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Marketing (Full)2007 347

Marketing (Full)2007 347

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Marketing Orientation

COMPANY ORIENTATION TOWARDS MARKETPLACE

1. PRODUCTION - EASY AVAILABILITY AND LOW COST 2. PRODUCT - SUPERIOR PRODUCTS, INNOVATIVE FEATURES 3. SELLING - AGGRESSIVE SELLING & PROMOTION 4. MARKETING / CUSTOMER - FOCUS ON CUSTOMER 5. SOCIETAL MARKETING - CUSTOMER & SOCIETY

SELLING V/S MARKETING

SELLING STARTING POINT PRODUCT

MARKETING CUSTOMER NEEDS

MEANS

AGGRESSIVE SELLING & PROMOTION

SUPERFLUOUS SELLING

ENDS

PROFITS THRU SALES VOLUME

PROFITABILITY THROUGH CUSTOMER SATISFACTION

PILLARS OF MARKETING / CUSTOMER ORIENTATION

1. CLEAR DEFINITION OF TARGET MARKET (DEMOGRAPHICS, PSYCHOGRAPHICS, MEDIAGRAPHICS, GEOGRAPHICS) 2. PERFECT UNDERSTANDING OF CUSTOMER NEEDS 3. INTEGRATE / COORDINATE ALL ACTIVITIES (INTER & INTRA DEPT) 4. PROFITABILITY THROUGH CUSTOMER SATISFACTION

THUS CUSTOMER ORIENTATION MEANS
1. OBSESSED WITH CUSTOMER & AWARE OF COMPETITOR 2. MONITOR UNFULFILLED NEEDS CONTINUOUSLY THROUGH RESEARCH. 3. FUTURISTIC - MARKETING EXPENDITURE AN INVESTMENT 4. MARKETING CULTURE - CUSTOMER OVERRIDES ORGANISATIONAL INTERESTS 5. SPEED IN RESPONSE TO CUSTOMER’S PROBLEMS 6. CONSISTENCY IN DELIVERY OF VALUES, SATISFACTION 7. CUSTOMER RETENTION STRATEGIES 8. MASS CUSTOMIZATION 9. INTERACTIVE AND CUSTOMER FRIENDLY DELIVERY SYSTEMS 10. LOOKING AT CONSUMPTION SYSTEM RATHER THAN PRODUCT FOR AUGMENTATION 11. ALL DEPARTMENTS THINK CUSTOMER 12. CUSTOMER SATISFACTION - GOAL & MARKETING TOOL

6

WHAT IS MARKETING

ALL ACTIVITIES DESIGNED TO GENERATE AND FACILITATE EXCHANGE OF PRODUCTS AND VALUES INTENDED TO SATISFY HUMAN NEEDS AND WANTS. MARKETING MANAGEMENT IS THE PROCESS OF PLANNING AND EXECUTING THE CONCEPTION, PRICING, PROMOTION, AND DISTRIBUTION OF IDEAS, GOODS, AND SERVICES TO CREATE EXCHANGE THAT SATISFY INDIVIDUAL AND ORGANIZATIONAL GOALS.

MARKETER’S TASK

DEMAND MANAGEMENT (Level, Timing & Composition) STATES OF DEMAND NEGATIVE - Redesign Mix NO DEMAND – Connect Benefits to Need LATENT – Measure FALLING – Creative Remarketing IRREGULAR - Use Synchro Marketing FULL – Maintain OVERFULL – Use Selective Demarketing UNWHOLESOME – Use Laws, Fear, Price Hike, Reduced Availability

CORE CONCEPTS OF MARKETING

NEEDS – Deprivation of basic satisfaction WANTS –specific satisfiers of need DEMAND-wants backed by ability and willingness to buy PRODUCTS- anything( Physical good, service,person, idea0 that can satisfy a need or want UTILITY & VALUE &-SATISFACTION EXCHANGE-A value creating process TRANSACTION-Trade of values between parties RELATIONSHIPS-relationship marketing V/s transaction marketing MARKETS-all potential customers

MARKETING

PRODUCTS

SERVICES

PERSONS

PLACES

ACTIVITIES

IDEAS

MARKETING MIX - 7 PS

PRODUCT PRICE PLACE PROMOTION PEOPLE PACE (PROCESS) PROOF OF PERFORMANCE

CHOICE OF MARKETING MIX DEPENDS ON TARGET MARKET & POSITIONING

Expanded Marketing Mix For Product/Service
Product Physical good features Quality level Services Packaging sizes Warranties Branding variety Design ,style Place Channel type coverage Intermediaries Outlet locations Transportation Storage Promotion - Promotion blend - Salespeople Number Selection Training Incentives - Advertising Targets Media types Types of ads Copy thrust - Sales promotion - Publicity -direct mktg Price Flexibility Price level CreditTerms Differentiation Payment period Discounts Allowance

12

People - Employees Recruiting Training Motivation Rewards Teamwork - Customers Education Training

Physical evidence Facility design Equipment Signage Employees dress - Other tangibles Reports Business cards Statements Guarantees

Process - Flow of activities Standardized Customized - Number of steps Simple Complex - Customer involvement

13

RESPONSIVE V/S CREATIVE MARKETER

1. STATED NEED - PRODUCT DEMANDED E.g. INEXPENSIVE CAR 2. REAL NEED - FUNCTIONAL BENEFIT DESIRED E.g. LOW MAINTENANCE COST 3. UNSTATED NEED - EXPECTATION FROM COMPANY E.g. DEALER SERVICE 4. DELIGHT NEED-Eg COMPLIMENTARY GIFT 5. SECRET NEED - EMOTIONAL BENEFIT - E.g. SEEN BY OTHERS AS VALUE ORIENTED BUYER

CUSTOMER SATISFACTION V/S DELIGHT
PERCEIVED PERFORMANCE = EXPECTATIONS OK / SATISFIED

PERCEIVED PERFORMANCE

< EXPECTATIONS

DISSATISFIED/ UNHAPPY

PERCEIVED PERFORMANCE

> EXPECTATIONS

DELIGHTED

DELIGHTED CUSTOMERS HAVE EMOTIONAL AFFINITY WITH BRAND & HENCE LOYALTY. EXPECTATIONS BASED ON PAST BUYING EXPERIENCE, ADVERTISEMENTS, FRIENDS, COMPETITORS EXPECTATIONS, PRICE, BENCHMARKING. EXPECTATIONS DIFFER BASED ON PRODUCT, CUSTOMER.

Tools to track customer satisfaction
• • • • Complaint and suggestion systems Customer satisfaction surveys Ghost shopping lost customer analysis

• Cautions to be exercised in C.S. surveys • Definition in detail • Manipulation by customers and managers
16

DEFINING CUSTOMER VALUE

EXCELLENT PRODUCT IS OF NO USE IF IT FAILS TO MEET CUSTOMER NEEDS. A COMPANY SHOULD BE SKILLED IN MARKET ENGINEERING NOT JUST PRODUCT ENGINEERING.

CUSTOMER DELIVERED VALUE

CUSTOMER DELIVERED VALUE is the difference between total customer value and total customer cost. TOTAL CUSTOMER VALUE is the bundle of benefits customers expect from a given product or service. TOTAL CUSTOMER COST is the bundle of costs customers expect to incur in evaluating, obtaining, and using the product or service.

CUSTOMER DELIVERED VALUE

PRODUCT SERVICE PERSONNEL IMAGE CUSTOMER DELIVERED VALUE MONETARY VALUE TIME COST ENERGY COST PSYCHIC COST TOTAL CUSTOMER COST TOTAL CUSTOMER VALUE

DELIVERING CUSTOMER VALUE

1. MICHAEL PORTER’S GENERIC VALUE CHAIN 2. BENCHMARK AGAINST COMPETITION 3. VALUE CHAIN OF SUPPLIERS, DISTRIBUTORS, CUSTOMERS TO CREATE SUPERIOR VALUE-DELIVERY NETWORK

GENERIC VALUE CHAIN
• • • • • • • • • • • PRIMARY ACTIVITIES Inbound Logistics Operations Outbound Logistics Marketing and Sales Service SUPPORT ACTIVITIES Procurement Technology development Human resource Management Firm Infrastructure

21

CORE BUSINESS PROCESS

1. NEW PRODUCT REALIZATION PROCESS 2. INVENTORY MANAGEMENT PROCESS 3. ORDER TO REMITTANCE PROCESS 4 5 6 7 CUSTOMER SERVICE PROCESS MARKET SENSING PROCESS CUSTOMER ACQUISITION PROCESS CUSTOMER RELATIONSHIP MANAGEMENT PROCESS

23

CUSTOMER VALUE BUILDING APPROACHES - BERRY & PARASHURAMAN

1. ADDING FINANCIAL BENEFITS-FREQUENCY MARKETING PROGRAMS AND CLUBS 2. ADDING SOCIAL BENEFITS-INDIUALIZING AND PERSONALIZING RELATIONSHIPS 3. ADDING STRUCTURAL TIES-SUPPLY CUSTOMERS WITH SPECIAL EQUIPMENT OR COMPUTER LINKAGESTHAT HELP CUSTOMERS MANAGE THEIR ORDERS,PAYROLL, INVENTORY ETC

CUSTOMER RELATIONSHIP BUILDING

BASIC MARKETING – Simply Sell REACTIVE MARKETING – Sell & encourage customer to call if any Questions, comments or complaints. ACCOUNTABLE MARKETING – Salesman phones after sale PROACTIVE MARKETING – Salesperson contacts from time to time with suggestions about improved product uses or new products PARTNERSHIP MARKETING – Company works continuously with customer to discover ways to effect customer savings or help customer perform better.

LEVELS OF RELATIONSHIP MARKETING
HIGH MARGIN MEDIUM MARGIN LOW MARGIN

Many customers/ distributors Medium number of customers/ distributors Few customers / distributors

Accountable

Reactive

Basic or reactive Reactive

Proactive

Accountable

Partnership

Proactive

Accountable

LIFE TIME VALUE OF CUSTOMER

1. Lost customer revenue 2. Lost opportunity revenue 3. Customer replacement costs

COST OF ACQUISITION

1. COST OF AVERAGE SALES CALL (SALARY, COMMISSION, BENEFITS, EXPENSES)

=

TOTAL COST TOTAL SALES CALLS

2. AVERAGE NUMBER OF SALES CALLS TO CONVERT AVERAGE PROSPECT TO CUSTOMER

=

TOTAL SALES CALLS TOTAL NO. OF NEW CUSTOMERS

3. COST OF ATTRACTING NEW CUSTOMER = 2 X 1

Service Encounters or Moments of Truth Service encounters are the building blocks of service quality & satisfaction
- Every experience with product, service or person which allows customer to judge/ form impressions about the quality of service is a moment of truth. - It takes 10 good moments of truth to wipe one bad moment of truth. - Disney Corporation 74 service encounters in amusement park. Marriott Hotels - 4 of the top 5 factors come into play in first 10 minutes of guest’s stay. • Types of service encounters- remote, phone, face to face. - In remote - tangible evidence & technical quality important. - In phone- process quality - In face to face - customer also play role.
29

CUSTOMER / PRODUCT PROFITABILITY ANALYSIS
Customers C1 P1 P2 P3 P4 + High-profit customer Mixed-bag customer + + Losing customer C2 + C3 + Highly profitable product Profitable product Losing product Mixed bag product

Products

30

STRATEGIC PLANNING

STRATEGIC PLANNING

MARKET-ORIENTED STRATEGIC PLANNING - is the managerial process of developing and maintaining a viable fit between the organizaiton’s objectives, skills, and resources and its changing market opportunities. The aim of strategic planning is to shape and reshape the company’s business and products so that they yield target profits and growth.

Thus strategic planning is concerned with 1. 2. 3. Treating business as an investment portfolio. Building game plan for each business – based on industry position opportunity, resources, mission, objectives. Future potential and not just current potential.

SEE APPENDIX – 18 (THE STRATEGIC PLANNING, IMPLEMENTATION, AND CONTROL PROCESS)
Planning
Corporate planning

Implementing Organizing

Controlling Measuring Results Diagnosing results

Division planning Business planning Product planning

Implementing Taking corrective action

CORPORATE & DIVISION STRATEGIC PLANNING

• DEFINING THE CORPORATE MISSION • ESTABLISHING STRATEGIC BUSINESS UNITS (SBUS) • ASSIGNING RESOURCES TO EACH SBU • PLANNING NEW BUSINESSES

DEFINING THE CORPORATE MISSION

• Shaped by History, current preferences of owners and management, market environment, resources, distinctive competences. • Provides sense of purpose, direction, and opportunity. • Good mission statements, limited number of goals and values and major competitive scopes. • Provides direction for 10 – 12 years.

ESTABLISH STRATEGIC BUSINESS UNITS AND ASSIGN RESOURCES
Assigning resources by evaluating by using analytical tools for classifying its businesses by profit potential. 1. Boston Consulting Group Model 2. General Electric Model

Boston Consulting Group Model

Market Growth Rate

20% 18% 16% 14% 12% 10% 8% 6% 4% 2%

Stars

Question Marks

Cash Cow

Dogs

0.5 X 0.4X 0.3 X

0.2 X

10 X

2X 1.5 X

0.1X

0

4X

1X

Relative Market Share

37

BCG’s GROWTH SHARE MATRIX

1. 2.

An unbalanced portfolio would have too many dogs or question marks and/or too few stars and cash cows. BUILD – for stars HOLD - strong cash cows HARVEST – weak cash cows, question marks, dogs. DIVEST – dogs, question marks.

3.

SBUs - change their position in the growth-share matrix.

GENERAL ELECTRIC MODEL

Each business is rated in terms of two major dimensions, market attractiveness and business strength. 1. MARKET ATTRACTIVENESS – Overall market size,,mkt growth rate,profit margin,competitive intensity,inflationary vulnerability.,technological requiremnets,environmental impact.. STRENGTH OF SBU / FIRM = Market share,share growth,product quality,brand reputation,distribution network,promotion effectiveness,production capacity,productive effeciency,R&D performance,managerial personnel,

2.

Each of these factors is assigned weights and business is measured of 5 point scale.

(a)

Classification BUSINESS STRENGTH Strong 5.00 Hydraulic pumps 3.67 Joints Aerospace fittings Medium Weak

Clutches Flexible Fuel Pumps

2.33

diaphragms

1.00 5.00

Relief values 3.67 2.33 1.00
40

(B) Strategies
PROTECT POSITION

BUSINESS STRENGTH INVEST TO BUILD • Challenge for leadership. • Build selectively on strengths. • Reinforce vulnerable areas
SELECTIVITY / MANAG FOR EARNING

• Invest to grow at maximum digestible rate. • Concentrate effort on maintaining strength. BUILD SELECTIVELY • Invest heavily in most attractive segments. • Build up ability to counter competition. • Emphasize productivity by raising productivity. PROTECT AND REFOCUS •Manage for current earnings. • Concentrate on attractive segments. • Defend strength. Strong

BUILD SELECTIVELY • Specialize around limited strength. • Seek ways to overcome weaknesses. • Withdraw if indications of sustainable growth are lacking.

LIMITED EXPANSION • Protect existing program. OR HARVEST •Concentrate investments •Look for ways to expand without high risk;otherwise, in segments where profitability is good and minimize investment and rationalize operations. risks are relatively low.
MANAGE FOR EARNINGS

•Protect position in most profitable segments. •Upgrade product line. • Minimize investment. Medium

DIVEST • Sell at time that will maximize cash value. •Cut fixed costs and avoid investment meanwhile. Weak
41

CORPORATE NEW BUSINESS PLAN

When gap between future desired sales and projected sales, then three options. 1. INTENSIVE GROWTH – current business 2. INTEGRATIVE GROWTH – build or acquire businesses related to the company’s current businesses. 3. DIVERSIFICATION GROWTH – opportunities in unrelated business.

GROWTH STRATEGIES

INTENSIVE GROWTH – (Ansoff’s Product / Market Expansion Grid )

INTEGRATIVE GROWTH – Backward, Forward, Horizontal

DIVERSIFICATION GROWTH – Concentric (Same technology / Marketing synergy), Horizontal (Appeals to current customers), Conglomerate (No relationship to the company’s current technology, products, or markets).

Current Product

New Product

Current Markets

1. Market- penetration strategy

3. Productdevelopment strategy

New Markets

2. Marketdevelopment strategy

(Diversification Strategy)

44

THE BUSINESS STRATEGIC PLANNING PROCESS

1. 2. 3. 4. 5. 6. 7.

BUSINESS MISSION SWOT ANALYSIS GOAL FORMULATION STRATEGY FORMULATION PROGRAM FORMULATION IMPLEMENTATION FEEDBACK AND CONTROL

OPPORTUNITY AND THREAT

A MARKETING OPPORTUNITY - is an area of buyer need in which a company can perform profitably. OPPORTUNITIES - can be classified according to their attractiveness and their success probability.

