like toiletries, cosmetics, beverages have steady demand. They do not vary significantly in different seasons. Need to adopt aggressive marketing strategies, heavy promotions, intensive distribution, and product development. 2. Irregular Demand Some products may have demand, which varies seasonally. Demand for fans and A/Cs are

seasonal. In such a cases, off-season discounts are offered to produce regular demand. These efforts are also called Synchro-Marketing. It aims at matching supply and demand according to variations over time.

Evolution of Marketing
In the evolutionary stages of marketing one finds the transformation from *Seller’s Market to Buyer’s Market *Local Markets to Global Markets

The Philosophy of Marketing
The philosophy of marketing has been changing with times. It is found marketing has been conceptualized in five different ways. 1. Production Concept Concept 2. Product Concept 4. Marketing Concept 3. Selling 5. Societal Concept

1. Production Concept
The emphasis is on production of goods and services and distributing them at lower price. This is based on “Supply creates its own demand”. The high volume - low price philosophy succeeds when, *Consumers are interested in product availability, as there was no supply so far *Consumers are looking for low-priced products since they cannot afford to buy the existing products. Example : Low-priced Nirma Detergent Powder for middle and low income group expanded the market and high volume of production became essential.

2. Product Concept
This centers around Quality. Quality Sells - make unique products and lead the market. This will yield results, when *Consumers are interested in quality and features, like buying the best *Consumers can afford high prices and are willing to pay for quality. But product obsession can lead many companies to failure. (Case of Office Files) Product failures takes place when products are designed, without real understanding of the needs. The undue concentration on the product rather than the need is referred to as “Marketing Myopia” Case of Promise Tooti-Frooti flavored Toothpaste Just-for-kids. Soaps and cosmetics was available for kids but not toothpaste. Segment is very small for kids less than 2%. Toothpaste is a family product. Tooti-frooti flavor may make children eat it than use it for brushing teeth. Quality or distinctiveness are essential, but are to be related to the needs of the market.

3. Selling Concept
Here focus is on motivation. People are inertia by nature; they tend to postpone things. To make them active, motivation is needed. Here it is one sided, helping the seller. It is unmindful of buyer’s

needs. It advocates the use of persuasion and pressure to make people buy. As such, it may create post-purchase dissatisfaction among buyers. Eureka Forbes promoted its vacuum cleaners by door-to-door selling (direct marketing). The sales person demonstrated of how it works and sold them. After some time most of the housewives found it less useful for floor cleaning which is a daily routine and slowly it found a place in store room.

4. Marketing Concept
This embraces all activities of the enterprise and focuses on matching the “Offer” with “Needs” to secure the desired satisfaction among customers and “Targeted Profits” to the Organization. The 3 requirements of Marketing Concept are a. Market Focus - Who are our customers? Segmenting and Target Marketing b. Consumer Orientation - What are their needs? Consumer Research based practices c. Coordinating Marketing - What must we do to win their preferences? Integrating Marketing with other functions

HLL’s “Lifebuoy” oldest as well as largest selling soap in India. Why? *Priced low and is within reach of common man *150gram soap and therefore offers value for money *Its long lasting (important from target segment’s point of view) *Its health positioning is also appealing (Tandurusti-ki-raksha). The children sing with delight. *Also, the dream it sells of being a “Winner” also excites the consumers. Market Focus : Market segment is clearly identified as the low income segment comprising hard working people, who are price sensitive Consumer Orientation : HLL has identified consumer needs like health consciousness and achievement orientation. Coordinated Marketing : The need to deliver customer satisfaction by each employee and activity is an important of marketing concept. Consumer is central, and all work together to sense, serve and satisfy the customer. Small viable units is the answer for this.

5. Societal Concept
This is broadened version of marketing concept. Besides customer, it also included society in its focus. Consumer satisfaction with welfare of society is the concern of marketers. These two aspects always conflict many a time. Customers prefer harmful products like cigarettes and alcohol. Marketers should de-market to promote welfare. Customers prefer “use and throw” products. But they cause environmental pollution. How to reconcile these opposing view points? A marketer strikes a balance between them depending upon the situation and one’s own ethical values.

Consumer Buying Behavior
Analyzing Marketing Opportunities
1.Understanding Consumer Buying Behavior 2.Marketing Intelligence and Market Research 3.Market Segmentation, Targeting and Positioning

Consumer Behaviour
The basic model applicable to all Consumers Marketing Offer Product Price Place Promotion + Environment Socio-cultural Technological Economic Political

Socio-cultural factors
Culture : Buying decisions which are influenced by social customs, traditions, beliefs. Social norms influence directly individuals. Social Class : Occupations / Incomes, Lower / Middle / High Classes Groups : Humans, being social animals form groups and develop behaviours. Primary Group > Family, Friends, Neighbours Secondary Group > Offices, Self Help, Political (Opinion Groups) Family : Important Consumer Buying Organization. Decision maker is head of the family. Role & Status : Every person is a member of more than one group or organization. Role refers to the behaviour expected of the individual in the group. Status refers to the place given to the person by the group because of his position and achievements. Sociability : Exposure to other people and the interactions they have. Technological Factors New / Innovative Technology has an impact on the occupations and life styles of people. Economic Factors Poverty Levels, Income Levels, Per capita consumption Political Factors Development Plans, Employment Program, IT Policy Stimuli Internal : Originates from self * feel need for food (natural phenomena) * for elegant dressing on observing friends / other around you (social comparison)

External : By Market Offer & Environment which induce a consumer to think about purchasing a product

Buyer Characteristics which effect the buying process
1. Age & Life-cycle Stage Below 12 years (child) books, pencils 13 to 19 years (teenage) two wheelers, cell phones 20 to 40 years (young) restaurants, entertainment 40 to 60 years (middle aged) credit cards, garments Above 60 years (old) clubs, parks 2. Occupation The goods and services bought by the individual is influenced by the occupation 3. Economic Situation The purchasing power of an individual is the prime consideration and income sensitivity of goods and services will result in viable market offer in the form of low priced pack sizes, installment payments / discounts etc 4. Life-style It is person’s pattern of living determined by activities, interests and opinions of people. Activities - work, hobbies, social events Interests - food, fashion, family, recreation Opinions - about self, society, government, business 5. Personality and Self-concept Unique psychological characteristics which relates to products people buy. (based on situation and type of person) 6. Psychological Factors Helps describe what goes on the minds of the consumer, have influence on his decision making Perception, Cognition, Beliefs and Attitudes, Motivation Perception : is the process by which people select, organize and interpret information to form meaningful picture of the object / product. Selection Attention - people pay attention to things that they consider of value Selection Distortion - people interpret information to support what they already believe Selection Retention - people remember what, in their view, is supportive to the beliefs and attitudes Cognition : information gathering and processing style Beliefs and Attitudes A belief is a descriptive thought that a person holds about anything. Beliefs may be based on knowledge, opinion, faith or emotion. Attitudes describes a person’s relatively consistent evaluations, feelings and tendencies towards an object or idea. Attitudes has three components Cognitive - information evaluation and inference Conative - emotional feelings Behaviour - disposition to do or not to do Motivation An inner urge that moves or prompts an action.

Maslow’s Need Hierarchy Theory of Motivation. Basic, Productivity, Social, Esteem, Self Actualization Needs Buying Decision Process Need recognition, Information search, Evaluation of alternatives, Purchase decision, Post purchase behaviour. Buying Behaviour Patterns Degree of Involvement - Rational, Emotional Time Spent - Planned, Emergency, Impulse Buying

Marketing Intelligence & Market Research
• • • • • • • Why Marketing Intelligence & Market Research? Effective Marketing Decisions are based on information in market place rather than intuitions or hunches. In changing market place, Marketers should continuously gather information on Customers, Competitors and Environment to decision making. Marketing Intelligence Marketing Intelligence is an on-going activity to provide continuous information for decision making. Market research is on of the parts of Marketing Intelligence. Marketing Intelligence System

Secondary Data Sources + Market Research Studies +* Internal Information System +* Marketing Intelligence System-> Decision Support System-> Marketing Strategy Development-> Market Response* DSS - a coordinated collection of data, systems, tools,and techniques with necessary software & computer hardware

Market Research
• • • Market Research is defined as the “Objective and Systematic Process” of obtaining, analyzing and reporting of data (or information) for decision making in marketing. “Objective and Systematic Process” is that market research which should not be influenced by personal views and considerations. Market Research undertakes periodic studies (not on continuous basis) to collect and analyze data with specific objectives like sales analysis, market share analysis, forecasting sales, assessing market potential, competitor analysis, bench marking, new product research etc.

Market Research Process
How to conduct market research? Or What are the tasks involved in market research? Step 1. Identify the Problem / Opportunity and Define Research Objectives.

Step Step Step Step

2. 3. 4. 5.

Develop Research Design (or plan) Collect the Data (or information) Process and Analyze the Data Present Research Findings or Report

Step 1. Identify the Problem / Opportunity and Define Research Objectives.
The first step is to identify the marketing problem or opportunity accurately, and define the objectives of marketing research. “Research Brief” gives the background information about the problem and how the findings of marketing research will be useful for making decisions to solve the problem. Normally through this there is an agreement between the Marketing Manager and the Researcher about the Problem and the Research Objectives.

Step 2. Develop the Research Design (or plan)
This basically indicates the procedure and the cost of conducting research study. The decision areas in Research Design are : 1.Information Type 2.Sources of Data 3.Research Methods 4.Sampling Plan 5.Method of Contacts 6.Data Collection Methods (Research Instruments) • 1. Information Type Prepare a list of information required from Research Objectives.

For example one of the research objectives is to obtain Competitors Information, the list should include : List of Competitors, Their Market Share, Whether they are Local, National or MNC’s, Whether they will be any new competitors in future, Major Competitors strength, weaknesses, objectives, marketing strategies, pricing policies and prices. • 2. Sources of Data

Primary Data consists of original information gathered for specific purpose. Survey method is extensively used in market research to collect information from buyers. Secondary Data consists of information that exists somewhere and was collected earlier for some purpose. Its advantages are ready availability and at low cost. Its disadvantages are that data may be outdated, inaccurate or incomplete. Commercial Data are the marketing information offered by some market research organizations (referred as syndicated research) to select clients on payments basis. • 3. Research Methods for Primary Data Collection

(a) Observational - people and their behaviour are observed and the information is recorded, without asking questions.

(b) Exploratory - when the problem is not clearly defined or little information is available about the problem, exploratory research methods such as focus groups and indepth-interviews are used to gain insight into the problem (c) Survey - descriptive study (ie describing the way the things are) or Survey Method is used by interviewing or asking questions to people who are believed to possess desired information. It measures magnitude of people’s knowledge, attitudes and buying behaviour. (d) Experimental - purpose of experimental research is to measure cause and effect relationship by setting up a controlled situation. Primary Data Collection The primary data collection method is through Survey Research - Awareness, Attitudes and Buying Behaviour of Customers. In Survey Method Four Different Possibilities of Data Collection takes place *Structured and Direct Interview *Unstructured and Direct Interviews *Structured and Indirect form of Interviews *Unstructured and Indirect form of Interviews

*Structured and Direct Interview
“Structured Survey” Preferred when Sample Size is Large & When Market is Geographically Disbursed Less Skilled Interviewer - Low Cost per Interview Standardized Information - Easy to Edit, Tabulate and Analyze Data Difficult to get Unbaised and Complete Answers to Questions regarding Personal & Motivational Factors.

*Unstructured & Direct Interviews
“Depth Interview” Used for Exploratory Research, Conducted in Informal and Casual Manner, More Probing Questions, Builds Rapport and Obtains Information on Hidden Motives Advantages - Encourages Respondents to Express any /many Ideas, Gives Flexibility to Interviewers Disadvantages -Takes Longer Time Interviewing Difficult to Quantify / Analyze Data Competent Interviewers are Required - Cost per Interview High

*Structured and Indirect form of Interviews
“Delphi Technique” Obtain Info from Group of Experts within or Outside the Company Seek Responses Separately from Each Panel Member to Same Problem Coordinator Collects, Summarizes and gives Group’s Average Individual Experts again Responds to same problem “Delphi Technique” This gets repeated 3 to 4 Rounds until Consensus Opinion is reached Used to get answers to difficult problems of forecasting future trends on external environmental factors such as Economic, Technological and Political. Selection of Experts is very Important.

