Notes on Marketing Management Notes Prepared By Name of Book Written By Muhammad Akhlaq Khan Marketing Management Philip Kotler

Prepared by Muhammad Akhlaq Khan

CHAPTER-1 Assessing Marketing’s Critical Roll in Organizational Performance
GLOBAL ECONOMY: Rapid changes can easily render yesterday’s winning businesses obsolete. After the end of cold war countries and companies are wrestling with increased global competition. A good news is that by global market we means a much larger market for goods and services and the bad news is that now these companies have to face a greater competition for a great number of competitors. Income Gap: A large part of world have grown poorer in the last few decades. Although the wages has risen but the purchasing power has declined especially for the less skilled work force. The gap between rich and poor nations is growing. Poor nations pressure the richer nations to open their markets but richer nations maintain tariffs and quotas to protect their local industry and employment. There are two solutions to this problem; 1 Counter Trade: {poorer nations should pay in goods for other goods and services. 2 Providing More for Less: The poorer nations should sell their goods for less than of the richer nations. Environmental Restrictions: Since 1970’s environmental lows are being implemented which requires to install pollution control equipment. All these laws raised cost of manufacturing for the companies of richer countries. Technical Points: Companies must avoid jumping in too soon (before the market is ready) or too late (after the market has been concurred. WHAT IS MARKETING? THE CORE CONCEPTS: Marketing has been defined in various ways. One scholar has defined it as: - “Creation and Delivery of standard of living.” The definition which serves out purpose is as follows: “A social and managerial process by which individuals and groups obtain what they need and want through creating, offering or exchanging products of value with others.” This definition have following important points: A social and managerial process. 2. Individuals and groups 3. Needs and Wants, 4. Creating, offering and exchanging, 5. Products 6. Having value Let us consider them one by one. 1&2 A Social and Managerial Process: Marketing is not an individuals own working but the actions of individuals or groups with other individuals or groups. 3 Needs, Wants and Demands: Needs: Needs of every many are specific and few. They are Food, air, clothing, shelter and survival. Beyond this people have a strong desire for recreation. Need is a state of deprivation of some basic satisfaction. They are not created by society they exist in the very texture of human biology. Wants: Wants are the desires for specific satisfiers of needs. Need is food but a desire to eat a chicken or burger are wants. Needs are few but wants are many which are continually shaped and reshaped by social forces and institutions like school, families, business, competitors. Demands: Wants for specific products that are backed by 1) ability to buy and 2) willingness to buy them. 4 Creating Offering and Exchanging: People can obtain products in 4 ways 1) Self Production. 2) By coercion, (3) By begging and 4) by exchanging. Marketing emerges when people decided to satisfy their needs and wants through exchange. What is Exchange: It is the act of obtaining a desired product from someone by offering something in return. It have 5 conditions 1) At least two parties. 2 Each one have something of value. 3 Each one have a capability of communication and delivery 4 Each one is free to accept or reject the exchange offer. 5 Each one believes in the appropriateness of the exchange. 5 Product (Goods, Services, and Ideas) A product is any thing that can be offered to satisfy a need or want. A product can consist of as many as three components: 1- Goods, 2- Ideas, and 3- Services. 6 1

Notes on Marketing Management

Prepared by Muhammad Akhlaq Khan

Value Cost and Satisfaction: A consumer chooses among many products to satisfy a need on the basis of value and cost of the article. Value: It is the consumer’s estimate about the overall capacity of the product to satisfy his need, and Cost includes the value he have to pay for the product and includes the opportunity cost (The cost of leaving the other products which he have not purchased.) 7 Markets: Market consists of all potential customers having a particular need or want (who are willing and able to engage in exchange) to satisfy that need or want. Thus market depends upon, 1) the no of persons who have need or want, 2) Have resources of other’s interest, and 3) willing and able to offer these resources in exchange for that they want. Traditionally a market is a place where buyer and sellers are gathered to exchange their goods. MARKETING MANAGEMENT Marketing management takes place when at least one part to a potential exchange thinks about the means of achieving desired responses from other parties. So, “Marketing Management is a process of planning and executing, (conception, pricing, promotion and distribution) ideas, goods and services to create exchange that satisfies individuals and organizational goals. Types of Demands: 1 Negative Demand When people are even ready to pay to avoid such product. i.e. major part of the market dislikes the product. 2 No Demand When customer are unaware of or uninterested in product. 3 Latent Demand A demand which cannot be satisfied by any existing product. 4 Declining Demand: When demand of product starts decline day-by-day. 5 Irregular Demand: Demand for such products which varies seasonally, daily or even on hourly basis and causing problems of idle or overworked capacity. 6 Full Demand: Organizations faces full demand when they produces up to their full capacity. The marketing function is to maintain the current level of demand by continuously improving its quality and by measuring customer’s satisfaction. 7 Overfull Demand When demand goes more than their capacity and want to handle. Marketing management work in such situation is to decrease demand temporarily or permanently. 8 Unwholesome Demand: An organized effort to discourage their utilization. Like unselling compains conducted against cigarettes, alcohol etc. The marketing task is to get people who like something to give it up using such tools as fear messages, price hikes, reduced availability. COMPANY ORIENTATIONS TOWARD THE MARKET PLACE THE SELLING CONCEPTS Companies while making marketing, make certain assumptions on the basis of ideas they have some of these ideas are as follows: 1 Production Concept: Consumers favor those products which are widely available at low cost. Production oriented managers concentrate on high production with wide distribution. 2 Product Concept: Consumer favor those products that offer most quality, performance on innovative features. Product oriented managers focuses on marketing the superior products and improving them over time. 3 Selling Concept/Sales Concept: If customer is left alone, will ordinarily not buy enough of the organization’s products. The organization must, therefore, undertake an aggressive selling and promotion effort. THE MARKETING CONCEPTS: The marketing concept is to achieve organizational goals by being more effective than competitors in integrating marketing activities to wards determining and satisfying the needs and wants of target markets. Pillars Of Marketing Target Market: Determine a part of total market to be served. 2) Customer Needs: Customers needs are of five types Stated needs: (The customer wants an expensive care) · Real need: (Customer wants a car having low operation cast and not effected by its initial price) Unstated need, (The customer expects good service from the dealer) Delighted Needs, (Customer buys the care and receives a complimentary US. road atlas) · Secret Need. (Wants to be seen by friends as a value-oriented savvy consumer) Coordinated or Integrated Marketing. When all the company’s departments work together to serve the customer’s interests, the result is integrated marketing. It takes place on two levels: Various marketing functions____sales force, advertising, product management, marketing research, and so on____must work together. All these marketing functions must be coordinated from customer’s point of view. · Social marketing must be well coordinated with other company departments. 2

Notes on Marketing Management

Prepared by Muhammad Akhlaq Khan

Profitability or organization. The ultimate purpose of the marketing is to help organizations to achieve their goals. In for profit organizations the key aim is not only profits but to achieve profit as a by-product of doing the job well. Points That forces organizations More towards the Marketing Concepts: 1 Sales Decline Look for the answer for decline in sales and movers to increase this sales by marketing. 2 Slow Growth: When sales growth rate is low and organization makes organized marketing movement to catch new markets. 3 Changing Buying Patterns: When customer wants changes rapidly. 4 Increased Competition... When companies are suddenly attacked by powerful marketing companies and forced to meet the change. 5 Increased Marketing expenditures: When expenditures of companies for advertising, sales promotion, marketing research, and customer, service getting out of hand. Management then decides it is time to undertake a marketing audit to improve its marketing. 5 Social Concept: In the social concept managers determine needs wants and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the consumer’s and the society’s well-being. THE RAPID ADOPTION OF MARKETING MANAGEMENT: Marketing management today is the subject of growing interest in all types of organizations, within and outside the business sector and in countries throughout the world.

CHAPTER-2 Building Customer Satisfaction Through Quality, Service, and Value
DEFINING CUSTOMER VALUE AND SATISFACTION: Customer 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 Satisfaction: Satisfaction is a person’s feelings of pleasure or disappointment resulting from comparing a product’s perceived/actual performance (or outcome) in relation to his or her expectations. Tools for Tracking and Measuring Customer Satisfaction: Complaints & Suggestion System: Make it easy for customer to deliver suggestions and complaints. By way of suggestion boxes, supplying comments cards to customers or hiring a public relationing officer. Customer Satisfaction Survey: Responsive companies uses a direct measure of customer satisfaction by conducting periodic surveys. They send questioner or make a telephone call asking about their satisfaction with the product. Ghost Shopping: Companies hire persons top pose potential buyers to report their findings on strong and weak points they experienced in buying the products of company and of the competitors. These hired persons are called ghost shopper can even pose certain problems to test whether the company’s sells personnel handle the situation well. Lost Customer Analysis: Companies should contact customers who have stopped buying or switched to other suppliers to learn the reason. DELIVERING CUSTOMER VALUE AND SATISFACTION: Keeping in view the importance of customer value and satisfaction, what does the company produce and deliver the customer? To answer this question, we need to discuss the concepts of a value chain and value-delivery systems. Value Chain: is a tool for identifying ways to create more customer value. It is a collection of activities that are performed to design, produce, market, deliver and support product. Value chain identifies nine strategically relevant activities that create value and cost in a specific business. These nine activities consist of five primary and four support activities. The primary activities represent the sequence of bringing materials into the business, converting them in to final products, shipping out them, marketing them and servicing them. The support activities include procurement, technology development, human resources management and firm infrastructure Value Delivery System/Network: To be successful the firm needs to look beyond its own operations, into the value chains of its suppliers, distributors, and customers. Many companies today partnered with specific suppliers and distributors to create a superior value-delivery network Attracting and Retaining Customers: 3

1 2 3


3. There are 5 different levels of company investment in customer relationship building. a company should not invest in customer relationship building so much as the cost may exceed the gains. and so on. They may continue to buy from competitors as well. they have poor credit standing or being unprofitable.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan 1 2 3 4 5 6 7 8 1 2 3 4 5 1 2 3 In addition to improving supply many companies are intent on developing stronger bonds and loyalty with their ultimate customers. Customers may be nameless to the institution: clients cannot be nameless. However. Developing the loyal customers increases the company’s revenue. Adding Financial Benefits: A company can offer two financial benefits. During all above process some customers may become inactive or drop out due to moving other location. inventory. Relationship Marketing The process of attracting and keeping customers is called relationship marketing. Estimate how much profit it loses when it loses customers. Prospects: Out of suspects the persons having strong potential interest in the product and ability to pay for it are separated and are called prospects. a) frequency marketing programs and b) club marketing programs. Accountable Marketing: The sales person phones the customer a short time after the sale to check whether the product is meeting the customer’s expectations and also ask him for any product or service suggestions and any specific disappointments. Clients The next step is to convert repeated customers in to clients. Clients are those customers who buy only from the company the relevant product categories. comments or complaints. clients are served on an individual basis. (Use of sales rapes) Partnership Marketing: The company works continuously with customers to discover ways to effect customer servings or to help the customer to perform better. Partners: It is an ultimate challenge to turn advocates into partners where the customer and company work together actively. Reactive Marketing: the sales person sells the product and encourages the customers call if they have any question. 4 . A company can use three customer value-building approaches 1) Adding financial benefits. The main steps in customer development process are as follows: Suspects: The company locates every one who might buy the product or services. payroll. b) Many companies have created affinity groups. First-Time Customers: The company hopes to convert many of its qualified prospects into first-time customers. Disqualified Prospects: Disqualified prospects are those to whom the company rejects because. there are four steps to this process: Company must define and measure its retention rate. Pro-active Marketing: The sales person contacts the customer from time to time telling about improved products and products new uses. dissatisfaction or adopting other companies products etc. 4. COMPUTING THE COST OF LOST CUSTOMERS: Today companies must pay closer attention to their customer defection rate and take steps to reduce it. Distinguish the causes of customer attrition and identify those that can be managed better. 2. Club membership may be offered automatically upon purchase of a certain amount. Advocate: The next step is to convert clients into advocates. Adding Social Benefits: Here company personnel work on increasing their social bonds with customers by individualizing and personalizing their customer relationships. clients are served by the professional assigned to them. or by paying a fee. Basic Marketing: The sales person simply sells the product. It is often easier to re-attract ex-customers than to find new ones. The cost of attracting a new customer is estimated to be 5 times the cost of keeping a current customer happy. Repeated Customer: The first time customers which are satisfied with the product and buys it again becomes repeated customers. The company have to spend for building greater customer loyalty. Frequency Marketing Programs (FMPs) are designed to provide rewards to customers who buy frequently and/or in substantial amounts. Customers are served as part of the mass or as part of large segments. Adding structural Tiles: The company may supply customers with special equipment or computer linkages that help customers manage their orders. Frequency Marketing is an acknowledgment of the fact t that 20% of a company’s customer might account for 80% of its business. The Need for Customer Retention The cost of attracting a new customer is estimated to be five times the cost of keeping a current customer happy. How it would cost to reduce the defection rate. or clubs of their customers to bond them closer to the company. Advocates are those who praise the company products and encourage others to buy from it. Customers are served by anyone who happens to be available. 2) adding social benefits 3) adding structural tiles.

Quality is the totality of features and characteristics of a product or service having ability to satisfy stated or implied needs. Marketers play several roles in helping their company in defining and delivering high quality goods and services to target customers. and technical assistance.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan IMPLEMENTING TOTAL QUALITY MARKETING: Total Quality Marketing (TQM) is an organization-wide approach to continuously improving the quality of all the organization’s processes. training. and must constantly hold up the standard of giving the customer the best solution. They bear the responsibility for correctly identifying the customers’ needs and requirements. products and services. One implication of TQM is that marketing people must spend time and effort not only to improve external marketing but also to improve internal marketing. The marketer must complain like the customer complains when the product or the service is not right. 5 . Marketing must be the customer’s watchdog or guardian. · they must make sure that the customers’ orders are filled correctly and on time. · They must check that customers have received proper instructions. · They are making their specific contributions to total quality management and customer satisfaction. · They must communicate customer expectations correctly to product designers. · They must stay in touch with customers after the sale to ensure that they are satisfied and remain satisfied.