AN ENVIRONMENTAL THREAT - is a challenge posed by an unfavorable trend or development that would lead, in the absence of defensive marketing action, to deterioration in sales or profit. Threats should be classified according to their seriousness and probability of occurrence.

CHECKLIST FOR STRENGTHS / WEAKNESSES ANALYSIS
Importance of factor(High ,Medium , Low) and performance rating (Major/minor strengh,Neutral,,Major/Minor weakness)on dimensions in Marketing –Company reputation,marketshare,product/service quality,pricing/distribution/advtg/salesforce/innovation effectiveness,geog coverage Finance-cost/availability of capital,cash folw/,financial stability Manufacturiing-facilities,economies of scale,capacity,mfg skill ,dedicated workforce Organization-visionary leadership,dedicated employees,entrepreneurial orientation,flexible/responsive
47

GOAL FORMULATION

• OBJECTIVES MUST BE HIERARCHICAL • QUANTITATIVE • REALISTIC • CONSISTENT

STRATEGY FORMULATION

MICHAEL PORTER’S THREE GENERIC STRATEGIES • OVERALL COST LEADERSHIP – firms should be good at engineering, purchasing, manufacturing and distribution. • DIFFERENTIATION – on key customer benefit area e.g. services, quality, style, technology. • FOCUS – on narrow market segment and pursue either cost leadership or differentiation. • “CLEAR STRATEGY IMPORTANT” - “Don’t be middle of the roaders” • Firms pursuing same strategy in same to market constitute strategic group.

STRATEGIC ALTERNATIVES

Long -term profits

Growth in sales or market share

Efficiency, short-run profits
Market Penetration

Market Development

New segments Convert nonusers

Existing Customers Competitors’ customers
New product developments

Decrease inputs Reduce costs Improve asset utilization

Increase outputs Increase price Improve 50 sales mix

PROGRAM FORMULATION AND IMPLEMENTATION, FEEDBACK & CONTROL

PROGRAM FORMULATION - Develop programs in line with strategy e.g. Technology leadership – strengths – R&D, gather technological intelligence, develop leading edge products, train technical sales force, develops ads to communicate technology leadership. IMPLEMENTATION – The McKinsey 7-S Framework(Hardwarestrategy,structure,systems and Software-Style, Staff, Skills, Shared Values) FEEDBACK & CONTROL - Need to review and revise implementation, programs, strategies, or even objectives.

MARKETING PROCESS

Involves 1. 2. 3. 4. Analysing Marketing Opportunities Developing marketing strategies (Differentiating and positioning) Developing marketing programs (Marketing mix) Managing marketing effort through - Annual plan control (Achievement of sales, profits and other goods). - Profitability control (Analysis of profitability of products, customers, trade channels and order sizes, Marketing profitability analysis and marketing efficiency studies). - Strategic control (Appropriateness of companies marketing strategy to market conclusions through marketers audit).

A GOOD MARKETING STRATEGY

• CO-ORDINATES FUNCTIONAL AREAS OF ORGANISATION • ALLOCATES RESOURCES EFFICIENTLY • HELPS PRODUCT ATTAIN MARKET POSITION • COMPETITIVE

OBJECTIVES OF MARKETING PLAN

TO, 1. 2. 3. 4. 5. 6. 7. Define current situation facing the product (and how we got there) Define problems and Opportunities Establish objectives Define strategies and programs necessary to achieve objectives Pinpoint responsibility to achieve Encourage careful and disciplined thinking Establish customer-competitor orientation

CONTENTS OF A MARKETING PLAN
I. II. Executive summary and table of contents Current marketing situation Presents a brief over of the proposed plan Presents relevant background data on the market, product, competition, distribution, and macroenvironment. Identifies the main opportunities/threats, strengths/weaknesses, and issues facing the product line. Defines the plan’s financial and marketing goals in terms of sales volume, market share, and profit Presents the broad marketing approach that will be used to achieve the plan’s objectives. Presents the special marketing programs designed to achieve the business objectives. Forecasts the plan’s expected financial outcomes. Indicates how the plan will be monitored

III.

Opportunity and issue analysis

IV.

Objectives

V. VI. VII. VIII.

Marketing strategy Action programs Projected profit-and-loss statement Controls

FREQUENT MISTAKES IN PLANNING PROCESS

1. 2. 3. 4. 5. 6. 7. 8. 9.

Speed of planning Amount of data collections Who does the planning Structure Length of plan Frequency of planning Number of courses of action considered Who sees the plan Insufficient senior management leadership

10. Tying compensation to efforts

MARKETING ENVIRONMENT

MARKETING ENVIRONMENT ANALYSIS

OUTSIDE - IN VIEW TO TRACK TRENDS, OPPORTUNITIES & THREATS FOLLOWED BY MARKET RESEARCH TO DETERMINE AN OPPORTUNITY’S PROFIT POTENTIAL. OPPORTUNITIES CAN BE CLASSIFIED ON ATTRACTIVENESS & SUCCESS PROBABILITY (COMPETITIVE ADVANTAGE). THREATS ARE CLASSIFIED ON BASIS OF SERIOUSNESS & PROBABILITY OF OCCURRENCE.

CHECKLIST FOR STRENGTHS / WEAKNESSES ANALYSIS
Importance of factor and performance rating on dimensions in Marketing –Company reputation,marketshare,product/service quality,pricing/distribution/advtg/salesforce/innovation effectiveness,geog coverage Finance-cost/availability of capital,cash flow/,financial stability Manufacturing-facilities,economies of scale,capacity,mfg skill ,dedicated workforce Organization-visionary leadership,dedicated employees,entrepreneurial orientation,flexible/responsive

PORTER’S MODEL

Threat of new entrants Intensity of Competitive rivalry Bargaining power of buyers Bargaining power of suppliers Threat of substitutes

MARKETING ENVIRONMENT
I. MAJOR FACTORS - (MACROENVIRONMENT)

A) DEMOGRAPHIC - (BREAKUP & CHANGES IN AGE, INCOME, SEX, EDUCATION, URBAN-RURAL, LIFE EXPECTANCY, OCCUPATION, PERSONS PER HOUSEHOLD). B) SOCIO / CULTURAL - (FAMILY STRUCTURE, DECISION-MAKING, PESTERPOWER VALUES LIFESTYLES). C) TECHNO LOGICAL - (CREATIVE DESTRUCTION, IMPACT ON PRODUCT, PACKAGING, ADVERTISING). D) POLITICAL / LEGAL - (LAWS TO PREVENT UNFAIR COMPETITION, CONSUMERS & SOCIETY). E) ECONOMIC - (PER CAPITA INCOME, CREDIT AVAILABILITY, SAVINGS, STAGE OF BUS CYCLE). F) PHYSICAL - (GOVTAL INTERVENTION, NEW OPPORTUNITIES).

MARKETING ENVIRONMENT

II.

ACTORS - (MICROENVIRONMENT)

A) COMPANY B) SUPPLIERS C) MARKETING INTERMEDIARIES D) CUSTOMERS E) COMPETITORS F) PUBLIC - ASCI, CONSUMER ACTION GROUP

TYPES OF COMPETITION

1. BRAND COMPETITOR - PEPSI / COKE 2. FORM COMPETITOR - COLA / LIME / ORANGE 3. GENERIC / CATEGORY - SOFT DRINKS / CONCENTRATES / SYRUPS 4. DESIRE / BUDGET - SPENDS ON DRINK / FOOD

COMPETITION - WHAT DO YOU NEED TO KNOW

1. WHAT ARE THEIR CURRENT / FUTURE OBJECTIVES - GROW, HOLD, HARVEST, DIVEST. 2. WHAT ARE THEIR CURRENT / FUTURE STRATEGY. 3. WHAT ARE THEIR STRENGTHS / WEAKNESS 4. WHAT ARE THE REACTION PATTERNS

HOW STRONG THEY ARE

ASSESSING COMPETITIORS STRENGTHS / WEAKNESS

1. BOTH CORPORATE & BRAND LEVEL 2. ANY INVALID ASSUMPTIONS 3. SHARE OF MARKET, MIND, HEART 4. SATISFACTION / DISSATISFACTION AREA

CONSUMER BEHAVIOUR

7 O’s FRAMEWORK

WHO BUYS - OCCUPANT

• WHAT DOES HE BUY - OBJECT • WHY DOES HE BUY - OBJECTIVE • WHEN DOES HE BUY - OCCASION • WHERE DOES HE BUY - OUTLET • HOW DOES HE BUY - OPERATIONS • WHO ARE INVOLVED - ORGANISATION

MODEL OF BUYER BEHAVIOUR

Buyer’s characteristics Marketing stimuli Product Price Place Promotion Other stimuli Economic Technological Political Cultural Cultural Social Personal Psychological

Buyer’s Decision Process Buying roles Buying types Buying Stages

Buyer’s decisions Product choice Brand choice Dealer choice Purchase timing Purchase amount

Factors influencing behavior

PERSONAL

CULTURALSOCIAL
• REFERENCE
• CULTURE GROUP • FAMILY • SUBCULTURE •ROLES AND STATUSES • SOCIAL CLASS

•AGE AND LIFE CYCLE STAGE • OCCUPATION •ECONOMIC CIRCUMSTANCES • LIFESTYLE •PERSONALITY AND SELFCONCEPT

PSYCHOLOGICAL • MOTIVATION
•PERCEPTION •LEARNING •BELIEFS AND ATTITUDES

BUYER

BUYING ROLES

INITIATOR

• INFLUENCER • DECIDER • PURCHASER • USER

BUYING BEHAVIOUR TYPES

High Involvement

Low Involvement

Difference between brands perceived B

COMPLEX

VARIETY SEEKING

A

P

WB

P

A

DISSONANCE Difference REDUCING between brands not perceived B P New B

HABITUAL A

WB

P

A

STAGES OF BUYING DECISION PROCESS

• PROBLEM RECOGNITION
• INFORMATION SEARCH – Criteria, Alternatives • EVALUATION OF ALTERNATIVES • PURCHASE DECISION • POSTPURCHASE BEHAVIOUR

INFORMATION SEARCH SOURCES

• PERSONAL SOURCES
• COMMERCIAL SOURCES • PUBLIC SOURCES • EXPERIENTIAL SOURCES

SUCCESSIVE SETS INVOLVED IN CONSUMER DECISION MAKING

TOTAL SET

AWARENESS SET

CONSIDERATION SET

CHOICE SET

PURCHASE DECISION

POST-PURCHASE BEHAVIOUR

ALTERNATIVE EVALUATIVE TECHNIQUES

COMPENSATORY MODEL • EXPECTANCY VALUE MODEL • IDEAL BRAND MODEL

NON-COMPENSATORY MODEL • CONJUNCTIVE MODEL • DISJUNCTIVE MODEL • LEXI COGRAPHIC MODEL

EXPECTANCY VALUE MODEL OF CONSUMER CHOICE
CAR
ENGINE CAPACITY WTS. 0.4

ATTRIBUTES
EXTERIORS PRICE MILEAGE PERCEIVED VALUES

0.2

0.3

0.1

FORD ESCORT OPEL ASTRA HONDA CITY CIELO

10 8 6 4

8 9 10 6

6 6 8 5

8 6 9 5

8.2 7.4 7.7 4.8

STRATEGIES FOR MARKETERS

• MODIFY THE BRAND – REAL REPOSITIONING
• ALTER BELIEFS ABOUT THE BRAND – PSYCHOLOGICAL REPOSITIONING • ALTER BELIEFS ABOUT COMPETITOR’S BRAND – COMPETITIVE DEPOSITIONING • ALTER IMPORTANCE WEIGHTS • CALL ATTENTION TO NEGLECTED ATTRIBUTES • SHIFT BUYER’S IDEALS

PERCEIVED RISK

• FINANCIAL
• PHYSICAL • SOCIAL • PERSONAL

79

Organizational Buying Behavior

80

Organizational buying behaviour
• Organizational

Buying is the decision-making process by which formal organizations establish the need for purchased products and services and identify , evaluate, and choose among alternative brands and suppliers. Organizations could be corporate, manufacturing firms,Service firms, Institutional & Government markets.

Business Market V/S Consumer Market
1. Fewer buyers 2. Larger buyers 3. Close supplier-customer relationship - Customization 4. Geographically oriented buyers 5. Derived demand -business marketer must closely monitor buying patterns of ultimate consumers. 6. Inelastic demand - in short run as producer cannot make quick changes in production methods, also small percentage of items total cost. 7. Fluctuating demand - given 10% increase in consumer demand can cause 200% increase in business demand. 8. Professional purchasing - Policies, constraints, requirements. 9. Several buying influences - buying committees 10. Direct purchasing 11. Leasing - e.g. Heavy construction equipment, computers, etc. 12. Reciprocity - Chemical manufacturer & Paper manufacturer

Buying Situations
1. Straight rebuy - recorder on routine basis automatic recording system from approved list of suppliers. Insuppliers & outsuppliers strategy. 2. Modified rebuy - modifying in product specifications. Prices, delivery requirements or other terms. 3. New

task - Buying for first time

* Greater cost or risk, more the decision participants & greater the information gathering. * Missionary sales force used by marketer * Mass media in awareness stage, stage sales people in interest stage & technical sources in evaluation stage.

Participants in Business Buying Process
• Straight rebuy & modified rebuy situations- purchasing agent important. • New buy- engineering or other departments. • Purchasing agent dominate in selecting suppliers.

Buying roles in Buying centre
1. Initiators - Users or others. 2. Users - Users may initiate & help define product requirements. 3. Influencers - help define specifications & provide information for evaluating alternatives technical personnel. 4. Decider - decide on product requirements & suppliers. 5. Approver - authorize actions of decider buyer. 6. Buyer - formal authority to select suppliers, negotiate. 7. Gatekeeper - Prevent sellers or info reaching buying center. e.g. - purchasing agents, telephone, operators, receptionists.

Major influences on Industrial Buying Behaviour
• Business buyers responds both to economic & personal factors. Personal (treatment etc)when similarity in supplier offers.
ENVIRONMENTAL Level of demand •Economic outlook •Interest rate •Rate of technological change •Political and regulatory developments •competitive developments •Social responsibility concerns
ORGANIZATIONAL •Objectives •Policies •Procedures •Organizational Structures •Systems

INTERPERSONAL

INDIVIDUAL •Age •Income • Education • Job position •Personality •Risk attitudes •Culture

•Interest •Authority •Status •Empathy •Persuasiveness

BUSINESS BUYER

Trends in Organizational Buying
1. Purchase department upgrading 2. Centralized purchasing - in multidivisional companies 3. Decentralized purchasing for small ticket items. 4. Long-term contracts 5. Purchasing performance evaluation & rewards hence pressure put on suppliers. 6. Just- in-time 7. Single sourcing & early supplier involvement.

Purchasing / Procurement Process (Buy Phases)
1. 2. 3. 4. 5. 6. 7. 8.

Problem recognition - as a result of internal or external stimuli General need description - items general characteristics, attributes & quantity. Product specification- Technical specifications. Supplier search - buyer can examine trade directories, computer search, trade
shows, advertisements, recommendations of others. presentations.

Proposal solicitation - Buyer invites qualified suppliers to submit proposal, make

Supplier selection - based on important factors e.g. product reliability, technical
service, price, supplier flexibility, reputation. contract/ stockless purchase plan.