*Unstructured and Indirect form of Interviews
“Focus Group Interview” Group of 6 to 10 Invitees spend few hours with a skilled Moderator to discuss a given Problem Meeting held in Pleasant Surroundings Discussion held in Relaxed and Informal Manner Skilled Moderator Focuses on Problem and leads Discussion Discussion recorded through Note Taking - Audio – Video. “Focus Group Interviews” Recordings are examined subsequently to Understand Attitudes, Opinions, and Buying Behaviour of Present and Potential Customers. Focus Group Techniques is used : Obtain Preliminary Information (Exploratory) before undertaking a large scale market survey For generating Hypothesis Examining New Product Concepts Generating Ideas for Improving Existing Products Getting Insights into Consumer’s Perceptions, Attitudes, and Behaviour Advantages - Saving in Time compared to depth interviews One should not generalize the findings of Focus Group Research as Sample Size is Small and not Drawn Randomly. This is used more in Consumer Research (for Exploratory Research)

4. Sampling Plan
Sample is a Part of Population (or Universe) which is selected to obtain the Necessary Information. A Universe consists of all the items (or objects) under consideration in a research project, and depends on the research objective. Sampling Plan consists of three decisions : (a) Sampling Unit (b) Sampling Size (c)Sampling Procedure (or scheme) (a) Sampling Unit Researcher should determine population. Answer - Who is to be Surveyed? (b) Sample Size Researcher decides on how many people (firms) should be selected from the population for survey. Use of mathematical formulas in determining the Sample Size. (c)Sampling Procedure / Sampling Scheme The decision on how study objects are selected. Good Sampling Scheme / Procedure characteristics are : *It should be truly representative sample

*It should result in small sampling error *It should consider the cost and time available for research *It should enable results of the sample study to be applicable for the population with a reasonable level of confidence Sampling Schemes are classified into 2 types (a) Probability based Sampling Scheme (Probability or Random Sampling) (b) Non - probability based Sampling Scheme (Non-probability Sampling) (a) Probability or Random Sampling Based on concept of random selection - each object or item in the population Has an equal chance of being included in the sample. Advantages - it can measure errors of estimation statistically. Dis-advantage cost and time involved are high (b) Non-probability Sampling Non random sampling Sampling error cannot be estimated Research findings cannot be generalized Possibility of personal biases of researcher while selecting sample Advantages - cost and time involved are less

Sampling Schemes and Sampling Techniques
For Probability or Random Sampling 1. Simple Random Sampling 2. Stratified Random Sampling 3. Cluster (area) Sampling 4. Systematic Sampling 1. Simple Random Sampling All study Objects (members) of population have equal chance of selection in the sample 2. Stratified Random Sampling Population is segmented into several homogeneous groups (or stratas) and then a sample is selected from each group at random 3. Cluster (area) Sampling Large population is divided into small clusters (or geographical areas). Then randomly selection of a sample of few areas (or clusters) is done and again a few members from each area are chosen at random or census conducted. 4. Systematic Sampling First, study object is selected randomly and then remaining units (or Objects) are selected at a fixed interval, which is calculated by formula : Population divided by Sample Size

Non-probability Sampling

1. Convenience Sampling Sample is selected based on convenience of location or cooperation of study objects 2. Judgement Sampling Based on past studies (or experience), the researcher uses judgement in selecting a sample 3. Quota Sampling Based on prior knowledge of population, the researcher first defines categories or groups, and then interviews a fixed number (or quota) of people in each category, based on convenience or judgement.

Methods of Contact
1. Personal Interviews - most widely used when the sample size is relatively small. This is most expensive, time consuming, needs more planning and supervision and is also is subject to interviewer’s biases. 2. Telephone Interviews - useful if interviews are short and not too personal. It is quicker and response rate is high and expenses are lower than personal interviews but gaining access to respondents is bit difficult. 3. Mail Surveys Wording and structure of collecting data is important because contact is impersonal and replies can be ambiguous or omitted. Problem is low response rate but low in cost.

Data Collection Methods (Research Instruments)
1. Questionnaire: This includes number of questions, printed or typed in proper sequence, for presenting to respondents for their answers. Each question should contribute to research objectives. Questions should be simple, easy to understand, direct and unbiased. Questions can be closed end to open end – yes/no, multiple choice. Normally first pre-tested (pilot survey)using convenience sampling method 2. Mechanical Instruments : audio, video, eye camera

Step 4 Process & Analyze Data
Processing includes Editing, Coding, Classification (Qualitative & Quantitative), Tabulation Analysis of Data can be categorized into Descriptive Analysis, Inferential (or statistical) analysis through computer programmes

Step 5 Presenting the Research Findings / Reports
1. Title Page 2. Table of Contents

3. Executive Summary 4. Introduction (or Research Brief) 5. Problem Formulation and Research Objectives 6. Research Methodology 7. Results (or Findings) of Research

8. Conclusions and Recommendations 9. Appendix 10.Bibliography



Industrial Market Research

1. Sources of Data Con More reliance on primary data Indl More reliance on secondary data 2. Research Method Con Survey - Observational / Experimental Indl Survey - Exploratory - Expert Opinion 3. Researcher Con General Orientation Indl Technical Orientation 4. Sample Size Con Large sample due to large universe and individual / house hold buyers are geographically dispersed Indl Small sample due to small universe(or Population) and concentration of buyers 5. Respondents Con Simple as individuals or households users are generally the buyers Indl More difficult, as buying decisions are made by several members of buying committee and not purchase executives only 6. Respondents cooperation / accessibility Con Less difficult to obtain data, accessibility is easy Indl More difficult due to time constraint and accessibility is limited to working time

Market Segmentation, Targeting & Positioning
Selecting and attracting markets involves three key decisions Segmenting, Targeting and Positioning àSegmentation is the process of dividing or categorizing market into different groups based on one or more variables àTargeting is selecting the market segments, which can be served efficiently and profitably. It is deciding on market coverage strategies. àPositioning is a market attraction strategy, which involves placing the product or brand in the minds of the customers in the target market. The various steps involved in the market coverage and attraction process are: Decision : * Segmentation Action : 1.Identification of various basis for segmenting market 2.Developing Profiles of the market segments Decision : * Targeting Action : 3.Evaluating market segments for their attractiveness 4.Deciding market coverage strategy Decision : * Positioning Action : 5.Identifying possible competitive advantages of brand 6.Selecting the right competitive advantage 7.Communicating chosen competitive advantage to target customers

Segmentation is a process of dividing a heterogeneous market into homogeneous sub-units. The division is based on the premise that different people have different preferences. The basic market preference patterns are : àHomogenous preferences where consumers have roughly the same preferences àDiffused preferences where consumers are scattered throughout the market by their preferences àClustered preferences where consumers are found in distinct preference groups

Degrees of Segmentation
If Segmentation is considered as a process with two polar points from zero to complete, four distinct segmentation approaches are identifiable Zero àMass Marketing - Considers all people as a bunch àSegment Marketing - Identifies people as different groups

àNiche Marketing - Serves selectively one or very few groups of people Complete àRelationship Marketing - Focuses on individuals or very small groups

Marketing Evolving
Mass Marketing * Product Focus * Anonymous Research * Short Term * Few Campaigns * Wide Reach * Little or No

Segment Marketing * Group Focussed * General Category Profiles Based on Segment Analysis of Demographics

* More Campaigns * Smaller Reach * Short Term


Niche Marketing A niche is a very small group with a distinctive set of traits, who seek a special combination of benefits. Niche Marketing identifies special sub-groups within larger segments and offers different products and services. Relationship Marketing * Customer-Focussed * Targeted to Individuals * Many Campaigns * Discreet Reach on Detailed Customer Behavior and Profiles * Long Term * Based

Basis of Segmentation
There is no one way of Segmenting the Market. A Marketer may look for one or more variables àGeographic àDemographic àPsychographic àBehavioral 1. Geographic Segmentation Markets are divided into segments based on variables like * Zones / Regions, States, Districts, Cities / Towns / Villages by * Size, Density, Climate (tropical, rainy, cold) and Culture 2. Demographic Segmentation Markets are divided into segments based on *Age and Life-cycle *Gender *Religion. *Marital Status *Family Size *Income *Occupation *Education

a. Age and Life-cycle Age Segment : Infants Age under 6 years Diapers &Johnson, HLL Age Segment : Products : Milk Powder, Cereals, Soaps, Typical Brands : Glaxo, Nestle, Johnson

Children Age 6 to 12 years Magazines

Products : Toothpaste, Confectionery, Sports Cycle, Story Books,

Typical Brands : Peposodent, Nutrine, Britannia, Parle, BSA, Hero, Amar Chitra Katha Age Segment : Teens Age 13 to 19 years Products : Toothpaste, Face Cream, Shoes, Bikes, Soft Drinks

Typical Brands : Close-up, Fair & Lovely, Nike, Hero Honda, Coke, Pepsi, Thumps up Age Segment : Young Adults Age 20 to 40 Years Products : TV, Music System, Computers, Cars Typical Brands : Sony, Samsung, LG, Compaq, Maruti, Santro Age Segment : Elders Age 41 to 60 Years Peroducts : Suitings, Brief Cases, Spectacles

Typical Brands : Park Avenue, Arrow, Samsonite, Bauch & Lomb Age Segment : Seniors Age above 60 years Products : Rocking Chairs, Self Diagnostic Kits, Medicines Typical Brands : Cipla, Reddy Labs b. Gender : Differences are observed in terms of dress, footwear, cosmetics. c. Marital Status : Unmarried - Small size Houses / Flats or Hostels, Fast Food Joints Married - Houses / Flats, Hotels d. Family Size : As family size increases, consumption of consumables will increase. e. Income : Income level influences the purchase decisions relating to quantity and quality. f. Occupation : Needs vary based on occupation. Doctor needs Medicines, Syringes, Needles, Stethoscope, BP Kit etc.Student needs Stationery items. g. Education : This provides knowledge and skills. It improves the thinking process and facilitates understanding of issues more clearly and at higher plane. h. Religion : It provides a code of life and links the visible real world, with the invisible world of death. Each prescribes the way to worship god, through lighted lamps, incense sticks, camphor, candles, bells, perfumes, white caps etc

3. Psychographic Segmentation :
Geographic & Demographic Segmentations provide a physical view of the markets, the true dynamics of purchase can be assessed & marketing offer can be designed only on basis of Psychographics of people. Markets are divided into different segments based on three variables : *Social Class *Life-style and *Personality

Social Class * Society consists of a structure, which represents a hierarchy of classes or grades of people. * Caste is one of the divisions of class system in India along with wealth. * However, presently social class is determined by a combination of factors like education, occupation, income, wealth and others. The social classes may be categorized into six groups : 1.Upper 2.Lower 3.Upper 4.Lower 5.Upper 6.Lower Upper Upper Middle Middle Lower Lower

Lets look at the Characteristics and Preferences of each of the social classes. 1. Upper - Upper : Characteristics àSocial elite, wealth inherited, well known family background, ascribed status, small in number, reference group for others Preferences àJewellery, antiques, farmhouses, vacations, luxury products at high prices. 2. Lower - Upper : CharacteristicsàSocial elite, wealth earned, educated and professional, active in social and civic affairs, aspire and associate with upper-upper stratum. PreferencesàStatus symbols - cars, homes, expensive school, exhibition products, art pieces etc. 3. Upper - Middle : CharacteristicsàCarrer oriented, dependant on education and hard work, dual career families, seek comfort, ambitious. PreferencesàQuality life products and entertainment, good interior decoration, vacation. 4. Lower - Middle : CharacteristicsàAvergae paid employees, small businessmen, college background, fashion oriented but traditional, dual career families PreferencesàBetter life products, nice homes, nice furniture, decent school, occasional vacations, travel and tours, regular and economical entertainment. 5. Upper - Lower : CharacteristicsàAbove poverty line - Depend on loans and advances, hand to mouth, dual career families, traditional, strong family ties, school education. PreferencesàEconomy products, instalment and credit buying, low priced popular brands and local unbranded products. 6. Lower - Lower : CharacteristicsàBelow poverty line, daily incomes, low per capita income, poor health and hygiene, dependence on petty loans and charity. PreferencesàLocal Unbranded products, daily purchases, cheap varieties, buy seconds or collect thrown out clothes, food etc.