2 Processes: A company can accomplish its goals only by managing and linking its processes. such companies divide them in to Strategic Business Units. e) Vertical Scope: The number of channels and levels involved in process from raw material to making finished goods and then their distribution. B) CARPORATE STRATEGIC PLANNING: All corporate headquarters must undertake planning activities: i. (SBUs). In rapidly changing business environment organizational structures and policies can be changed (with difficulty) but its culture is hard to change. suppliers and distributors. The business must strive to satisfy the expectations of each stakeholders group. material. 1 Stakeholders: The business must define its stakeholders and their needs. The aim may. 2 Have a distinct mission from others and the company. I) Defining company mission. 2 GOOD MISSION STATE MAJOR CHARACTERISTICS: The major characteristics of a good mission are as follows: i) Focus on limited number of goals. c) The market environment: d) Resources Available determines. over time lose its relevance because of changed market conditions. They divide them according to their major products or markets. These resources can be owned. The management should adopt the way which provide them best output at labor outlets. II) Establishing Strategic Business Units. IV) Planning new business. policies and achievements. The satisfaction of stakeholders lead to increase in profits and higher value of the organization. b) Product and Applications Scope: The range of products and application in which the company will participate. 3 Resources: To carry-out processes a company needs resources like labor power. f) Geographical Scope: The range of regions. e) What should our business be? 1 ELEMENTS THAT SHAPE THE COMPANY’S BUSINESS. III) assigning resources to each SBU. 3 Have its own competitors 4 Have its own executive group with profit responsibilities. which mission is possible. policies.e. Each company’s business is shaped by 5 elements: a) History: of aims. 1) Stakeholders. 2) processes. counties and groups in which a company will operate.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan CHAPTER-3 Winning Markets Through Market Oriented Strategic Planning A) THE NATURE OF HIGH PERFORMANCE BUSINESS: There are four proposed characteristics of a high-performance business. But its changing is a key to implementing a new strategy successfully. 4 Organization: Organization consist of its structures. Successful company renew their mission in the light of following questions: a) When is our business. c) Competency Scope: The range of technical and other competencies which the company will master. and corporate cultures. e) Distinctive Competencies: Mission should be based on what it does best. Stakeholders may be customers employees. CHARACTERISTICS OF SBU: 1 Separately identifiable. 3) resources and 4) organization. II Establishing Strategic Business Unit: Large companies normally manage quite different business at one time. each requiring its own strategy. b) Who is our customer? c) Value of the customer. It may be any of the following types: a) Industry Scope: The scope of the industry in which the organization operates. III Assigning Resources to SBUs 6 . d) Market Segment Scope: the type of customer the company will serve. d) What will our business be. I Defining Corporate Mission: Organizations exists to accomplish something. which should be clear and specific. ii) Stress the major policies and values that the company want to honor. b) Current Preferences of management and owners. machines energy etc. iii) Define the major competitive scopes within which the company will operate. leased or rented.

Notes on Marketing Management

Prepared by Muhammad Akhlaq Khan

The purpose of identifying SBUs is to develop separate strategies and assign appropriate funding. Each SBU sends its plan to headquarters, who approves them and sends back for revision or implementation. The purpose of sending plans to the headquarters is to check, which of its SBU is performing well and to decide, which SBU to be build, hold, maintained, harvest and divest. IV Planning New Business: Often the projected sales are less than corporate management wants them to be. If their is a strategic-planning gap between future desired and projected sales, company management will have to develop new business to fill this gape. There are three ways to fill this gap. 1) Intensive Growth 2) Integrative Growth, 3) Diversification Growth, and 4) Downsizing Older Business. 1 INTENSIVE GROWTH: Management first reviews for improving its existing business performance. It may be done by adopting following three strategies: Market Penetration Strategy: Finding the ways to increase the current products market share in the current market. b) Direct Market Development Strategy: A strategy to look for new markets whose needs might be met by its current products. c) Product Development Strategy: In addition to above tow management should also consider new-product possibilities. 2 INTEGRATIVE GROWTH: Sales and profits can often be increased by backward, forward and horizontal integration. Backward Integration: Mixing or engaging the business supplying to you, e.g. raw materials. b) Forward Integration: Integrating with an organization to whom you provide goods, like retailers and wholesalers. c) Horizontal Integration: Acquiring one or more competitors. 3 DIVERSIFICATION GROWTH: When good opportunities are found outside the present business. There are three types of diversified growth. Concentric Diversification Strategy: Seek new products having technological synergy’s with existing product lines even through the new products themselves may appeal to a different group of customers. b) Horizontal Diversification: Search new product that could appeal to current customers through the new product or technology, unrelated to its current product line. c) Conglomerate Diversification: Find new business having no relationship to the companies old business. 4 DOWNSIZING OLDER BUSINESS: Management should not only develop new businesses but also carefully divest / close tired old business in order to release needed resources and reduce costs. C BUSINESS STRATEGIC PLANNING: Individual business units managers prepares their own strategic plans in the light of the organization goals and strategies. It consist of six steps: 1) Business mission, 2) External environmental analysis, 3) Internal Environment Analysis, 4) Goal formulation, 5) Strategy Formulation, 6) Program Formulations, 7) Implementation, and 8)Feedback. 1 Business Mission: Each SBU define its mission within the broad company missions. 2 External Environmental Analysis: A SBU manager has to monitor key external macro-environment and significant micro environment actors e.g. customs, competitors, suppliers etc.) that effect its ability to earn profit. It should identify the associated opportunities and threats. Opportunities: Marketing opportunity is an area of buyers in which a company can perform profitably. Opportunities can be listed and classified according to their attractiveness and success probability. Threats: An environmental threat is a challenge posed by an unfavorable trend or development that would lead in the absence of defensive marketing action to deteriorate the sales and profit. 3 Internal Environment Analysis: Keeping in view the external environmental opportunities and threats they should consider the internal strengths and weaknesses. 4 Goal Formulation: After evaluating the strengths and weaknesses of organization management proceeds to develop specific goals for the planning period. This stage of business strategic planning process is called goal formulation. Every few businesses follow only one objective, rather most businesses pursue a mix of objectives including profitability, sales, growth market shares. The business units sets these objectives and then manages by objectives. Business objectives must meat four criteria's: They must be arranged hierarchically. b) Should be stated quantitatively c) Goals should be realistic. d) Objectives must be consistent. 5 Strategy Formulation: 7

Notes on Marketing Management

Prepared by Muhammad Akhlaq Khan



8 D

Goals indicate what a business unit wants to achieve. Strategy is a game plan for ____how to get their or how to get above goals. Three generic types of strategies are: Overall Cost Leader Ship: Business works hard to achieve the lowest cost of production and distribution so that it can set price lower than its competitors, and win a large market share. b) Differentiation: In it business concentrate on achieving superior performance in an important customer benefit area valued by a large part of the market. c) Focus: In it business focuses on one or more narrow markets rather than going after a large market. d) Alliances: Many firms make marketing alliances which fall in to 4 categories. Product / Service Alliance or Licensing. company licenses another to produce its product or two companies jointly market their complementary products or an new product. · Promotional Alliances One company agrees to carry a promotion for another company’s product or service. e.g. A ban may agree to display paintings from a local art gallery on its walls. · Logistics Alliances: One company offers logistical support services for another company’s product. For example Abbot Laboratories warehouses and delivers all 3Ms medical and surgical products across the USA. · Pricing Collaboration: One or more companies join in a special pricing collaboration. Program Formulation: After formulating strategies business works out detailed work programs. After formulating programs, marketing people must evaluate the program costs. These are the determination of ways as to, how the strategy will be implemented. Thus if a business decides to achieve technical leadership it must have to make program to develop its research and development department, etc. Implementation: Clear strategy and well-thought-out supporting programs are useless, if the firm fails to implement them carefully. Indeed strategy is one of the seven elements that the best managed companies exhibit. The seven elements are divided in to two groups. Hardware and Software. HARDWARES are Strategy, Structure, and System. SOFTWARES are style, staff, skills and shared value. Style means that employees share a common way of thinking and behaving. Staff: Means company have hired able people, trained them well and assigned them the right jobs. Skills: Means that employees have the skills needed to carry out the company’s strategy. Shared Values: Means employees share the same guiding values. Feed-Back & Control: At the end the firm need to track the results and monitor new developments in the internal and external environments. THE MARKETING PROCESS: To fully understand the marketing process, we must first look at how a company defines its business. The task of any business is to deliver value to the market at a profit. There are at least two views of the value-delivery process. First is the traditional view is that firms makes something and then sells it. In this view marketing takes place in the second half and it assumes that the company knows what to make and that the market will buy enough units to produce profits for the company. Second one is the new view of business process. It places marketing at the beginning of the business planning process. Instead of emphasizing marketing and selling, companies see them-selves as part of a value creation and delivery sequence. This sequence consist of three parts. Choosing the value, represents the “homework” that marketing must do before any product exists. The formula ____ segmentation, targeting, positioning (STP)_____ is the essence of strategic marketing. b) When the value has been chosen, business unit is ready to provide the value. The tangible product’s specifications and services must be detailed, and a target price must be established. Developing specific product features, prices, and distribution occurs at this stage and are part of tactical marketing. c) In the third phase the value is communicated. Here further tactical marketing occurs in utilizing the sales force, sales promotion, advertising, and other promotional tasks to inform the market about the product. The Japanese have further developed this view by promulgating the following concepts: Zero Customer feedback time: Customer feedback should be continuously collected, to learn, how to improve the product and its marketing. 2) Zero product-improvement time: Improvement ideas of customers and employees should be evaluated and the most valued and feasible ideas should be introduced as soon as possible. 3) Zero Purchasing Time: Company should receive required parts continuously through just-in-time arrangements with suppliers. 4) Zero Setup Time: The company should be able to manufacture any of its products as soon as they are ordered. 5) Zero defects: The product should be of high quality and free of flaws. The Marketing Process consist of 1)analyzing marketing opportunities, 2) developing marketing strategies, 3) planning marketing programs, and 4) managing the marketing effort. 8

Notes on Marketing Management

Prepared by Muhammad Akhlaq Khan

1 2


Analyzing Marketing Opportunities: The first task of marketing managers is to analyze the long-run opportunities in this market for improving the unit’s performance. The purpose of market research is to gather significant information about the marketing environment. Developing Marketing Strategies: It consist of two parts 1) Differentiating, and 2) positioning strategy for the target market. After launching the products the product strategy will have to be modified at the different stages in the product life cycle, consisting of four phases, introduction, growth, maturity, and decline. Planning Marketing Programs: To transform market strategy into marketing programs marketing managers must make basic decisions on i) marketing expenditures, ii) marketing mix, and iii)marketing allocation. i) MARKETING EXPENDITURE: The management have to decide as to what level of marketing expenditure is necessary to achieve its marketing objectives. ii) MARKETING MIX: Marketing mix is the set of marketing tools that the firm uses to pursue its marketing objectives in the target market. There are literally dozens of marketing-mix tools. A four factor classification of these tools is very popular, called as four Ps: product, price, place and promotion. Marketing mix decision must be made for both distribution channels and final consumers. All the marketing-mix variables cannot be adjusted in the short run.

Marketing Mix


Product Price Promotion Place Variety List Price Sales promotion Channels Quality Discounts Advertising Coverage Design Allowances Sales Force Assortments Brand Name Payment - Public relations Locations Packing period Direct Marketing Inventory Sizes Credit Transport Services terms Warranties Returns. Managing the Marketing Effort. The final step in marketing process is managing the marketing effort. The company must build a marketing organization that is capable of implementing the marketing plan. There are three types of marketing control: Annual Plan control: The task of company is achieving its sales, profits, and other goals. First management state well-defined goals for each month or quarter. · Second, management must measure its ongoing performance in the market place. · Third, management must determine the underlying causes of any serious performance gaps. · Fourth, management must choose corrective actions to close gaps between goals and performance. Profitability Control Measuring the actual profitability of products, customer groups, trade channels, and other sizes. Marketing profitability analysis measures the profitability of different marketing activities. Marketing efficiency studies try to determine how various marketing activities could be carried out more efficiently. c) Strategic Control: Evaluating whether the company’s marketing strategy is appropriate to market conditions. Because of rapid changes in the marketing environment, each company needs to re-assess periodically its marketing effectiveness through a control instrument known as the marketing audit.


Notes on Marketing Management Prepared by Muhammad Akhlaq Khan CHAPTER-4 Managing Marketing Information System and Measuring Market Demand A WHAT IS MARKETING INFORMATION SYSTEM: A marketing information system consist of people equipment and procedure to gather. analyze. and h) talking to other managers & personnel within the company. b) Using on line information services such as America on Line. d) ESTABLISHING AN INTERNAL MARKETING INFORMATION CENTER to collect and circulate the marketing intelligence information. sales prices. analyzing and reporting data and findings which are relevant to a specific marketing situation. inventory levels. receivable. evaluate. By analyzing these information marketing managers can spot light important opportunities and problems. II) SALES REPORTING: Marketing manager need up-to-date reports of their current sales. c) Many small companies routinely visit their competitors to bring new ideas. sales representatives_____ to discover their information needs. retailers. It is done by: a) reading books. Large companies can adopt any of the following ways of marketing research. Computer technology may be used to design fast and comprehensive sales reporting system Marketing Information System represents a cross between what a manager think they need. 2 Marketing Intelligence System It is a set of procedures and sources used by managers to obtain their everyday information about pertinent development in the marketing environment. shipping goods back ordering of out-of-stock items and receiving payment against shipped items. e. valuable information could be lost or arrive too late. It includes procedure and time involved in receiving order. g) talking to other outsiders. 3 Marketing Research System: Marketing research system is a systematic way of designing. and distribute needed informations timely and accurately to marketing decision makers. e) talking to suppliers f) talking to distributors. The staff scans major publications. In this regard marketing executives ____like product managers. and sell this information to the parties having concern. It collect and files relevant information to assist manager in evaluating new information. These research firms gather and store data at a much lover cost than the company could do on its own basis. A well run company take following 4 steps to improve quantity and quality of marketing intelligence system: THROUGH TRAINING THE SALES FORCE: By training the sales force to spot and report new developments. They should know that what type of information to be provided to which manager. b) THROUGH DISTRIBUTORS: Company may motivate distributors. I) SUPPLIERS OF MARKETING RESEARCH: There are a number of ways to do marketing research. 3 Marketing Research and 4 Marketing Decision Support System. 10 . and other intermediaries to pass along important intelligence. 1 Internal Record System: It includes reports on orders. Large companies generally have their own marketing research departments.g. b reading newspapers. sales managers. prepare an abstract of relevant news and provide it to marketing manager. I) ORDER-TO-PAYMENT CYCLE It is the heart of the internal record system. Many companies are now using electronic data interchange (EDI) software to improve the accuracy and efficiency of the order to payment cycle. what manager’s really need. payable and so on. c) trade publications d) talking to customers. Yet being very busy they may fail to pass on the significant information. faced to the company. Sub-systems of MIS 1 Internal Company Records. sort. 2 Marketing Intelligence Activities. c) PURCHASE INFORMATION FROM OUTSIDE: Company may purchase information from outside suppliers. The needed information is developed through sub-systems of Marketing Information System. Today companies need to do these steps quickly and accurately as the customer favor those firms who deliver goods on time. research firms. collecting. If the marketing intelligence system is too casual. such as given bellow: Engaging students or Professors to design and carry-out marketing research projects. While small companies may not have such departments and can conduct research in creative and affordable manner. they are in excellent position to pick-up information missed by other means. and what is economically feasible.