Routine order specification - Trend especially in MRO items is blanket Performance review

Buying stages in buying classes
BUYCLASSES NEW TASK MODIFIED STRAIGHT REBUY REBUY 1. Problem recognition Yes Maybe No 2. General need description Yes Maybe No Yes Yes Yes 4. Supplier search Yes Maybe No BUYPHASES 5. Proposal solicitation Yes Maybe No 6. Supplier selection Yes Maybe No 7. Order-routine specification Yes Maybe No 8. Performance review Yes Yes Yes

3. Product specification

Vendor analysis
An example of vendor Analysis Rating scale
ATTRIBUTES IMPORTANCE WEIGHTS (1) POOR (2) FAIR (3) GOOD (4) EXCELLENT

Price Supplier reputation Product reliability Service reliability Supplier flexibility

.30 .20 .30 .10 .10

X X X X X

Total score: .30(4) + .20(3) + .30(4) + .10(2) + .10(3) = 3.5

COMPETITION

91

COMPETITION WHAT DO YOU NEED TO KNOW
• WHO ARE OUR COMPETITORS - IDENTIFY & SELECT • WHAT ARE THEIR OBJECTIVES • WHAT ARE THEIR STRATEGIES • WHAT ARE THEIR STRENGTHS & WEAKNESSES • WHAT ARE THEIR REACTION PATTERNS

92

IDENTIFYING COMPETITION
• CORRECT DEFINITION IMPORTANT TO MARKET PLANNING & STRATEGY • KEY QUESTION IS DEGREE EXTENT • BALANCE BETWEEN TOO MANY & TOO FEW • NOT EASY AS EMERGING COMPETITION • WRONG DEFINITION LEADS TO a) MARKETING MYOPIA b) AMBIGUITY IN MARKET RELATED STATISTICS

93

IDENTIFYING COMPETITORS
I. INDUSTRY CONCEPT OF COMPETITION II. MARKET CONCEPT OF COMPETITION

94

INDUSTRY CONCEPT OF COMPETITION

95

Market concept of competition
• Stimulates long run strategic market planning • Key to identify is mapping product/market grid • Opens eyes to broader set of actual & potential competitors • a) Brand • b) Product form competition • c) Category / Generic / Industry Competition • d) Desire / Budget

96

COMPETITIVE LEVEL & TASKS
Competitive Level Brand (inward oriented) Product Manager’s task Convince customers brand is better than others in product form

Product Form (inward)

Convince product form is best in the category

Generic / Category (Outward)

Convince product category is best to satisfy need

Desire / Budget

Convince Generic need / benefit is best way to spend discretionary income
97

METHODS FOR DETERMINING COMPETITORS
I. PREDETERMINED CATEGORIES - ORG

II. MANAGERIAL JUDGEMENT

III. CUSTOMER BASED MEASURES a) PURCHASE DATA FOR BRAND SWITCHING MATRIX b) CROSS ELASTICITY OF DD c) CONSUMER JUDGEMENTS c.1. JUDGED OVERALL SIMILARITY c.2. SIMILARITY OF CONSIDERATION SET c.3. PRODUCT DELETION SET c.4. SUBSTITUTION IN USE
98

BRAND SWITCHING MATRIX
TIME (++1) A A TIME t B C D E .6 .2 .2 0 .1 B .2 .3 .3 .1 0 C .2 .4 .5 .1 0 D 0 .1 0 .5 .4 E 0 0 0 .3 .5

99

FIGURE 3.13: METHODS VERSUS COMPETITION LEVELS AND INFORMATION REQUIRED
Level of Competition Approach Typical Data Sources

Brand Product Generic Budget Primary Secondary Form

Existing definitions Technology substitution Managerial judgment Customer behavior based: Brand switching Interpurchase times Cross-elasticities

X X X

X X X X X X

X

X

X X X

X X X X

X X X

100

FIGURE 3.13: METHODS VERSUS COMPETITION LEVELS AND INFORMATION REQUIRED
Level of Competition Approach Typical Data Sources

Brand Product Generic Budget Primary Secondary Form

Customer evaluation based: Overall similarity Similarity of consideration sets Product deletion Substitution in use X X X X X X X X X X X X X X X X X

Note: An X indicates that either the method is useful for determining competition at that level or it employs data of a certain type. 101

IDENTIFYING COMPETITORS STRATEGIES
• A group of firms following same strategy in given target market is called a strategic group. • Dimensions include level of technological sophistication,geographicalscope, manufacturing methods,marketing strategies etc

102

ASSESSING COMPETITOR’S CURRENT STRATEGY

1. TARGET MARKET 2. CORE MARKETING STRATEGY a) POSITIONING b) DIFFERENTIAL ADVANTAGE 3. MARKETING MIX

103

ASSESSING COMPETITOR’S CURRENT OBJECTIVES
• growth v/s hold v/s harvest v/s divest. •Short term v/s long term profits, satisfycing v/s maximizing profits, cash flow,,market sharegrowth,,technological/,service /cost leadership • objectives shaped by size, history, management perspective, financial situation, place in larger organisation • objectives can be assessed a) from strategy b) geographical home of parent c) ownership of firm - private / public/ government
104

ASSESSING COMPETITOR’S STRENGTHS & WEAKNESSES
1. THROUGH - SECONDARY DATA - PERSONAL EXPERIENCE - PRIMARY SOURCES (CUSTOMERS, SUPPLIERS, DEALERS) 2. ANALYSIS SHOULD BE FOR BOTH CORPORATE & BRAND LEVELS 3. ANY INVALID ASSUMPTIONS THAT COMPETITOR IS MAKING 4. SHARE OF MARKET, MIND, HEART 5. SATISFACTION / DISSATISFACTION AREA 6. COMPARISION VIS-A-VIS OUR BRAND
105

ESTIMATING COMPETITOR’S REACTION PATTERNS

DEPENDS ON a) IMPORTANCE OF BUSINESS OR PRODUCT b) HOW COMMITTED IS THE COMPETITOR (PHILOSOPHY, MIND-SET) c) AGGRESSIVENESS OF MANAGERS

106

ESTIMATING COMPETITOR’S REACTION PATTERNS

TYPES OF COMPETITORS • LAID BACK • SELECTIVE • TIGER • STOCHASTIC

107

DESIGNING COMPETITOR INTELLIGENCE SYSTEM
1. COSTLY SIGNALS

2. CHEAP TALK SIGNALS

PRODUCT MANAGER MUST COLLECT BOTH TYPES OF INFORMATION BUT BE WARY OF (2)

108

SOURCES OF INFORMATION OF COMPETITORS

I.

SECONDARY

II. PRIMARY III. OTHERS IV. UNETHICAL

109

SELECTING COMPETITION
1. LEVEL 2. SELECTING COMPETITOR FOCUS CHOOSING WHO TO COMPETE HAS IMPLICATIONS ON PERFORMING STDS (MARKET SHARE) & COMPETITIVE STRATEGY DEPENDS ON a) TIME HORIZON b) STAGE OF PLC c) RATE OF CHANGE OF TECHNOLOGY
110

SELECTING COMPETITORS TO ATTACK & AVOID

1. STRONG V/S WEAK COMPETITORS 2. CLOSE V/S DISTANT 3. GOOD V/S BAD

111

BALANCING CUSTOMER & COMPETITOR ORIENTATION

112

COMPETITIVE POSITIONS
• DOMINANT-Controls behavior of other competitors ,wide choice of strategic options • STRONG-can take independent actions and maintain its long term position • FAVOURABLE-exploitable strength and above average opportunity to improve position • TENABLE-exists at sufferance of dominant company and has lesser than average opportunity to improve position • WEAK-poor performance.must change or exit • NON-VIABLE-poor performance and no opportunity for improvement
113

MARKET LEADER STRATEGIES

I. II.

EXPANDING TOTAL MARKET DEFENDING MARKET SHARE

III EXPANDING MARKET SHARE

114

Market- Leader Strategies Expanding Total Market
NEW USERS : Non-users or competitors users (Market penetration) Different segments (New Market Strategy) Geographical segments (Geographical Expansion Strategy) NEW USES :For example Vaseline as lubricant. Skin ointment, healing agent, hair dressing. MORE USAGE :Shampoo
115

MARKET LEADER DEFENSIVE STRATEGIES Through continuous innovation, increasing competitive effectiveness and value to customers.
a) POSITION DEFENSE – not enough today. e.g. Coke has also diversified. b) FLANK DEFENSE – Erect outposts to protect a weak front or serve as an invasion base for counter attacking. E.g. Asian Paints Tractors. c) PREEMPTIVE DEFENSE – Launch attack before enemy starts offense across market with many models.
116

Market Leader Defensive Strategies
d) COUNTER OFFENSIVE DEFENSE – e.g. HLL reaction to Tide. e) MOBILE DEFENSE – Stretch Domain over new territories through market broadening i.e. shifting focus from current product to generic need E.g. Bank to insurance, Mutual Funds etc. Aquafina & Kinley f) CONTRACTION DEFENCE- Recognising that there is no sense to spread too thin. (Strategic withdrawal)

117

EXPANDING MARKET SHARE
• Increased market share above 40% earns ROI of 38.5%,more than 3 times that of those firms with shares under 10% • • • • But important to consider 3 factors Provoking monopolist action Economic cost—holdout customers Wrong marketing mix
118

MARKET CHALLENGER STRATEGIES

Firms that occupy 2nd ,3rd or lower ranks are called runner ups. These firms can either attack leader and make aggressive bid for further market share( market challenger ) or play ball and not rock boat ( market follower)
119

Market challenger strategies
1. Can attack Market leader- high risk-high payoff.Makes good sense if false leader 2. Can attack firms of own size that are not doing well or are under financed. 3. Small and regional firms
120

MARKET CHALLENGER STRATEGIES

• FRONTAL ATTACK-attacking opponent’s strength rather than weakness.Matching opponent on product,advertising,price with 3:1 advantage otherwise cant succeed •MODIFIED FRONTAL ATTACK-Match leader’s offer on all and beat on price • FLANK ATTACK-Blind spots. Flank attack can be geog or segmental eg Nirma. Much more likely to succeed than frontal attack •
121

MARKET CHALLENGER STRATEGIES

•ENCIRCLEMENT ATTACK-Comprehensive Blitz attack on front,sides rear.Offer everything opponent offers and more • BYPASS ATTACK-is an indirect assault strategy.like diversifying into unrelated products,new geographical markets and leapfrogging into new technology • GUERRILLA ATTACK-waging small intermittent attacks. Harass , Demoralise eg price cuts, promotional blitz,legal action

122

MARKET FOLLOWER STRATEGIES

Company prefers to follow than to challenge.
1. COUNTERFEITER 2. CLONER-The cloner emulates the leader’s products,distribution, advertising etc Sudar dust 3. IMITATOR-copies some things of leader but maintains differentiation on packaging, advertising, pricing etc 4. ADAPTER –adapts or improves leader’s product. Can become future challenger E.g. Japanese firms
123

MARKET NICHER STRATEGIES

• SPECIALIZATION- Customer, geographic product line, • MULTIPLE NICHING BETTER THAN SINGLE NICHING

124

SEGMENTATION, TARGETING & POSITIONING

REQUIREMENTS FOR EFFECTIVE MARKET SEGMENTATION

• RELEVANT • MEASURABLE • SUBSTANTIAL • ACCESSIBLE • ACTIONABLE

STEPS IN SEGMENTATION

1. IDENTIFY BASES OF SEGMENTATION 2. PROFILING

BASIS FOR SEGMENTING CONSUMER MARKETS
I. CONSUMER CHARACTERISTICS 1. GEOGRAPHIC (REGION, URBAN-RURAL) 2. DEMOGRAPHIC (AGE, SEX, OCCUPATION, INCOME, EDUCATION, FAMILY LIFE CYCLE, FAMILY SIZE). 3. PSYCHOGRAPHICS (SOCIAL CLASS, LIFESTYLE, PERSONALITY) II. CONSUMER RESPONSES 1. BENEFITS SOUGHT 2. OCCASIONS 3. USAGE RATE (HEAVY, MEDIUM, LIGHT) 4. USER STATUS (EX, CURRENT, NON, POTENTIAL, REGULAR, 1ST TIME) 5. LOYALTY STATUS (HARDCORE, SOFT CORE, SHIFTING, SWITCHERS) 6. BUYER READINESS (UNAWARE, AWARE, INFORMED, INTERESTED) 7. ATTITUDE TO PRODUCT (ENTHUSIASTIC, POSITIVE, INDIFFERENT, NEGATIVE, HOSTILE).

129

MAJOR SEGMENTATION VARIABLES FOR BUSINESS MARKETS
DEMOGRAPHIC 1. Industry : which industries should we serve? 2. Company size: What size companies should we serve? 3. Location: Which geographical areas should we serve ? OPERATING VARIABLES 4.Technology : What customer technologies should we focus on? 5. User / customer status: Should we serve heavy users, medium users, light users, or nonusers? 6. Customer capabilities: Should we serve customers needing many or few services? PURCHASING APPROACHES 7. Purchasing -function organization : Should we serve companies with highly centralized or decentralized purchasing organizations? 8. Power structure: Should we serve companies that are engineering dominated, financially dominated, and so forth? 9. Nature of existing relationships: Should we serve companies with which we have strong relationships or simply go after the most desirable companies? 10. General purchase policies: Should we serve companies that prefer leasing? Service contracts? Systems purchases? Sealed bidding? 11. Purchasing criteria: Should we serve companies that are seeking quality? Service? Price?

MAJOR SEGMENTATION VARIABLES FOR BUSINESS MARKETS
SITUATIONAL FACTORS 12. Urgency: Should we serve companies that need quick and sudden delivery or service? 13. Specific application: Should we focus on certain applications of our product rather than all applications? 14. Size of order: Should we focus on large or small orders?

PERSONAL CHARACTERISTICS 15. Buyer-seller similarity: Should we serve companies whose people and values are similar to ours? 16. Attitudes toward risk: Should we serve risk- taking or risk-avoiding customers? 17. Loyalty: Should we serve companies that show high loyalty to their suppliers?

STEPS IN MARKET TARGETING

1. DEVELOP MEASURE OF SEGMENT ATTRACTIVENESS AND EVALUATE. 2. SELECT TARGET SEGMENTS.

133

BASIS FOR EVALUATION & SELECTION OF TARGET SEGMENTS

1. SIZE 2. GROWTH 3. STRUCTURAL ATTRACTIVENESS (PORTER’S MODEL) 4. OBJECTIVES & RESOURCES 5. ECONOMIES OF SCOPE

PATTERNS OF TARGET MARKET SELECTION

1. SINGLE SEGMENT CONCENTRATION 2. MARKET SPECIALISATION 3. PRODUCT SPECIALISATION 4. SELECTIVE SPECIALISATION 5. FULL MARKET COVERAGE

ALTERNATIVE TARGETING STRATEGIES

CO’S MARKETING MIX

WHOLE MARKET

UNDIFFERENTIATED MARKETING

MARKETING MIX 1 M M M M 2 3

SEGMENT 1 SEGMENT 2 SEGMENT 3

DIFFERENTIATED MARKETING

SEGMENT 1 MARKETING MIX SEGMENT 2 SEGMENT 3 CONCENTRATED MARKETS

DIFFERENTIATION & POSITIONING

DIFFERENTIATION IS THE ACT OF DESIGNING A SET OF MEANING DIFFERENCES TO DISTINGUISH THE COMPANY’S OFFERS FROM COMPETITOR’S OFFERS. POSITIONING IS THE ACT OF DESIGNING COMPANY’S OFFER AND IMAGE SO THAT IT OCCUPIES A DISTINCT AND VALUED PLACE IN THE TARGET CUSTOMER’S MIND.

138

139

EFFECTIVE POSITIONING REQUIRES

1. DETERMINING IMPORTANT DIMENSIONS 2. ASSESSING IDEAL POSITIONS 3. ASSESSING CURRENT POSITION OCCUPIED BY COMPETITORS

STEPS IN POSITIONING

1. DEVELOP ALTERNATIVE POSITIONING CONCEPTS 2. SELECT POSITIONING STRATEGY 3. SIGNAL THROUGH MARKETING MIX

Positioning Strategy
1. 2. 3. 4. 5. 6. 7. 8. ATTRIBUTE – for e.g. clinic with zpto BENEFIT – USE/ APPLICATION USER COMPETITOR LEADERSHIP – quality , technology, service PRODUCT CATEGORY DISASSOCIATION EXCLUSIVE CLUB

142

POSITIONING STRATEGY TO BE AVOIDED

1. UNDERPOSITIONING - VAGUE IDEA 2. OVERPOSITIONING - TOO NARROW AN IMAGE 3. CONFUSED POSITIONING 4. DOUBTFUL POSITIONING

PRODUCT REPOSITIONING

1. CHANGING TARGET CONSUMER PROFILE 2. COMPETITOR TOO CLOSE 3. INCREASE MARKET - E.g. CADBURY 4. COMMUNICATE TECHNOLOGICAL ADVANCEMENT / UPGRADATION IN THE PRODUCT - E.g. SURF. 5. CHANGING CUSTOMER NEED.

144

DIFFERENTIATION VARIABLES

PRODUCT Features Performance Conformance Durability Reliability Reparability Style Design

SERVICES Ordering ease Delivery Installation Customer training Customer consulting Maintenance and repair Miscellaneous

PERSONNEL Competence Courtesy Credibility Reliability Responsiveness communication

CHANNEL Coverage Expertise Performance

IMAGE Symbol Written and audiovisual media Atmosphere Events

MEASURING CUSTOMER EFFECTIVENESS VALUE - METHOD FOR COMPETITIVE ADVANTAGE SELECTION
FEATURE COMPANY COST (1) CUSTOMER VALUE (2) CUSTOMER EFFECTIVENESS (3 = 2/ 1)

Rear window defrosting Cruise control Automatic transmission

$100 600 800

$200 600 2400

2 1 3

146

Methods for competitive - Advantage selection
1 Competitive Advantages 4 2 3 Company Competitor Importance of Standing Standing Improving Standing (H-M-L)* 5 6 Affordability Competitor’s and speed Ability to (H-M-L) Improve standing (H-M-L)

7 Recommend ed Action

Technology Cost Quality Monitor Service Invest

8 6

8 8 8 4

L H 6 3

L M

M M

L H

L H

Hold Monitor L L

* H = High; M = Medium; L= Low

147

PRODUCT & BRANDING

5 LEVELS OF PRODUCT

1. CORE BENEFIT 2. BASIC PRODUCT - FEATURES, BENEFITS, DESIGN & STYLE, PACKAGING, BRAND NAME. 3. EXPECTED PRODUCT - CREATES NO PREFERENCE 4. AUGMENTED PRODUCT - TOTAL CONSUMPTION SYSTEM 5. POTENTIAL PRODUCT THE 5 LEVELS CONSTITUTE CUSTOMER VALUE HIERARCHY WITH EACH LEVEL ADDING MORE CUSTOMER VALUE.