Life Style One way of Life Style classification is *Trend Setters *Traditionalists *Chameleons Let us understand the influence of Life Style on Product Choices 1. Trend Setters Characteristics àAmbitious for self and family àInterested in change àProgressive àCareer Minded àAchievement Oriented àPositive Thinking àSocial àIndependent àStatus Seeking àGood reading habits àSeek entertainment and recreation àPrefer love marriages and dual career families “Product Choices” 2. Chameleons Characteristics àActive àLack Courage and Confidence àIndecisive àPrefer following than leading àFavor love marriage and career oriented spouse at heart but do not allow full freedom to spouse àProgressive thinkers àGood reading habits àAverage financial soundness “Product Choices” 3. Traditionalists Characteristics àPassive àHopeful àConservative àEmotional àCulture Bound àContended àUnder Achievers àPrefer peace to prosperity àPrefer tradition to fashion àHome loving àPrefer arranged marriages “Product Choices” One way of Life Style classification women is *A capable home maker *A career women *A free spirit

*Personality refers to the set of psychological and physical characteristics of an individual that determine the individual behavior *These characteristics are unique making individuals different from one another

*Personality can be defined with the help of characteristics like àSelf confidence àSociability àAdaptability àAssertiveness àAutonomy àCreativity àSensitivity and so on For example : * A person with social nature and creative zeal is likely to prefer picnics, parties, photography. * Marketers offer restaurants with good food and ambience, picnic spots, concessional membership cards, cameras, photo films, processing labs etc to satisfy their requirements. * Consumers buy those products or brands where the perceived personality of which match or fit with their self-perceived personality

Behavioral Segmentation
Behavior of consumers is a better guide to segment the markets. To understand the behaviors we need to raise following questions. àWhen do people buy? Occasions àWhy do people buy? Benefits sought

àDo they buy? Once? More? àHow much do they buy? àDo they repeat the buy? àWhere do they buy? àWhat do they buy? 1. Occasions *Festivals *Events *Important Dates *Anniversaries etc 2. Benefits Sought

User Status Usage rate Loyalty status Place - Retail Outlet Products possessed

Varies from consumer to consumer. Consumer may buy a Car seeking one or more of following benefits *Status symbol *Sense of fulfillment *Convenience of transport *Economy in commuting Based on the benefits sought, consumers are grouped and positioning is effectively done to pull the consumers to buy. 3. User Status

Consumers can be categorized as follows based on their user status with the corresponding marketer actions User Status **Ex-user àStopped Using àUsing other brand Marketers Action Convince them about benefits User Status Marketers Action User Status Marketers Action User Status àNon-users **First Time user Assure benefits **Regular users àRepeat buy àTrial buy

Appreciate them and advice them on usage. Assure service. **Potential users àUsers of other brand

Persuade them explaining relative benefits

>>Evidently each category of users is to be treated as a separate segment and marketing offer should be designed to suit each one of them. 4. Usage Rate Based upon the size of their consumption, consumers may be categorized as *Light Users *Medium Users *Heavy Users Pack sizes are designed differently to meet the requirements of different users. 5. Loyalty Status A market can also be segmented on the basis of consumer loyalty to brands, stores, and companies. Companies design marketing actions based on loyalty status. Loyalty Status Goal Marketing Action Strong To retain Improve the features and promotions Weak To attract Identify weaknesses and fortify the brand. Support with good promotion Non-loyal To convert Heavy sales promotion campaign 6. Place Products are promoted by developing an understanding of the place where the potential buyers congregate mostly and prefer to buy the products. Shopping malls / haats - melas àretail spaces promoting several products

7. Product Possession Categories

Targeting a buyer on the basis of products he already possesses. Product Categorization for durables and its hierarchy is based on the needs and wants of the people. Category - I : Products are of immediate use to the family or things which tend to be instrumental in supplementing the income in these households Category - II : Products consists of a combination of the products that ease the households, work-strain and act as a source of entertainment Category - III : Products show a combination of classy products that fulfill the above needs Category Product Price Products I Below Rs.1000/Wrist watches, Transistor, Pressure Cooker / Pan, Electric Iron II Between Rs.1000/and Rs.6000/Mixer Grinder, Vaccum Cleaner, Two-in-one, Sewing Machine Category Product Price Products III Above Rs.6000/- Two-wheeler, Refrigerator, Color TV, VCR, VCP, Washing Machine Categorization is used as a guideline to target the next customer, who move from category to category.

Market Targeting & Positioning
Selecting and attracting markets involves three key decisions Segmenting, Targeting and Positioning àSegmentation is the process of dividing or categorizing market into different groups based on one or more variables àTargeting is selecting the market segments, which can be served efficiently and profitably. It is deciding on market coverage strategies. àPositioning is a market attraction strategy, which involves placing the product or brand in the minds of the customers in the target market.

àSegmentation is the process of identifying and establishing alternative market segments àNext Step, Targeting involves evaluating the various segments and selecting how many and which ones to target. The three aspects in targeting are evaluation, selection and coverage 1. Evaluation of Segments In evaluating market segments a company has to first identify the criteria for evaluation. The following criteria may be applied to determine the attractiveness of segments. a. àProfitability : Conduct cost-benefit analysis and ascertain profitability of the segment. Relevant information includes *Sales Volumes *Distribution Costs *Promotion Costs *Sales Revenues *Profit Margins b. àAttractiveness : *Small and New Companies may lack the skills, experience and resources neede to serve the larger segments *Some segments may be less attractive when there is already more competition. c. àGrowth Rate : *A segment’s attractiveness depends not only on its current profitability but also future prospects. *Growth Rate of the Segment is in reference to >Growth in Population >Rise in Purchasing Power >Increase in preference for the use products d. àCompany Objectives : *Company should evaluate the segment opportunity with reference to their >Short Term Objectives >Long Term Objectives e. àLimitations : *Company should examine whether the entry into segments is acceptable to the society and government.

*If entry provokes unnecessary criticism, the Company may have to struggle hard to explain its stand and safe guard its image. 2. Selection of Segments Selection of the Segment(s) can be made by rating the alternative segments on a predetermined scale in respect of the criteria we have discussed earlier. S.No. Criteria 1. Profitability 2. Growth 3. Attractiveness Strength (Resources) 3 Threats (Competition) 0 4. Company Objectives 3 (Degree of Consistency) 5. Limitations 0 High 3 3 Rating Scale Medium Low 2 1 2 1 2 1 2 1 1 2 1 2 Nil 0 0 0 3 0 3

Segments are ranked based on the scores obtained and be considered for selection. Those with high scores will be accepted and others will be kept aside for future considerations. 3. Coverage of Segments Organizations have three alternative coverage strategies to suit their segmentation approaches. SegmenType of Coverage tation Marketing Strategy Zero Mass Undifferentiated Substantial Segment Differentiated Selective Niche Concentrated àUndifferentiated Strategy This marketing strategy focuses on “What is Common” among the consumers and tries to employ it in its design of its marketing offer. àDifferentiated Strategy This marketing strategy investigates and identifies differences between segments and tries to match the market offer to the desires and expectations of each segment. The results of such exercise would be *Strong identification of the company in the product category *More costs but higher sales. Hence more profits. *More loyal customers àConcentrated Strategy This marketing strategy directs all marketing efforts towards one selected segment. It facilitates specialization in serving the segment and achieving higher level of consumer satisfaction, delight and loyalty. This has some risks in course of time, such as *Preference of consumers may change, and *Large companies may become competitors seeing the success of this company 4. Choosing a Coverage Strategy Four variables are used to choose a coverage strategy.

Variable / Strategy Undifferentiated *Company Resources Limited *Product Variability *Product Life-cycle Stage Introduction *Market Variability High - Differentiated Moderate Less Large Less - Concentrated

More Introduction Growth Less High

àUndifferentiated Strategy is to be chosen, when company resources are moderate, product variability is less, and product life-cycle is in introduction stage in the market, that has less variability à Differentiated Strategy is to be chosen, when company resources are large, product variability is more, and product life-cycle is in growth stage in the market, that has high variability à Concentrated Strategy is to be chosen, when company resources are limited, product variability is less, and product life-cycle is in introduction stage in the market, that has high variability

Positioning is the act of finding a place in the minds of consumers and locating the brand therein. Companies have to plan positions that give their products the necessary advantage in the target markets. Positioning involves three tasks àIdentifying the differences of the offer vis-a-vis competitors’ offers. àSelecting the differences that have greater competitive advantage àCommunicating such advantage effectively to the target audience Identifying the Differences The marketing offer may be differentiated along the following lines : *Product *Services *People, or *Image àProduct Differentiation Products can be differentiated on attributes like shape, size, color, quality, composition, and performance. Functional differences signify ease in process and benefits of use. àService Differentiation Services may be differentiated in respect of delivery, installation, and maintenance. Long warranty

periods, free service coupons, service at phone call distance, 24/7 service, emergency care etc. are examples. àPeople *People, who come in contact with users, may quite often influence the decision of consumers. *In this era of Relationship Marketing, differentiation by people is worth considering. *Service Organizations like Hospitals, Schools, Banks, Road Transport, and Telecommunication, require people who serve with smile and are efficient. *Service Organizations mainly emphasize on competence of their people. àImage *The image of a brand or company may win the consumer, even though the product is very much similar to a competitive one. *Image is built by advertisements, symbols, signs, colors, logos, atmosphere of organization, and social activities. *Images may be related to attributes such as quality, high tech, ethical etc. Selecting the Right Differences When a Company identifies several differences, it can evaluate them with the help of following criteria àAttractive - Does it provide value to the Customer? àDistinctive - Is it different from that of its Competitors? àPreemptive - Is it very difficult for Competitors to copy it? àAffordable - Can Buyers pay for it? àCommunicable - Can the differences be clearly expressed? Is it visible? Is it Understandable? The evaluation requires the following steps : 1.Identification of attributes, which can give competitive advantage. Attributes can be for example, Quality, Service, Technology, and Economy. 2.Use of a rating scale. Say, 10 point scale. 3.Rating the attributes on the five criteria viz., attractive, Distinctive, Preemptive, Affordable and Communicable 4.Then, developing a comparative table of Competitive Advantages to arrive at an appropriate decision Tables for Company and Competitors, on *Evaluation of Differences *Competitive Advantages Difference Quality Service Technology Economy Company 32 33 34 35 Competitor 36 32 36 30

From above, Economy Position has a clear advantage than Service aspect. The other two differences are strengths of competitors. Hence positioning on Economy will benefit the company. How many differences to promote?

Marketers develop “USP” for each brand to maintain it. Bets Quality, Best Technology, Best Service etc. Sometimes Companies claim more than one benefit to make its position less vulnerable, when it has no one “Best”. Communicating Once the company has chosen the differences, it has to chose as appropriate communication strategy to reach the consumers.

• •

Competition Identifying & Analyzing Competitors Understanding Competitor’s Strategies

What is Competition?
Competition denotes the existence of actual and potential rival companies, which manufacture or produce perfect or close substitutes product offerings to attract consumers.

Types of Competition
1. Generic Competition : Every product is in competition with every other product. Eg All durables and consumables 2. Form Competition : A product is in competition with different products offering similar benefits. Eg All vehicles , 4, 2 Wheelers 3. Industry Competition : A product is in competition with different companies making the same product. Eg Automobiles - Passenger Car industry 4. Brand Competition : A product is competition with other brands of the same product category, which is similar to it. Ambassador (Diesel) vs Zen (Diesel) Levels of Competition for Maruti Zen - Diesel * * * * Generic Form Industry Brand All Durables and Consumables All Vehicles, Four wheeler and Two wheelers Automobiles - Passenger Car Industry Ambassador (Diesel)

Marketing Strategy & Competition The company’s basic Marketing Strategy is influenced by the nature and type of Competition it faces. The key questions need to be addressed are *Who are our Competitors? - Know your Competitor. *What are their strengths & weaknesses? *What are their strategies? *What are our Counter Strategies? Who are our Competitors? - Know your Competitor. Whether one has to consider Brand Competition, Industry Competition or Generic Competition? Industry Competition is right consideration when analyzed with Brands in Competition. “Product - Market Fit” analysis is useful in mapping the locations of Competitors with their brands in different market segments. Example - Mapping of Toilet Soap Market Cosmetic Johnson & Johnson Lux Lifebuoy Plus

Medicinal Segment Kids Women Men

Dettol / Savlon Family

Assess Strengths & Weaknesses Financial Data Analysis - Rating 1. Overall : Sales, Investments, Capacity Utilization, Reserves & Surpluses 2. Marketing : Share of Market, Product Quality, Product Availability, Sales Force Effectiveness, Marketing Costs 3. Finance : Availability of Funds, Cost of Capital, Debt Equity ratio, Turnover Ratio, Liquidity Ratio 4. Manufacturing : Manufacturing Costs, Raw Material Availability, Technical Skills, Plant & Machinery and other Facilities 5. Entrepreneur : Innovative, Visionary, Leader, Responsive to Change For each Competitor, based on above information gathered, ratings are given like Excellent, Good, Average, Poor, Very Poor on points based on 3 to 5 years historical data rather than snapshot, current year study of Competitor. Based on above analysis Competitors can be classified as follows : 1. Based on ability to engage in and sustain competition - Strong & Weak 2. Based on % of Market Share - Close and Distance held by a Competitor Competitive Positions These Competitors, in turn, are assigned following Competitive Positions : 1. Market Leader - Largest Market Share, Strong in Designing & Implementation Plans 2. Market Challenger - Close & Strong Competitor to Market Leader, Aggressively or Mildly Challenges Leader 3. Market Follower - Distant / Weak Competitor whose is content in following Leaders and Challengers 4. Market Nicher - Independent, Non-fighter, who carves his niche for peaceful and profitable specialized operations Understanding Competitor Strategies What are the moves of the Competitors? The possible moves of Leader, Challenger, Follower, Nicher are : 1.Growth : Grow Strong, Become invincible 2.Offensive : Weaken or Destroy Competitor 3.Defensive : Develop Protection Against Attack 4.Play Safe : Select Less Competitive Areas and Activate 1. Growth Strategies Grow Strong, Become Invincible Market Penetration Encourage Current Customers to use more Encourage Other Customers to Switch Encourage Non-users to Use Market Development Identify New Market Segments and Cultivate