iii) Survey Research: Survey research best suit for descriptive research. · Research approaches Research data may be gathered in four ways i) Observational research: Data gathered by observing the relevant actors and settings. body. and measure its magnitude in the general population iv) Experimental Research It is the most significally valid research. The interviewer can ask more questions and can record additional observations about the respondent such as dress. Generally a sample of 1% of population give the reliable results. ii Mechanical Instruments: Used less frequently. iii) Sampling Procedure: How should the respondents be chosen? To obtain a representative sample a probability sample of the population should be drawn. beliefs. Sampling Plans: After deciding the research approach and instruments. II) THE MARKETING RESEARCH PROCESS: Marketing research process is consist of five steps given bellow: Define the problem and research objectives. The target population to be sampled. i) Mail Questionnaire is the best way to reach people who would not give personal interviews or whose responses might be biased by the interviewers. ii) telephone. or iii)personal interviews. 11 . It consist of a set of questions presented to respondents for their answers. ii) Focus Group Research: 6 to 8 people are invited to spend few hour with a skilled researcher and discuss product or issue. Questions may be close end or open end closed end questions specify all the possible answers that are easier to interpret and tabulate. A well defined problem is half solved.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan Syndicated-service Research Firms: These firms gather information about consumers and trade which they sell for fee. satisfaction et. Averages and measures of dispersion are computed for the major variables. b) Developing the Research Plans depends on the defined problem. the researcher must design a sampling plan. subjecting them to different treatments. controlling extraneous variables and checking whether observed responses differences are statistically significant. It calls for selecting matched groups of subjects. and language. Research instruments: Two main research instruments for collecting data are Questionnaires and Mechanical Instruments. iii) Personal Interviewing is the most versatile of the three methods. It is the most expensive and prone to error stage of research process. It involves planning for gathering the needed information. surveys are under taken to learn about peoples knowledge. the choices are i) mail. Galvanometers measure the subject’s interest or emotions aroused by exposure to a specific ad or picture. and optical scanners has helped organizations in gathering informations before and after an advertising compain. The interviewer is able to clarify questions if the respondents do not under stand them. c) Specialty Line Marketing Research Firms: They provide specialized research services to others. e) PRESENT THE FINDINGS: The last step of marketing research is presenting the findings to the relevant parties. The research plan involves decision about: Data sources: i) Secondary Data: Already gathered data for some purpose and can also be used for this purpose and ii) Primary Data: Data gathered only for the specific purpose. but rather should present major findings that are pertinent to the major marketing decisions facing management. d) ANALYZE THE INFORMATION: The next-to-last step is to extract pertinent findings from the collected data. But in it response is very low and slow. The use of modern instruments like Computers. The researcher should not overwhelm management with lots of numbers and fancy statistical techniques. They participate along with company in designing the way of study and thus report results which becomes the property of the company. ii) Telephone Interviewing a best method for gathering information quickly. c) COLLECT THE INFORMATION. Researchers tabulates the data and develops frequency distributions. Contact methods: When the sampling plan has been determined the researcher must decide how the subject should be contacted. ii) Sample Size: How many people should be surveyed. It is the most expensive method requires more administrative planning and supervision than other method. It is necessary for the organization to take care while collecting information and to edit it properly. Open end questions allow respondents to answer in their own words. b) Custom Marketing Research Firms: These firms are hired to carry-out certain research projects. cash registers. But causes more difficulties and more expenses. It calls for three decisions i) Sampling Unit: Who is to be surveyed. Large sample give more reliable results. i) Questionnaires: A most commonly used instrument for collecting primary data.

d) Target Market also called served market is the part of qualified available market the company decide to pursue. Market demand can be measured for six different product levels. the market potential. income and access to a particular market offer. AN OVERVIEW OF FORECASTING AND DEMAND MEASUREMENT Companies undertake marketing research to identify market opportunities. The absolute limit of company demand is. d) Interdependence of Models and Data: e) Value and Cost of Information: f) Healthy Skepticism: g) Ethical Marketing. Sales Budget: is a conservative estimate of the expected volume of sales and is used primarily for making current purchasing. Scientific Method: is careful observation. e) Penetrated Market the set of customers who have already bought the product of the company. Marketing is responsible to prove sales forecasts which are based on demand. 4 Product line sales 5 Product Form sales 6 Product item sales.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan III Characteristics Of A Good Marketing Research: A good marketing research should have seven characteristics. To assess market potential we have to visualize the market demand for a “very high” level of industry marketing expenditure. Five different space levels 1 world 2 Country wide 3 Region 4 Territory 5 Customer and three time levels 1 Short run 2 Medium run 3 Long run. Definition of Market: A market is a set of all actual and potential buyers of a product. 1 All sales. division or sales representative. prediction and testing. b) Available Market the set of consumer who have interest. of course. and cash-flow decisions. Keeping in view this definition a market may be sub-divided in to following ways. Managers need to define carefully what they mean by market demand. It is primarily a managerial device for defining and stimulating sales effort. The two would be equal if the company achieved 100% of the market. Companies Sales Potential It is the sales limit approached by company demand as company marketing effort increases relative to competitors. c) Qualified available Market: the set of consumers who have qualifications of available market and also qualification for the particular market offer. 4 Marketing Decision Support System:(MDSS) MDSS is a coordinated collection of data. After completing research company evaluate each opportunity before choosing target market. Companies sales Forecast expected level of company sales based on a chosen marketing plan and on assumed marketing environment. Market demand for a product is the total volume that would be bought by a defined customer group in a given geographical at a specified time period in a defined marketing environment under a defined market program. tools and techniques with supporting software and hardware by which an organization gathers and interprets relevant information from business and environment and turns it into a basis for marketing action. Potential Market is the set of consumers who has shown a sufficient level of interest in a defined market offer. Company Demand: is the companies estimated share of the market demand at alternative levels of company marketing effort. Market Forecast The market demand corresponding to the level of expenditure actually occurred is called the market forecast. 2 Industry Sales 3 company sales. where further increase in marketing effort would have little effect in stimulating further demand. production. A Vocabulary for Demand Measurement. MEASURES OF MARKET DEMAND: As a part of their planning companies prepare many estimates of market size. b) Research Creativity: Marketing research should also develop innovative ways to solve a problem c) Multiple Methods: Good Market researchers prefer to use multiple sources to avoid over-reliance on anyone method. formulation of hypotheses. 12 . Market Potential The market forecast shows expected market demand not maximum market demand. Sales Quota the sales goal set for a product line.

debt. geography and so on. Each population group has certain specific wants and buying habits. It is a major determinant in the nations industrial structure. but poor in other respects. Industrialization creates a new rich class and a small growing middle class. Economic Environment: Economic environment denotes the available purchasing power of the economy. tools and supplies and material handling trucks. IDENTIFYING AND RESPONDING TO THE MAJOR MACRO-ENVIRONMENT FORCES: Companies. 4 educational level 5 household patterns and 6 regional characteristics. between 7 to 10 years or longer. 3) Natural environment 4) Technological environment 5) political/legal environment. Many companies fail to see change as opportunity. and without social. social. ANALYZING NEEDS AND TRENDS IN THE MACRO ENVIRONMENT: Successful companies recognize and respond (profitably) to un-met needs and trends in the macro environment. customers. HOUSE HOLD PATTERNS: The traditional house hold pattern quit differs from a modern house hold pattern now all the peoples of house either do job or go to school and use redeemed foods. 2 ages distribution. Within rapidly changing global picture the firms must monitor six major forces effecting the environment. b) High school drop-outs c) High school degrees d) College degrees. both demanding new types of goods. its suppliers. Changing a mass Market in to Micro Markets: All the above changes causes a mass market to be changed / converted in to numerous micro markets. 13 A 1 2 3 4 5 6 B 1 . It depends on current income. 1) Demographic environment. prices. and 6) Social/Cultural environment. They recognize that the marketing environment is constantly spinning new opportunities and threats and the understand the importance of continuously monitoring and adopting to the changing environment. lifestyle. Depending on number of foreign residing and wealthy native rulers and landholders. As manufacturing increases countries relies more on imports of raw materials & heavy machinery. political and technical changes (that are slow to form). Marketers keenly interested 1 growth rate of population in different cities. competitors all operate in macro environment of forces and trends that shape opportunities and threats. i. short lived. GROWTH RATE: is watched to make the future and present needs planning. they are also a market for western-style commodities and luxury goods. and once the come they influence us for some time. They ignore or resist change until it is too late. economic. A trend is a direction or sequence of events that have some momentum and durability. There economies offer few opportunities for marketers b) Raw Material Exporting Economies: These economies are rich in one or more natural resources. 3 ethnic mix. e) Professional degrees. some of which can be satisfied only by imports. Much of their revenue comes from exporting these resources. CURRENT INCOME: Nations vary greatly in their level and distribution of income. savings. d) Young adults age 25-40 e) Middle-aged adults age 40-65 f) Old adults above 65 ETHNIC MARKETS: Ethnic means national or tribal groups that has a common culture tradition.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan CHAPTER-5 Scanning the Marketing Environment Successful companies take an outside-inside view of their business. c) Industrializing Economies: Economies in which 10 to 20% of the country’s gross domestic products are manufactured. EDUCATIONAL GROUP: Population of any society falls into five educational groups a) Illiterate. education. The people are shifting from rural areas to cities and population of cities is increasing in multiples. A Fad is an unpredictable. Such countries are good markets for extractive equipment. The education level also effect the environment of the market. AGE MIX: can be divided in to six age groups a) Pre-school b) School-age children c) Teens. REGIONAL / GEOGRAPHICAL CHARACTERISTICS: Geographical characteristics also effects the environment. They are non-controllable and must have to be monitored and responded. There are four types of industrial structures Subsistence Economies: In it wast majority is engaged in simple agriculture and consume most of their products. economic and political significance. They are more predictable and durable than fads. 2) economic environment. Demographic Environment: Means the population forces which effect the environment. and credit availability. Many opportunities are found by identifying trends. Each group has its own preferences and consumer characteristics. and less on import of finished products.e. Megatrends are large.

and Finite nonrenewable resources like oil. zinc. PRICES: Depends upon various things like inflationary rate.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan d) 2 3 4 5 6 7 8 C D E F Industrial Economies: the major exporters of manufactured goods and investments funds. and the finite nonrenewable. They buy manufactured goods from each other and also export them to other types of economies in exchange for raw materials and semi-finished goods. industrialization in the country. People’s Views About Themselves. c) People’s Views About Society. Scientists today are working on a startling range of new technologies that will revolutionize products and production process. It includes following: LEGISLATION REGULATING BUSINESS: Business legislation has three main purposes: Protect companies from unfair competition Protect consumers from unfair business practice. Safety and health regulations have been increased in the areas of food. though in long run their are many problems. DEBT: Debts depend upon the savings of the economy. Every new technology has a force creative force and distructs the previous inventions. silver. the finite renewable. Social /Cultural Environment: Societies are shaped with their beliefs.Governments vary in their concern and efforts to promote a clean environment. Government agencies and pressure groups that influence organizations as well as markets. the marketers should watch the following trends in technology: Accelerating Pace of Technological Change. values and norms. the quantity of DDT and other chemical pollution’s in the soil etc. Like dangerous mercury levels in the ocean. Marketers should be aware of these regulations when proposing developing and launching new products. such as air and water poses no immediate problem. They try to save their interests and thus effect the environments. As products become more complex the public needs to be assumed of their safety. c) Increased Level of Pollution: Some industrial activities inevitable damage the natural environment. 3) market intermediaries 14 . d) Increased Regulations of Technological Change. Many of the today's common products were not available 30 years ago. platinum. Such as pollution and the action of “greens” against it. such as forests. This environment is composed of. Laws. Keeping in view the above situations it is necessary to increase the research and development budgets. automobiles. b) Unlimited Opportunities for Inventions. because as they are deteriorating their prices are increasing. 2) the supplier. EXTERNAL MICRO ENVIRONMENT: They are part of companies marketing system 1) the market. b) People’s Views About Others. Government agencies are now investigating to ban potentially unsafe products. d) People’s Views About Nature. c) Varying Research and Development Budgets. SAVINGS: The economy making more savings will prosper fastly because banks can give loan at lesser interest rate. Protect interests of society from un-bridled business behavior.g. transistors hurt the vacuum-tube etc. and food must be used wisely. The major hopes are that companies around the world will accept more social responsibility and that less expensive devices will be invented to controlled and reduce pollution. Marketers need to be aware of threats and opportunities associated with four trends in the natural environment. Technological Environment: Technology is dramatically changing lives of the people. will pose serious problems as their time of depletion approaches. electrical appliances. Infinite resources. The time lag between new ideas and their successful implementation is decreasing rapidly. e. economic stability etc. GROWTH OF SPECIAL INTEREST GROUPS: Power of special groups have increased over the last few decades. e) People’s Views of the Universe. CREDIT AVAILABILITY INTEREST RATE STAGE OF ECONOMY IN THE BUSINESS LIFE CYCLE INFLATION Natural Environment: Natural environment also effects the environment trends. Finite renewable resources. b) Increased Energy Cost: Nonrenewable finite resources has created serious problems for the world economy. d) Changing roles of Governments: . Political / Legal Environment: Marketing decision are strongly affected by change in political and legal requirements. Shortage of raw material The earth’s raw materials consist of the infinite. People have different views and at the same time from different points of views. and construction. clothing. coal.

and 2)Various facilitating organizations which provide services i.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan 1 2 3 Market: Market have three factors People or organizations with wants. c) Their buying behavior. The Supplier: Organizations need cooperative relationship with supplier. Market Intermediaries: They are independent business organizations that directly aid in the flow of goods and services between a marketing organization and its markets. b) Their purchasing power. warehousing. 15 .e. financing etc. There are two types of market intermediaries 1) The firms middle-man (the whole seller and retailer appointed by the organization). They are needed to complete exchange between buyers and sellers. transportation.