CLASSIFICATION OF PRODUCTS-CONSUMER GOODS
DURABILITY & TANGIBILITY 1. 2. 3. NON-DURABLE GOODS – tangible, consumed in few uses. Many locations, small mark up, heavy advertising. DURABLE GOODS – personal selling, guarantees, higher margin. SERVICES – intangible, variable, credibility of supplier very important.

SHOPPING HABITS 4. 5. 6. 7. CONVENIENCE GOODS – staples, impulse & emergency goods SHOPPING GOODS – comparison shopping .Homogenous & heterogenous strategies differ. SPECIALITY GOODS – goods with unique characteristics and or brand identification.Location should be advertised. UNSOUGHT GOODS – advertising and personal selling.

Classification Of Products

Most goods
Easy to evaluate

Most services

Difficult to evaluate

{ { {
High in search qualities

{

High in experience qualities

{

High in credence qualities

152

153

PRODUCT LINE DECISIONS

1. PRODUCT LINE ANALYSIS A. PRODUCT LINE SALES & PROFITS B. PRODUCT LINE MARKET PROFILE - PRODUCT MAPPING C. PRODUCT LINE LENGTH - UPWARD / DOWNWARD / TWO WAY STRETCH D. LINE MODERNIZATION E. LINE FEATURING F. LINE PRUNING

BRAND

A BRAND IS ESSENTIALLY A SELLER’S PROMISE TO CONSISTENTLY DELIVER A SPECIFIC SET OF FEATURES, BENEFITS AND SERVICES TO BUYERS.A BRAND IS ABOUT INTANGIBLE AND TANGIBLE ASSOCIATIONS

156

BRANDING DECISIONS

1.

BRAND OR NOT – Advantages of branding – easy processing, legal protection, brand loyalty, segmentation ,corporate image. Also distributors and consumer s prefer brands. SPONSOR – Manufacturer / Distributor / Licensed BRAND NAME – Individual / Blanket / Separate family / Co. + Individual. Company names legitimizes and individual name individualizes

2. 3.

4.

BRANDING STRATEGY – Line extensions (success rate higher), Brand extensions (risk of brand dilution test association), Multi-brands, New brands, Co brands (also called dual branding). REPOSITIONING – shifting customer preferences or competitor too close.

5.

ESSENTIALS OF A GOOD BRAND NAME

1. 2. 3. 4. 5.

Easy to pronounce, spell and remember. Suggest about benefits, quality, use or action. Unique, distinctive. Versatile – can be added to new products / global reach. Registered and protected.

BRAND NAME TESTS

A. ASSOCIATION TEST B. LEARNING TESTS (PRONOUNCABILITY) C. MEMORY D. PREFERENCE E. GLOBAL REACH

PACKAGING TESTS

1. ENGINEERING 2. VISUAL 3. DEALER & CONSUMER TESTS

BRAND - MEANING

1. ATTRIBUTES 2. BENEFITS - FUNCTIONAL & EMOTIONAL 3. VALUE 4. CULTURE 5. PERSONALITY 6. USER

DEEP V/S SHALLOW BRAND

BRAND ASSOCIATIONS Product attributes
Intangibles Country/geographic area Customer benefits

Competitors

Brand-name and symbol

Relative price

Product class

Use/application

Lifestyle/personality

Celebrity/person

User/customer

HOW VALUES AFFECT BRAND CHOICE FUNCTIONAL VALUE CONDITIONAL VALUE SOCIAL VALUE

BRAND CHOICE

EMOTIONAL VALUE

EPISTEMIC VALUE

163

BRAND EQUITY (DAVID AAKER)

1. BRAND AWARENESS 2. PERCEIVED BRAND QUALITY AND FUNCTIONALITY 3. POSITIVE BRAND MENTAL & EMOTIONAL ASSOCIATIONS 4. BRAND LOYALTY 5. OTHER ASSETS - PATENTS, TRADEMARKS ,CHANNEL RELATIONSHIPS

ATTITUDE TOWARDS BRAND

1. CUSTOMER WILL CHANGE BRAND FOR PRICE REASONS 2. CUSTOMER IS SATISFIED - NO REASON TO CHANGE 3. CUSTOMER IS SATISFIED & WOULD INCUR COSTS BY CHANGING BRAND 4. CUSTOMER VALUES THE BRAND AND SEES IT AS A FRIEND 5. CUSTOMER IS DEVOTED TO BRAND.

BRAND EQUITY IS RELATED TO 3, 4, 5.

IMPORTANCE OF PROPER PACKAGING

1. 2. 3. 4. 5. 6. 7.

PROTECTION ADVERTISING VALUE CONVENIENCE TO CONSUMERS BENEFIT TO RETAILERS AFTER-USE VALUE IDENTIFICATION INFORMATION

166

FACTORS TO BE CONSIDERED FOR PACKAGE DESIGNING

1. 2. 3. 4. 5. 6. 7. 8. 9.

LANGUAGE COLOUR SIZE CLIMATE NATURE OF THE PRODUCT LENGTH OF DISTRIBUTION CHANNEL ACCEPTED NORMS METHOD OF TRANSPORT USED TRENDS IN PACKAGING

10. COST-BENEFIT ANALYSIS

167

PACKAGING

1. 2. 3.

PRIMARY SECONDARY SHIPPING

DECISIONS 1. 2. 3. 4. The first task is to establish packaging concept. What packaging should be or do. e.g. protection, novel dispensing method, visibility. Decision on packing elements Tests – engineering tests, visual tests, dealer tests and consumer tests. Labeling – identify, describe and promote.
168

Introduction to Services

169

Services Characteristics V/s Goods
Goods ServicesResulting implications
Tangible Intangible - Services cannot be inventoried. - Patented. - Readily displayed or communicated. - Pricing is difficult. Standardized Heterogeneous - Service delivery and customer satisfaction depend on employee actions. - Service quality depends on uncontrollable factors Production Simultaneous production - Customers & employees affect the service separate from and consumption outcome. consumption Nonperishable Perishable - Difficult to synchronize supply and demand with services. - Services cannot be returned or resold.

170

The services triangle and technology
Company

Internal Marketing
Enabling promises

External Marketing
Making promises

Technology

Providers

Customers
Interactive Marketing
Keeping promises
171

Expanded Marketing Mix For Services
Product Physical good features Quality level Accessories Packaging Warranties Product lines Branding Place Channel type Exposure Intermediaries Outlet locations Promotion Price Flexibility Price level Terms Differentiation Discounts Allowance

- Promotion blend - Salespeople Number Selection Training Transportation Incentives Storage - Advertising Managing channels Targets Media types Types of ads Copy thrust - Sales promotion - Publicity

172

People - Employees Recruiting Training Motivation Rewards Teamwork - Customers Education Training

Physical evidence Facility design Equipment Signage Employees dress - Other tangibles Reports Business cards Statements Guarantees

Process - Flow of activities Standardized Customized - Number of steps Simple Complex - Customer involvement

173

Consumer Behaviour in Services

174

Continuum of evaluation for different types of products

Most goods
Easy to evaluate

Most services

Difficult to evaluate

High in search qualities

High in experience qualities

High in credence qualities

Consumer decision making and evaluation of services

Information Search

• Use of personal sources
• Perceived risk high

Evaluation of Alternatives • Evoked set smaller

Culture • Language
• Values and customs • Material culture * Aesthetics

Purchase and Consumption

• Emotion & mood
• Service provision as drama • Service roles and expected scripts • Compatibility of customers

Postpurchase Evaluation • Attribution of dissatisfaction to self & less complaints • Innovation diffusion slow • Brand loyalty high due to more search costs
176

Gaps Model of Service Quality

177

Gaps Model of Service Quality

Customer Customer Gap

Expected Service

Perceived Service

Company Gap 1

Service Delivery Gap 3 Customer-driven service designs and standards Gap 2 Company perceptions of consumer expectations Gap 4

External Communications to customers

178

The provider gaps are the underlying causes behind the customer gap: Gap 1 -- Not knowing what customers expect. Gap 2 -- Not selecting the right service designs and standards. Gap 3 -- Not delivering to service standards. Gap 4 -- Not matching performance to promises.

179

Customer Expectations of Service

180

Customer Expectations of Service - The Zone of Tolerance

Desired Service Expectations

Zone of Tolerance

Adequate Service Expectations
181

1.

Desired service want. Adequate service accept; Predicted service likely to get.

which reflects what customers

2.

what customers are willing to

3.

what customers believe they are

182

- Zone of tolerance is range in which customers do not notice service performance. - A customers desired service expectation is same for all service providers within a category e.g. Service expectations from fast food restaurants V/s fine dine restaurants. - Adequate service expectation level varies for different firms within a category. - Zone of tolerance expands or contracts for a customer from time to time. E.g. Customer hard pressed for time will have narrow zone of tolerance. - Zone of tolerance varies for different customers. - Zone of tolerance varies for service dimensions. E.g. unreliability will be least tolerated. - Zone of tolerance varies for first time & recovery service.

183

Nature and determinants of customer expectations of service
Enduring Service Intensifiers * Derived expectations from others (customers) family * Personal Service Philosophies ∴ of your own trained standards. Explicit Service promises * Advertising * Personal Selling * contracts * Other communications Implicit Service Promises * Tangibles * Price Expected Service Desired Service Zone of Tolerance Word of Mouth * Personal * “Expert” (Consumer Reports, publicity, Consultants, surrogates) Past Experience Across Industries Predicted Service
184

Personal Needs

Transitory Service Intensifiers * Emergencies * Service problems earlier Perceived Service Alternatives Self- Perceived Service Role e.g. articulate customer Situational Factors * Bad weather * Catastrophe * Random overdemand

Adequate Service Gap 5 Perceived Service

Customer Perceptions of Service

185

Customer perceptions of quality and customer satisfaction
Situational Factors

Reliability Responsiveness Assurance Empathy Tangibles

Service Quality

Product Quality

Customer Satisfaction

Price

Personal Factors - emotions, attributions for service success or failure, 186 Perceptions of equity or fairness

* Service quality is a focused evaluation that reflects the customer’s perception of specific dimensions of service: reliability, responsiveness, assurance, empathy, tangibles. Satisfaction, on the other hand, is more inclusive: it is influenced by perceptions of service quality, product quality, and price as well as situational factors and personal factors. * Satisfaction is the customers’ evaluation of a product or service in terms of whether that product or service has met their needs and expectations.

187

Service Quality Dimensions
• Reliability : Ability to perform the promised service dependably and accurately. • Responsiveness: Willingness to help customers , solves problems and provide prompt service, be flexible. • Assurance : Employees knowledge and courtesy and their ability to inspire trust and confidence. • Empathy: Caring individualized attention given to customers. • Tangibles: Appearance of physical facilities, equipment, personnel and written materials. Sometimes customers will use all of the dimensions to determine service quality perceptions, at other times not. For example,in a remote encounter such as an encounter with an ATM, empathy is not likely to be a relevant dimension.

188

Perceived Performance V/s Expectations
Perceived Performance > expectations → delight Perceived Performance = expectations → Happy / Ok/ Satisfied Perceived Performance < expectations → unhappy/disgusted/ dissatisfied Improving performance & hence perceptions is virtually impossible in basics/ core/ technical elements. Hence process is where one can play around.

189

Service quality perceptions
Technical Outcome quality Process quality

- When technical quality cannot be evaluated accurately (e.g. Professors, doctors,) customers form impressions, of service including technical quality from own shorthand cues.

190

Service Encounters or Moments of Truth service encounters are the building blocks of service quality & satisfaction
- Every experience with product, service or person which allows customer to judge/ form impressions about the quality of service is a moment of truth. - It takes 10 good moments of truth to wipe one bad moment of truth. - Disney Corporation 74 service encounters in amusement park. Marriott Hotels - 4 of the top 5 factors come into play in first 10 minutes of guest’s stay. • Types of service encounters- remote, phone, face to face. - In remote - tangible evidence & technical quality important. - In phone- process quality - In face to face - customer also play role.
191

Marketing Information System

192

Marketing Information System
Helps develop &manage information necessary to conduct marketing activities.

MARKETING INFORMATION

MARKETING INFORMATION SYSTEMS INTERNAL REPORTS SYSTEM MARKETING RESEARCH SYSTEM

MARKETING INFORMATION

MARKETING ENVIRONMENT

MARKETING MANAGERS • Analysis

• Macro environment • Target market • Marketing channels • Competition • Public

• Planning • Implementation • Control
MARKETING INTELLIGENCE SYSTEM ANALYTICAL MARKETING SYSTEM

MARKETING DECISIONS & COMMUNICATIONS

Marketing Information System
• Internal Records System (result data) - Order to payment cycle (invoices, bills), sales reporting system (sales reports, call reports). • Marketing intelligence system(happening data)* Newspapers, trade publications, talking to customers, suppliers, distributors, trade show, analyzing products & ads. talking to competitors, employees, syndicated reports (ORG). *Need to train sales representatives & motivate distributors & retailers. • Marketing research - formal study of specific problem / situation. • Marketing decision support systems - Statistical tools, models & optimization routines.

SCOPE OF MARKETING RESEARCH 1. NEW PRODUCTS - Concept testing,Brand name generation,& testing,Product testing,packaging tests, Test-marketing, Market feasibility. 2. 3. PRODUCT RESEARCH - Competitive - product studies, SALES & MARKET - Market potential, Market characteristics, Market share analysis, Sales analysis, Distribution channel studies.

4. PROMOTION - Copy research, Media research, Ad effectiveness, sales promotion effectiveness.,public image studies, sales force effectiveness 5. BUSINESS & CORPORATE RESEARCH - Business trend studies,, International scope studies, Internal employees studies, Operations research, Location studies etc. 6. 7. 8. CORPORATE RESPONSIBILITY - Ecological studies, Values PRICING-Competitive pricing analysis,price elasticity BUYING BEHAVIOUR-Brand preference, attitude,product satisfaction,purchase behaviour,purchase intentions,brand awareness,segmentation studies

THE RESEARCH PROCESS I.
DEFINE THE PROBLEM - not too broad or narrow, watch for symptoms. II. RESEARCH OBJECTIVES - measurable and specific (except exploratory) III. RESEARCH DESIGN A) EXPLORATORY B) DESCRIPTIVE C) CAUSAL IV. DEVELOP RESEARCH PLAN A) DATA SOURCES SECONDARY PRIMARY B) SAMPLING PLAN
SAMPLE UNIT SAMPLING FRAME SAMPLE SIZE SAMPLING PROCEDURE A) PROBABILITY B) NON-PROBABILITY

CONCLUSIVE

CENSUS SAMPLE

THE RESEARCH PROCESS
E) CONTACT METHODS MAIL TELEPHONE PERSONAL v) ARRANGED INTERCEPT

COLLECT INFORMATION-Problems of not at home,non co-operation,biased,dishonest answers or fudging

vi) DATA ANALYSIS vii) REPORT & PRESENTATION

Sampling procedures
A) PROBABILITY SAMPLING : 1. Simple Random Sampling : random selection through lottery without replacement. Unrestricted random sampling is with replacement. 2. Systematic Sampling : involved a system of selecting every nth item in sampling frame after 1st name / unit is selected at random. 3. Random Route sampling: used for sampling households, shops etc. An address is selected at random & every nth address is selected therefrom. 4. Stratified Random Sampling: Population is divided into mutually exclusive groups & within each group, units are selected through random methods. 5. Cluster (Area) sampling: The area to be surveyed is broken into smaller areas. A few of these areas are then selected by random methods. Every unit or some units randomly selected may be interviewed in these selected areas.

SAMPLING PROCEDURES
B) NON - PROBABILITY SAMPLING used when a) Probability sampling not feasible because population not known or no suitable sampling frame. b) Random sampling too costly & time consuming. c) When information is exploratory in nature.

SAMPLING PROCEDURES
B) Non probability sample: 1. Convenience sample: The researcher selects the easiest population members from which to obtain information. 2 Judgement sample: The researcher uses his/ her judgement to select population members who are good prospects for accurate information. 3. Quota sample: The researcher decides on prescribed no. of people in each category (age, gender, income) & then finds & interviews.

Contact Methods
Contact Methods

TELEPHONE - Quick
- Interview should be short. - Cannot be personal. - Not strictly representative. - Screening of calls. - Non-verbal cues missing.
- Poor

MAIL
response rate - No chance of clarification

PERSONAL
- Most versatile - Non- verbal cues -Costly - Bias - Cold calls to prevent mall intercept interviews.