Product Development Introduce New Features Introduce New Products

Growth Strategies Supply Chain Management Forward - Acquire Distribution Backward - Acquire Supplier Integration - Acquire Competition Diversification Concentric Both Marketing & Technology Synergy New Products related to Current Customers Horizontal Only Marketing Synergy, New Technology Products related to Current Customers Conglomerate New Marketing & Technology Unrelated to Current Customers 2. Offensive Attack Strategies of Company Frontal Head on Collision with Opponent Match the Competitor’s Offer Flank Search for Gaps and Conquer Target Offer to Uncover Market Needs or Uncover Market Areas or Both Encirclement : Launch an Offensive from All Directions - Front, Rear and Sides Match Each and Every Offer of Competitor or Offer More By Pass : Leave the Strong Spots of Enemy and Attack Vulnerable Spots Diversify into Un-related Products New Geographical Markets Adopt New Technologies to Support Existing Ones Guerilla Small and Intermittent Attacks on Different Territories of Opponent Price Cuts and Intense Promotional Bursts in Small, Isolated, Weakly Defended Markets and Litigation

3.Defensive Strategies
Develop Protection Against Attack Position Defense Add Different Products to Survive Improve Existing Product Features Lower Price if Market is Un-segmented If Segmented, Price Low in Vulnerable and Price High in Less Vulnerable Segments Drop Marginal Retailers, Fortify Distribution & Reduce Costs Spend more on sales Promotion and Less on Awareness Building Flank Defense Line Filling Develop Complete Product-Line, Leave No Gaps Product Line Stretch Upward, Downward and Two-way Preemptive Defense Launch the Product much before the Competitor can do Line Modernization Counter Offensive Defensive :Cause Delay or Postpone Introduction of Competitor’s Product and Gain Time, Identify Weak Position and Attack It Mobile Defense : Growth Strategies Contraction Defense : Product Line Pruning Strategies, With-drawl from Products and Markets which Lack Competitive Strength, De-segmentation or Concentration Strategy

4. Play Safe Strategies
Follower : Imitation : Offer Copy or Improved Product at Lower Prices Make Local Distribution and Promotion Nicher : Specialization : Select a Distinct Segment and Serve Efficiently Strategic Marketing involves Four Situations which use approaches to Planning and Implementation 1. Competition Oriented Gaining Victory Over Competing Firms Already Discussed 2. Market Oriented Operating Through Market Life Cycle 3. Product Oriented Evolving Strategies Through Product Life Cycle 4. Consumer Oriented Tracking Customers, Their Value Expectations and Satisfaction 2.Market Oriented A Market in the Process of Evolution passes through the following Stages *Market Crystallization (Niche Single and /or Multiple Niches, Mass Market) *Market Expansion (No Serious Competition)

*Market Fragmentation (Intense Competition) *Market Consolidation (New Products) *Market Dissolution ( Technology / Product Obsolete, Divestment)

3. Product Oriented Stages in PLC
Introduction Basic Product, Cost Plus Pricing, Selective Distribution, Informative Ads, Heavy Sales Promotion Growth Product Extension, Services and Warranty Offer Penetration Pricing, Intensive Distribution Persuasive Ads, Moderate Sales Promotion Maturity Diversify Brands, Competitive Pricing Intensive Distribution, Comparative Ads, Moderate Sales Promotion Decline Phase out Weak Items, Lower Price Selective Distribution, Reminder Ads, Minimal Sales Promotion

4. Consumer Oriented
To Keep Track of Customer’s Value Expectations and Satisfaction Generate Brand Loyalty through * Understanding Customer’s Needs * Delivering High Customer Value Customer Needs * Stated Needs (Articulated) * Real Needs (Exactly what customer is looking for. May have a Gap between What one says and What one wants) * Unstated Needs (Expected not Stated) * Delight Needs (Desire for surprise benefits not anticipated) * Secret Needs (Hidden) Customer Value Value Delivered is the difference Between Benefits and Costs Indicates the Worthiness of a Product Buyers Evaluate based on Perceived Value of the Products

The Balancing Act Marketer finds himself confronted with 4 diverse orientations * Product Orientation * Market Orientation

* Competition Orientation * Customer Orientation Always Starting Point is “Customer Orientation” and need to evaluate the other three to find an integrated concept 1. Customer vs Product Orientations Product Orientation Low High Technology Orientation Market Orientation Innovative Orientation Imitative Orientation

High Low Customer Orientation

Customer vs Product Orientations
Technology Obsession to make Best Product Market High Pressure Selling Innovative (Most Desirable) Develop New Products to meet Consumer Needs Imitative Selling Copy Cats / Fakes 2. Customer vs Market Orientation High Market Orientation Low Push Approach indifferent Approach

problem solving Pull Approach Approach High Low Customer Orientation

Customer vs Market Orientation Indifferent Do not bother for Sales or Customer Needs Pull Attracts Customers by Relationships. Does not Pressurize to Buy. Push Pressurize Customers to Buy whatever their needs be Problem Solving (Most Preferred) Selling Solutions and Not Products

3. Customer vs Competition Orientation Yes Competition Orientation No Competition Orientation Product Orientation Market Orientation Customer Orientation

Low High Customer Orientation Customer vs Competition Orientation Product : Obsession to make the Best Product Customer : To make Offers to Match the Consumer Needs Competition : Engaging in Market Warfare and Incidentally Satisfying Consumer Needs Market ( Best in the New Era of Competition) : Waging Market Battles and at the same time Satisfying Consumers

Micro / Industry Environment
• Industry is the Group of Firms manufacturing Goods or Rendering Services of Identical Nature. Industry Environment stands for things prevailing in an Industry. The Industry Environment has its Constituents, namely, Competitors,

Customers, Suppliers and Substitutes. Each is competing force. Industry and Competition How Competitive Forces Shape Strategy? Porter, Michael E (1) Threat of New Entrants (2) Bargaining Power of Customers (3) Bargaining Power of Suppliers (4) Rivalry or Jockeying for Position among Current Players (5) Threat from Substitutes (1) Threat of New Entrants • • • • • New entrants are a powerful source of Competition New Capacity & Product Range - New Competitive Pressure New Economies of Scale / Investment - Cost Advantage - Severe Competitive Effect Developed Channels of distribution New Limit on Prices - affects profitability of existing player

(2) Bargaining Power of Customers Buyer Cartels on price, quality and delivery results in influence in Costs and Investments. Powerful Buyers bargain for better services which will cost more for Producer. (3) Bargaining Power of Suppliers The more specialised the offering the more bargaining power for Supplier.The limited in number of Suppliers the more bargaining power. (4) Rivalry among the Current Players • This is nothing but Competition.

The Competitors influence price as well as the cost of competing in Industry, in Production Facilities, Product development, Advertising, Sales Force etc

(5) Threat from Substitutes • • • • Substitutes are latent and major source of competition. Substitutes Offering Price advantage and / or performance improvement The five forces together determine Industry Attractiveness / Profitability. Sizing up the “Competition Proper” is not enough; all forces Shaping Competition must be sized up.

“Value Chain” approach in Competitor Analysis Porter, Michael E. Value Chain is basically a tool for identifying ways in which value could be created/ enhanced by a Firm. Firms can use the concept for assessing the competitive position within the Industry, by comparing their own value with those of their competitors. • The Value Chain Approach

Basis : Every firm is a collection of activities and can be disaggregated in terms of activities Porter identifies nine distinct activities as the ones which create value in a firm; they would, of course, create cost as well. Five Primary and Four Support Activities. • Five Primary Activities

1. Inbound Logistics (bringing materials into business) 2. Operations (product design, manufacturing etc) 3. Outbound Logistics (sending products out) 4. Marketing and Sales 5. Service • Four Support Activities 1. Firm’s Infrastructure 2. Human Resources 3. Technology Development (R&D included) 4. Procurement The four support activities occur through all Primary Activities * The Primary and Support Activities together generate a vast matrix of value- creating activities in the Firm. * This matrix of value-creating activities along with their interacting effects, constitutes the Value Chain of the Firm * Value creation depends on the each departments performance as well the coordination of all departments in a Firm. Value Chain also covers the coordination aspect. * All Business Process is basically a Value-creating and value delivering process. Buyers patronise the Firm that offers the highest delivered value.

* Hence, the name of the game is to locate the activities in which value could be created, and create maximum possible in each of them.

* Firm examines the costs and performance in its Value Chain – the total value chain as well as in each link in the chain vis a vis Competitors. * Firm will achieve a position of superiority / distinction relative to Competitor.

Five step approach to Competitor Analysis

1. Identify the Competitors 2. Identify what they want 3. Identify their Strategy 4. Identify their Strengths and weaknesses / relative capabilities 5. Predict what they will do

Product Strategy • * Product is any thing that Satisfies Human Needs & Wants

* Product Decisions are a part of Marketing Strategy * Emergent Dynamic, Competitive Environment, Multi-Product Firms are fighting hard to gain commanding market share through their Product Strategies. * It is through continuous Design and Redesign of Product Mixes that a Company lays its way to success and fame. Product Classification 1. 2. 3. 4. 5. 6. 7. 1. Product Classification is Based on : Tangibility and Intangibility Purpose of Use Functional Life of Products Shopping Habits Price & Quality Product Development Brand Hierarchy Level Based on Tangibility & Intangibility Products yes yes some times Services no no yes

Characteristics Tangibility Seperability Variability Perishability Ownership 2.

some products yes yes no

Based on Purpose of Use

Purpose Type User Products Purpose Type User Products : Consumption : Consumer Goods : Households : Toiletries, cosmetics, beverages, home appliances

Purpose : Production Type User : Industrial / agricultural goods : Industrial , Farms / poultries

Products : Raw materials, components, agricultural inputs and machinery, animal feed 3. Based on Functional Life of Products Type : Consumables Nature of use : One time Functional life period : Short Examples : Food & Beverages, Soft drinks Type : Durables Nature of use : Life Time Functional life period : Long Examples , Furniture, Cars, Computers 4. Based on Shopping Habits ( The way we buy) Three categories 1. Convenience Goods 2. Shopping Goods 3. Specialty Goods 4. Convenience Goods Mostly consumables like provisions, toiletries, cosmetics etc Product Type : Consumables Buyer Involvement : Low Buy Frequency : Frequent Buying Decision Evaluation : Simple Buying Place : Provision stores, Departmental store, Super market, Maals, Pan shop,

2. Shopping Goods : Clothing, Furniture, Home Appliances Product Type : Durables Buyer Involvement : Moderate Buy Frequency : Occasional Buy Decision Process : Complex Buying Places : Urban - Show Rooms, Chain Stores, Rural - Fairs, Haats, Mandis & Shops in Feeder Towns

3. Specialty Goods Cars, Two-wheelers, Cameras Tractors, Mopeds in Rural Product Types : Durables Buyer Involvement : High Buy Frequency : Once in Life Buying Evaluation Process : Complex Buying Place : Shops in Cities & Towns 5. Based on the Price & Quality

1 Mass Products (Cheaper & Economy Products) Cheaper Products - Low Quality and Low Price. Perform core function but lack certain attributes, which make them use less comfortable, less pleasant, less desirable Nirma washing powder Economy Products - with all necessary functional features but no fancy features. Its price & quality are fairly reasonable. Mopeds 2 Premium Products (Superior Products) Products which appeal to the ego of buyer. Goods for conspicuous consumption. Being high quality, high priced goods, they are known as Premium Goods and Prestige Goods. Examples : Jewellery, high price cosmetics, Cars

* Cheap Goods : Nirma Washing Powder - packaging poor, powder spills, cheap, when mixed with water burning sensation in skin / palms

* Economy Goods : necessary functional features and no fancy features (no frills)- money savers Needs Gratified. Moped, TV without remote, TV B/W with limited channels * Premium Goods : Products which appeal to ego of the buyer. These are goods of conspicuous consumption. High Quality, High Price, Premium Goods & Prestige Goods. Jewellery, Dresses (designer wear), high priced cosmetics, perfumes, toiletries, Cars, Bunglows.