Objectives Why does the market buy? 4. interests.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan CHAPTER-6 Analyzing Consumer Markets and Buyer Behavior The aim of marketing is to satisfy the target customers needs and wants. b) Family: Most influential primary group. Cultural Factors: Culture influences the consumer behavior most effectively than any others. c) SOCIAL CLASS: It is relatively homogeneous divisions of society which are hierarchically ordered and whose members share similar values. and behaviors. social class. Personal Factors: Following are the personal factors which effect the consumer behavior: Age and stage in life cycle: People buy different goods and services over their lifetime. friends. b) Occupation: Occupation also effect the consumption pattern. savings and assets. patterns. area of residence. and trade-union groups which require less interaction. sub-culture and social class. Model of consumer Behavior In the beginning marketers could understand consumers through the daily experience of selling them. e) Personality and Self Concept: Each person has a distinct personality that influences his or her buying behavior. e. and occupation may lead quite different lifestyles. and socialization for its members. It differs in their dress. dominance. By personality. and opinions. autonomy. parents and other i. Secondary groups include religious. Operations How does the market buy? 6. deference. spouse and children c) Roles and Status's: Role is the activities that a person is expected to perform due to his status e. It do not reflect income alone but also other indicators like occupation. sociability. perceptions. performance. Objects What does the market buy? 3.e. and roles and status's. Which include their spend able income. Organizations Who participates in buying? 5.g. But with the growth of companies direct contact with the consumer has become impossible. debts.g. in the company where he works. 16 1 2 3 4 . in family. Now managers had to rely on 7 O’s given bellow. while the president of company will buy expensive things. Every economy have its own values. A lifestyle is the person’s pattern of living in the world as expressed in the person’s activities. It includes broad culture/atmosphere of country. d) Lifestyle: People coming from the same subculture. preferences. Social Factors: In addition to cultural factors. Biogenic: The need which arise from physiological states of tension such as hunger. 3 Learning 4 Beliefs and Attitudes. nationalities. religions. discomfort etc. we mean a person’s distinguishing psychological characteristics that lead to relatively consistent and enduring responses to his or her environment. speech. a worker will purchase necessities with low price. and adaptability. Psychological Factors: Psychological factors are four: 1 Motivation. b) SUB-CULTURE: Each culture consists of small sub-cultures providing more specific identification. 1 Occupants Who constitute the market? 2. Reference groups: A persons reference groups consist of all the groups that have a direct (face-to-face) or indirect influence on the person’s attitudes or behavior. They are of two types. borrowing power and attitude toward spending versus saving. professional. It include culture. Groups having a direct influence on a person are called membership groups. Primary groups include family. 2 Perception. and geographical regions. I) MOTIVATION: A man have many needs at any one time . can also be subdivided in two groups. education. Outlets Where does the market buy? MAJOR FACTORS INFLUENCING BUYING BEHAVIOR: These factors can be sub-divided in to following four categories. defensiveness. c) Economic Circumstances: Product choice is also greatly effected by one’s economic circumstances. Occasions When does the market buy? 7. 1 Cultural Factors 2 Social Factors 3 Personal Factors 4) psychological Factors. It is a useful variable in analyzing a persons behavior. Personality is usually described in terms of such traits as self-confidence. neighbors and co-workers etc. with whom the person interact fairly and continuously. family. a consumer’s behavior is influenced by such social factors as reference groups. Membership groups may be subdivided in to primary and secondary. thirst. with friends. CULTURE: A fundamental determinant of a persons wants and behavior. They include.

e) User: A person who consumes or uses the product or service. To differentiate the brand’s features marketers should use print media to describe brand’s benefits. Buying Roles: It is easy to identify buyer for many products. How the motivated person actually acts is influenced by his or perception of the situation. · People likely to notice those adds whose deviations are large than normal size adds. IV) BELIEFS AND ATTITUDES Through doing and learning people acquire beliefs and attitudes. they learn. A belief is a descriptive thought that a person holds about something. and · has much to learn. Different people can perceive the same situation differently due the three perceptual processes: a) Selective Attention. he make thoughtful purchase choice. Marketers must. reducing buyer behavior. These in turn influence their buying behavior. b) Selective Distortion: It is the tendency of people to twist information into personal meanings and interpret information in a way that will support their perceptions. therefore. be careful to take these perceptual processes into account in designing their marketing campaigns. It involves changes in the individual’s behavior arising from experience. DISSONANCE ____REDUCING BUYER BEHAVIOR: Reducing buying behavior is characterized by: consumer is highly involved in purchase. Buying Behavior: Behavior varies with the type of buying decision.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan 1 2 b) Psychogenic They arise from psychological states of tension such as the need for recognition. · product is expensive and risky. and An Attitude is a person’s (enduring favorable or unfavorable evaluations). organizes and interprets information inputs to create a meaningful picture of the world. Most psychogenic needs are not intense enough to motivate the person to act on them immediately. A need becomes a motive when it is aroused to a sufficient level of intensity. b) Selective Distortion and Selective Retention. Perception depends upon not only physical stimuli. esteem or belonging. 1) buyer develops beliefs about the product. Perception is the process by which an individual selects. 1) Complex buying behavior. But marketers must be careful in making their (targeting)decisions because buying roles change. and 4) variety seeing buying behavior. · see litter difference in brands. 3) Habitual buying behavior. A motive is a need sufficiently pressing to drive the person to act. COMPLEX BUYING BEHAVIOR: Consumer are involved in complex buying behavior when they are highly involved in purchase. THE BUYING PROCESS: To be successful marketers must go beyond the understanding as to how consumers actually make their buying decisions. what. There are five roles people can play in buying decisions Initiator: Who firs suggest the idea of buying product. rather they must identify who makes the buying decision. develops attitudes about the product and third. people may not necessarily see or hear the message that marketers want to send. III) LEARNING When people act. As a result. emotional feeling and action tendencies toward sum object or idea. 2) dissonance. 17 . c) Selective Retention: People tends to retain those information that supports their attitudes and beliefs due to selective retention. b) Influencer: A person whose view or advice influence the decision. · aware of significant differences among brands. but also on the stimuli’s relation to the surrounding field and on conditions within the individual. The types of buying decisions and steps in buying process are given bellow. · typically does not know much about product category. d) Buyer: Who actually purchase. c) Decider: A person who decides on any component of buying decision _____ whether to buy. It involve three step process. there are four types of consumers buying behavior based on degree of buyer’s involvement and degree of differences among brands. how and whom to buy. II) PERCEPTION: A motivated person is ready to act. Second. Selective Attention: Selective attention means the marketers have to work hard to attract consumer’s notice because to consumer pay selective attention to the advertisements. People notice those adds that relates to current needs · People notice those adds that they anticipate. The marketers must know the consumers information gathering and evaluation process and develop strategies to assist the buyer in learning about the product’s attributes and call for his attention towards high standing of the company’s brand.

the value he gives to the additional information and the value of satisfaction he obtains from the search. THE STAGES OF THE BUYING DECISION PROCESS:` Smart companies keep an eye on the buying decision process involved in their product category. the consumer learns about competing sets of brands and their features. the amount of information he already has. salt. Internal needs are like hunger. The company must also identify the other brands in the consumer's choice set so that it can plan its competitive appeals. using the product. avoiding out-of-stock conditions. Evaluation of Alternatives: There is no single and simple valuation process used by all consumers in all situations. These five stages are 1) Problem recognition. e. friends. In such a situation the market leader try to encourage habitual buying behavior by dominating the shelf space. toothpaste resisting cavity. coupons. see friends who have purchased that product etc. • Public sources Mass medial. Some basic concepts will help us to understand consumer evaluation process: i) Consumer is trying to satisfy a need. packaging. arise to a thresh hold level and becomes a drive. acquaintances. and engages in other activities to learn about the product. like ads of the product. and advertising that presents reasons for trying something new. tea. 2) Information Search. deals.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan · purchase is expensive . 3 HABITUAL BUYING BEHAVIOR: Many products are bought under conditions of low consumer involvement and the absence of significant brand differences. Information Search: An aroused consumer will be inclined to search for more information. Marketers need to identify the circumstances that trigger a particular need. ii) He is looking for certain benefits from the product solution. THE ACTIVE INFORMATION SEARCH: At this stage he actually looks for reading material. neighbors. e. Challenger firms will encourage variety seeking by offering lower prices. A need may arise either internally or externally. sex etc. toothpaste etc. Marketers can convert low involvement products into one of high involvement by four ways given bellow: link product to some involving issue e. · link product to some involving personal situation. 18 4 1 2 3 . 3) Evaluation of Alternatives. Generally a buyer while making buying decision passes through 5 different stages. • Experiential sources: Handling. · advertise to trigger strong emotions related to personal values or defence. The Milder search and the active information search. thirst. dealers. The selling company must strategies to get its product into the awareness set. Through gathering information. and sponsoring frequent reminder advertising. for example a person passes a bakery and saw bread and biscuits that stimulates his hunger. salespersons. THE MILDER SEARCH: It may also be called as heightened attention. After the purchase the consumer might experience dissonance that stems from noticing certain disquieting features of the product or hearing favorable things about other product. The external need aroused by an external source. and the ease of obtaining additional information. He should also identify the consumers information sources and evaluate their relative importance. and choice set. The extent of search depends upon the strength of the drive. displays. · Add an important product feature to a low involvement product.g. At this stage the consumer simply pays more attention to information's about the desired product. free samples. consideration set. It is not necessary that consumer pass through them sequentially especially in the case of low involvement purchase in such a case consumer may shift or reverse some stages. perhaps responding primarily to a good price or to purchase convenience. VARIETY SEEING BUYING BEHAVIOR: This type of buying behavior is characterized by: Low consumer involvement. then they develop the marketing strategies that trigger consumer interest. infrequent and risky. • Commercial sources: Advertising. our coffee taken early in the morning shake of sleepiness. 4) Purchase Decision. consumer-rating organizations.g.g. 5) Post purchase behavior. Consumer may can get information from the following four sources: • Personal sources: Family. In this case the buyer will shop around to learn what is available but will buy fairly quickly. phones friends. · significant brand differences · consumers can do a lot of brand switching. The consumer will be alert to the information to justify his decision of purchase. Problem Recognition: Buying process begins when buyer recognizes the problem or need. examining. We may distinguish between two levels of arousal.

two factors may intervene between the purchase intention and purchase decision. iii) Alter the beliefs about the competitors brands. ii) Unanticipated situational Factors: A consumer's decision to modify. v) Call attention to neglected attributes: In such a case the marketer draws the buyer's attention to neglected attributes. 19 . size. A try to alter the buyers beliefs about where competitive brands stand on different attributes. i) Attitudes of Others The extent to which others attitudes reduces one's preferred alternatives depends on two things. or avoid a purchase decision is heavily influenced by perceived risk. It is not recommended if buyers are accurately evaluating brand exaggerated claims would lead to buyer dissatisfaction and bad word or mouth. This strategy. ride quality. and post purchase product use and dispose. the amount of attribute uncertainty. called competitive repositioning. speed. and life. atmosphere. second. with varying abilities of providing benefits sought to satisfy need. makes sense when buyer mistakenly believe a competitor's brand has more quality that it actually has. Marketers can do a number of things to influence buyers decision: i) Modify Product: They may redesign the brand so that it offers more characteristics that the buyer desires. and the amount of consumer self-confidence. It is also called real repositioning. ii) Alter beliefs about the brand: A try to alter the buyers' beliefs about where the brand stands on key attributes. Post Purchase Behavior: After purchasing the product the consumer will experience some level of satisfaction or dissatisfaction The marketer's job does not end when the product is bought but continues into the post purchase period Marketer must monitor post purchase satisfaction. • tyers: safety. Purchase Decision: In the evaluation stage the consumer forms preferences among brands in the choice set. which are not very clear in the mind of the buyer. the consumer's motivation to comply with the other person's wishes. the more the consumer will adjust his purchase intention. price. 1) Attitudes of others. The more intense the other person's negativism and the closer the other person is to the consumer. sharpness. The consumer may for an intention to buy the most preferred brand. and 2) Unanticipated situational factors. postpone. price. cleanliness. post purchase actions. It is useful where the buyer underestimate the brand qualities. tread life.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan 4 5 iii) He looks at every product as a bundle of attributes. price. It is often accomplished by running a comparison ad. • hotel: location. The amount of perceived risk varies with the amount of money at stake. first. The attributes of interest to buyers vary by product: • camera: picture. vi) Shift the buyers ideas: The marketers could try to persuade buyers to change their ideal levels for one or more attributes. However. the intensity of the other person's negative attitude toward the consumer's preferred alternative and. iv) Alter the importance weights: The marketer could try to persuade buyers to attach more importance to the attributes in which the brand excels.

constraints. evaluate. and insurance. and requirements. The major industries making up the business market are agriculture. There are three types of buying situations the straight re-buy the modified re-buy and the new task. transportation. The number of decisions depends on the type of buying situation. construction. Therefore. Out supplier try to get a small order and then enlarge their share over time. used in the production of other products or services. delivery requirements or other terms. Consequently business marketers have to send well trained representatives and often uses teams to deal with the well-trained buyers. Business markets have several characteristics that contrast sharply with consumer markets some of them are given bellow: 1 FEWER BUYERS: Business marketers normally deals with far fewer buyers than the consumer marketers does. DIFFERENCE BETWEEN BUSINESS MARKET AND CONSUMER MARKET: Business Market: consist of all the organizations that acquire goods and services. 11 RECIPROCITY: Business buyers often select suppliers who also buy from them. and a 10% fall in consumer demand may cause a complete collapse in business demand. 2 MODIFIED REBUY: A situation in which the buyer wants some modification in price. especially in the short run. necessary to produce the additional output. 7 FLUCTUATING DEMAND: A small percentage increase in consumer demands can lead to a much larger percentage increase in demand for planed and equipment. 3 CLOSER SUPPLIER-CUSTOMER RELATIONSHIP: Because of the smaller number of customer base and the importance and power of the large customers. the users initiate the buying proposal. communication. 20 . sales promotion and publicity plays important role but personal selling usually serves as a main marketing tool. This means the business marketers have to provide greater technical data about their product and its advantages over competitors' products. This sales volatility has led many business marketers to diversify their products and markets to achieve more balanced sales over the business cycle. Professional buyers spend their lives in learning how to buy better. The out supplier see an opportunity and offer better facilities to gain some business. It is called system buying Participants in the Business Buying Process: It is also called buying center and includes all persons involved in purchasing which are given bellow: i) Initiators: Those who request that something be purchased. 8 PROFESSIONAL PURCHASING: Business good are purchased by trained purchasing agents. 3 NEW TASK: Purchasing for the first time. rented. 2 LARGER QUANTITY BUYERS: Buy in bulk items for reproduction. buyers are concentrated in few localities. A few large buyers do most of the purchases. 9 SEVERAL BUYING INFLUENCES: More people can influence a business buying decision than a consumer buying decision. manufacturing.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan CHAPTER-7 Analyzing Business Markets and Business Buyer Behavior WHAT IS ORGANIZATIONAL BUYING: Organizational buying is the decision-making process by which formal organizations establish the need for purchased products and services and identify. or supplied to others. 12 LEASING: Many industrial buyers lease their equipment instead of buying it. ii) Users: Those who will use the product or service. public utilities. System Buying and Selling: Many business buyers prefer to buy a total solution of their problem from one seller. forestry. It involves additional discussion between buyer and seller representative who tries to defend his position and becomes nervous. 1 STRAIGHT REBUY: Purchases are ordered on routine basis from a previous supplier called in-supplier. Sometimes a rise of 10% in consumer demand can cause as much as 200% rise in business demand for the product in the next period. there are close relationships between customers and suppliers. who must follow the organizational policies. therefore requires more time and analysis of suppliers. and fisheries mining. In many cases. Buying Situations: Business buyers faces many decisions in making a purchase. The out-supplier offer something new or exploit dissatisfaction with the supplier. and choose among alternative brands and suppliers. that are sold. 10 DIRECT PURCHASING: Business buyers often buy directly from the manufacturers rather than through intermediaries. 6 INELASTIC DEMAND: The demand of such goods is not much effected by the change in price. especially those items that are technically complex and expensive. Buying committees consisting of technical experts and senior managers are common in the purchase of major goods. distribution and services. banking. finance. Although ad. are more cost effective. because producers cannot make quick changes in their production methods. 4 GEOGRAPHICALLY CONCENTRATED BUYERS: Generally one type of organizations exist in one locality. 5 DERIVED DEMAND: Demand of business goods is ultimately dependent on demand of consumer goods.