QUESTIONNAIRE

Open - ended (Useful in exploratory research)

Close - ended (Easy to interpret and tabulate)

1. Completely unstructured 2. Word association 3. Sentence completion 4. Story completion 5. Picture completion 6. Thematic apperception test (TAT)

1. Dichotomous (2 choice) 2. Multiple choice (3 or more) 3. Likert scale 5 point scale of agreedisagree 4. Semantic Differential 5. Importance Scale 6. Monadic Rating

QUESTIONNAIRE

• Most common instrument must be carefully developed, tested and debugged before they are administered on a large scale. • Each question should contribute to research objectives. • Logical sequence • Wording / Styling Simple, direct, and unbiased. • Not too long. Lead question should be interesting. • Sensitive questions at the end and give range.

A QUESTIONABLE QUESTIONNAIRE

1. What is your total income to the nearest dollar. 2. Are you an occasional or frequent flyer. 3. Do you like this restaurant? 4. How many ads did you see on TV last week? 5. What are the most salient factors in buying a car ? 6. Do you think it is right for the government to ban common salt and deprive a lot of people of jobs ?

Characteristics of good Marketing Research
• Scientific method • Creativity • Multiple methods • Value & cost of information • Look at background - Classic failure of coke. Don’t look at problem in isolation. • Don’t give in to temptations of giving management what they want to hear.

Emerging Trends in Marketing

207

Emerging Trends in Marketing
Markets Cause related marketing - Social cause, (P & G) ecological cause (Orchid Hotels). Ambush Marketing (Coke 1996 world cup official sponsor, Reebok Atlanta Olympics 1996). Viral Marketing - hotmail Mousetrapping - (on internet) Guerilla marketing - (unconventional & creative attention grabbing techniques). E.g. Burger king used McDonalds Ronald. 6. Buzz marketing - By revealing only partial information. (JJKN). 7. Glocalization - McDonalds, Coca-Cola, L & G Sampoorna, Nokia 1100. 8. Permission marketing (Seth Godin) 9. Experience Marketing - Sony’s CD stores,Parryware experiencentres, Shoppers Stop 10. Collaborative Marketing - design (DC car ) Pricing (Zodiac grill) segmentation (Dell) 11.Lifestyle marketing - adopt promotional activity to customers lifestyle. E.g. Cellphones. 12. Ethical marketing - Pfizer, J & J Tylenol • 1. 2. 3. 4. 5.

• Customer Management : 1. Relationship management - Jet airways flying returns,Shoppers stop First Citizens Club. 2. Affinity group & online communities. • Product & Branding : 1. Mass customization - e.g. Scorpio, Asian Paints, Dell. 2. Umbrella Branding • Pricing : 1. Target pricing 2. Announcing price upfront • Packaging : 1. Sachet marketing • Distribution : 1. Non- traditional methods - Multilevel (Avon , Oriflame ),Party plan (Tupperware)

•Advertising, Media, sales promotion: 1. In film advertising - Baghban, Castaway (Fedex) 2. Surrogate advertising. 3. Comparative advertising. 4. Use of new, unconventional media, below the line media. (e.g.. Surf Vans). 5. Increase in sales promotion. 6. Using colours & sensory methods - e.g. Blue (Cool), Red (Hot).

PRICING

PRICING

I. CONSISTENT WITH TARGET MARKET & POSITIONING A) PRICE - DETERMINED BY OBJECTIVES - SURVIVAL, PROFIT OR MARKET SHARE OR SIGNALLING LEADERSHIP. B) METHOD - COST BASED V/S CUSTOMER BASED V/S COMPETITOR BASED. C) UNDERSTAND CUSTOMER PRICE SENSITIVITY (PRICE ELASTICITY OF DEMAND) D) OTHER FACTORS

Setting the Price
Selecting the pricing objective Determining demand Estimating Costs Analyzing competitor’s costs, prices and offers Selecting a pricing method Selecting the final price

6 MAJOR PRICING OBJECTIVES
• • • • • • • SURVIVAL MAXIMUM CURRENT PROFIT MAXIMUM CURRENT REVENUE MAXIMUM MARKET SHARE(penetration pricing) MAXIMUM MARKET SKIMMIMG PRODUCT QUALITY LEADERSHIP ANY OTHER - SOCIAL OBLIGATIONS ETC.

Selecting the Pricing Method
• Markup pricing • Target return pricing • Perceived value pricing • Value pricing • Going rate pricing • Sealed bid pricing

Selecting the Final Price
• Psychological pricing • Influence of other marketing mix elements on price • Company pricing policy • Impact of price on other parties

Adapting the Price
I. Geographical pricing

II. Pricing discounts & allowance III. Promotional pricing IV. Discriminatory pricing V. Product mix pricing

Adapting the Price
I. Geographical pricing

II. Price Discounts & allowances - Cash discounts, Quantity discounts, functional discounts, seasonal discounts, allowances(trade in allowances,promotional allowances).

Adapting the price
III. Promotional Pricing 1. Loss leader pricing 2. Special event pricing 3. Low interest financing 4. Larger payment terms 5. Warrantees & service contract 6. Psychological discounting - e.g. Rs. 1000/- earlier now Rs. 800. 7. Rebates

IV. Discriminatory Pricing 1. 2. 3. 4. 5. 6. V. 1.. 2. 3. 4. 5. 6. Customer segments Product form Image Location Time - e.g. Where yield is important. Channel Pricing Product mix pricing Product line pricing Optional feature pricing Captive product pricing Two parts pricing - (Fixed + Variable) e.g. telephone operators Byproduct pricing Product bundling pricing

PRICING TERMINOLOGY

VALUE PRICING - GIVING MORE VALUE IN RELATIONSHIP TO PRICE PAID. PENETRATION PRICING - CHARGING LOWER PRICE TO GAIN MARKET SHARE. SKIMMING PRICING - CHARGING AS HIGH AS POSSIBLE TO GET FIRST LAYER OF CUSTOMERS AND THEN PROGRESSIVELY LOOK DOWNWARDS. TARGET COSTING - DETERMINE PRICE AT WHICH PRODUCT MUST SELL GIVEN ITS APPEAL AND COMPETITION AND THEN WORK BACKWARDS.

PENETRATION

SKIMMING

1. WHEN PROFITS POSSIBLE THROUGH VOLUMES 2. PRICE-SENSITIVE MARKET 3. 4. HIGH COMPETITION COST IS MORE FIXED THAN VARIABLE

1. HIGH PRICE-PERCEIVED QUALITY RELATIONSHIP 2. PRICE INSENSITIVITY 3. COMPETITION IMMINENT 4. COST IS MORE VARIABLE THAN FIXED.

MEASURING PERCEIVED VALUE

I.

PV

>

PRICE

>

V COST

MAY BE DELIBERATE II. PRICE > PV > VC

REDUCE PRICE OR INCREASE PERCEIVED VALUE III. PRICE > VC > PV

FAILURE SCENARIO IV. OPTIMAL IS PRICE = PV > VC

METHODS FOR CALCULATING PERCEIVED VALUE

1. DIRECT PRICE RATING METHOD WHAT PRICE WILL YOU PAY FOR C IF A IS RS. 90/2. DIRECT PERCEIVED VALUE RATING METHOD GIVE MARKS OUT OF 100 TO A B C. IF PRICE OF A IS 90. WHAT SHOULD BE PRICE OF C. 3. DIAGNOSTIC METHOD PRODUCT ATTRIBUTES IMP A B C

METHODS FOR CALCULATING PERCEIVED VALUE

4. ECONOMIC VALUE TO CUSTOMER
REFERENCE PRODUCT A NEW PRODUCT Y (SAME AS X) NEW PRODUCT Z WITH INCREMENTAL FEATURES PURCHASE PRICE STARTUP COSTS POST PURCHASE COSTS 300 200 500 1000 600* 100 300 1000 700* 200 400 1300

ESTIMATING PRICE SENSITIVITY
NAGLE HAS IDENTIFIED FOLLOWING FACTORS FOR LESS SENSITIVITY 1. UNIQUE VALUE EFFECT 2. SUBSTITUTION AWARENESS 3. DIFFICULT COMPARISION Eg. CARPETS, DOCTORS 4. TOTAL EXPENDITURE EFFECT (VIS-A-VIS INCOME) Eg. SALT 5. END COST EFFECT - PRODUCT SMALL PART OF END PRODUCT 6. SHARED COST EFFECT 7. SUNK INVESTMENT - PRODUCT USED IN CONJUNCTION WITH ASSETS PREVIOUSLY BOUGHT 8. PRICE - QUALITY EFFECT 9. INVENTORY EFFECT - CANNOT STORE PRODUCT

IF DEMAND ELASTIC, LOWER PRICE

OTHER FACTORS

1. PRICE AS INDICATOR OF QUALITY 2. BUYERS HAVE REFERENCING PRICING IN MIND - FAIR PRICE, PRICE BANDWIDTH. 3. PSYCHOLOGICAL PRICING BARRIER 4. ODD END PRICING SHOULD BE AVOIDED IF HIGH PRICE IMAGE IMPORTANT. 5. HOW IMPORTANT IS PRICE TO INDIA IN PURCHASE DECISION_JUST ASKING CUSTOMERS THROUGH SURVEYS IS NOT ENOUGH (CONJOINT ANALYSIS BETTER).

INITIATING PRICE CHANGES
INITIATING PRICE CUT INITIATING PRICE INCREASE

REASONS 1. Excess capacity - Might trigger a price war 2. Declining market share 3. 4. Drive to dominate through lower costs Economic recession

REASONS 1. Expected improved profitability 2. Cost Inflation 3. Overdemand

Risks - Low Quality trap - Fragile Market Share trap. Buyer loyalty is not ensured - Shallow pocket trap. Reserves are less. Staying power is less.

BETTER METHOD THAN INCREASING PRICE (ESPECIALLY PRICE SENSITIVE MARKET)

1. Shrink amount of product 2. Substitute less expensive materials 3. Reduce or remove product features / services 4. Less expensive packaging or promoting larger pack sizes. 5. Reducing number of models / sizes 6. Creating new economic brands

REACTIONS TO PRICE CHANGES
CUSTOMER’S REACTIONS COMPETITOR’S REACTIONS

TO PRICE CUT 1. Product might be faulty 2. Not selling well 3. Financial trouble. Company may go out of business. 4. Prices may fall further. Hence wait. 5. Quality is reduced 6. New model TO PRICE INCREASE 1. Item is hot 2. Item has good value 3. Seller is greedy

Competitor will react when few firms, product homogeneous, buyers highly informed. It is important to estimate the competitor’s likely reactions before affecting a price change. The factors to be considered are : 1. Competitor’s Financial Position 2. Competitor’s Sales and Capacity, Customer loyalty 3. Competitor’s Corporate Objectives • Market Share - Likely to match p/c • Profit Maximisation - Likely to improve Quality & Sales Efforts 4. Customer Loyalty

RESPONDING TO COMPETITOR’S PRICE CHANGES
Analyse the problem on the following lines: • Why was the price reduced? • Is it permanent? • How are other competitors likely to respond? • What will happen to company’s market share and profits if it does not respond? Response varies with situation - importance of product in Co’s portfolio, stage of PLC, markets price sensitivity, behaviour of costs with volume. It is better to anticipate than to react. Homogeneous-product Market • Little choice but to match price cut • However, price increase need not be matched. Ultimately competitors will be forced to reduce. Price Quality Realiability Service Strength of these factors may desensitize buyers to price changes Nonhomogeneous product Market Factors

RESPONDING TO COMPETITOR’S PRICE CHANGES

Reactions: 1. Maintain Price when • Not likely to lose market share • Might regain market later • Would lose too much profit if price reduced 2. Raise perceived quality while maintaining price 3. Reduce Price when Costs fall with volume Market is price sensitive Difficult to rebuild market share later 4. Increase price aned improve quality 5. Launch lower price fighter line

PRICE-REACTION PROGRAM FOR MEETING A COMPETITOR’S PRICE CUT
HAS COMPETITOR CUT HIS PRICE? YES NO IS THE PRICE LIKELY TO HURT PRESENT YES SALES? NO IS IT LIKELY TO BE PERMANENT PRICE CUT? HOW MUCH HAS THE PRICE BEEN CUT? NO HOLD THE PRICE AT PRESENT LEVEL…CONTINUE TO WATCH COMPETITOR’S PRICE.

YES

BY < 2% INCLUDE DISCOUNT COUPON FOR THE NEXT PURCHASE

BY 2-4% DROP PRICE BY HALF OF THE COMPETITOR’S PRICE CUT

BY > 4% DROP PRICE TO COMPETITOR’S PRICE

DISTRIBUTION

DISTRIBUTION

A COMPANY LAUNCHING A PRODUCT NEEDS 1. SALES CHANNEL (TALKING ABOUT PRODUCT) 2. DELIVERY CHANNEL (HOME DELIVERY, INSTALLATION) 3. SERVICE CHANNEL THE 3 NEED NOT BE SAME.

Marketing Channels

M

C

M

C

M

C

M

D

C

M
No of contracts = 9

C

M
No. of contracts = 3

C

Marketing Channels  customer marketing channels
Manufacturer Consumer
Eureka Forbes

Manufacturer

Retailer

Consumer
Medicines

Manufacturer

Wholesaler

Retailer

Consumer
Bombay Dyeing

Marketing Channels  Industrial marketing channels
Manufacturer Industrial Consumer
ABB

Manufacturer

Industrial distributor

Industrial Consumer
Bombay Dyeing

Manufacturer

Manufacturer’s sales branch

Industrial distributor

Industrial Consumer
Car spares

CHANNEL LEVELS

EACH INTERMEDIARY WHO BRINGS PRODUCT AND ITS TITLE CLOSER TO BUYER CONSITUTES CHANNEL LEVEL. • ZERO CHANNEL(Direct marketing channel) - Door to door ,home

parties, mail order, telemarketing, TV selling,,internet selling manufacturer stores.
• ONE LEVEL • TWO LEVEL • THREE LEVEL

CHANNEL DESIGN DECISIONS

Decide what is ideal, feasible, available
I. CHANNEL DESIGN IN TUNE WITH MARKETING OBJECTIVES. II. CUSTOMER’S DESIRED SERVICE OUTPUT LEVELS - Eg. CONVENIENCE, WAITING AND DELIVERY TIME,FASTER SERVICE, PRODUCT VARIETY, SMALL LOT SIZE ETC. ESTABLISH CHANNEL CONSTRAINTS A. PRODUCT CHARACTERISTICS - PERISHABLE, NONSTANDARDISED, BULKY. B. S/W OF DIFFERENT INTERMEDIARIES C. COMPETITORS CHANNEL D. COMPANY’S STRENGTH & RESOURCES. E. ENVIRONMENTAL CONDITIONS - Eg. IN RECESSION, SHORTER CHANNEL & WITHOUT NON-ESSENTIAL SERVICES.

IDENTIFYING MAJOR CHANNEL ALTERNATIVES

A. TYPES OF INTERMEDIARIES - Eg. CELL PHONES. SEARCH FOR INNOVATIVE CHANNEL BECAUSE LESS DOMINANCE. B. NO. OF INTERMEDIARIES - EXCLUSIVE V/S SELECTIVE V/S INTENSIVE. C. TERMS & RESPONSIBILITIES OF CHANNEL MEMBERS - E.g. TERRITORIAL RIGHTS, MUTUAL SERVICES & RESPONSIBILITIES.

(Franchisees)

EVALUATING CHANNEL ALTERNATIVES

I. ECONOMIC - AGENT FOR SMALLER FIRMS, LOW VOLUME TERRITORIES.Each channel alternative will produce a different level of sales and costs.eg internet vsSalesforce.Company will try to switch their customers to low cost channels asumimg no loss of sales or deterioration of service quality. II. CONTROL - LESS ON AGENT. III. ADAPTIVE

CHANNEL MANAGEMENT DECISIONS

I. SELECTING CHANNEL MEMBERS - NO. OF YEARS, OTHER LINES CARRIED, REPUTATION, CO-OPERATIVENESS, GROWTH AND PROFIT RECORD. II. MOTIVATING - THROUGH TRAINING, SUPERVISION & SHARING INFORMATION. - Using

power (coercive,reward, legitimate, expert & referent power) to get co-operation.
III. EVALUATING CHANNEL MEMBERSagainst standards as sales qouta attainment,avg inventory levels,customer delivery time,treatment of damaged or lost goods,cooperation in training and promotional programs.. IV. MODIFYING CHANNEL ARRANGEMENTSdue to ineffectiveness, consumer buying pattern changes,market expands,new competition areises,innovative distribution channels emerge,product life cycle.

Channel dynamics
• A conventional marketing channel comprises an independent producer, wholesaler(s), and retailer(s). Each is a separate business entity seeking to maximize its own profits,even if this goal reduces profit for the system as a whole. • A vertical marketing system (VMS), by contrast, comprises the producer, wholesaler(s), and retailer(s) acting as a unified system. One channel member owns the others or franchises them or has so much power that they all cooperate. The vertical marketing system can be dominated by the producer, the wholesaler, or the retailer.