6. Based on Product Development : * Innovations Imitations ( Novelties, Me-too goods, Copy cats) Innovations In Urban markets - Communication Devises Cell phones, WLL etc In Rural markets – Tractors, Fertilizers, High yield Hybrid seeds, New Farming methods * Imitations Poor Imitator : Produces deception goods, spurious, fakes, copy cats. Dupes gullible customer by offering products have close resemblance's with Original. Quality very poor. * Competent Imitator : Produces improved version of original product. Original Novelties Copy cats Life buoy Nirma buoy New line buoy, Colgate Nirma Pepsodent Wheel Nimba buoy College Neerbha, Nima, Nilima Friends & lovely

Fair & Lovely Fairever

7. Based on Brand Hierarchy Level Five levels of Products based on Branding Global Brands Pepsi, Coke, LG TV, P&G National Brands Tata, Birla, Mahendra, Godrej Regional Brands ETV, SUN channels Local Brands Surya Masala, Joy Chips Unbranded Products Oils , Food Grains Commodities Tamarind, Cloves, fish, eggs, meat

Product Strategy Concept This refers to Long Range Competitive Plan Involving decisions on Product Items, Product Lines and Product Mixes to make proper utilization of Resources and achieve Marketing Goals • Product Strategy Significance

Effective Product Strategy offers following benefits Achieves Product - Market Fit Offers Products based on Market Needs * Encourages Innovativeness This fine tunes the market offer to current and future needs of customers. This should form an inbuilt feature of Product Strategy * * Provides Competitive Edge Through Good Intelligence anticipate competitive moves and launch new products. Through Effective Product Strategy attack, flank competition, defend and wage guerilla war fare. * Makes Better Use of Resources Use Physical, Financial, Human Resources. * Add - delete products. Increase Productivity / Quality.

Product Strategies
Level Strategy Product Item Quality, Features, Design, Brand and Package Core and Augmentation Product Mix Width Extension - New Product Lines Length Extension - New Product Items Depth Extension - New Product Variants Product Lines Stretching - Upward, Downward, Bothways Line Pruning - Line Modernization * Product Line is a group of closely related products priced within a range and distributed through same channels to the same customer group. * Product Length - it refers to the total number of items in line * Product Depth - it is total number of variants to Product Items * Line Stretching : Downward : adding lower end items Upward : adding high end items Both ways : adding items at both higher and lower ends * Reasons for Line Stretching : Reaction : To meet competition innovative products are added

Opportunity : Utilize existing market gap, new items are introduced Image : Full line company image Pressure : Pressure from sales force and dealers Strength : Use available excess capacity Desire : To fulfill CEO / Product manager - to introduce new product items • Line Pruning

Product lines tend to lengthen over time. Some are stretched rationally, some emotionally. Some dead wood to accumulate. It is weeded out periodically based on contribution they yield. Some Product Lines are * Traffic Builders - which attract customers but generate marginal income * Bread Winners - which generate major share of incomes * Parasites - which incur losses and depend on Bread Winners Reasons for Pruning : * Dead wood is depressing profits * Existing Production Capacity limited and cannot handle all product lines.

Line Modernization
Technological Developments change the products and their quality. Modernization decisions are taken on following aspects. Timing : * Conversion readiness of consumers from old to new products * Competitor moves * Profitability levels of existing product lines Approach : Change total or piece meal, cash flow, surprise competitors / imitators

Product Item Decisions
Products or Service is an offer made by Marketer that has the ability to satisfy the needs and wants of customers 1. Core Product Development 2. Tangible Product Development 3. Augmented Product Development Core Product Development Product are Transient, but basic needs of the customers remain same Need-Product Relationships Needs Old Product New Products

* Core Product The product that provides the important form utility and ensures performance of basic functions. * Tangible Product When psychological needs are satisfied in physical terms, product concept becomes visible and operational. Product & Service has 5 Characteristics 1. Quality – Durability, Capacity, Efficiency, Economy, Reliability 2. Features – Rational / Problem Solving or Emotional / Fancy

3. Style / Design – Geometric Design / Modern Style 4. Packaging – Primary Package (Bottle), Secondary Package (Carton), Shipping Package (Corrugated Box) 5. Branding Packaging Three levels of Appeal by Packages Level Purpose Package Package Characteristics Determinants Different Packages offer different benefits 1. Easy to Identify and Easy to Recognize Different Shapes Different Sizes Different Colours 2. Easy to Carry, Easy to Use and Easy to Dispense Tetra packs – Soft Drinks, Milks Polythene Covers – Dairy Milk Metal / Plastic Tubes – Tooth pastes, Medicines (Ointments), Fairness Creams Card board / Paper Packs – Toilet Soaps, Hair dyes, Shaving Creams, Mosquito coils Small Bottles – Honey, Sauce, Jams, Tonics, Syrups Spray Bottles – Air Freshners Tear Sheets (Blister Packs) – Medicines (tablets), Mosquito Mats Tins – Protex, Ovaltine, Threptin Biscuits Lamitubes – Cherry Blossom 3. Good to Store Food grade plastics / glass bottles. Beverages – Bournvita, Boost, Horlicks, Edible Oils (saffola) 4. Attractive to Re-use Good to store bottles are often reusable 5. Easy to Evaluate Product Quality, Product use Information, Life period of Product.All evaluated through labeling, through sight / smell Packaging Strategies 1. Small Packs - affordability, usage, storability, benefits to retailers, display 2. Large Size / Packs - economies of scale 3. Combi Packs - related products are packed together and sold at an economical prices. Its an

assortment. Eg. Johnson Baby care kit has Powder, soap, shampoo, hair oil, cream 4. See Through Packs - Transparent tubes, wrappers

New Product Development
New Product Development Consumers seek better & improved products that are * Easy to use * Occupy less storage place * Are aesthetics and provide value for money The above leads to Product Innovations which is a major component of Product Policy – which leads to * Introducing New Products * Improve existing ones New Products can be classified as ; 1. New to the world - Products First time and expected to create new markets - Polarized Instant Camera 2. New Products Lines Helps company enter with new product in a established market 3. Additions to Existing Product Lines New Products that contribute to existing Product Lines of the company. Variations of Product include - Size, Flavor, Color, packaging. Improved Life Buoy, Chota Coke) 4. Improvements & Revision of Existing Products – Improved Versions / Performance These Products usually improve the perceived value of existing products and replace them 5. Repositioning the Existing Products Targeting the existing products to new markets or newer segments 6. Cost Reduction - Reducing the cost of product Introducing new products that provide the same benefits at a lower cost • Challenges in New Product Development

*Average age of a product continuous to be on decline *Customers demand new and better products *Competitors keep coming up with new products *Innovate new products in order to create a competitive advantage

Organizing the Product Development Process

*Product Managers *Product Committees *Product Departments - special for only Product Development & Innovations *Product Venture Teams - Groups bought together from various departments

Stages in New Product Development
1. Idea Generation 2. Idea Screening 3. Concept Testing & Analysis 4. Product Development 5. Test Marketing 6. Commercialization 1. Idea Generation : R&D, Market Research, Sales Team and other Employees 2. Idea Screening : * Product Idea matches the existing products of company * Degree to which new product can cannibalize the sales of existing products * Company’s ability to produce and market the product thus developed * Buyer behavior and probable changes in environment PURPOSE : Reduce the number of Ideas to a manageable few for further attention for development 3. Concept Testing & Analysis : Idea is submitted for external evaluation to get a feedback from market àTo understand what attributes & benefits a customer is looking for in a product a. Business Analysis : In-depth financials analysis b. Sales Estimation c. Estimating Costs & Profits d. Risk Analysis (Probability)

e. Break Even Analysis

4. Product Development àIdentifying Target Customers àPositioning Strategy àDeveloping Attributes of New Products àCompetitors Activities / Strategies àDifferentiation of Products / Competitive Advantage àProduct Development Schedules àMarketing Issues / Financials Issues / Legal & Regulatory Issues àProduction Requirement Proto-types Product Use Testing àPerformance, Safety, Acceptability of Sizes, Color, Weight àCustomer Preferences 5. Testing Marketing 6. Commercialization

Brand Management
• Brand Management ** Branding Marketing relies on Branding to give Products / Services an Identity, Personality, Image, Equity and Attractiveness. ** Brand Concept Brand is Name, Term, Sign, Symbol, Design or Colouring or a Combination of them, which help identify Seller’s Products and Differentiates them from those of Competitors. • Examples Marks Penguin Rishi Tiger

*Brand Name Kelvinator Dabur Chyawanprash Goodlass Nerolac

*Brand Name Colours Nivea Bright Blue Everready, Coke, Lifebuoy Red Liril Lemon Green Tata Tea Green Branding Policy Branding Decisions Include * To Brand or Not to Brand * Sponsorship - Company or Middleman * Name Individual or Family Branding - The Need Arguments for 1. * * * * Brand Identity helps Processing Gives Identity to the Company’s Products Helps easy Processing for Company, Distributor and Consumers Saves Cost and Time in Manufacturing, Warehousing, Transporting & Order Processing Consumers can Spot & Select Product

2. Brand Image gives Competitive Advantage * Earns Recognition and Reputation by their Performance * Helps Existing Products in the Line and New Products * Commands Higher Price than Competitors * Convinces Distributors to carry Products 3. Brand Personality convinces Consumers * Brands in course of their association with Consumers develop Personality * Advertisers match Personality of Brands with that of Prospects

* Helps build Brand Loyalty - a Lasting Companionship. * Helps bring a Strong Bondage between a Brand and Consumer 4. Brand Equity enhances Value * Enhances not only Value-in-Use but also in Value-in-Exchange * Commands Premium Price from Competitor / Entrepreneur willing to Own Brand Arguments Against Branding 1. Investments - Returns doubtful * Huge Long Terms Investments in R7D, Advertising Budgets, Dealer Discounts * No Assurance of Returns 2. Image and Personality an Emotional Nonsense * Psychological Fantasies created by Self-seeking Marketers * No Product Sells only on Brand Name * Fundamentally Product fulfills Need, Stays & Succeeds in Market 3. Brand Equity * Brand Equity Concept replaces the Old Term “Good Will” * Its an Identification Factor that helps Promote Distinctiveness Brand Sponsoring Who has to sponsor the brand? 1. Manufacturer Brand (National Brand) 2. Distributor Brand (Private Brand) * The development of Retail Chains / Malls, Super Markets provides the opportunity to leave Branding to Distributors. * Consumers prefer National Brands. Identified as Quality Products. Brand Identity The primary purpose of branding is creating an Identity of the Product. Two important considerations * Name What? * Name How? Name What? 1.Should each product be given a Brand Name? 2.Should Each Group of Products be named with a Family Brand Name? Or all Products? 3.Should Company Trade Name be associated with Brand Name? The Brand Naming Options are related to Product Levels. Product Level - Individual Brand Names Product Line Level - Product Group Family Names Product-Mix Level - Blanket or Umbrella Family Name

Individual Names examples HLL - Lifebuoy, Liril, Lux, Pears P&G - Peposdent, Ariel Godrej - Cinthol, Marvel, Ganga Merits * Image of the Company not effected by failure of one brand * Free to introduce low quality products without any adverse impact on the high quality products in the line Demerits * Too many brand names result in confusion. * Identification of Products with their Company is difficult * Development Costs is incurred for each brand separately and together results in High Costs * Spill-over benefits of Successful Brands are marginal • Individual Names with Company Name - Examples

* Ponds : Ponds Dream Flower Talc, Ponds Magic * TVS : TVS 50 XL * Wipro : Wipro-Shikakai Merits * Company name Legitimizes the products * Image & Benefits of successful products helps other products of the Company Demerits * Product failures tarnish the image of Company Product Group Family Names Multi-Product Group Companies may choose to name different groups with different family brand names Examples Raymonds : Raymonds for Textiles, Park Avenue for Ready-mades, shoes and toiletries

Merits * Helps promote a group of products. Hence development costs are less. * Failure of a product will have a limited negative impact on its group only * Different groups need different psychological associations. * Different Brand names help evoke different and appropriate responses.

Demerits * Individual Items will have sufficient Brand Power and Recognition.

Blanket Family Name Namely all the Products of a Company with one Name - Family Brand Name Examples Usha : Fans, Sewing Machines, Industrial Pumps Nirma : Detergents, Toothpaste, Soap Colgate : Dental Cream, Toothbrushes Merits * Development Costs are very less * Under Umbrella Brand name all Products get Easy Recognition * Fear of Failure makes management cautious in launching New Products * Marginal Products also do better aided by the success of other products * New Products get instant recognition Saves time and Money during Product Launch Demerits * Unsuccessful products may dilute the Company Image • Name How?