and system. Recently some of the companies have started the centralized purchasing. 2) organizational factors. or . vi) Buyers: People who have formal authority to select the supplier and arrange the purchase terms. INTERPERSONAL FACTORS: The buying center usually includes several participants with differing satisfy a legal or social obligation. policies. For buying goods business buyers have to go through buying or procurement process having eight steps called buy phases. SUPPLIERS SELECTION: The buying center. level of demand for their product Economic outlook. and culture. ii) Centralized Purchasing: In multi-divisional companies most purchasing is carried out by separate divisions because of their differing needs. ii) A machine breaks down and requires replacement or new parts. job position. For it a product value analysis is conducted. and persuasiveness. PROBLEM RECOGNITION: Some one in the organization recognizes the problem that can be met by acquiring a good or service. SUPPLIER SEARCH: Then the company searches the most appropriate suppliers. perceptions. and telephone operators may prevent sales persons from contacting user or deciders. iv) Decider: People who decide on product requirements and or on suppliers. iv) A purchasing manager senses an opportunity to obtain lower prices or better quality. receptionists. although whatever information he can discover about the personalities and interpersonal factors would be useful. iii) Purchased material turns out to be unsatisfactory. Events leading to problem recognition are the following: i) Company decides to produce a new product and needs new equipment and materials to produce it. They may be classified in to four groups 1) environmental factors. income. organizational structure. and political regulatory. and preference. and 4) Individual factors. What is the product value analysis: PVA is an approach to cost reduction in which components are carefully studied to determine if they can be redesigned or standardized or made by cheaper methods. authority. specify the desired attributes of the suppliers. Business marketers should be particularly aware of these. influenced by the participants age. GENERAL NEED DESCRIPTION: On recognition the buyer proceeds to determine the needed items general characteristics and quality needed.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan iii) 1 2 3 4 1 2 3 4 5 6 Influences: People who influence the buying decision by defining specifications and providing information for evaluating alternatives. make money . ENVIRONMENTAL FACTORS: Business buyers are heavily effected by factors in the current and expected economic environment. the business marketer is not likely to know what kind of group dynamics take place during the buying process. and the company searches for another supplier. procedures. THE PURCHASING PROCESS: Business buyers purchase goods and services . The attributes may include the delivery reliability. ORGANIZATIONAL FACTORS: Each buying organization has specific objectives. status. education. For this purpose organizations uses trade directories. iii) Decentralized Purchasing of small ticket items: iv) Long-term Contracts: Business buyers are increasingly accepting long term contracts with suppliers. PROPOSAL SOLICITATION: The buyer invite the qualified suppliers to submit proposals with detailed specifications. Following are the organizational trends in the organizational area: i) Purchasing department upgrading: Purchasing department commonly occupy a low position in the management hierarchy They are now being up graded. computer search or make phone to other companies for recommendations. Technical personnel are particularly important influences. empathy.g. purchasing agents. For this they often use a supplier-evaluation model. PRODUCT SPECIFICATION: After identifying the general needs the buying organization proceeds to develop the items technical specifications. v) Purchasing Performance Evaluation and buyers professional development: Many companies have installed the incentive systems to reward purchasing managers for goods buying reduce operating cost. 3) interpersonal factors. and supplier 21 . INDIVIDUAL FACTORS: Each participant in the business buying process has his own motivations. v) Approvers: People who authorize the proposed actions of deciders or buyers. Then it will rate suppliers on these attributes and identify the most attractive suppliers. The company evaluate proposals and eliminate some suppliers and invite the remaining ones to make a formal presentation. vii) Gatekeepers: People who have the power to prevent sellers or information from reaching to members of the buying center. interest rate technological developments. attitudes toward risk. Major Influences on Business Buyers: Business buyers are subject to many influences when they make their buying decision. personality. price. before selecting a supplier.

PERFORMANCE REVIEW: When all is done the buyer reviews the performance of the chosen supplier. etc. They also often require the chosen suppliers to achieve continuous quality and performance improvement while at the same time lowering the supply price each year by a given percentage. INSTITUTIONAL AND GOVERNMENT MARKETS: So far our discussion is about the profit seeking organizations. The purchaser also do not wants to make a large purchase order ( and thus decreasing number of orders). Writing a new purchase order each time is expensive and time consuming. because it means to carry more inventory. A blanket contract establishes a long term relationship in which the supplier promises to re-supply at an agreed price over a specified period of time. some of these stages would be compressed or bypassed. ii) Quantity needed.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan 7 8 reputation are highly important. The buying center also decide as to how many suppliers to use. iii) expected time of delivery. However. Much of it also applies to the buying practices of institutional and government organizations. In modified-re-buy or straight-re-buy situations. Furthermore these companies want each chosen supplier to be responsible for a larger component system. 22 . v) warrantees. Then the buying center attempt to negotiate with its preferred suppliers for better prices and terms before making the final selection. 1) the buyer may contact the end user and ask for evaluation. iv) return policies. their certain special feature found in these markets. ORDER-ROUTINE SPECIFICATION: After selection of supplier the buyer negotiate final order listing the i) Technical specifications. Three methods are commonly used. Above given stages are for the new task buying situation. 2) Rate the supplier on several criteria using a weighted score method or 3) aggregate the cost of poor supplier performance to come up with adjusted cost of purchase including price.

It is even more unattractive if the segment is stable or declining. features. It may by due to a regulatory edict. styling. These are industry competitors. strong. 3 Form competition: Occurs when a company sees its competitors as all companies manufacturing products that supply the same service. The major barriers include high capital requirements. 4 PURE COMPETITION: Consists of many competitors offering the same product and service (stockmarket. The five threats they poses are as follows: 1 Threat of intense segment revelry: A segment is unattractive if it already contains numerous. beauty shops). and demand more quality. Most common barriers are lager moral obligations to customers. Each competitors may seek leadership in one of these major attributes. low asset salvage value due to over-specialization or obsolescence.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan CHAPTER-8 Analyzing the Industries and Competitors There are five forces that determine the intrinsic long-run profit attractiveness of a market or market segment. Exit and Shrinkage Barriers: Ideally firms should be free to leave industries in which profit are unattractive. A segment is unattractive when there are actual or potential substitutes for the product are available. Few new firms can enter the industry. 3 Threats of Substitute Products. and reputational requirements. autos) The differentiation can occur along lines of quality. Since there is no basis for differentiation. and employees. Number of Sellers and Degree of Differentiation: The starting point for describing an industry is to specify whether there are one. raw materials. IDENTIFYING COMPETITORS: Competitors may be at four levels: 1 Brand competitors: A company offering similar product and services to the same customers at similar prices. potential entrants. But when the entry and exit both barriers are high it means that poor performing firms will also stay in the market. scale economics or other factors. i) Differentiated Oligopoly: consist of a few companies producing partially differentiated products (cameras. patents and licensing requirements. 2 Industry competitors: Occurs when a company sees its competitors as all companies making the same product or class of products. or distributions. No competitor will advertise unless advertising can create psychological differentiation (cigarettes) in which case it would be more proper to describe the industry and monopolistically competitive. there are two forms of oligopoly pure and differentiated. 5 Threat of suppliers growing bargaining power. The most attractive segment is one in which entry barriers are high and exit barriers are low i. 2 Threats of new entrants: A segment's attractiveness varies with the high of its entry and exit barriers. and poor-performing firms can easily exit. or services. i) Pure oligopoly: consist of a few companies producing essentially the same commodity (oil. Sellers will enjoy different profit rates only to the extent that they achieve lower costs of production or distribution. Industry Concept of Competitors: An industry is a group of firms that offer a product or class of products that are close substitutes for each other. attract the consumers favoring that attribute and charge a price premium for that attribute. but they often face exit barriers. or aggressive competitors. patent. license. Many of the competitors focus on market segments where they can meet customer needs in a superior way and command a price premium. 23 . 2 OLIGOPOLY: An industry structure in which a small number of (usually) large firms produce product that range from highly differentiated to standardized. 3 MONOPOLISTIC COMPETITION: Consist of many competitors able to differentiated their offers in whole or part (restaurants. few. commodity market). substitutes. scarce locations. and if both barriers are low it means more firms can enter in the segment. creditors. government restrictions. 4 Generic competition: Occurs when a company sees its competitors as all companies compete for the same consumer Rupee. or many sellers of the product and whether the product is homogeneous or highly structure type: 1 PURE MONOPOLY: Exist when only one firm provides a certain product or service in a certain country. A company in a pure oligopolistic industry would find it hard to charge anything more than the going price unless it can differentiate its services. lack of alternative opportunities high vertical integration and emotional barriers. competitors price will be the same. and suppliers. 4 Threat of buyers growing bargaining power: A segment is unattractive if the buyer have strong or growing bargaining power because he will force prices down. economies of scale. Entry and Mobility Barriers: Industry differ greatly in their ease of entry.e. It is easy to open a new restaurant but difficult to enter the air craft industry. buyers. steel).

and certain guidelines beliefs. Name the first company that comes to mind in this industry. They can augment their knowledge by conducting primary marketing research with customers. Degree of Globalization: Some industries are highly local others are global. personal experience. For example steel making involves heavy manufacturing and raw-materials cost. or any thing else. Here are some of the observations about the likely state of competitive relations. slow in noticing the move. ii) Share of mind: The percentage of customers who named the competitor in responding to the statement. In general every company should monitor three variables when analyzing its competitors: i) Share of market: The competitor's share of the target market. A company need to identify the strategic group in which it competes. Most competitors fall into one of following four categories. It might respond to price cuts but not to advertising expenditure increases. Moreover. a certain internal culture. profit margin. may face lack of funds to react. Degree of Vertical Integration: Some firms find it advantageous to integrate backward and forward which often causes lower in cost and give company more control over the value-added stream. A competitors objectives are shaped by many things. vertically integrated firms can manipulate their prices and costs in different segments of their business to earn profit where taxes are low. Such competitor might or might not retaliate on a particular occasion: there is no way of predicting this decision on the basis of its economic situation. history. A group of firms following the same strategy in a given target market is called a strategic group. financial situation.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan Even if some firms do not want to exit the industry they might want to decrease their size. DETERMINING COMPETITORS' OBJECTIVES: After identifying its main competitors and their strategies a company may ask itself: what is each competitor seeking in the marketplace? What drives each competitor's behavior? An initial assumption is that competitors strive to maximize their profits. technological leadership. IDENTIFYING COMPETITORS' STRATEGIES: A company's closest competitors are those pursuing the same target markets with the same strategy. If a competitor is part of a larger company. then competitive equilibrium is unstable. Cost Structure: Each industry has a certain cost mix that drive much of its strategic conduct. suppliers. The reasons may vary. The laid back competitors may feel their customer are loyal. it is important to know whether the parent company is running it for growth or milking it. Finally a company must also monitor its competitors expansion plans. and others by contrast fighting. market shale. and dealers. If the competitor is not critical to its parent company. current management. cash flow. Name the company from whom you would prefer to buy the product. 3 THE TIGER COMPETITOR: A competitor that react swiftly and strongly to any assault on its terrain. 2 THE SELECTIVE COMPETITORS: A competitor that react to only certain types of attacks and not to others. Estimating Competitors Reaction Patterns: Identification of competitors strangest and weaknesses help managers to anticipate the competitors likely reactions to other companies' strategies (e. iii) Share of heart: The percentage of customers who named the competitor in responding to the statement. Assessing Competitors Strengths and Weaknesses: To identify the strengths and weaknesses of competitors a company should first gather recent information on each competitor's business. including its size. Companies normally learn about their competitors position through secondary data. 24 . Firms will pay the greatest attention to their greatest costs and will strategies to reduce these costs. history. a promotion step-up. In addition. each competitor has a certain philosophy of doing business. 2 If a single major factor is the critical factor.g. it could be attacked more readily. A company must continuously monitor its competitors' strategies and revise their strategies through time depending upon the competitors strategy. including data on sales. Companies in the global industries need to compete on a global basis if they are to achieve economies of scale and keep up with the latest advances in technology. 1 If competitors are nearly identical and make their living in the same way then their competitive equilibrium is unstable. Two of the most common shrinkage barriers are contract commitments and suborns management. The companies try to reduce the shrinkage barriers to help their ailing competitors get smaller gracefully. All these sources help a company decide whom to attack in the programmable-controls market. market share growth cash flow. 1 THE LAID BACK COMPETITORS: A competitor that doesn't react quickly or strongly to a rival's move. and hearsay. a price cut. service leadership and son on. while toy manufacturing involve heavy distribution and marketing cost. new investments and capacity utilization. or a new-product introduction). Some industries are characterized by relative accord among the competitors. and place in the large organization. return on investment. 4 THE STOCHASTIC COMPETITORS: A competitor that does not exhibit a predictable reaction pattern. and alternative assumption is that they pursues a mix of objectives : current profitability.

This strategy requires fewer resources and time per share point gained.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan 1 2 3 3 If multiple factors may be critical factors. DESIGNING THE COMPETITIVE INTELLIGENCE SYSTEM: Each company should carefully design its competitive intelligence system to be cost effective. 3 Assess the company's and competitors' performances on the different customer values against their rated importance. circuits. they invest in over capacity. They will have a better sense of whom they can effective compete with in the market. Competitors all have their competitive segment. and competitors' employees. The major steps in customer value analysis are: 1 Identifying the major attributes that customers value 2 Assess the quantitative importance of the different attributes. 2 Collecting the Data: the data are collected on a continuous basis form the field. SELECTING COMPETITORS TO ATTACK AND AVOID: With good competitive intelligence. they favor healthy industry. they limit themselves to a portion or segment of the industry. Generally managers conduct a customer value analysis to reveal the company's strengths and weaknesses relative to various competitors. 5 Monitor customer values over time. then it is possible for each competitor to have some advantage and be differently attractive to some consumers. and the accept the general level of their share of profits. 25 . There are four main steps involved in designing a competitive intelligence system: 1 Setting up the System: The first stem calls for identifying vital types of competitive information identifying the best sources of this information and assigning a person who will manage the system and its services. the more competitors who can coexist. 3 Evaluating and Analyzing the Data: The data are checked for validity and reliability. the company should avoid trying to destroy the close competitor. they lead to more differentiation. and organized. defined by the preference for the factor trade-offs that they offer. they motivate other to lower costs or improve differentiation's. Good competitors have a number of characteristics: they play by the industry's rules: they make realistic assumptions about the industry's growth potentials. and good versus bad competitors. offers. it can focus its attack on one of the following classes of competitors: strong versus weak competitors. A company benefits in several ways from good competitors. But in the process of attacking weak competitors. The firm should also compete with strong competitors to keep up worth the state of the art. The aim of a customer value analysis is to determine the benefits that customers in a target market segment want and how they perceive the relative value of competing suppliers. Close versus Distant Competitors: Most companies compete with competitors who resemble them the most. The more factors that may provide a advantage. 4 disseminating information and Responding: Key information is sent to relevant decision maker and managers' inquires about competitors are answered. and the firm may prove to be a worthy competitor. they increase total demand. managers will find it easier to formulate their competitive strategies. At the same time. Everyone in the company must be only sense. Bad competitors violate the rules: They try to buy share rather than earn it: they take large risks. Furthermore. 4 Examine how customers in a specific segment rate the company's performance against a specific major competitor on an attribute-by-attribute basis. the share the cost of market development and legitimatize a new technology. even strong competitors have some weaknesses. serve and satisfy the customer but also be given an incentive to spot competitive information and pass it on to the relevant parties in the company. Sometimes cross-disciplinary teams are formed specifically for this purpose. and in general. interpreted. Good Versus Bad Competitors: Porter argues that every industry contains "good" and "Bad" competitors. from people who do business with competitors. Strong Versus Weak Competitors: Most companies aim their shots at their weak competitors. After the company has done its customer value analysis. they improve bargaining power vis-à-vis labor unions or regulators. they set prices in a reasonable relation to costs. and they may service less attractive segments. Competitors confer several strategic benefits: They lower the antitrust risk. close versus distant competitors. the firm may achieve little in the way of improved capabilities. they upset the industrial equilibrium.