I.

Vertical marketing Systems

1. Corporate VMS - combines successive stages of product & distribution under single ownership. I.e. vertical integration. 2. Administered VMS - Co-ordinates successive stages of production & distribution through size & power of one of the members . E.g. HLL commands high level of cooperation from reseller in terms of shelf-space, displays etc. 3. Contractual VMS - consists of independent firms at different levels of production and distribution integrating their programs on a contractual basis to obtain more economies and /or sales impact than they could achieve alone. E.g. retailer co-operative, franchise organizations.

I. Horizontal Marketing Systems - In which two or more unrelated companies put together resources or programs to exploit on emerging marketing opportunity ( called symbiotic marketing). E.g. SBI & Management.

III. Multichannel Marketing Systems - Occurs when a single firm uses two or more marketing channels to reach one or more customer segments.

246

Channel Conflict
• Types of conflict

1. Vertical channel conflict 2. Horizontal channel conflict 3. Multichannel conflict

Causes of channel conflict
• Goal incompatibility - dealers want short-term profits while company wants long-term customer satisfaction. • Unclear roles & rights. • Differences in perception - of market, customer needs, economic outlook e.g. company optimistic, dealer pessimistic). • Intermediaries great dependence on manufacturer.

• Lack of financial resources for direct marketing. • Not feasible / practical. • Channel members add time, place, possession, form utility. Thus it is not whether various channel functions need to be performed but rather who is to perform them. • Key Functions – Information – Promotion – Ordering – Financing – Risk taking – Physical possession – Payment – Title

Why are marketing intermediaries used & why not direct marketing

INTRODUCTION TO INTEGRATED MARKETING COMMUNICATIONS

And Yet Another… by AAAA
… a concept of marketing communications planning that recognizes the added value of a comprehensive plan that evaluates the strategic roles of a variety of communications disciplines-for example, general advertising, direct response, sales promotion and public relations-and combines these disciplines to provide clarity, consistency, and maximum communications’ impact through the seamless integration of discrete messages

Thus IMC can help us deliver
• Different media for same message: Nescafe- ads Vs Sales Promotion, Bagpiper- yaaron ka yaar (TV, Radio) • Consistency over time: Lux • Different message over different audience: Fair & Lovely- Urban Vs Rural areas • Same message in different languages: Coke

WHY I M C

????????

In early 90s, no one made a fuss about IMC. In fact not many people were even aware of this. Then why is it so important now ?

IN THOSE DAYS
• 1 single channel – everyone saw it • MDH Masala and Hawkins could place an ad every weekend to become legends • Limited competition in markets • Which meant functional claims would take years to bridge

• • • •

Market: Cluttered More competition: Less Buyers Media Exposure is very high Media Fragmentation: Many TV Channels and even more newspapers and weekly newsmagazines • Lifestyle change: Malls and Cafes • Technology – Email, net, mobile, SMS easy access to information for customer

HOWEVER TODAY…

AND..
• Shrinking budgets and demand for accountability • And acceptance by marketing managers that specialization is important
Advertising Sales Promotion IMC Public Relations Direct Marketing Event Marketing Internet Marketing

MARKETING COMMUNICATIONS MIX

ALSO CALLED PROMOTION MIX CONSISTS OF 1. 2. 3. 4. 5. 6. 7. 8. 9. ADVERTISING SALES PROMOTION PUBLIC RELATIONS AND PUBLICITY PERSONAL SELLING DIRECT MARKETING MERCHANDISING EVENT SPONSORSHIP PRODUCT DESIGN ONLINE ADVERTISING

10. WORD OF MOUTH RECOMMENDATION

TABLE 20.1 COMMON COMMUNICATION PLATFORMS PERSONAL ADVERTISING SALES PUBLIC DIRECT
PROMOTION Print and broadcast ads Packaging—outer Packaging inserts Motion pictures Brochures & booklets Posters and leaflets Directories Reprints of ads Billboards Display signs Point-of-purchase displays Audio-visual material Symbols and logos Videotapes Contests, games, sweepstakes, lotteries Premiums and gifts Sampling Fairs & trade shows Exhibits Demonstrations Coupons Rebates Low-interest financing Entertainment Trade-in allowances Continuity programs Tie-ins RELATIONS Press kits Speeches Seminars Annual reports Charitable donations Sponsorships Publications Community relations Lobbying Identity media Company magazine Events SELLING Sales presentations Sales meetings Incentive programs Samples Fairs and trade shows MARKETING Catalogs Mailings Telemarketing Electronic shopping TV shopping Fax mail E-mail Voice mail

COMMUNICATIONS: THE OLD MODEL VS NEW
Single Medium Multiple Medium Traditional Model Of Communications ?????????

IMC ???????? Single Message
Multiple audiences
And / or Multiple Tasks

Multiple Message

Contd….
Single Medium Multiple Medium Traditional Model Of Communications IMC
Led primarily by Advertising. Uniquely defined audience.

Only where audiences Can be segregated by Media Usage

IMC
Multiple audiences
And / or Multiple Tasks

Single Message

Multiple Message

ELEMENTS OF COMMUNICATION
SENDER Encoding Message Media Decoding RECEIVER

Noise

Feedback

Response

DEVELOPING EFFECTIVE COMMUNICATIONS

1. 2.

UNDERSTAND COMMUNICATION PROCESS UNDERSTAND CONCEPTS OF SELECTIVE ATTENTION, DISTORTION, RETENTION

DEVELOPING EFFECTIVE COMMUNICATIONS • • • • • • • IDENTIFY TARGET AUDIENCE – affects what to say, how to say, when, where and to whom to say. SITUATION ANALYSIS & DETERMINE COMMUNICATION OBJECTIVES DESIGNING THE MESSAGE SELECT THE COMMUNICATION CHANNELS ESTABLISH TOTAL PROMOTION BUDGET DECIDE ON PROMOTION MIX MEASURE PROMOTION RESULTS

DETERMINING COMMUNICATION OBJECTIVES
MARKETER CAN SEEK A COGNITIVE, AFFECTIVE OR BEHAVIOURAL RESPONSE FROM TARGET AUDIENCE.

HIERARCHY OF EFFECTS MODEL
AWARENESS COGNITIVE STAGE KNOWLEDGE
THIS SEQUENCE IS LEARN-FEEL-DO (HIGH INVOLVEMENT/HIGH DIFFERENCE) DO-FEEL-LEARN (HIGH INVOLVEMENT/LOW DIFFERENCE) LEARN-DO-FEEL (LOW INVOLVEMENT)

AFFECTIVE STAGE

LIKING

PREFERENCE

CONVICTION

BEHAVIOUR STAGE

PURCHASE

Design the Message
• Based on the AIDA model
Awareness

Interest Desire Attention

Message Issues
• What to say ? ( Message Content ) –Message appealsInformational(rational),Transfomational appeals(sensory,social,ego satifaction); message strategy will look at one of four appeals in context of product-inuse ,results of use or incidental to use experience. negative positive appeals. • How to say it logically? ( Message Structure )- Appeal, Conclusion Drawing .eg- Femina – Woman of Substance • How to say it symbolically? ( Message Format ) • Who should say it? ( Message Source ) – Celebrity, expert, Common man. Eg – Amitabh Bacchhan- Reid and Taylor, Sachin- TVS Victor, Dentist- toothpaste, Hema Malini- Casper

SELECTING COMMUNICATION CHANNELS

1. 2.

PERSONAL CHANNELS – Advocate channel (salespersons) expert channel (independent) social channel (neighbors, friends etc.) NON-PERSONAL CHANNELS – Media, atmospheres and events.

ESTABLISH TOTAL PROMOTION BUDGET
1. 2. 3. 4. 5. 6. 7. 8. 9. AFFORDABLE METHOD UNIT OF SALES OR CASE RATE METHOD PERCENTAGE OF SALES METHOD COMPETITIVE PARITY METHOD – spend as much as competition SHARE OF VOICE METHOD OBJECTIVE & TASK METHOD EMPIRICAL METHOD QUANTITATIVE MATHEMATICAL MODEL INVESTMENT SPENDING

10. PECKHAM’S METHOD - For new products spend twice, For established products same share or less

PROMOTIONAL TOOLS
UNDERSTANDING UNIQUE CHARACTERISTICS AND COSTS OF EACH 1. ADVERTISING – Strategic and long term, most economical form of consumer contact, transforms products into brands. Persuasive, expressive public presentation hence perceived as legitimate but impersonal . SALES PROMOTION – Short term, tactical Creates quick response but not effective in building long-run brand preference. PUBLIC RELATIONS & PUBLICITY – High credibility, dramatization, catch buyers off guard. PERSONAL SELLING – Useful in later stages but long-term cost commitment. DIRECT MARKETING – Customized, interactive, secrecy. MERCHANDISING or Point of Purchase activity for traffic building in outlets especially self-service outlets

2.

3. 4. 5. 6.

PROMOTIONAL TOOLS

7. 8. 9.

EVENT SPONSORSHIP – should be relevant target audience. PRODUCT DESIGN – and packaging and brand name acts as silent salesmen. ONLINE ADVERTISING – internet users few, but interactive.

10. WORD OF MOUTH recommendations – need to be stimulated through proper identification of opinion leaders

DECIDING ON PROMOTION MIX

FACTORS a) TYPE OF PRODUCT MARKET – business v/s consumer markets

b) Push v/s Pull strategy c) Buyer – readiness stage

d) Product lifecycle stage

The Communication Process

Communication
- passage

of information, the exchange of ideas, or the process of establishing a commonness or oneness of thought between the sender and receiver.

Success Factors
• Nature of Message: striking, eye catching, • Audience’s interpretation of it • Environment in which it is received: eg. 20% off in recession would be more effective. Words, pictures, sounds, colours may have different meanings to different people Eg: Black; in urban areas- sophisticated, in rural areas- death

Basic Model of Communication

Sender’s field of experience

Receiver's field of experience
c e D g n i d o

Sender Feedback

c n E g n i d o

Message Noise

Receiver Response

Target Audience Identification & Communication
• • • • • Individuals: Personal selling Groups: Multi-level personal selling Market Niches: Personal selling/ Direct Mail Market Segments: Newspapers, Magazines, TV Mass Markets: Advertising, Publicity

Models of Response Process
AIDA model represents stages of sales-person must take a Customer through in personal selling.

Stages Cognitive Stage Affective stage Behaviora l Stage

AIDA Model Attention Interest Desire Action

Models of Response Process
Developed by Robert Levidge and Gary Steiner, the model helps in Setting and measuring objectives.

Hierarchy of Effects Model Cognitive Awareness Stage Knowledge Affective Liking stage Preference Conviction Behaviora Purchase l Stage

Stages

Models of Response Process
For adoption of new product. Trial through demonstration and Sampling. Leading to adoption/rejection.

Innovation Adoption Cognitiv Awareness Model e Stage Affectiv Interest e stage Evaluation Behavior Trial al Stage Adoption

Stages

Models of Response Process
• Information Processing Model: Developed by William Mc Guire • Similar to Hierarchy of effects model, attention and comprehension are similar to awareness and knowledge. Yielding is similar to liking. There is a new element ‘retention’ in this model. • Model assumes the receiver as an information processor and is in a ‘being persuaded’ situation (e.g.: advertising) and this is a response hierarchy.

Models of Response Process
Information Processing Model Cognitive Presentation Stage Attention Comprehension Affective stage Yielding Retention Behavioral Behaviour Stage Stages

Methods of obtaining Feedback
Effectiveness tests Circulation reach Listener, reader, viewer recognition Recall. Checklists Brand attitudes, purchase intent Recall over time Inventory, PoP consumer panel Steps in persuasion process Exposure/presentation Attention Comprehension Message acceptance/ yielding Retention Purchase behaviour

Integrated Information Response Model (for Low Involvement)

Cognition

Trial

Affect

Commitment

Integrated Information Response Model (for High Involvement)
Advertising Low Lower order beliefs

+

Lower order affect

Trial

Direct Exp.

High

Higher order beliefs Higher order affect

Commitment

FCB Planning Model
Thinking
High Involvement 1. Informative (thinker) Car, house, furnishings, new products Low 3. Habit Involvement Formation (doer) Food, household items

Feeling
2. Affective (feeler) Jewelry, cosmetics, motorcycles 4. Self satisfaction (reactor) Cigarettes, liquor, candy

ADVERTISING, MEDIA & SALES PROMOTION

DEVELOPING & MANAGING AN ADVERTISING PROGRAM

• MISSION • MONEY • MESSAGE • MEDIA • MEASUREMENT

Creative Strategy

POSSIBLE ADVERTISING OBJECTIVES

1. 2.

INFORMATIVE ADVERTISING – used in pioneering stage to build primary demand. PERSUASIVE ADVERTISING – important in competitive stage, to build selective demand. Comparative advertising. REMINDER ADVERTISING – for mature products reinforcement advertising for assurance.

3.

TABLE 21.1 POSSIBLE ADVERTISING OBJECTIVES
TO INFORM Telling the market about a new product Suggesting new uses for a product Informing the market of a price change Explaining how the product works Describing available services Correcting false impressions Reducing buyers’ fears Building a company image

TO PERSUADE Building brand preference Persuading buyers to purchase now Encouraging switching to the brand Persuading buyers to receive a sales Changing buyers’ perception of product call attributes TO REMIND Reminding buyers that the product may Keeping it in buyers’ minds during be needed in the near future off-seasons Reminding buyers where to buy it Maintaining its top-of-mind awareness

DECIDING ON ADVERTISING BUDGET

FACTORS 1. 2. 3. 4. 5. STAGE IN PRODUCT LIFECYCLE MARKET SHARE AND CONSUMER BASE COMPETITION AND CLUTTER ADVERTISING FREQUENCY REQUIRED PRODUCT SUBSTITUTABILITY

CHOOSING ADVERTISING MESSAGE

A. MESSAGE CONSTRUCTION - (CONTENT) Benefit Promise Or Unique Selling Proposition Should Be Believable, Desirable And Exclusive And Supported By A Reason – Why Benefit Promise Is Strategic In Nature And Should Not Change Unless Change In Product Formulation, Marketing Strategy, Or Changing Consumer Needs / Wants. Should Appear In Headline

-

CHOOSING ADVERTISING MESSAGE

B. MESSAGE EXECUTION a. b. c. d. e. APPEALS – rational, emotional, moral TONE – positive, humour ? WORDS FORMAT – placement of elements, typography (press) background, colour, arresting key frame (TV). STRUCTURE (conclusion) drawing, one sided v/s two sided argument, order of presentation).

Promotional Executions
• The way the promotional appeal is presented
– Can be executed in multiple ways through multiple media & promotional elements
• • • • • Straight sell Technical expertise Scientific Evidence Demonstration Comparison
– Direct or indirect

• Testimonial
– Authority, celebrity, peer

• • • • • • • •

Slice of life Life style Animation Personality symbol Fantasy Dramatization Mood or Image Musical

Message Appeals
• Rational- comparative vs competitive • Moral • Emotional – fear, pride, love, sex, humour, joy, grief

Conclusion Drawing
• Should the message draw a firm conclusion or leave it to the receivers? - Messages with explicit conclusion are more easily understood. - Open ended ads are more effective for involved audiences.

Message Sidedness
• One sided Message: Mentions only positive attributes. • Two side Message: presents both good and bad points.

Message Structure
• Where should the most important message be placed? - Research on learning and memory indicates that items presented first and last are remembered better than those presented in the middle.

Ad message recall as a function of Order of Presentation
Recall

Beginning

Middle

End

Verbal Vs. Visual Messages
• When verbal information is low in imagery value, use of pictures increases both immediate and delayed recall. • When verbal information is high in imagery value addition of pictures does not increase recall.

Source Factors
• Credibility: Extent to which the recipient sees the source as having relevant knowledge, skill or experience and trusts the source to give unbiased, objective information.  Applying expertise- use of doctors, dentists etc.  Applying trustworthiness- use of hidden cameras to record consumers liking for the brand.