* Names generate distinct thoughts in the minds of the People. * Brands Names also reflect particular characteristics and accomplishments. * Guidelines to help name brands are : Easy to use Easy to understand Easy to distinguish • Effective Brand Names Guideline Description Example Tide, Surf

Easy to Use Short, Simple, (Learning Memory) Easy to

Easy to Pronounce Rin, Colgate Read & Remember Meaningful & Medimix, Kleenex Walkman Cease fire Clinic Plus Pepsi Parachute KitKat

Understand Suggest (Association) Characteristics & Functions of Products Easy to Distinguish Unique, Peculiar & Distinctive. (Preference) Not Imitation

* The association of Brand grows larger beyond the product with which it is first associated. * Brand Identity starts with the product to which the name is given * Brand grows next to become a Symbol, a Person and finally an Organization * Example Philips - electrical products, symbol of quality, illustrious person and an innovative great company Brand Strategies 1.Brand Extension 2.Multi-Branding 3.Co-Branding 4.Brand Equity 1. Brand Extension * Product Innovations are a regular feature for a Competitive Organization. * They can be launched as a Separate Brand or an Extension of existing Strong Brands. * Decision in favour of Brand Extension are >>To make a brand more visible >>To reduce development costs of a brand >>To reduce risk, by banking on the image of a reputed brand >>To meet competition or to complete the line of offer Types of Extensions 1. Category Related 2. Image Related 3. Unrelated Category Related Parent Brand Name is given to product variants, which have the same use but slightly different benefits. Here the common point is - same Customer Needs. Only tastes differs. It satisfies variety seekers. It is a part of flanking strategy of a Company. Image Related Parent Brand name is given to the product items in a different Product-Line. Here, the common factor is Customer Group. The related needs of the customer groups will be satisfied by these product items. The image of the parent product and its emotional benefits can be transferred to the Brand Extensions. Unrelated There is not even one common factor between the parent brand and the extension. It is entirely a different product line requiring a different marketing strategy catering to different customer groups. • Examples

Product : Godrej Shaving Cream Category Related : Godrej Shaving Cake Image Related : Godrej Hair Dye Unrelated : Godrej Refrigerator Product : Usha Ceiling Fan Category Related : Usha Table Fan

Image Related : Usha Sewing Machine Unrelated : Usha Industrial Pump 2. Multi-Branding A Company may introduce several brands in a Product-Line with different features to appeal to different categories in the same customer group. Many FMCG Companies follow this Strategy Benefits Flanking of the major brand Occupying more shelf space of retailers Gaining more profits Disadvantages * Each brand may have a small market share * Cannibalization of some brands of the Company * High development costs as many brands are to be developed • Examples

Company : HLL Product Group : Soaps Multi Brands : Lifebuoy, Liril, Lux Company : Godrej Product Group : Soaps Multi Brands : Cinthol, Ganga, Marvel, Fair glow 3. Co-Branding Offer one brand with another brand of same company or another company. Offer may take two different forms 1. Ingredient Co-Branding 2. Product Co-Branding Ingredient Co-Branding takes place when * Maker of the parts - get visibility and gain image - insists on publicizing his brand. * Part is important and maker has an image that enhances consumer acceptance of ultimate product * Competitors are following such practices Examples IBM & Compaq buy chips from Intel. Advertise Intel Inside. Reliance markets its Pillow - SlumbRel - with Dupont Fibres highlighted Cell & Milton advertise their thermoware saying “We use SAIL Steel” Kelvinator Refrigerator comes with ‘Blue Star” Thermostat 4. Brand Equity When Brands are effectively managed they acquire “Value” and become “Assets” with “GoodWill”

“Brand Equity is a set of assets (and liabilities) linked to a brand’s name and symbol that adds to (or subtracts from) the value provided by a product or service to a firm and / or that firm’s customers.” The major asset categories are : 1. Brand Name Awareness 2. Brand Loyalty 3. Perceived Quality 4. Brand Associations • Brand Management

Effective Brand Management involves * Enhancing Brand Personality * Protecting Brand Identity 1. Brand Personality Like a person, Brand is a psychological being having an appearance, emotional feelings and rational behaviour. Brand Personality can be described at three levels Sensory, Emotional, Rational • Examples

Brand : Onida Sensory : Ugly Male Devil Emotional : Greed, Irritation Rational : Quality Image : Hi-Tech Brand : Lux Sensory : Beautiful, Feminine Emotional : Aspiration & Achievement Rational : Soft, High Quality Image : Star with Charisma * The Interaction of a Consumer with the Brand at three levels produces Image, which may reflect Attractiveness, Trustworthiness and Expertise. * Brand Personality creates impressions in the minds of people. The impression left by the Brand in the minds of the people is known as “Brand Image”. The Purchase Behaviour is influenced by Brand Image. 2. Protecting Brand Identity Protecting Brand Identity is through Semiotics - the study of signs, symbols and their interpretation. * Most FMCG Good’s protect brand identity through this. * Colour, Logo and Mascot add strength to the above.

Pricing Strategy & Policies
Concept of Pricing Determinants of Consumption (4A’s) * Affordability * Availability * Awareness * Acceptability. Major Determinant of Consumption : Affordability - two main factors namely Incomes of Consumer and Prices of Products & Services * Price represents Market Value of a Product or Services. * Price contains all the terms of purchase. Monetary - Non Monetary including discounts, handling, credit etc. * Pricing relevance more in present day context of “Value Added Marketing” Price is a Multi Dimensional Concept * To the Company : It is a revenue generator being a Cost Plus factor. * To the Consumer : It is their cost of purchase as well as cost of living index. (Purchase Power Index) * To the Economy : It is the mechanism by which resources are allocated. * To the Government : It is the tool for promoting Welfare. Support - Ration prices) Significance of Pricing * Historical Significance - Price & Demand Theory. * Functional Significance a. Economic Reason : Defines target market. Fixation of Price. b. Technical Reason : From the point of view of Consumers Price is quantitative, unambiguous whereas Product Quality, Product Image, Customer Service, Promotion and similar factors are qualitative, ambiguous. c. Social Reason : Symbolizes Quality, Value, Status, Life Style. Recent Trends Recent Trends which lead to pricing playing a significant role as an element in Marketing Mix decision. 1. Market Fragmentation : Based on the Income Classes, NCAER categories Indian Consumers into 5 Categories, Multi-tiered consuming classes. * The Very Rich - Above Rs.215 k

(Regulatory -

1994-95 1999-00 2005-06 1m HH 3m HH HH Benefit Maximisers : Own Cars, PC’s * The Consuming - 45k to 215k 29 m HH 55 m HH 75m HH Cost Benefit Maximisers : Have Bulk of branded consumer goods, 70% own 2 wheelers, refrigerators, washing machines * The Climbers - 22k to 45k 48m HH 66m HH 78m HH Cash Constrained Benefit Seekers : have at least one major durable (mixer, Sewing M/c, Television) * The Aspirants - 16k to 22k New Entrants into Consumption : 48m HH 32m HH Have bicycles, Radios, Fans 35mHH 24mHH 33m HH


* The Destitute - < 16k Hand to Mouth Existence : Not buying


2. Market Saturation : Indian Urban Markets are well penetrated for all FCMG and White Goods. In Rural Markets products like TV’s, shampoos, toothpaste well penetrated in high income rural group. In fact in mass consumption goods like washing powder, Penetration ahs increased to unbelievable levels. Pricing plays a very important role in such saturated markets. 3. Inter-Category Competition : Market is flooded with several types of goods perplexing the mind of the consumers. Cell phones and Air time are both now very cheap than before. Computers are available cheap and in easy installments. 4. Value Conscious Consumption : The profusion of consumer offers and price wars have taught the Indian consumers that he can bargain with the marketers. When there is a choice , consumer is choosing the best brand with best value delivery 5. Offering Value for Money Proposition 6. Branding / Debranding and Customisation Trends Aspect Self Reliant *Incomes Exploited From To Policy Low Rise Hungry Less Fragmented * Consumer Optimistic, Immature * Competition Brand Competition Depressed, Mature Category Brand Loyal Value Loyal High Rise Saturated More Fragmented subsidies *Government Support by No subsidies *Market Virgin,


Pricing Objectives 1. Profit : Profit Maximisation.Target Profit. 2. Sales : Gain Market Share, Growth in absolute sales, Growth in market share, Maintain Sales Volume, Minimum sales necessary to survive. 3. Competition : Meet or prevent competition (Market Leader) Destroy Competition (Lower Price Block entry of new firm) 4. Development : Gain Market Share (Expanding existing markets, stimulating non users / encouraging to buy, enter new markets - new launch) Constituents of a Pricing Policy a. Identification of situations requiring pricing decisions. b. Understanding the factors – internal, external. c. Right approach - Cost, Demand or Competition Oriented. d. Selection of method of Price Determination. When do you think organisations face pricing problems (situations)? a. PLC stages : Introduction, Growth, Maturity and Decline. PLC Short - Long. b. Competition -High or Low c. Consumer types - Gullible or Discerning? d. Product level promotion -Item or Product Mix e. Distribution Geography - local area or wide area f. Motivating channel members

What do you think are the factors which influence pricing decision process? 1. Determine the Cost of the Product ( Cost Factor) 2. Estimate the Demand for the product at various prices ( Demand Factor) 3. Estimate the reaction of Competitors to alternate prices ( Competition Factor) 4. Estimate the impact of Each Product Price on Complementary Products ( Product Line Factor) 5. Determine how Reseller react to each proposed price ( Channel Factor) 6. Assess the impact of each price on Product Mix Strategy (Marketing Strategy Factor) 7. Determine whether any of the prices will result in Legal action from the Government ( Politicolegal Factor) 8. Choose the Final Price (Management’s Judgement Factor) Internal : Cost, Product Line, Marketing Strategy External : Demand, Competition, Channel, Politico- Legal Internal / External : Management Judgement Factor Right Approaches / Methods available for Pricing. 1. Cost -Based Approach : (It tends to ignore Demand and fails to reflect Competition adequately ) * Cost Plus or Mark Up : Full Cost + Fixed percentage of Margin

* Marginal Cost or Contribution : Price is fixed to Maximise its Total Contribution to meet Fixed costs and Profit * Target Return : % of Costs, % on Sales, % on Capital Employed) * Pay back period (Capital Recovery) : Price to cover all Costs and Capital Investment within a Specific Time Period ) * Experience Curve : An Experience Curve represents the relation between Costs and Cumulative Experience. With Learning the Costs Decline and allow fixation of Lower Prices. 2. Competition -Based Approach : * Leader Pricing : Some Product Items may be Priced Low , to Attract Customers and to Generate more overall Demand for Other Items. * Competitive Pricing : It is Reactive. It matches the Market Prices of Competitors. Going Rate Pricing : Products are Price at the Same Level or Below Prices of Leading Competitors. Sealed Bid Pricing : In Indl Marketing / B 2 B Marketing, Open /Closed bids are invited. Firms quote their Price based on ( Probability ) What Competitor would quote. 3. Demand-Based Approach : * Discrimination/ Differential/ Variable/ Flexible : Products are sold at two or more prices based on Customer Segment, Product-form, Image, Location and Time. * Perceived -value : Based on Perceived Value of each component of the Product, the Price is Estimated and Employed. * Psychological : Based on Attitudes of Consumers on Quality - Price Relationship ( High Price means High Quality) Odd Prices (which Conveys the notion of Discount or Bargain) Reference Prices (a Price on an Average considered right for a Product) * Value : Prices which will generate Value Satisfaction to the Consumers - Regular Prices on all Days but Lower Prices during Special Promotion Periods. Now a days Consumers are more * Quality Conscious * Value Conscious * Price Conscious. How do react to these kind of consumers on pricing? Life Style : * Very Rich Annual Income Rs > 215K * Consuming Class > 45K & < 215K * Climbers > 22K & < 45K Category : Quality Conscious Value Conscious Price Conscious

* Aspirants * Destitute

> 16K & < 22K < 16K

Price in other Marketing Mix (i) Quality Conscious Consumer Value for Money Product : Premium Products (ii)Value Conscious Consumer Frills, Value for Money Product : Mass Products (iii) Price Conscious Consumer Product : Spurious Goods Concerned with Functional Benefits Price : High Promotion : High Price Sensitive, Concern for Functional Benefits, No Price : Medium Promotion : High

No concern for Quality Price : Low Promotion : No

Pricing for Quality Conscious
* Quality Difference : Larger the Perceived Difference in Quality of Brands in a Category, the PQ relationship is stronger (eg : TV’s, Home Appliances, 2 Wheelers ) * Quality Uncertainty : Greater the uncertainty involved in judging the Quality of Product, stronger the P-Q Relationship (Consumers lack ability to judge the quality or they do not have / know other cues to detect quality) eg TV’s LG Golden Eye & KY Thunder Series * Price Consciousness : Higher the price conscious and more prices variations within the category of Products, P-Q Relationship is stronger. Eg : HLL has Surf Excel at top end in the Fabric Wash Category, Rin Powder / Bar in Mid –Price Segment and Blue Wheel Powder at Lower End Segment. * Need Compulsion : Certain Products more in Services that fill certain needs will have strong PQ Relationship. Eg : Reputed Surgeon charge premium rates for their services as their services are viewed essential. * Place of Availability : Within the same product category, P-Q Relationship is stronger for the brands sold to the premium market. Egs : Doctor’s services in a Corporate Hospital, Mineral Water in an a Restaurant. * Social Consciousness : Publicly consumed products like Shirts / Shoes etc have a strong P-Q Relationship than privately consumed products like toothpaste etc.