A form of individual marketing in which individual customer takes more responsibility for determining which product and brands to buy. Consumers belonging to one segment are considered quit similar in their wants and needs. or localized marketing. (C) market segmentation procedure. The company can produce a more fine tuned product and price it appropriately for the target audience. (B) patterns of segmentation. target one or more of those segments and develop products and marketing programs for each segment. 26 A 1 2 3 4 5 B . If several brands are in the market they are likely to position through out the space and show real differences to match consumer-preference differences. In it market programs are tailored to the needs and wants of local customers groups.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan CHAPTER-9 Identifying Market Segments and Selecting Target Markets A company that decide to operate in a broad market recognizes that it cannot serve all customers in that market because customer are too numerous and diverse in their buying requirements. yet they are not identical. 3 Market Positioning: Establish and communicate products. 2) niches. Segments being fairly large attract several competitors while niches are fairly small and normally attract only a few competitors. Segment marketing offers several benefits over mass marketing. buying habits. SELF MARKETING. MARKET SEGMENTATION: Market consist of buyers who differ in many ways. Segment marketing is the mid point between mass marketing and individual marketing. It can be carried out at four levels. Three different patterns can emerge. an auto company identify four levels segments of car buyers. and (E) requirements for effective segmentation. and company have to face fewer competitors. Instead of competing everywhere the company needs to identify the market segments that it can serve most effectively.g. The first brand to enter the market is likely to position in the center to appeal to the most people. In mass marketing the seller engages in the mass production. It is usually identified by dividing a segment into sub-segments. i) those who are seeking basic transportation. it means producing a thing on receipt of order from customer according to the specifications. and 4)individuals and 5) self marketing. (D) basis for segmenting of consumer and business markets. ii) those who are seeking high performance. The company tries to isolate some broad segments. Target marketing involves three major steps: 1 Market Segmentation: Identifying distinct groups of buyers who might require separate products. The choice of distribution channels. 2 Market Targeting: Select one or more market segments to enter. LOCAL MARKETING: Also called regional marketing. 1) segments. iii) those who are seeing luxury. we can distinguish preference segments. and mass promotion of one product for all buyers. 3) local areas. The traditional argument is that mass marketing creates the largest potential market. but it is difficult to carry out. Here will examine (A) level of segmentation. which leads to the lowest costs and ultimately results in lower prices or higher margins. key distinctive benefits in the market. The segment marketing companies know that buyers differ in want. INDIVIDUAL MARKETING: It is the ultimate level of segmentation which lead to "one -to-one marketing". Patterns of Market Segmentation: Market segments can be built up in many ways. Instead of looking at demographic or lifestyle segments. A second competitor would locate next to the first brand and fight for market share. Markets can be segmented in a number of way. In target marketing the sellers distinguish the major market segment. Some segment members wants additional features not included in the offer while others would gladly give-up what they do not want very much. e. i) HOMOGENEOUS PREFERENCES: A market where all the customers roughly have the same preference. The market shows no natural segments. and iv) those who are seeking safety. etc. Before discussing these levels first we have to understand MASS MARKETING. Or it could locate in a corner to attract a customer group that was not satisfied with the center brand. location. For example in the segment of heavy smokers a sub-segment of heavy smokers with emphysema. like coca cola. Levels of Segmentation: Market segmentation represents an effort to increase a company's targeting precision. ii) DEFUSED PREFERENCES: At the other extreme the customers preferences may be scattered and customers vary greatly in their preferences. (trade areas neighbor hoods). SEGMENT MARKETING: A segment consist of large identifiable group within a market. and communication channels becomes much easier. mass distribution. purchasing power. NICHE MARKETING: A niche means a small market whose needs are not being well served.

From these findings researchers prepare a formal questioner to collect data about their: Attitudes and their importance rating Brand awareness and brand ratings. family life cycle gender. or family. These variables are the most popular because they are easier to measure than most other types of variables. Attitudes towards the product category. a) Age and Life . attitudes and behavior. demographics. Demographics.g. and psycho-graphic characteristics. cosmetics and travel. 2 Benefit Segmentation: A powerful form of segmentation involves classifying buyers according to the benefits they seek from the product. education religion. the goods they consume express their lifestyles. or use a product. regions countries. Basis of Segmenting Consumer Markets: Two broad groups are used to segment consumer markets. Product usage patterns. However it is a tricky variable and is mostly effected by the psychology. or social class. home furnishing. 3 User Status: Markets can be segmented into groups of nonusers. a) Lifestyle: People exhibit many more lifestyles than seven as are suggested by the social classes. b) Gender. buyers are divided into different groups on the basis of lifestyle and / or personality. demographic. behavior. e. Following are the types of behavioral segmentation. In fact. 27 . e) Social Class: It has a strong influence on a person's preference in cars. while smaller firms will often focus on attracting current users away from the market leader. An air line can specialize in serving people for whom one of these occasions dominates. competitors would enter and introduce brands in the other segments. vacation.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan iii) C D 1 2 3 4 CLUSTERED PREFERENCES: The market might reveal distinct preference clusters. called natural market segments. It might position in the center. and then decide to operate in one or a few geographic areas. First researchers form segments by looking at consumer characteristics. which may include geographic. each positioned in a different segment. They endow their products with brand personalities that correspond to consumer personalities. They use occasions and brands. d) Generation: Each generation is profoundly influenced by the milieu in which it grows up. nationality. STEP THREE PROFILING STAGE: Each cluster is profiled in terms of its distinguished attitudes. c) Income: Another long-standing practice in such product and service categories as automobiles boats. Generally applied in clothing hair-styling. rural. The major segmentation variables are: 1) geographic. People product interests are influenced by their lifestyles. generation. purchase a product. demographic. Occasionally other marketers notice an opportunity for gender segmentation. climate etc. 1 Occasions: Buyers can be distinguished according to the occasions they develop a need. cosmetics. states. GEOGRAPHIC SEGMENTATION: Dividing the market into different geographical units such as nations. psycho-graphics. air travel is triggered by occasions related to business. use of. Marketshare leaders will focus on attracting potential users. psycho-graphic and media-graphics of the respondents. Marketers are increasingly segmenting their markets by consumer lifestyles. STEP TWO ANALYSIS STAGE: The researcher applies factor analysis to the data to remove highly correlated variables. It might develop several brands. STEP ONE SURVEY STAGE: Researchers conduct exploratory interviews and focus on consumer's motivations. If the first firm developed only one brand. b Personality: Marketers also use personality variables to segment marketers. The company's position in the market will also influence its focus. It may position in the largest market segment. The first firm in this market has three options. Market Segmentation Procedure: Marketing research firms uses a three-step approach to identify the segments in the market. cities. clothing. reading habits etc. geographic. race. People within the same demographic group can exhibit very different psycho-graphic profiles. urban. However. and media patterns. first-time users. and regular users of a product. hoping to appear to all groups. income does not always predict the best customers for a given product. and magazines. then apply cluster analysis to create a specific number of (maximally different) segments. income. clothing. Other researchers try to form segments by looking at consumer responses to benefits sought. psycho-graphics and behavioral segmentation. DEMOGRAPHIC SEGMENTATION: In it market is divided into groups on the basis of demographic variables such as age.Cycle Stage: Consumers wants and abilities change with age. Many companies designee products for specific social classes PSYCHO-GRAPHIC SEGMENTATION: In psycho-graphic segmentation. or response to a product. ex users. occupation. Some marketers target baby bombers using communications and symbols that appeal to the optimism of that generation. potential users. Each segment can be given a name. based on dominant distinguishing characteristic. attitude toward. family size. BEHAVIORAL SEGMENTATION: Buyers are divided into groups on the basis of their knowledge of .

Consumers can have varying degrees of loyalty to brands. 4 General Purchase Policy: Serve them who prefer leasing. they don’t constitute separate segments. 3 Location: Which geographical areas should we serve. how many and which ones to target. iv) Switchers: Consumers who show no loyalty to any brand. companies may begin their marketing with one targeted segment. indifferent. Operating Variables: 1 Technology: What customer technologies should we focus on? 2 User /Nonuser status: Should we serve heavy users. 6 Buyers-Readiness Stage: A market consist of people in different stages of readiness to buy a product. Yet business markets can also use several other variable given bellow: Demographic: It may include: 1 Industry: Which industries should we serve. Heavy users are often a small percentage of the market but account for the high percentage of total consumption. positive. negative. however. TARGET MARKETING 1 After identifying market-segments the enterprise has to evaluate them and decide. Some are unaware of the product. engineering dominants. or go after the most desirable. all segmentation are not effective. then expand into other segments. Targeting Multiple Segments: Very often. some are interested. 4 DIFFERENTIABLE: The segment are conceptually distinguishable and respond differently to different marketing -mix elements and programs. service contracts. ii) Split Loyals: Who are loyal to two or three brands. benefit sought and usage rate. iii) Shifting Loyals: Those shift from favoring one brand to another. financially dominants or so forth? 3 Nature of Existing Relationships: Serve companies having strong relations with us. and heavy product users. and other entities. stores. 2 Company size: What size companies should we serve. 2 SUBSTANTIAL: Segment should be large and profitable enough to serve. 5 Locality Status: A market can be segmented by consumer-locality patterns. Marketers usually prefer to attract one heavy user to their product or service rather than several light users. better defined target groups. Now we will examine the process of evaluating and selecting marketing segments: Evaluating the Market Segments: While evaluating the market segments the firm must look at two factors given bellow: I) The overall attractiveness of the segment and 28 . and hostile. 3 ACCESSIBLE: The segment can be effectively reached and served. 4 ACTIONABLE : Effective programs can be formulated for attracting and serving the segments. BASIS FOR SEGMENTING BUSINESS MARKETS: Business market s can be segmented with many of the same variables employed in consumer market segmentation. such as geography. Rather they are increasingly crossing several variables in an effort to identify smaller. To be useful market segments must be: 1 MEASURABLE: The purchasing power and characteristics of the segment can be measured. some are formed. system's purchases or sealed bidding. i) Hard-core loyals: Who buy one brand all the time. some are aware. 7 Attitude: Five attitude groups can be found in a market enthusiastic. light or nonuser? 3 Customer Capabilities: Should we serve customers needing many or few goods or services? Purchasing Approach: 1 Purchasing Function Organization: Should we serve highly centralized or decentralized purchasing organizations? 2 Power Structure Should we serve Co.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan 5 E 4 Usage rate: Market can also be segmented into light. If married and un-married woman respond similarly to a sale on perfume. Buyers can be divided into four groups according to their brand-loyalty. 5 Purchasing Criteria Serve those companies seeking quality? Service? or price? Situational Factors: 1 Urgency: Should we serve companies that need quick and sudden delivery or service? 2 Specific application: Should we focus on certain application of our product rather that all applications? 3 Size of Order: Should we focus on larger or small orders? Personal Characteristics: 1 Buyer Seller Similarity Should we serve companies whose people and values are similar to ours? 2 Attitudes toward risk: Should we serve risk-taking or risk-avoiding customers? 3 Loyalty: Should we serve companies that show high loyalty to their suppliers? Requirements for Effective Segmentation: There are many ways of segmenting a market. The relative numbers make a big difference in designing the marketing program. MULTY ATTRIBUTE SEGMENTATION Marketers no longer talk about the average consumers. some desire the product. and some intend to buy. medium. or even limit their analysis to only a few market segments. medium.

promotion. II) SELECTIVE SPECIALIZATION: Here the firm selects a number of segments. and 4) intersegment cooperation. At the same time. a) Undifferentiated Marketing: In it the firm ignores market-segment differences and goes after the whole market with one market offer. Even if one segment becomes unattractive the firm can continue to earn more in other one. It design a product and a marketing program that will appeal to the broadest number of buyers. but each segment promises to be a money maker. performance and technology side. 3) segment-by-segment evasion plans. This requires extra marketing reach. IV) MARKET SPECIALIZATION: Here the firm concentrates on serving many needs of a particular custom group. there may be little or no synergy among the segments. the company should pay close attention to segment interrelationships on the cost. segment managers should not be so segment-focused as to resist cooperation with other company personnel to improve overall company performance. It relies on mass distribution and mass advertising. the result is increased promotion-planning costs and media costs. Selecting the Market Segment. Socially responsible marketing calls for segmentation and targeting that serve not just the interests of the company but also the interests of those targeted. Selection can be made in any of the following five patterns I) SINGLE SEGMENT CONCENTRATION: The most simplest case in which company selects only one segment and concentrates on it. planning and channel management. Large firms can cover a whole market in two broad ways through undifferentiated marketing or differentiated marketing. sales analysis. Administrative cost: for separate marketing plan for each market segment. In market targeting the issue is not who is targeted but rather how and for what. This multi-segment coverage strategy has the advantage of diversifying the firm's risk. engineering and special tooling costs. 2) segment interrelationships and super segments. In it a company can build strong reputation in the specific product area. A super segment is a set of segments sharing some exploitable similarity. Segment By Segment Invasion Plans: Even if the firm plans to target super segment. V) FULL MARKET COVERAGE: When the firm attempts to serve all customer groups with all the products that they might need. forecasting. Ethical Choice of Market Targets: Market targeting sometimes generates controversy like cigarette markets have generate much controversy. Segment Interrelationships and Super segments: In selecting more than one segment. Companies should also identify and try to operate in super segments rather than in isolated segments. 29 . ADDITIONAL CONSIDERATION IN EVALUATING AND SELECTING SEGMENTS: Following four more considerations must be taken into account in evaluating and selecting segments: 1) Ethical choice of market targets. Intersegment Cooperation: The best way to manage segments is to appoint segment managers with sufficient authority and responsibility for building their segment's business. b) Differentiated Marketing: In it firms operate in several market segments and designs different programs for each segment. The downside risk is that the product may be supplanted by an entirely new technology. each objectively attractive and appropriate. The competitors must not know to what segment(s) the firm will move next. After evaluating the firm decide to which and how many segments to serve. It focuses on buyers needs rather than differences among buyers. given the firm's objectives and are resources. Manufacturing cost: It is usually more expensive to produce 10 units of 10 different products than 100 units of one product.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan 2 1 2 3 4 II) The companies objectives and resources. it is wise to enter one segment at a time and conceal its grand plan. III) PRODUCT SPECIALIZATION: When the firm concentrates on making a certain product that it sells to several segments. differentiated market creates more total sales than undifferentiated It also increase the cost of business the following are the costs: Product modification cost: Modifying a product to meet different market segment requirements usually involves more research and development. Promotion costs: The company has to reach different markets segments with different promotion programs. Only very large firms can undertake a full market coverage strategy. Inventory Costs: It is usually more to manage inventories containing many products than inventories containing few products.