Source Attractiveness
• Similarity: Athletes endorsing sports goods • Likeability: Using celebrities

Drawbacks
• Overshadowing the product • Overexposure of the celebrity

ADVERTISING COPY STRATEGY (CREATIVE BRIEF)
• SHOULD BE TRUE TO OVERALLPOSITIONING OF PRODUCT • SHOULD BE WRITTEN • POSITIONING SHOULD BE CLEAR, COMPETITIVE, CORRECT FOR PRODUCT & TARGET MARKET, NONGENERIC, BELIEVABLE

GOOD COPY STRATEGY

HAS FOUR PARTS 1. WHAT ADVERTISING AIMS TO CONVEY - CENTRAL PROMISE 2. FACTS TO SUPPORT 3. CUSTOMER ADDRESSED 4. TONE & ATMOSPHERE

SUPPORT

1. PRODUCT ITSELF - INGREDIANTS - REAL OR PERCEIVED 2. PEOPLE WHO MAKE IT 3. PACKAGING 4. WAY IT IS SOLD 5. ACTUAL CONSUMER REPORTS 6. PEOPLE WHO BUY IT 7. REGION 8. OPINION OF INDEPENDENT JUDGES

RECOGNISING GOOD ADVERTISING
1. STRATEGIC FIT WITH POSITIONING 2. DISTINCTIVE / EXCLUSIVE 3. COMPETITIVE 4. NON-GENERIC 5. PROVOCATIVE 6. CONTENT MORE IMPORTANT THAN STYLE 7. BOING FACTOR 8. BELIEVABLE LOGIC 9. VISUAL / VERBAL COHERENCE 10. CONSUMER EMPATHY

MEDIA BRIEF
• TARGET AUDIENCE • ADVERTISING • REACH V/S FREQUENCY • MEDIA HABITS OF TARGET AUDIENCE • TIMING OF CAMPAIGN • REGIONAL WEIGHTS • SHARE OF VOICE DESIRED IN EACH MARKET • CREATIVE REQUIREMENTS - MINIMUM SIZE OR LENGTH OF TIME

JUDGING MEDIA PLANS

1. AGREED TARGET AUDIENCE 2. AGREED ADVERTISING MESSAGE 3. MEDIA DECISIONS

AGREED TARGET AUDIENCE

QUESTIONS TO ASK 1. CAPTIVE SALES OR CONQUEST SALES 2. DEMOGRAPHIC CHARACTERISTICS 3. REGIONAL CHARACTERISTICS 4. PSYCHOLOGICAL CHARACTERISTICS

Media Planning

Brand and Category Analysis
Category Development Index Percentage of product category total sales in CDI = market Percentage of total Indian population in market

X 100

Brand and Category Analysis
Brand Development Index Percentage of brand sales in market to total BDI = Indian sales Percentage of total India population in market

X 100

BDI and CDI
• Help the product manager achieve focus in locating geographical regions that require focus • These figures help in test marketing of new products and in testing advertisements

MEDIA PLANNING & STRATEGY

1. Deciding On Reach, Frequency & Impact 2. Choosing Among Major Media Types 3. Selecting Specific Media Vehicles 4. Deciding On Media Timing 5. Deciding On Geographical Media

DECIDING ON REACH, FREQUENCY & IMPACT

• REACH ( R ): The number of different persons or households exposed to a particular media schedule at least once during a specified time period. • FREQUENCY (F): The number of times within the specified time period that an average person or household is exposed to the message. • IMPACT (I): The qualitative value of

Reach and Frequency
Reach of One Program Reach of Two Program

Total market audience reached

Total market audience reached

Duplicated Reach of Both

Unduplicated Reach of Both

Total reached with both shows

Total reach less duplicate

Graph of Effective Reach
25%

Percentage Reach

20% 15% 10% 5% 0% 0

Ineffectiv e Reach Effectiv e Reach Ineffectiv e Reach

5

10

15

Exposures

REACH V/S FREQUENCY

REACH

FREQUENCY

• Launching new products • Launching new extensions • Infrequently purchase brands • Undefined target market

• • • • •

Strong competitors Complex story High consumer resistance Frequent purchase cycle High forgetting rate

Marketing Factors Important to Determining Frequency
• Brand history • Brand share • Brand loyalty • Purchase cycles • Usage cycle • Competitive share of voice • Target group

Creative Factors In Determining Frequency
• • • • • • • Message complexity Message uniqueness New vs. continuing campaigns Image versus product sell Message variation Wearout Advertising units

Media Factors Important to Determining Frequency
• Clutter • Editorial environment • Attentiveness • Scheduling • Number of media used • Repeat Exposures

CHOOSING AMONG MAJOR MEDIA TYPES

FACTORS 1. TARGET AUDIENCE MEDIA HABITS 2. PRODUCT 3. MESSAGE 4. COST

CHOOSING AMONG MAJOR MEDIA TYPES

1. TV – Best for Demonstration Purpose 2. NEWSPAPER – best for launch announcements, authoritative medium. 3. MAGAZINES – can segment audiences, long life span, pass on readership but periodic hence advertising impactless. 4. RADIO – good reminder medium 5. CINEMA – South and smaller towns 6. OUTDOOR – geographically selective medium 7. OTHERS – neon signs, matchbox

SELECTING SPECIFIC MEDIA VEHICLES

DEPENDS ON • In PRINT – circulation, effective audience, effective ad-exposed audience which affects cost per thousand criterion. • In TV – effective audience, TRP, QRP

Determining Relative Cost of Media
• CPM (cost per thousand)
Cost of ad space/time = Circulation/Audience x1000

• CPRP (cost per rating point) Cost of commercial time = Program rating

DECIDING ON MEDIA TIMING
• • • • • • • Depends on buyer turnover, purchasing frequency forgetting rate Macroscheduling problem Microscheduling problem CONTINUITY CONCENTRATION – spending all in one period FLIGHTING – advertising followed by hiatus then second flight PULSING – continuous advertising at low weight level reinforced periodically by waves of heavier activity.

CONTINUITY V/S BURSTS

CONTINUITY • FREQUENT PURCHASE PATTERN • HIGH LEVEL OF IMPULSE BUYING • EXPANDING MARKET • NO BUDGET CONSTRAINTS

BURSTS • INFREQUENT PURCHASE PATTERN • STRONG LOYALTY TO BRAND • HEAVY LAUNCH WEIGHT • BUDGET LIMITATIONS

TIMING DEPENDS ON

• BUYER TURNOVER • PURCHASE FREQUENCY • FORGETTING RATE

TIMING PATTERNS (SEE APPENDIX NO.13)
Rising (2) Falling ( 3) Alternating ( 4)

Concentrated Level (1)

Continuous (5)

(6)

( 7)

( 8)

Intermittent ( 10 ) ( 9) ( 11) ( 12)

Month

SALES PROMOTION

SALES PROMOTION

SALES PROMOTION CONSISTS OF A DIVERSE COLLECTION OF INCENTIVE TOOLS, MOSTLY SHORT-TERM, DESIGNED TO STIMULATE QUICKER AND / OR GREATER PURCHASE OF A PARTICULAR PRODUCT BY CONSUMERS OR TRADE.

WHILE ADVERTISING OFFERS A REASON TO BUY, SALES PROMOTION OFFERS AN INCENTIVE TO BUY.

REASON FOR SALES PROMOTION INCREASE

1. MANY BRANDS & SEEN AS SIMILAR 2. COMPETITION USES IT 3. CONSUMERS MORE PRICE ORIENTED 4. TRADE DEMANDS MORE DEALS 5. ADVERTISING EFFICIENCY HAS DECLINED 6. MEDIA CLUTTER

WHY SALES PROMOTION POPULAR

1. SALES PROMOTION PRODUCE RESULTS 2. SALES PROMOTION PRODUCE RESULTS QUICKLY 3. SALES PROMOTION IS ALWAYS WELCOMED BY ALL - CONSUMERS, TRADE, SALESFORCE 4. SALES PROMOTION IS RELATIVELY EASY & INEXPENSIVE TO IMPLEMENT 5. MOST PRODUCT MANAGERS ARE UNDER GREAT PRESSURE TO INCREASE THEIR CURRENT SALES 6. SMALL SHARE FIRMS FIND IT ADVANTAGEOUS TO USE SALES PROMOTION AS CANNOT AFFORD TO MATCH MARKET LEADER’S LARGE ADVERTISING BUDGETS & CANNOT OBTAIN SHELF SPACE

PROBLEMS OF SALES PROMOTION

1. SALES PROMOTION TEND TO ORIENT MARKETING MANAGERS TOWARDS THE SHORT-TERM 2. OVERUSE RESULTS IN ERODING ATTITUDES TOWARDS BRAND 3. SALES PROMOTION OFTEN ATTRACT BRAND SWITCHERS AND NOT LOYALISTS OF OTHER BRANDS. 4. SALES PROMOTION USED IN MARKETS OF HIGH BRAND SIMILARITY, PRODUCE A HIGH SALES RESPONSE IN SHORT RUN BUT LITTLE PERMANENT GAIN IN MARKET SHARE IN MARKETS OF HIGH BRAND DISSIMILARITY, SALES PROMOTION CAN ALTER MARKET SHARES PERMANENTLY.

5.

SALES PROMOTION TOOLS

UNDERSTAND WHAT EACH TYPE OF SALES PROMOTION TOOL CAN OR CANNOT DO. CONSUMER FRANCHISE BUILDING TOOLS WHICH REINFORCE THE CONSUMER’S BRAND UNDERSTANDING THROUGH IMPARTING SELLING MESSAGE ALONG WITH DEALS ARE BETTER E.g. PREMIUMS RELATED TO PRODUCT, FREE SAMPLES ETC. TRADE PROMOTIONS - LOOK FOR PROOF OF PERFORMANCE & PREVENT FORWARD BUYING OR DIVERTING. LOOK FOR CREATIVE EDGE.

Segmentation, targeting and positioning
• Must know STP before sales promotion ‘coz
– No promotion is directed towards every customer – Buyers have different reasons to buy different products – No sense in directing sales promotion for loyal customers and regular users

Whom to target the Sales Promotion to ?
• Segment on basis of Loyalty
– – – – – Loyal Customers Competitive Loyals Switchers Price buyers Non Users
Target Market for All Promotion Based Activities

MAJOR DECISIONS IN SALES PROMOTION
1. ESTABLISH SALES PROMOTION OBJECTIVES 2. SELECT SALES PROMOTION TOOLS - CONSUMER, TRADE, SALESFORCE, BUSINESS 3. DEVELOPING SALES PROMOTION A. SIZE OF INCENTIVE B. CONDITIONS FOR PARTICIPATION C. DURATION D. DISTRIBUTION VEHICLE E. TIMING F. BUDGET 4. PRETEST PROGRAM 5. IMPLEMENT 6. EVALUATE SALES PROMOTION RESULTS THROUGH SALES DATA, 339 CONSUMER SURVEYS & EXPERIMENTS.

CONSUMERS

OBJECTIVES OF SALES PROMOTION

1. TO INTRODUCE NEW PRODUCT & GENERATE TRIAL. • GATHER INFORMATION. • MAKE IT EASY TO REDUCE PROCESS. 2. TO ATTRACT NEW CUSTOMERS 3. TO INDUCE PRESENT CUSTOMERS TO BUY MORE 4. TO HELP FIRM REMAIN COMPETITIVE 5. TO INCREASE OFF SEASON SALES 6. TO REWARD LOYAL CUSTOMERS 7. BUILD LONG - TERM RELATIONSHIP. RETAILERS 1. PERSUADE RETAILERS TO CARRY NEW ITEMS 2. PERSUADE RETAILERS TO CARRY HIGHER LEVEL OF INVENTORY 3. OFF SETTING COMPETITIVE PROMOTIONS 4. INDUCE RETAILERS TO PROMOTE BRAND BY FEATURING DISPLAY 5. STIMULATE RETAILERS TO PUSH THE PRODUCT

OBJECTIVES OF SALES PROMOTION

SALESFORCE 1. ENCOURAGING SUPPORT FOR NEW PRODUCT 2. ENCOURAGING MORE PROSPECTING 3. STIMULATING OFF SEASON SALES

TYPES OF SALES PROMOTION

CONSUMER PROMOTION - SAMPLES, COUPONS, PRICE OFFS, PREMIUMS PATRONAGE REWARDS, FREE TRIALS, PRIZES, TIE-IN PROMOTIONS, CROSS PROMOTIONS, POINT OF PURCHASE DISPLAYS, DEMONSTRATIONS. TRADE PROMOTION - PRICE OFFS, ADVERTISING & DISPLAY ALLOWANCES, FREE GOODS BUSINESS PROMOTION - TRADE SHOWS, FAIRS, CONVENTIONS, SPECIALITY ADVERTISING SALES FORCE PROMOTION - CONTESTS

Sales Promotion Tools
• • • • • • • Samples Coupons Cash refund offers or rebates Price packs Premium Gifts Prizes – contests – sweepstakes Patronage awards
343

Samples
• Offer free amount of product or service • Might be delivered
– – – – Door to door Mail Pick up in a store Attached to product

• A very expensive way
344

Coupons
• Help in stimulating sales of mature brand • Should provide at least 15-20 % saving to the customer

345

Cash Refund / Rebates
• Provide a price reduction after purchase rather than at the shop • Proof of purchase necessary

346

Price Packs
• Savings off the regular price of a product • Maybe through
– Reduced price pack – Banded pack

• Are often more effective than coupons

347

Premiums - Gifts
• Merchandise is offered free or at low cost as incentive to purchase a product • Self – liquidating premium is an item sold below its normal price to consumers who request it • Maybe a
– – – – Near Pack On-Pack In-Pack With-pack
348

Prizes – Contests - Sweepstakes
• Prize – offers to win an expensive gift when you purchase the product • Contests require the submission of an entry like a jingle or a slogan • Sweepstakes require you to put in your name in the lucky draw • Gain a lot more attention than coupons or small premiums
349

Tie-in Promotions
• Involve two or more brands or companies that team up on coupons, refunds and contests to increase their pulling power • Sales force of two companies push promotions to retailers thus giving strong thrust

350

Contests and Loyalty Cards

351

Some Special Offers

352

Trade Promotion Tools
• Price-Off
– Straight discount off the list price on each case purchased during a stated time period

• Allowance
– An amount offered to display prominently the wares

• Free goods
– Extra cases of merchandise to intermediaries who buy a certain size
353

Business Promotions
• Trade Shows and Conventions • Sales Contests • Specialty Advertising

354

SALES PROMOTION - DEVELOPING THE SALES PROMOTION PROGRAMME
1. CERTAIN MINIMUM INCENTIVE NECESSARY FOR PROMOTION TO SUCCEED. A HIGHER INCENTIVE LEVEL WILL PRODUCE MORE SALES RESPONSE BUT AT DIMINISHING RATE. 2. 3. 4. 5. DURATION OF PROMOTION - NOT TOO SHORT (NO ONE KNOWS) OR TOO LONG (LOSES ITS ACT NOW FORCE). OPTIMAL FREQUENCY 3 WEEKS PER QUARTER AND OPTIMAL DURATION - LENGTH OF AVERAGE PURCHASE CYCLE. EACH DISTRIBUTION VEHICLE INVOLVES DIFFERENT REACH, COST, IMPACT. TOTAL SALES PROMOTION BUDGET INCLUDES ADMINISTRATIVE COST (PRINTING, MAILING & PROMOTING THE DEAL) & INCENTIVE COST ( COST OF PREMIUM OR PRICE OFF) MULTIPLIED BY EXPECTED NUMBER OF UNITS THAT WILL BE SOLD ON THE DEAL.

FOR CONSUMER PROMOTION TO SUCCEED

1. VALUE OF INCENTIVE SHOULD BE PROPORTIONATE TO MAIN PRODUCT. 2. GIFT SHOULD PREFERABLY NOT BE EASILY AVAILABLE IN THE MARKET. 3. INCENTIVE SHOULD BE A QUALITY PRODUCT. 4. THE INCENTIVE SHOULD BE OF INTEREST TO THE CONSUMER OF THE MAIN PRODUCT. 5. INCENTIVE SHOULD HAVE INDEPENDENT VALUE. 6. ADDITION OF FREE GIFT MUST NOT FORCE THE CUSTOMER TO SPEND MORE ON THE MAIN PRODUCT.