Pricing Methods for Quality Conscious
Discriminatory Pricing : * Product form Pricing : Different version of products are priced differently but not in proportion to their respective costs Egs : Books Hard Bound and Paper Packs are available at different prices Beverages are offered in different sizes and packs. * Location Pricing : The same products are priced different at different locations though the cost of offering at each location is same. Egs : In Theatres, seats are priced differently based on location.

* Time Pricing : Prices are varied by day or season. Egs : Museums / Zoo’s / Parks charge higher on Sundays & Holidays. Hill Resorts charge higher in Summer and Lower in other Seasons. Perceived Value Pricing : Companies add features to their products with a view to enhancing their Customer’s Perceived Value. For each of the features, which enhance convenience, durability, reliability, attractiveness etc of the Product, the Company fixes prices to be charged and adds tem to the product price to arrive at the Final Price. Psychology Pricing * Reference Pricing : Products are priced Higher which have Celebrity Endorsements, Products placed along with classy products. * Image Pricing : Effective in case of ego-sensitive products like Cars, Sunglasses, Cameras etc. People Buy Expensive ones as Price acts as signal of Quality.

Pricing for Value Conscious
Some Consumers are Price Sensitive irrespective of their place of living and socio-economic category. They are willing to pay for products of their choice as long as they get ‘Value for Money’. Consumers are getting more attracted by the Consumer Durables Market where they encounter goods with more feature and Lower Prices. There is greater alignment between value and price. Pricing Methods for Value Conscious : Psychological Pricing-odd numbers. Eg : Bata Value pricing : Skimming vs Penetration

Pricing for Price Conscious. Small Unit Low Pricing - Promotional pricing. Affordability being less

Price War
* Is Customer benefited ? * How to fight a Price War ?

Why Price War ?
* To Capture the Customer In the battle to capture the customer increasingly, price is the weapon of choice and frequently the skirmishing degenerates into a Price War. * To Ward Off Competition & Competitors * Some Marketers goal is to create low price appeal for their Products and Services. But what happens is that the result of one retaliating price slashing after another is often a precipitous decline in Industry Profits.

* Price War can create economically devastating and psychologically debilitating situations that can take an extraordinary toll on individual, company and industry profitability. * No matter who wins, the combatants all seem to end up worse off than before they joined the battle. And yet, Price Wars are becoming increasing common and uncommonly fierce. * Price Wars are becoming more common because Managers tend to view a Price Change as an easy, quick and reversible action. * Virtually every competitive move is based on Price, every counter measure is a Retaliatory Price Cut. * Most Managers will be involved in a Price War at some point in their careers. Every price cut is potentially the first salvo, and some discounts routinely lead to retaliatory price cuts that then escalates into full blown Price War. When Price War ? * High degree of sensitivity to price on consumer usage * Price War starts because somebody thinks price in a certain market is high * Someone is willing to buy market share at the expense of Current Margins * The largest driver of Price Cuts and resulting in Price War is Excess Capacity * When reviving idle plants / service by stimulating demand through lower prices / price war * Low variable costs due to economies of scale and technology * Up-gradation tempting business to cut prices Benefits to Customer due to Price wars * Product available at lower price * Possible Best Quality at Best Price * Better terms of Purchase

Loss to Customer due to Price Wars * Poor quality of Product * Lowering of Quality / Price / Value relationship How to fight a Price War ? 1. Diagnosis 2. Prescription 3. Cure First Step : Diagnosis Intelligent Analysis that leads to accurate diagnosis is more than half the cure. Diagnosis Process involved is : * Understanding the opportunities for pricing actions based on Market Trends * Responding to Competitors action based on players and their resources Through Diagnosis process : * Understand why a Price War is occurring or may occur * It is also critical to recognize where to look for resources to do battle.

Analyze 4 key areas
* Customer Issues - Price Sensitivity and Customer Segments that may emerge if prices change * Company Issues - Business Cost Structure, Capabilities and Strategic Positioning * Competitors Issues - Rivals Cost Structure, Capabilities and Strategic Positioning * Contributor Issues - Other players in the industry whose self interest - profiles may affect the outcome of Price War Once the four areas are examined carefully it will automatically result in actual quite a few different options. 1. 2. 3. 4. Defusing the conflict Fighting it out on several fronts - when and how to fight a Price War ? Retreating - when to flee ? When to start one ?

1. Defusing- stop the war before it starts. * Make sure your competitors understand the rationale behind your pricing policies. * Make sure your competitors know your costs are low. This effectively warns them about potential consequences of a price war. It some times pays to reveal your cost advantage.

* A business that has relatively low variable costs enjoy an enviable advantage in price war with competitor with higher variable costs. * But low cost companies should carefully consider strategic positions before they start or join a price war. * Lower costs often tempt a business to cut its prices, but doing so can diminish consumers perceptions of quality and may trigger an unprofitable price war. 2. Fight it out : First Respond with Non Price Actions * Customer Segments exhibit different degrees of sensitivity to price and quality. Quality, not Price. Even rival / competitor price cut will not effect the company. * Introduce add on / supplementary services (free or marginal cost basis) * Focus on

* Alert Customers to Risk. More specifically the risk of poor quality. * Emphasize other negative consequences. * Seek help or appeal to Contributors to weigh on competitive situation. * Appeal to Customers, Vendors, Channel Partners, Sales Reps and other like minded players.

Use Selective Pricing Actions : 2. 3. 4. 5. 6. 7. 1. Multiple - Part Pricing Quantity Discounts Loyalty Programs Time of use pricing Price bundling Buy one get one free Change Customer choice

3. Retreat : On rare occasions, discretion is the better part of valor. Other issues : Price leadership Price cartels Regulators

Marketing Channels(Distribution or Trade) & Marketing Logistics (Physical Distribution) Marketing Channels (Distribution or Trade) * A set of interdependent organizations that make a product or service available to customers for use or consumption. Marketing Logistics (Physical Distribution) * This consists of delivering completed products to customers and channels intermediaries Warehousing, Transportation.

Marketing Channels (Distribution or Trade) - Trends
Element of Sales 1. Time (Selling When?) From : Restricted, Limited Timing To : Unrestricted, Any Time 2. Place (Selling Where?) Home or Work Place or Consumer’s Place From : Own Retail Outlet, occasionally public places for eg Exhibitions To : Any where 3. Choice (Selling What?) From : Limited to Brands To : Any Product to any Specifications, Unlimited 4. Sales (Selling What?) From : Products To : Products, Experiences, Relationships, Achievements 5. Result (Selling Why?) From : Customer Satisfaction To : Customer Participation & Satisfaction 6. Selling Who? From : Agents, Companies, Consumers

Marketing Channels - Nature
1. Geographic Distribution For Consumer Products Spread across in areas close to commercial centres For Industrial Products Concentrated near Industrial Estates 2. Channel Size - Short / Long or only intermediary 3. Characteristics of Intermediaries - Agents, Brokers, Commission Agents 4. Mixed System - Use of both Direct & Indirect Channels

Alternate Channel Structures
1. Direct Channel Structure When value of transaction high Buying process lengthy Buyer insists on direct purchase 2. Indirect Channel Structure When value is low Manufacturers have limited resources

Buyers widely disbursed Buyers buy one time

Why Marketers use Intermediaries?
Functions or Services performed by Middleman Buying, Promotion & Selling, assorting, Financing, Warehousing, Grading (inspection & testing), Transportation, Information, Risk Taking, Technical Service Why Customers Buy from Distributors? * Dependable Delivery * Information * Variety * Liberal Credit

Types of Middleman / Intermediaries
*Manufacturers Representatives - Commission on Sales *Distributors or Dealers - Full Functions General, Specialized, Combination *Brokers - represent either Buyer or Seller *Commission Agents - Standard Products (large quantity) *Value - Added Resellers (VARs) In Data Processing (Computer Industry) VARs Customize Hardware for Software Processing

Channel Design Framework
Develop Channel Objectives + Analyze Channel Constraints + (environment, competition, legal (MRP), product / customer characteristics, geographic) Analyze Channel Tasks = @Identify Channel Alternatives Selective, Intensive, Exclusive Distribution Types of Intermediaries, Number of Intermediaries, Number of Channels (Multi ChannelsBenefits *increased market coverage * low channel costs * more customized selling) Terms & Responsibilities of Channel Members (sales policy, territory or market segments) >> @Evaluate Channel Alternatives Economic factors (selling costs vs selling revenue) Control factor (company sales force, agent, broker) Adaptive factor (degree of adaptability)>> @Selection of Channel • Managing Channel Members

* Selecting Right Intermediaries at Right Time (continuous process)

Criteria for selection - Marketing Skills, Financial Standing, Technical skills, Location, Types of Customers served in past / present *Motivating Middleman =>Partnership Concept - Dealership Agreement Objective >> lower total cost For mutual benefit>> increase value for channel =>Reasonable Discount / Commission Discounts to dealers / distributors Commission to agents / brokers =>Distributors Councils or Meeting Conclaves =>Other Motivational Practices - Annual Retreat & Conference

Controlling Channel Conflicts
1. Difference in Objectives * Manufacturers - Long Term Profitability * Distributors - Short Term Profitability 2. Dealing with Customers * If large customers met by manufacturer and dealer gets only small, the distributor feels cheated 3. Difference in Interests adequate attention to all products 4. Differences in Perception whereas Dealers want to stock less * Manufacturer feels Distributor does not give * Dealer wants only Fast Moving Items * Manufacturer wants high inventory to carry,

5. Compensation * Manufacturers think commission given is High whereas Dealers always think the commission they are getting is less 6. Unclear Territory * Boundaries not clear will result in conflicts

Evaluating Channel Members
*Sales Achieved vs Sales Quota *Customer Delivery *Customer Complaints *Market Feedback *New Customers Generated

Marketing Logistics (Physical Distribution)
Getting Right Goods to the Right Places at the Right Time for Least Cost. Business Logistics System * Physical Supply - for manufacturers involves Raw Materials, Components supplies Materials Management / Purchase Function * Physical Distribution (Marketing Logistics) - Completed Product or Finished Product to Customers & Intermediaries Efficient Delivery *Creates value for customers & savings in costs *Better Customer Service *Creates a Competitive Advantage-Companies with superior logistics performance gained higher percentage of Customer Loyalty

JIT System *Delivery at Right Time *Delivery at Exact Quantity as required by Customer *Perfect Quality as No Inspection

Tasks or Activities of Physical Distribution
Relationships are complex between various tasks or activities Objectives *Maximizing Customer Service *Minimizing Distribution Costs Result *****Conflict Resolved by Good Mix of Both Objectives

Tasks or Activities
*Transportation *Warehousing - to make available when needed *Inventory Control - to make available Right Product Mix *Packaging & Labeling - for protection and identity *Material Handling - Speed of Loading and Unloading *Order Processing - Delivery of Products *Communication - Information Flow *Factory & Warehouse Location - Right Locations >>Higher Customer Service and Lower Transportation *Customer Service >>Creates Customer Value which has impact on Market Share, Total Cost, Profitability etc • Total Cost Approach

Focuses on balancing the two important elements *Total Distribution Costs (minimize) >> To maximize profits to company and channel members *Level of Service Provided to Customer (maximize) >> Customer Service

€ Total Distribution Costs (minimize)
Freight Cost + Warehouse Cost Delivery + Inventory Cost + Cost of Lost Sales Due To Delayed

Elements of Customer Service
>>Presales Service Advisory Service Technical Service Ordering Ease Patronage Awards >>During Sales Service Keeping Adequate Stocks Speed and Accuracy of Delivery Product Substitution

>>Post Sales Service Replacement of Defective Products Product Warranty Maintenance Contract Repair Service Installation Service Customer Training

Impact of Marketing Logistics on Intermediaries
To improve by *Developing Computerized System *Standardized Packaging & Material Handling *Manufacturer and Channel Members should improve Marketing Effectiveness

Role of Marketing Logistics (Physical Distribution)
*It is a long term Strategic Issue *It is a source of creating a Unique Competitive Advantage *Superior Customer Service at Lower Total Distribution Costs *It plays a key role in Global Competition, Worldwide Sourcing, JIT System and Total Quality Management(TQM)