and 7) few others." The number of differentiation’s varies with the type of industry. The main product differentiation’s are 1) features. It includes the speed. 3 FRAGMENTED INDUSTRY: Where company faces many opportunities for differentiation. PERFORMANCE: Refers the level at which the product's primary characteristics operate. DURABILITY: Durability is the measure of the product's expected operating life under natural and / or stressful conditions. the dye to competitive success often lies in adding more value-adding services and improving their quality. 4) customer training. 4)reliability. 3) installation. Product Differentiation: Differentiating the physical products. but these are small advantages. buildings. DESIGN: A most patent way to differentiate and position a company's products and services. companies making special machinery for selected market segments. Third a competitor will usually find a lower-cost production method and offer an even cheaper version. 30 A 1 2 3 4 5 6 7 8 B 1 2 3 4 . constantly about new feature and benefits to win the attention and interests of customers. need to think. steel aspirin. Even when they succeed their competitors adopt such their value package and thus competitive advantages lasts only for a short time. construction. 2)delivery. Here it is difficult to differentiate its product or decrease its cost Companies try to higher better salespeople. Style describes the product's looks and feel to the buyer. It is the totality of features that affect. In it a company can strive for low cast position or the highly differentiated position. e. RELIABILITY: It is the measure of the probability that a product will not malfunction or fail within a specified time period. B)Service. STYLE: Buyers are normally willing to pay a premium for products that are attractively styled. 4 SPECIALIZED INDUSTRY: An industry in which companies faces more opportunities for differentiation and each differentiation can have a high payoff. First cheaper products are often viewed as inferior in quality.g. Yet even here. for several reasons. and 7) design. but each opportunity for competitive advantage is small. how a product looks and functions in terms of customer requirements.g. TOOLS FOR COMPETITIVE DIFFERENTIATION: DIFFERENTIATION is the act of designing a set of meaningful differences to distinguish the company's offering from competitors' offering. 5) customer consulting. Here profitability is correlated with company size and market share. entertain more lavishly.g. Buyers normally will pay a premium for product with more reliability. genuine variation is possible. FEATURES: Features are characteristics that supplement the product's basic function. How exactly can a company differentiate its product form competitors. it will be soundly beaten by the competitor.g. The main service differentiation’s are 1) ordering ease. 2) performance. At the other extreme are products capable of high differentiation. new conveniences and enjoyments. such as automobiles. e. CUSTOMER TRAINING: It refers to training the customers' employees to use the vendor's equipment properly and efficiently. C) Personnel. DELIVERY: Refers to how well the product or service is delivered to the customer. steel industry. Companies therefore. and so on. They provide new guarantees. or E)Image. ORDERING EASE: It refers to how easy it is for the customer to place an order with the company. e. 2 SEGMENTED INDUSTRY: An industry in which there are only few competitive advantages and each is small. CONFORMANCE QUALITY: Is the degree to which all the produced units are identical and meet the promised target specifications. who can a small company can compete against industry leaders? One answer is by differentiating its product and avoiding direct competition. At one extreme the products are highly standardized and allow little variation. 5)reparability. When the physical product cannot easily be differentiated. Industries are of four types: 1 VOLUME INDUSTRY: A Industry in which companies can gain only a few but large competitive advantages. Companies that differentiate their offering solely by cutting their costs and price may be making a mistake. REPARABILITY: Buyers prefer products that are easy to repair. accuracy and care attending the delivery process. D)Channel. INSTALLATION: Installation is the work done to make a product operational in its planned location. e. There are five dimensions A) Product. Buyers of heavy equipment expect good installation service from the vendor. special rewards for loyal users. chicken. second the firm may cut services to keep the price down which may alienate buyers. 3)durability. 6) maintenance and repair.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan CHAPTER-10 Differentiating and Positioning the Market Offering In an industry know for intense competition. Companies are constantly trying to differentiate their market offering or value package from competitors. 6) style. If the firm did not distinguish its offering in any other way than price. Service Differentiation: In addition to differentiating its physical product a firm can also differentiate its services. and furniture.

Reliability The employees perform the service consistently and accurately. An effective image does three things for a product. it delivers emotional power so that it stirs the hearts as well as the minds of buyers. lowest price. In general. SYMBOLS: A strong image consists of one or more symbols that trigger company or brand recognition. Identity comprises the ways that a company aims to identify itself or position its product. Better trained personnel’s exhibit six characteristics Competence: The employee possess the required skill and knowledge. The most commonly promoted number-one positioning are "best quality. Coverage means its dealers are found in more locations than competitors' dealers." Not everyone agrees that single-benefit positioning is always best. Identity Versus Image: It is important to distinguish between identity and image. fastest. Courtesy: The employees are friendly. Second. best service. Image is the way the public perceives the company or its products. • Affordable: The buyer can afford to pay for the difference. it conveys a message in a distinctive way so that it is not confused with similar messages from competitors. Positioning is the act of designing the company's offering and image so that they occupy a meaningful and distinct competitive position in the target customers' minds. a company must avoid four major positioning errors. they risk disbelief and a sole of clear positioning. The company brands and logos should be designed to instant recognition. particularly these channels are 1)coverage. They can offer a better product warranty or maintenance contract than their competitors. How Many Differences to Promote: Many marketers advocate promoting only one benefit to the target market. Third. Each brand should back an attribute and tout itself a s number one on that attribute. Responsiveness The employees respond quickly to customers' requests and problems. Image Differentiation: Even when the offers of two competitors look same. 31 . DEVELOPING A POSITIONING STRATEGY: A company must carefully select the ways in which it will distinguish itself from competitors a difference is worth establishing to the extent that it satisfies the following criteria: • Important: The difference delivers a high valued benefit to a sufficient number of buyers. information system and advising service that the seller offers free or for a price to buyer. They can establish patronage awards. Communication: The employees make an effort to understand the customer and communicate clearly Channel Differentiation: Companies can achieve differentiation through the way they shape their distribution channels. • Superior: The difference is superior to other ways of obtaining the same benefit. Performance: refers to developing and managing direct marketing channels of high quality. Virtually there are unlimited number of specific services and benefits that companies can offer to differentiate themselves from their competitors. buyers may respond differently to the company or brand image. 2)expertise. Credibility The employees are trustworthy. • Distinctive: The difference either is not offered by other or is offered in a more distinctive way by the company. EVENTS: A company can build an identity through the type of events it sponsors. MISCELLANEOUS SERVICES: Companies find many other ways to add value by differentiating their customer services. • Preemptive: The difference cannot be easily copied by the competitors. • Communicable: The difference is communicable and visible to buyers. As companies increase the number of claims for their brand. ATMOSPHERE: Distinctive physical condition in which the origination produces or delivers its products and services is another powerful image generator. and 3) performance. Expertise: means its dealers are typically better trained and perform more reliably. PERSONNEL DIFFERENTIATION: Companies can gain a strong competitive advantage through hiring and training better people than their competitors. best value. MAINTENANCE AND REPAIR: It describes the company's service program for helping customers keep their purchased products in good working order.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan 5 6 7 C D 1 2 3 E 1 2 3 4 CUSTOMER CONSULTING: It refers to data. • Profitable: The company will fine it profitable to introduce the difference. WRITTEN AND AUDIOVISUAL MEDIA: The chosen symbols must be worked into advertisements that convey the company or brand personality. respectful and considerate. Double-benefit positioning may be necessary if two or more firms are claiming to be best on the same attribute. first it conveys a singular message that establishes the product's character and value positions. most convenient and most advanced technology. most customized. safest.

Use / application positioning: This involve positioning the product as best for some use or application. 32 . price. The different positioning strategies that a company can adopt are given bellow: Attribute positioning: This occurs when a company positions itself on an attribute. such as size. Product category positioning: Here the product is positioned as the leader in a certain product category. or manufacturer. User positioning This involves positioning the product as best for some user group. Competitors Positioning: Here the product positions itself as better in some way than a named or implied competitor. Quality / Price positioning: Here the product is positioned as offering the best value for the price. Confused Positioning: Buyers might have a confused image of the brand resulting to many claims or changing the brand's positioning too frequently. Overpositioning: Buyers may have too narrow an image of the brand. number or years in existence. The brand is seen just as just an other entry in a crowded marketplace.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan 1 2 3 4 1 2 3 4 5 6 7 Underpositioning: Some companies discover that buyers have only a vague idea of the brand. Doubtful Positioning: Buyer may found it hard to believe the brand claims in view of the product's features. That he deems it as high standard than his capabilities. Buyers don't really sense anything special about it. Benefit positioning: Here the product is positioned as the leader in a certain benefit.

iv) Coastlines of the new product development process: A company has to develop many new product ideas to find just one worthy of development. or 2 it can contract with independent researchers or new-product-development firms to develop specific products for the company. etc. The new product development route can take two forms. flavors. cannot raise the funds needed to research and produce them. or overpriced. CHALLENGES IN NEW-PRODUCT DEVELOPMENT: New technologies has shortened the product life cycle.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan CHAPTER-11 Developing New Product Every company must carry on new product development. Other companies set their R&D budget by applying a conventional percentage of sales figures or by spending what the competitors spends. A new product may fail due to any one or more of the following reasons. The most common of these are: 33 . An effective organization begins with its top management.e. i) Putting an new idea (favorite to high level executive) inspite of negative market research findings. which is ultimately responsible for the success of the new product. New product development requires management to define the business domains and product categories that the company wants to emphasize. archeological compatibility. or 3 it can buy a license or franchise from another company. iii) Social and governmental Constraints: New product have to satisfy such criteria as to consumer safety. Some companies solve this problem by encouraging and financing as many projects as possible. Thus top management must establish specific criteria for acceptance of new-product ideas. vi) Competitors fight back harder than expected.) iv) Improvements and revisions of existing products: New products that provide improved performance or greater perceived value and replace existing products. There are six categories of new products in terms of their newness to the company and to the marketplace. iii) The actual product is not well designed. not advertised effectively. EFFECTIVE ORGANIZATIONAL ARRANGEMENTS: Successful new product development requires the company to establish an effective origination for managing the new-product-development process. v) Development costs are higher than expected. The companies which fail to develop new products are putting themselves at great risk. iii) Additions to Existing product lines: New product that supplement a company’s established product lines (Package. especially in large multidivisional companies. their may be few ways left to improve the products ii) Fundamental Markets: Keen competition leads to market fragmentation. Replacement products must be created to maintain or build sales. hoping to achieve a few winners. 1 The company can buy other companies. Moreover. 1 The company can develop new products in its own laboratories. v) Repositioning: Exhibiting products that are targeted to new markets or market segments. Companies handle the organizational aspects of new product development in several ways. At the same time the development of a new product is also risky due to the chances of failure. i) New-to-the-world products: New product that create an entirely new market. which are given bellow: i) Shortage of new production ideas in certain areas i. In addition several other factors hinder new-product development. The acquisition route can take three forms. vii) Shorter Product Life Cycle: When a new product is successful rivals are quick to copy it. 2 it can acquire patents from other companies. Research and development out comes are so uncertain that it is difficult to use normal investment criteria for budgeting. company have to face high research and development costs. ii) New product lines: New product that allow a company to enter an established market for the first time. vi) Cost reductions: New product that provide similar performance at lower cost. ii) The idea is good but market size is over estimated. vi) Faster Development Time: Many competitors are likely to get the same idea at the same time and victory often goes to the swiftest. A company can add new product through acquisition and/ or new-product development. A major decision facing top management is how much to budget for new-product development. iv) New product is either incorrectly positioned in the market. v) Capital shortages: Some companies with good ideas. sizes. Still other companies decide how-many successful new products they need and work backward to estimate the required R&D budget investments.

telephone. designers. 3)concept development and testing 4) marketing strategy development. Scientists / Employees: Companies also rely on their scientists. no evaluation. They can find out what customers like and dislike in their competitor's products. of a problem and examining the relationships among them. and 8) commercialization. 2 New Product Managers: Some companies have appointed new-produce managers who report to group product managers.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan 1 1 Product Managers: Many companies assign responsibility for new-product ideas to their product managers. v) Brainstorming: Group creativity can be stimulated by brain storming technique. working with R&D department. and sales representatives. The usual brainstorming group consist of 6 to 10 peoples discussing the specific problem. this position professionalise the new-product function. vi) Synectics: William J. Consumers needs and wants are logical place to start the search for new-product ideas. 5 New-Product Venture Teams: A venture team is a group brought together from various operating departments and charged with developing a specific product or business. a combine machine containing fax. The hope is to find some novel combinations. channel members. the better. engineers. it is easier to tame down than to think up.g. They have first hand exposure to costumers needs and complaints. They can buy their competitors products. b) Autonomy of Object: Let the problem take on a life of its own. 4 New-Product Departments Large companies often establish a new-product department headed by a manager who has substantial authority and access to top management. The product managers are so busy in managing their existing products that they can thought litter about new products. the greater will be the chances of an idea worth pursuing.J Gorder felt the brainstorming sessions tent to produce solutions too quickly. Combining and Improving ideas is encouraged: Participants should suggest how other people's ideas can be joined into more ideas. distributors. In it the consumers are asked about needs. and within an hour over a hundred or more new ideas may find their way into the tape recorder. and copy machine into one unit. Top management: can be another manor source of development of new ideas. before a sufficient number of perspective have been developed. However. 6) product development. IDEA GENERATION: The new product development process with the search. and remember. Quantity is encouraged: The greater the number of ideas generated. and carrying out field testing and commercialization. ii) Forced Relationships: In it several aspects are considered in relation to one an other to create a new product. 34 . Idea Generation techniques: There are a number of techniques of idea generation some are given bellow: i) Attribute Listing: Listing the attributes of an existing product and then modifying each attribute in the search for an improved product. Competitors: Companies can also find good ideas by examining their competitor's products and services. problems and ideas. take them apart. we want as many ideas as possible. what competitors are doing." The ideas start flowing. New product ideas can come from many sources. To be maximally effective their four guidelines Criticism is ruled out: negative comments on ideas must be withheld until later. 1) idea generation. iii) Morphological Analysis: It consist of identifying the structural dimensions. They can lean from suppliers. The chain starts each discussion by saying. employees. new-product managers tend to think in terms of product modification and line extensions limited to their product market. one idea sparks another. c) Use of Common Place: Take advantage of the familiar as a signboard to the strange. Top managers should define the products the available markets and state the new products objectives. scientists. and top management. e. competitors. Freewheeling is welcomed: The wilder the idea. 7) market testing. Customers . Thus he has exposed a very different technique named as synectics method. It have five principles: a) Deferment: Look first for viewpoint rather than solutions. The departments major responsibilities include generating an screening new ideas. Successful companies have established a culture that encourages every employee to seek new ways for improving the company's production. MANAGING THE NEW PRODUCT DEVELOPMENT PROCESS: There are eight stages involved in the new-product development process. 5) business analysis. "Remember. and other employer for new-product ideas. like customers. 2)idea screening. d) Involvement / detachment: Alternate between entering into the particulars of the problem and standardizing back from them. In practice this system have many faults. and build better ones. Channel Members: Companies sales representatives and intermediaries are a particularly good source of new product ideas. 3 New product Committees: Many companies have a high-level management committee charged with reviewing and approving new-product proposals. like production managers. iv) Need / Problem Identification: In it idea generation starts from reviewing consumer needs / problems.