Pretesting Sales Promotion
• • • • Design on experience but conduct pretests Testing is inexpensive and fast Rank or rate promotion offers Restrict the promotion to a geographical test area only

357

• Must decide the lead time and sales time • Lead time

Implementing and Controlling the Sales Promotion Program

– Prepare design, approval of package modifications material to be mailed or distributed, advtg, POP material and the like – Notoifcation of field sales personnel, establishing allocations for distributors, purchase and printing of premiums, inventory mgmt, and eventual distribution to retailer

• Sell-in Time
– Begins with promotional launch – Ends when 95% of deal merchandise is in hands of consumers
358

Measuring Effectiveness
• Sales Data • Consumer Surveys • Experiments

359

Challenges in Sales Promotions
• Consumer franchise building V/S nonfranchise building • Forward buying • Diverting in non deal regions • Inability to police effectively • Wrong billing • Irritation of retailers
360

PRODUCT LIFE CYCLE

361

PLC PHASES

1. INTRODUCTION 2. GROWTH 3. MATURITY 4. DECLINE

362

PRODUCT LIFE CYCLE
THE LAUNCH PHASE • DEFINING THE POSITIONING; • ACHIEVING WHOLESALE DISTRIBUTION; • ACHIEVING RETAIL DISTRIBUTION; • AROUSING CONSUMER AWARENESS; • ATTRACTING CONSUMER TRIAL; • CONVERTING CONSUMERS TO THE PRODUCT; AND • ACHIEVING BUYING CONTINUITY
363

FOUR INTRODUCTORY MARKETING STRATEGIES
Promotion High High
Price

Low Slowskimming strategy Slowpenetration strategy

Rapidskimming strategy Rapidpenetration strategy

Low

364

PRODUCT LIFE CYCLE
THE GROWTH PHASE • INCREASING THE USER BASE; • EXPANDING DISTRIBUTION; • EXPANDING SHELF FACINGS; • INCREASING PURCHASE FREQUENCY; • SHIFT FROM PRODUCT AWARENESS ADVERTISING TO BRAND PREFERENCE ADVERTISING; • LOWER PRICES TO ATTRACT NEW LAYER OF PRICE SENSITIVE BUYERS • ENSURING ADEQUATE INVENTORIES AT WHOLESALE AND RETAIL LEVELS; AND • EXPLORING LINE EXTENSIONS

365

MATURITY PHASE

1. GROWTH MATURITY - SALES GROWTH RATE DECLINE, LAGGARDS 2. STABLE MATURITY - SALES FLATTEN; SALES GOVERNED BY POPULATION GROWTH & REPLACEMENT DEMAND 3. DECAYING MATURITY - ABSOLUTE LEVEL OF SALES STARTS TO DECLINE, CUSTOMERS SWITCHING TO OTHER PRODUCTS

366

PRODUCT LIFE CYCLE

THE MATURITY PHASE • RETAINING CURRENT USERS; • ATTRACTING NEW USERS; • RETAINING DISTRIBUTION; • OPTIMISING PRODUCT LINE AND PACKAGING; AND • OPTIMISING PRODUCT COSTS

367

MATURITY PHASE
1. MARKET MODIFICATION VOLUME = NO. OF BRAND USERS X USAGE PER USER a) INCREASING USERS • CONVERT NON-USERS • ENTER NEW MARKET SEGMENTS • SNATCH COMPETITOR’S CUSTOMERS b) INCREASING USAGE • MORE FREQUENT USE • MORE USAGE PER OCCASION • NEW AND MORE VARIED USES 2. PRODUCT MODIFICATION 3. MARKETING MIX MODIFICATION
368

PRODUCT LIFE CYCLE

REJUVENATION • DEVELOP AND QUALIFY MAJOR PRODUCT IMPROVEMENT; • REPOSITION PRODUCT VIA ADVERTISING; • ACHIEVE NEW DISTRIBUTION OUTLETS; • ACHIEVE CONSUMER TRIAL AND CONVICTION; AND • ATTRACT NEW USERS AND NEW USES.

369

PRODUCT LIFE CYCLE

DECLINE PHASE • RETARDING ATTRITION IN USER BASE; • ATTRACTING ‘BARGAIN’ BUYERS; • RESTRICTING PRODUCT LINE; • REDUCING PRODUCT COSTS; • RETARDING DISTRIBUTION LOSSES; • MAXIMISING IMMEDIATE PROFITS
370

PRODUCT LIFE CYCLE
THE NEW PRODUCT / ESTABLISHED PRODUCT DISTINCTION FOR THE NEW PRODUCT:

• ASCERTAIN THAT YOU REALLY HAVE A VIABLE PRODUCT
BEFORE YOU START MARKETING IT; • CONCENTRATE EFFORTS ON DEVELOPING EFFECTIVE POSITIONING AND ADVERTISING THAT REFLECTS THAT POSITIONING OPTIMALLY; • WITH THE TRADE, AIM AT DISTRIBUTION BEFORE ANYTHING ELSE; • CLEARLY ESTABLISH THE PRICE LEVEL THAT YOU WANT.

371

PRODUCT LIFE CYCLE
THE NEW PRODUCT / ESTABLISHED PRODUCT DISTINCTION FOR THE ESTABLISHED PRODUCT:

• DO NOT WANTONLY CHANGE POSITIONING OR ADVERTISING
UNLESS YOU HAVE REAL EVIDENCE THAT THEY ARE FUNDAMENTALLY WRONG; • ENSURE YOUR PRODUCT HAS SUFFICIENT SUPERIORITY TO THE COMPETITION TO MAKE IT VIABLE IN THE MARKET; • CONCENTRATE AS A FIRST PRIORITY ON HOLDING THE VOLUME YOU HAVE INHERITED AND THE USER BASE THAT HAS BEEN BUILT UP; • SEEK TO FIND EXPANSION POSSIBILITIES FOR NEW VOLUME NEW USERS, NEW TRADE OUTLETS, VOLUME PACKS AND PROMOTIONS; • UNDERSTAND AND RESPECT THE PRODUCT’S AND THE BRAND’S HERITAGE.
372

PRODUCT LIFE CYCLE STRATEGIES (SEE APPENDIX NO.6)

S a l e s

Introduction

Growth

Maturity

Decline

Time

373

PRODUCT LIFE CYCLE STRATEGIES Characteristics (SEE APPENDIX NO.6)
Sales Low sales Rapidly rising sales Peak sales Declining sales

Costs

High cost per customer

Average cost per customer Rising profits Early adopters Growing number

Low cost per customer High profits

Low cost per customer Declining profits Laggards Declining number

Profits

Negative Innovators Few

Customers Competitors

Middle majority Stable number beginning to decline

Marketing Objectives Create product awareness and trial Maximize market share Maximize profit while defending market share Reduce expenditure and 374 milk the brand

Strategies
Product Offer product Offer a basic product extensions, service, warranty Price to penetrate market Diversify brands and models Price to match or Best competitors Phase out weak items Cut price

Price

Charge cost-plus

Distribution

Build selective Distribution Build product awareness among early adopters and dealers

Build intensive distribution

Build more intensive Distribution

Go selective: Phase out unprofitable Outlets

Advertising

Build awareness and Stress brand differences Reduce to level Needed to retain and interest in the mass Benefits Hard-core loyals Market Increase to encourage Brand switching Reduce to minimal level
375

Sales Promotion

Reduce to take Use heavy sales advantage of heavy promotion to entice consumer demand trial

NEW PRODUCTS DEVELOPMENT

376

WHY DO NEW PRODUCTS FAIL-CHALLENGES

1. PUSHING A FAVORITE IDEA THROUGH INSPITE OF NEGATIVE MARKET RESEARCH FINDINGS 2. IDEA IS GOOD BUT MARKET SIZE IS OVERESTIMATED 3. ACTUAL PRODUCT NOT WELL DESIGNED 4. INCORRECT POSITIONING 5. INEFFECTIVE ADVERTISING 6. OVERPRICED 7. DEVELOPMENT COSTS HIGHER THAN EXPECTED 8. COMPETITORS FIGHT BACK HARDER THAN EXPECTED 9. SHORTAGE OF NEW PRODUCT IDEAS 10. FRAGMENTED MARKETS
377

WHY DO NEW PRODUCTS FAIL

11. SOCIAL & GOVERNMENTAL CONSTRAINTS 12. COSTLINESS OF NEW PRODUCT DEVELOPMENT PROCESS 13. CAPITAL SHORTAGES 14. FASTER DEVELOPMENT TIME 15. SHORTER PLC

378

STAGES IN NEW PRODUCT DEVELOPMENT PROCESS
1. IDEA GENERATION 2. IDEA SCREENING 3. CONCEPT DEVELOPMENT & TESTING 4. MARKETING STRATEGY DEVELOPMENT 5. BUSINESS ANALYSIS 6. PRODUCT DEVELOPMENT 7. MARKET TESTING 8. COMMERCIALISATION
379

IDEA GENERATION TECHNIQUES

1. ATTRIBUTE LISTING 2. FORCED RELATIONSHIPS 3. MORPHOLOGICAL ANALYSIS 4. NEED / PROBLEM IDENTIFICATION 5. BRAINSTORMING 6. SYNECTICS

380

IDEA SCREENING
EVALUATING A MARKET OPPORTUNITY IN TERMS OF COMPANY’S OBJECTIVES & RESOURCES I. COMPATIBILITY WITH COMPANY OBJECTIVES • PROFIT OBJECTIVE • SALES VOLUME OBJECTIVE • SALES GROWTH OBJECTIVE • CUSTOMER GOODWILL OBJECTIVE II. COMPATIBILITY WITH COMPANY RESOURCES • NECESSARY CAPITAL • PRODUCTION KNOW-HOW • MARKETING KNOW-HOW • DISTRIBUTION CAPABILITY
381

PRODUCT-IDEA RATING DEVICE
PRODUCT SUCCESS REQUIREMENTS (1) (2) (3 = 1 X 2) PRODUCT RATING

RELATIVE PRODUCT WEIGHT SCORE

Unique or superior product High performance-to-cost ratio High marketing dollar support Lack of strong competition Total

.40 .30 .20 .10 1.00

.8 .6 .7 .5

.32 .18 .14 .05 .69*

*Rating scale : .00 - .30 poor; .31 - .60 fair; .61 - .80 good. Minimum acceptance rate: .61.

382

CONCEPT DEVELOPMENT AND TESTING

A product idea is a possible product that a company might offer to the market

A product concept is an elaborated version of the idea expressed in meaningful consumer terms

383

CONCEPT DEVELOPMENT
Any product idea can be turned into several products concepts . A company can form several concepts: Concept 1: An instant breakfast drink Concept 2: tasty snack drink Concept 3: Health supplement Each of these concepts represents a category concept - that is , each positions the idea within a category.It is the category concept, not the product concept, that defines the product’s competition. • Product- positioning map - can be utilized in communicating and promoting the concept to the market. • Brand-positioning map - the product concept has to be turned into a brand concept.
384

PRODUCT DIMENSIONS TO TEST AT CONCEPT STAGE

1. CLARITY 2. BELIEVABILITY 3. NEED LEVEL NEED GAP SCORE

4. GAP LEVEL BETWEEN NEW PRODUCT AND EXISTING PRODUCTS 5. PERCEIVED VALUE 6. PURCHASE INTENTION 7. PERCEIVED USAGE-WHO,WHEN AND HOW OFTEN

385

MARKETING STRATEGY DEVELOPMENT
•Target market’s size, structure,and behavior; the planned product positioning; and the sales, market share, and profit goals sought in the first few years. • The product’s planned price, distribution strategy, and marketing budget for the first year. • The long-run sales and profit goals and marketing-mix strategy over time.

386

BUSINESS ANALYSIS
A. B. Estimating Total Sales - First time sales, replacement sales, repeat sales. Estimating Costs and Profits Year 0
1. Sales revenue 2. Cost of goods sold 3. Gross margin 4. Development costs 5. Marketing costs 6. Allocated overhead 7. Gross contribution 8. Supplementary contribution 9. Net contribution 10. Discounted contribution (15%) 11. Cumulative discounted cash flow

Projected five-year cash-Flow Statement (In Thousand Of Dollars)
Year 1 Year 2 Year 3 Year 4 Year 5

387

Break Even Analysis: Financial measures to evaluate the merit of a new-product proposal.

Risk Analysis: Here three estimates (optimistic, pessimistic, and most likely) are obtained for each uncertain variable affecting profitability under an assumed marketing environment and marketing strategy for the planning period.

388

PRODUCT DEVELOPMENT
• Large jump in investment. • The R & D department will develop one or more physical versions of the product concept. • Design required functional characteristics & to communicate its psychological aspects through physical cues. • The functional tests are conducted under laboratory and field conditions to make sure that the product performs for safety & effectiveness. • Consumer Testing includes bringing consumers into a laboratory to giving them samples In-home product placement tests.

389

Techniques for measuring consumer preferences: The most three most common are simple ranking, paired comparisons, and ranking scales. • The simple- rank- order method ask the consumer to rank the three items in order of preference. It is difficult to use this method when there are are many objects to be evaluated. • The paired-comparison method calls for presenting pairs of items to the consumer, then asking which one is preferred in each pair. • The monadic -rating method asks the consumer to rate his or her liking of each product on a scale. This rating yields more information than the order methods.even know the qualitative levels of her preference for each.

390

MARKET TESTING
. CONSUMER GOODS MARKET TESTING a. SALES WAVE RESEARCH –Pre-selected consumers are offered company’s & competitor’s products three to five times. Secrecy maintained but distribution issues can not be checked. b. SIMULATED TEST MARKETING – Pre-selected consumers are given money, exposed to ads. & purchase behavior observed. Ads effectiveness checked. c. CONTROLLED TEST MARKETING – Panel of stores carry new products. Checks advertising promotion. But, does not provide information how to sell to trade and also secrecy loss. d. TEST MARKETS – Ultimate way to test a new consumer product.
391

TEST MARKETS
1. HOW MANY TEST CITIES – 2 to 6 cities.larger number if regional differences, different marketing strategies, possible loss, possible interference by competitors. 2. WHICH CITIES – Not over tested, good media coverage, representative sample, average competitor activity. 3. LENGTH OF TEST – Depends on repeat purchase rate. Period should be cut down if competitors are rushing to the market. 4. WHAT INFORMATION – Store audit, consumer panels ( switching rates), buyer survey (Consumer attitude, usage , satisfaction). 5. WHAT ACTION TO TAKE – Depends on trial & repurchase 392 rates.

BUSINESS GOODS MARKET TESTING
. BUSINESS GOODS MARKET TESTING a. ALPHA TESTING – In company testing to measure & improve product performance, reliability & operating cost. b. BETA TESTING – Inviting potential adaptors to conduct confidential testing at site.Gives clues on problems of safety, servicing, usage & need for training. Also can observe value equipment adds to customer operations as a clue to pricing. c. TRADE SHOWS – Secrecy loss. d. DISTRIBUTOR & DEALER DISPLAY e. TEST MARKETING
393

COMMERCIALISATION

1. TIMING – First entry : ( first mover advantages but must be debugged) , parallel entry, late entry. 2. GEOGRAPHICAL STRATEGY – Planned market roll out necessary. 3. TARGET MARKET PROSPECTS – Prime prospects. (early adopters, heavy users, opinion leaders, reached at a low cost) 4. INTRODUCTORY MARKET STRATEGY
394

DIFFUSION OF INNOVATION
Exposure to Innovation
Innovation Characteristics
Consumer- Dependent Relative Advantage Compatibility Perceived Risk Complexity Effect on Adoption of Other Innovations Consumer -Independent Trialability Divisibility Reversibility Realization Communicability Form of Innovation

Exposure to Innovation

Consumer Characteristics
psychological Variables Perception Motivation Personality Value Orientation Beliefs Attitudes Previous Innovative Experience Demographics Age Education Income

Propagation Mechanisms
Types Marker- Controlled vs. Nonmarketer Vs. Impersonal Characteristics Credibility Clarity Source Similarity Informativeness

No

Innovation Resistance No Yes Is Innovation Amenable to Modification ? Yes

Modification
395

Adoption

Rejection

Innovators Late Majority 34%

2.5%

Early Adopters 13.5%

Early Majority 34%

Laggards 16%

Percentage of Adopters by Category Sequence
396

Adopter Categories
ADOPTER DESCRIPTION RELATIVE PERCENTAGE CATEGORY POPULATION WITHIN THE THAT EVENTUALLY ADOPTS
Innovators Venturesome - very eager to try new Ideas acceptable if risk is daring; more 2.5% cosmopolite social relationships; communicates with other innovators. Early Adopters Respect - more integrated into the local social system; the persons to check with 13.5% before adopting a new idea; category contains greatest number of opinion leaders; are role models. Early Majority deliberate - adopt new ideas just prior to the average time; seldom hold leadership positions; 34.0 deliberate for some time before adopting. Late Majority Skeptical- adopt new ideas just after the average time; adopting may be both an economic necessity 34.0 and a reaction to peer pressures;innovations approached cautiously. Laggards Traditional - the last people to adopt an innovation; most “localite” in outlook; oriented to the past; 16.0 suspicious of the new.

397

100.0%

MULTIPLE FACTOR BUYING POWER INDEX
Step 1. Specific customer profile in terms of factors. E.g. Demographic > 30 years Economic MHI > 20,000 Step 2. For each market, calculate percentage of each factor V/s total e.g. Demographic % = Markets men > 30 years All India men> 30 years Step 3. Determine importance weight of each factor Demographic = 40% Economic = 60% Step 4. BPI of a market = 0.4 X Demographic % + 0.6 X Economic %
398

CATEGORY DEVELOPMENT INDEX
ESTIMATED SALES (BASED ON ACTUAL BPI) SALES 2,00,000 2,00,000

BPI NATIONAL MUMBAI 100

CDI -

14

28,000

56,000

200

BANGALORE

7

14,000

42,000

300

DELHI

5

10,000

10,000

100

CALCUTTA

1

2,000

1,000

50
399

BRAND DEVELOPMENT INDEX
SAY FIRM A HAS A MARKET SHARE OF 15% = 30,000 ESTIMATED SALES (BASED ON ACTUAL SALES BPI) 30,000 60,000

BPI NATIONAL MUMBAI 100

BDI -

14

4,200

8,400

200

BANGALORE

7

2,100

4,200

200

DELHI

5

1,500

2,250

150
400

CALCUTTA

1

300

300

100

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