Emerging Trends & Issues in Marketing
Marketing Trends
* Opening of Indian Economy to Foreign Companies * Increasing Number of Foreign Corporate Alliances * Growth of Global Brands in Indian Markets * Rapid Dissemination of Global Life Styles * The Emergence of Attractive Rural Markets Analysis of Evolving Markets 1. Government Policy From Support by Subsidies To Self Reliant, No subsidies 2. Incomes From Slow Rise To High Rise 3. Market From Virgin, Hungry, Less Fragmented To Exploited, Saturated, More Fragmented 4. Consumer From Optimistic, Immature, Brand Loyal To Depressed, Mature, Value Loyal 5. Competition From Intra-Category, Brand Competition To Inter Category, Category Competition • Some Shocks

Some shocks we had faced in market place : 1. Consumer Behaviour to a certain extent transformed into huge, homogenous, predictable West influenced market but still unpredictable 2. Urban Consumers were expected to become less price sensitive, more benefit conscious and move up from popular (Mass) Products to Premium Products. They have also become more Value Conscious. 3. Rural Consumers on the other hand, Middle Income Rural Consumers are not settling for cheap TV and scooters as they were expected to. 4. FMCG Manufacturing Growth Rate of 15% was taken for granted upto 1998 and there after is less than 5%. The story of Consumer Durables is not much better either. • Marketing Issues

1. Changing Consumption Patterns 2. Changing Consumer Psychographics 3. Markets in Transition 4. Market Fragmentation 5. Market Saturation 6. Inter-category Competition 7. Value Conscious Consumption

Marketing Issues
1. Changing Consumption Patterns The average Indian spent at the compounded growth rate of 9.7% (!991-92 to 2001-02). Huge increase in per capita consumption is due to two factors, namely - Growth in Volumes and Higher Prices. Spending on traditional / main categories like Food, Beverages and Tobacco is decreasing and spending on other categories expanding, zooming ahead. • Consumer Shopping Basket Changes Years - 1999 to 2002

Foods & Grocery From 44% to 42.10% Personal Care From 6% to 8.80% Clothing From 5% to 6.60% Footwear From 1% to 2.50% Consumer Durables From 6% to 3.90% Home Appliances From 3% to 1.10% Movies / Theatres From 1% to 3.80% Eating Out From 8% to 12.20% Savings & Investments From 14% to 5.20% • 2. Changing Consumer Psychographics

Consumer is Changing. The New Values and Attitudes that drive Kids, Teens, Youth, Women and Families is also changing. * Kids freedom to do what I want ? 72% feel Very Important * Being Popular amongst friends 81% feel very important * Whooping 90% of Teens in Urban India get pocket money. Where does all this money go? On eating out, personal grooming, fun &entertainment * The Indian Women - changed values and attitudes - the young seek pleasures / enjoyment in different ways - old put family and tradition first

3. Markets in Transition On Supply Side : Grey markets to the premium end - competition is increasing – consumers are presented with interesting value propositions On Public Policy : Govenment is withdrawing subsidies On Sectorial Composition : Industry and Agriculture have slowed down and with its Consumer Growth. Growth in Services is recorded to balance. In India Economic Transition, Heightened Competition, Fragmented Retail Structure, Extreme Consumer Price Sensitivity, Low levels of Product Differentiation and through Managing Relationships with Channel Partners, Organizations are helping themselves reach out the End Consumer. 4. Market Fragmentation Consumer India is Fragmented by 5 Consuming Classes (Socio Economic Classification) and Two distinct Generations Pre and Post Liberlisation 1. Very Rich (Benefit Maximisers) 2. The Consuming (Cost Benefit Maximisers) 3. The Climbers (Cash Constrained Benefit Seekers) 4. The Aspirants ( New Entrants into Consumption) 5. The Destitute ( Hand to Mouth Existence) 5. Market Saturation Indian Urban Markets are well penetrated for all FCMG and White Goods. In Rural Markets products like TV’s, shampoos, toothpaste well penetrated in high income rural group. In fact in mass consumption goods like washing powder, penetration has increased to unbelievable levels. Pricing is plays a very important role in such saturated markets. • 6. Inter-category Competition

Market is flooded with several types of goods perplexing the mind of the consumers. * Cell phones and Air time are both now very cheap than before. * Computers are available cheap and in easy installments. * Role of Consumer Finance has gained importance. • 7.Value Conscious Consumption

The profusion of consumer offers and Price Wars have taught the Indian Consumers that he can bargain with the Marketers. When there is a choice , Consumer is choosing the best brand with best value delivery Consumer is looking for offers on Value for Money Proposition through Brands / De branding (price discounts) and Customization

Emerging Markets

1. What distinguishing features will characterize the marketing function and in particular marketing strategy in changing times? 2. How will a market-driven, customer-oriented firm be organized? The answers to the formidable questions were taking shape in the last decade or more through a continuous string of momentous events.

Emerging Markets & Momentous Events

1. Intensifying Competition 2. Changing Market Behaviour 3. Shifting Life Styles 4. Shortening Product Life Cycles 5. Continuing Pressures on Profitability and Productivity

The Momentous Events
1. Intensifying Competition in the Indian Market shocked many traditional-minded executives from the mainline firms into devising fresh strategies to respond to reduced prices prevailing in the market. 2. Changing Market Behaviour, along with new flexible manufacturing techniques, convinced even the most sceptical executives about the vast opportunities and competitive advantages of creating specialized products and services targeted to dissimilar groups based on age, income, education, occupation, race, ethinic and cultural characteristics. 3. Shifting Life Styles influenced marketers to focus on how different groups live, spend, and act – all of which were being highlighted by the media and influenced by diverse political, economic, cultural and social movements. 4. Shortening Product Life Cycles due to the proliferation of new products and the continuing flow of dazzling new and affordable technology convinced executives to probe for emerging or previously unserved market egments. In turn, these circumstances triggered even greater efforts to push for faster-cheaper-smaller-better products. 5. Continuing Pressures on Profitability and Productivity activated the pervasive movement towards downsizing, reengineering and outsourcing. The result, a rush for many forward looking executives to create market sensitive organizations committed to total customer satisfaction.

New Marketing Practices
1. Focus on The Customer 2. Build Net Works 3. Create Alliances 4. Develop Corporate Culture 5. Apply Technology 1. Focus on The Customer - the ability to translate the outside-in approach into reality means permitting your core customers to decide your strategy. The essential concept is that they know more about what they need you.

2. Build Networks - the new information technology allows links among customers, suppliers, business partners and employees. The continuous multi-directional flow of information and activities move in harmony from product concept to delivery of a wanted product to a customer and effective business model that allows you to be far more virtual with customers and suppliers.

3. Create Alliances - in the current stream of organizational and marketing strategy, alliances and other forms of partnering are key to success. 4. Developing Corporate Culture - indispensable to any organization is acquiring and maintaining a mind-set and an orientation that is totally customer-driven. A company’s culture – expressed as values, things, ideas and behavioural patterns- emerges to form healthy relationships, not only with customers and suppliers, but also with an attitude about employees as intellectual assets. 5. Apply Technology - Using the internet as an integral part of the marketing impacts directly on the traditional functions of the sales and customer service.

What Marketers are doing now?
1. Search for opportunities in unserved, poorly served or emerging market segments. Action * Pursue new product or market niches * Stretch Product Lines * Position products to the needs of customers and against competitors 2. Identify ways to create new opportunities Action * Differentiate and add value to products and services * Participate in new technology, Innovations and Manufacturing * Pioneer something new or unique 3. Look for opportunities through Market Creativity Action * Promote image through quality, performance and training * Use Creativity in Sales Promotion, Advertising, Personal Selling and the Internet 4. Monitor Changing Behavioural Patterns and Preferences Action * Practice segmenting markets according to behavioural patterns, demographic and geographic information * Identify clusters of customers who might buy or utilise different services for different reasons 5. Learn from Competitors and adapt strategies from other industries Action : Understand from your competitors * How they conduct business? * What products they sell? * What strategies they pursue?

* How they manufacture, distribute, promote and price? * Their weaknesses, limitations and possible vulnerabilities Summing up New Rules of Competition Demand that Organizations are : 1. Built on Change, Not Stability 2. Organized Around Networks, Not a Rigid Hierarchy 3. Based on Interdependencies of Partners, Not Self Sufficiency 4. Constructed on Technological Advantage

Sales Force Organization & Management
The Selling Process
1. Prospecting 2. Qualifying – Screening Thru Qualified Criteria 3. Preparation – Sales Presentation Pre-approach & Approach 4. Presentation & Demonstration àCanned Presentation àNeed Satisfaction Method àNegotiating Skills 5. a. Objection Handling b. Negotiation / Bargaining 6. Closing 7. Post-Sales Service (Follow-up & Maintenance)

What makes Successful Salesman
1. Greater Product Knowledge 2. More Enthusiastic Presentation 3. More ability to clinch order 4. Provides good service to customer 5. Asks questions &listens to customers 6. Responsibility / Delegation Skills 7. Contacts in Market / Industry – PR 8. Answers Objections Handling well 9. Pleasant impressions …….

Managing & Administration of Sales Force
1. Recruiting 2. Selecting Personal Interviews (Structured / Unstructured) *Criteria àHuman Relations àCommunication Skills àProduct / Job knowledge àNegotiating Skills 3. Training *Aims or Objectives à Company, Product, Market Information, Sales Policies, Selling Techniques 4. Supervising & Motivating

àCommunicating, Counseling, Establishing Standards of Performance, Creating Favorable Environment, Training & Development 5. Developing – Growth 6. Compensating – Fixed, Variable, Commission, TA/DA, Perks 7. Evaluating & Controlling – Quantitative, Qualitative – MBO Approach

Sales Organization
Four Types of Sales Organizations 1. Geographical / Territorial 2. Single Product / Multiple Products 3. Combination of (1) And (2) 4. Market-Customer Oriented Organization

Deployment of Sales Force
1. Setting Up or Revising Sales Territories 2. Size of Sales Force 3. Allocation of Sales Force to Sales Territories & Customers Team Selling with Relationship Marketing is a major strategy used to secure consistently good business. • Marketing Planning

Marketing Planning is an output of Marketing Planning Process. 1. Analyzing Marketing Opportunities 2. Segmenting, Selecting Target Segments and Positioning 3.Developing Marketing Strategies 4.Implementing & Controlling Marketing Plans • Business Strategy Leads to Marketing Plan It involves four steps :

1.Developing a Marketing Plan at Functional Level. The contents of Marketing Plan consists of a. Situational Analysis b. SWOT and Issue Analysis c. Objectives and Goals

d. Marketing Strategy e. Action Plan f. Marketing Budget g. Implementing & Control h. Contingency Plan 2. Effective Implementation of Marketing Plans Four Skills are required / Important a. Allocating (MMM) b. Monitoring (MIS) c. Organizing (OB) d. Interacting (Internal / External) • Guide to Marketing Plan

1. Situational Analysis : *Market Situation àIncludes data on Market Size, Growth, Sales, Market Share, Current Share, Future Projections of Total Market and each Target Market Segment. Includes Target Customer Needs, Buying Behavior. *Competitive Situation : Consists of Identifying, Ranking Market Share, Objectives & Strategies, Strengths & Weaknesses and Reaction Patterns of Major Competitors *Product Situation : Includes data on Sales, Unit Prices, Profits (or Contributions) for each major Product Item in the Product Line and across Product Mixes. *Macro-Environmental Situation : Identifying factors Economic, Political, Legal and Forecasting Future Trends and Impact on Product 2. SWOT and Issue Analysis : • • SWOT faced by the Product(s) Issue Analysis àDetermining major issues faced by firm, based on Situational & SWOT Analysis.

3. Objectives & Goals : Determine Sales, Market Share, Profits considering Environmental & Issue Analysis done earlier 4. Marketing Strategies :

*Selection of Target Market Segments *Positioning Strategies relative to Competitors *Marketing Mix Strategy 4 P’s *Customer Service & Marketing Research Strategies 5. Action Plan : Each Marketing Strategy element is broken down to specific actions to answer. WHO will take the specific action, and at WHAT Cost? 6. Marketing Budget : Building Revenue & Expenditure Budget *Building Revenue thru Forecasted Sales àIn Units àAverage Unit Price àSales Revenue *Expenditure Budget includes estimated Marketing Expenses on Personnel, Selling, Promotion, Distribution etc. 7. Implementation & Control : *Building Marketing Organization to Implement the Marketing Plan *Control includes periodic review of actual performance against goals and taking corrective actions if required. 8. Contingency Plan : *To prepare Contingency Plans in case of any uncertain situation arises.