The company determines whether the product idea can be translated into a technically and commercially feasible product. Who will use it. and adopt or reject them? Management must under stand this consumer-adoption process to build an effective strategy for early market penetration. By answering these questions a company can for many concepts. The sales forecast etc. try them. If they do the product concept can move to the product development stage PRODUCT DEVELOPMENT: Until now the idea exists only as a word description. Third: The long run sales and profit goals and marketing mix strategy. A product Image: is the particular picture that consumer acquire of an actual or potential product. We can distinguish among a product ides. CONCEPT DEVELOPMENT AND TESTING: Attractive ideas must be refined into testable product concepts. in hunger. However. COMMERCIALIZATION: If the test is cleared and company has decided to market the product the company have to make heavy expenditure on plant. The consumer adoption process is followed by the consumer loyalty process which the concern of the established producer. 4 Trail: Consumer try the product to improve his estimate of its value. 35 . At this stage a word or picture description can suffice. ii) Which cities. A product Idea is a possible product idea. The goals are to test the new product in more authentic consumer setting and to learn how target the mark to and how consumers and dealers react to handling using and repurchasing the actual product.g. all companies don’t conduct market testing. building. Stages in the Adoption Process: Adopters of the new product have been observed to move through the following five stages: 1 Awareness: The consumer becomes aware of the innovation but lacks information about it. In doing test marketing managers faces several questions like:i) How many test cities. at breakfast etc. 3 Evaluation: Consume consider in the light of information whether to try it or not. and iii) rejects. Management prepares estimates of sales cost and profit and determine whether they satisfy the companies objectives or not. the planned product positioning and the sales mark. BUSINESS ANALYSIS: After developing strategy the company evaluate the product's business attractiveness. When it can be used e. Concept Testing: Concept testing calls for testing product concepts with an appropriate group of target consumers. What primary benefits should it provide. If it cannot do so the companies accumulated project cost will be lost. accidental things suggest analogies that are sources of new viewpoints. CONSUMER ADOPTION PROCESS: How do potential customer learn about new product. MARKETING STRATEGY DEVELOPMENT: After testing the new-product manage must develop a preliminary marketing strategy plan for introducing the new product in to the market. It is better. v) What action is to be taken on the completion of test. i) A Drop-error: When dismissed a good idea. each being a category concept. The concept can be presented symbolically or physically. MARKET TESTING: If the management is satisfied with the products functional and psychological performance. A plan to market the product is consist of three parts: First: Target Market size. IDEA SCREENING: The new developed ideas should be written down and review each week by an idea committee and sot it into 3 groups. iii) Length of test.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan 2 3 4 5 6 7 8 e) Use of Metaphor: Let apparently irrelevant. iv) What information to be collected. a drawing or a prototype. i) Promising Ideas. However the more the tested concepts resemble the final product or experience. that the company might offer to the market A product concept is an elaborated version of the idea expressed in meaningful consumer terms. in winter. distribution strategy and marketing budget for the first year. The company should offer payment or recognition to the employees submitting the best ideas. that where the more risk is involved the product must be market tested. then getting those consumers' reactions. Following are the three questions on which the concepts are based. structure and behavior. and ii) A Go-error: When a company permits a poor idea to move into development and commercialization. a product concept and a product image. There may be two types of errors while idea screening. Second: Planned price. 2 Interests: The consumer is stimulated to seek information about the innovation. ii) Marginal ideas. The product is ready to be dressed up with a brand name packing and preliminary marketing program. Concept Development: A product idea can be turned into several product concepts. At this stage it jumps in investments evaluation and evaluation of costs to be incurred in the earlier stages. the more dependable concept testing is. manufacturing facilities. The marketing strategy will undergo further refinement in subsequent stages.

It is an important factor. marketers recognize a few basic truths about the adoption process: PEOPLE DIFFER GREATLY IN THEIR READINESS TO TRY NEW PRODUCTS: Different people exhibit different behaviors in respect of adopting new ideas. It have more influence on late adopters than early adopters and it is more important in risky situation than is safe situation. They rarely are leaders. one person have. However. ii) The innovation's compatibility: The degree to which it is relatively difficult to understand or use. the more quickly it will be adopted. It is more important in the evaluation stage of the adoption process than in the other stages. iii) Deliberates: They adopt new ideas before the average persons. iv) Skeptical: They adopt a product after a majority of people have tried it. risk and uncertainty. and social approval. LIKE PEOPLE ORGANIZATIONS VARY IN THEIR READINESS TO ADOPT AN INNOVATION: 36 . v) The innovation's Communicability: The degree to which its beneficial results are observable or describable to others.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan 1 2 3 4 5 Adoption: The consumer decides to make full and regular use of the innovation. They can be classified according to following five groups: i) Innovators: Willing to try new ideas at some risk ii) Early Adopters: Those who adopt new ideas early but carefully. i) Innovations relative advantages: The degree it appears superior to the existing products. THE CHARACTERISTICS OF THE INNOVATION PRODUCT EFFECTS ITS RATE OF ADOPTION: Some products gain attention immediately while others take long time to gain acceptance. Five characteristics are especially important in influencing the rate of adoption of an innovation. scientific credibility. v) Laggards: They are suspicious of changes and adopt the innovation only when it takes on a measure for tradition itself. on others attitudes. Factors Influencing Adoption Process: It is sometimes harder to generalize about consumers. PERSONAL INFLUENCE PLAYS A LARGE ROLE IN THE ADOPTION OF A PRODUCT: Personal influence is the effect. Other characteristics that influence the rate of adoption are cost. The new-product marketer has to research all these factors and give the key ones maximum attention in designing the new-product and marketing program. Its significance is greater in some situations and for some individuals than for others. iii) The innovation's Complexity: The degree to which it is relatively difficult to understand or use. iv) The innovation's Divisibility: The degree to which it can be tried on a limited basis.

1 INTRODUCTION: A period of slow sales growth and substantial profit improvement. 4 DECLINE: The period when sales show downward drift and profits erode. Fads do not survive because they do not normally satisfy a strong need or do not satisfy well. 3 Product follows either the standard product-life-cycle or one of several variant shapes. influence the duration of the fad's. Fashion. it is satisfied by some technology. The changing need level is described by a demand life-cycle curve. Each new technology satisfies demand in a better way than the previous technology.g.g. A Style is a basic and distinctive mode of expression appearing in a field of human endeavor. sales start declining and the company gives the other promotion push. Fads are fashions that come quickly into the public eye. 2 GROWTH: A period of rapid market acceptance and substantial profit improvements 3 MATURITY: A period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. profit rise and fall at different stages of the life cycle of the product. 2) Growth. Fads appears to people who are searching for excitement or who want to distinguish themselves from others. and they tend to attract only a limited following. fashions and fads. Many product categories stays at maturity stage indefinitely e. And Fad Life Cycles: There are three special categories of product life cycles that should be distinguished  those pertaining to styles. it can last for generations. Researchers have fond six to seventeen different life cycle patterns. Each of them can have different life cycle. 37 . going in and out of vogue.. Demand /Technology Life Cycle: Remember that most products exist as one solution among many to meet a need. nylon's sales shows a scalloped pattern because of the many new uses. AND BRAND LIFE CYCLES: The product life-cycle concept can be used to analyze product-category. Three common alternate patterns are. and decline very fast. For example jeans are a fashion in today's clothing. newspapers etc. 2 Cycle-Recycle Pattern: In it the company aggressively promotes its new product and this produces the firs cycle. Later. cigarettes. product and brand-lifecycle. A fashion tent to grow slowly. Profit stabilize or decline because of increasing marketing outlays to defend the product against competition. Once the need is identified.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan CHAPTER-12 Managing Life-Cycle Strategies PRODUCTS LIFE CYCLE:(PLC) The product life cycle is an important concept that provides insight into a product's competitive dynamics. 1 Product Category have the longest life cycle. 1) growth-slump-maturity patterns. 3 Scalloped Pattern: Her sales passes through a succession of cycles based on the discovery of the new product characteristics. Profit are nonexistent in this stage because of the heavy expenses incurred with product introduction. If we draw a curve of past sales history of products it will take bell shape and can be divided in to four stages: 1) Introduction. Stages in the Product Life Cycle: To understand the product life cycle one should understand positively that: Product have a limited life. The amount of media attention. Product requires different marketing strategies at different stages of their life cycle. Style. Their acceptance cycle is short. each early. we will firs describe its present concept the demand/technology life cycle. It is difficult to predict whether something will be only a fad or how long a fad will last. To fully explain the PLC. some brand names have a very long PLC. Usually the stages are marked where the rates of sales growth or decline becomes pronounced. and 4) Decline. PRODUCT-CATEGORY. product-form. 2 Product Form: follows the standard life-cycle. more faithfully than product categories. It is difficult to designate where each stage begins and ends. along with other factors. 4 Branded Products: can have a short or long product life cycle. remains popular for a while. 3) Maturity. 2) cycle-recycle patterns and 3) scalloped pattern. Other Shapes of the Product Life Cycle: Not all products exhibit the bell-shaped life cycle. and decline slowly. adopted with great zeal. Once a style is invented. 1 Growth-slump-Maturity Patterns: In it sales grow rapidly when product first introduced and then fell to "petrified" level. PRODUCT-FORM. The petrified level is sustained by the late adopters buying the product for the first time and early adopters replacing the product. uses or users e. A fashion is a currently accepted or popular style in a given field. sales passes through distinct stages. The length of fashion cycle is hard to predict. Marketer should check the normal sequence of stages in their industry and the average duration of each stage. Although many new brands die an early death. and are used to name and launch new products. PRODUCT. which produces a second cycle.

MARKETING STRATEGIES THROUGHOUT THE PRODUCT LIFE CYCLE: Each stage of the product life cycle have an appropriate marketing strategy. distribution. Companies maintain their promotional expenses.buyers are willing to pay high price potential competition is not eminent. Because it takes time to roll out the product in several markets and to fill the dealer pipelines. there are no new distribution channels to fill. . This stage normally lasts longer than the previous stages. promotion. marketing management can set a high or a low level for each marketing variable (price.the firm faces potential competition and wants to build brand preference. Maturity Stage: Here the product's rate of sales growth will slow down. The reasons for slow growth may be i) delay in the expansion of production capacity. In launching a new product. iv) A Slow penetration strategy: Launch a product at low price with low promotional expenses THE MARKET PIONEERS: Companies while entering in the market must decide either to be first in the market which is highly rewarding but risky. ii) delay in obtaining adequate distribution i. II) Stable Maturity: Sales flatten on a per capital basis because of market saturation.e. and expensive.manufacturing cost falls with scale of production and accumulated manufacturing expenses.those who become aware of the product are eager to have it and pay the asking price. . Market is unaware of the product. Profits increase during growth stage as 1) promotion costs are spread over the large volume and 2) unit manufacturing cost fall faster than price decline. This strategy promises to bring about fastest market penetration and the largest market share. ii) Add new models and flanker products iii) Enters new market segments. or to come in later which would make sense that the firm can bring superior technology. MARKETING STRATEGIES IN THE INTRODUCTION STAGE. Considering the price and promotion management can pursue one of the four strategies given bellow: i) A Rapid-Skimming Strategy: Launching product at high price and high promotion level. The high promotion acts to accelerate the rate of market penetration. Introduction Stage: The introduction stage starts when the new product is launched. or brand strength. quality. The early adopters like to adopt the product and additional costumers start to buy the product. This strategy make sense under the following assumptions: . ii) A Slow Skimming Strategy: Launching a product at high price and low promotion. The Growth Stage: Marked by rapid climb in sales.most buyers are price sensitive Strong potential competition. Maturity stage can be subdivided in to three phases. and iii) customer reluctance to change established behaviors. The rate of growth eventually changes from an accelerating rate to decelerating rate. iii) A Rapid Penetration Strategy: Launching a product at low price and spend heavily on promotion. vi) Low down the price to attract the next layer of price-sensitive buyers. Assumptions are: Market is large. MARKET STRATEGIES IN THE GROWTH STAGE: To sustain rapid market growth as long as possible following are the strategies: i) improve product quality and adds new product features and improved styling. The introduce the new product features and expand the distribution chain. retail outlets. and customers start switching to other products. Firms have to watch for the on set of the decelerating rate in order to prepare new strategies. III) Declining Maturity: The absolute level of sales starts to decline.Market is of limited size. v) Shifting from product awareness advertising to product preference advertising. MARKETING STRATEGIES IN THE MATURITY STAGE: Some company abandon their weak products. I) Growth maturity: The sales growth rate starts to decline. sales growth is slow at this stage. This strategy makes sense when . Marketers should systematically consider strategies of market product and marketing-mix modification. iv) Increase its distribution coverage and enters new distribution channels. and the product will enter a stage of relative maturity. 38 . Its characteristics are: Prices remain the same or slightly changes due to change in demand. Seeing the attractive market opportunities competitors enter in the market. and . This combination is expected to skim lot of profit from the market.a large part of the potential market is unaware of the product . . product quality). High price helps to recover much profit per-unit and low promotion keeps the marketing expenses down. Most of the market is aware of the product.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan 1 2 3 The real winner in the fad war are those who recognize them early and can leverage those fads into products with staying power. and it poses formidable challenges to marketing management.

adds message be changed or timing. and decline. a computer program analyzes this and helps manager to decide. Much depends on the exit barriers in the industry. vi) Services: Like speeding up delivery. some firms withdraw from the market. modify its marketing strategy. Here are also three strategies: i) More frequent use: The company can try to get customers to use the product more frequently. 4 Decline Stage: The sales of most product forms and brands eventually decline. They may withdraw from smaller market segments and weaker trade channels. 2 Volume can also be increased by convincing current brand users to increase annual usage of the brand. technical assistance. maturity. If the product has strong distribution and residual goodwill. 39 . re-division of sales territories. iii) Style improvement: increasing to product's aesthetic appeal. that expand the products versatility. reliability. and increased domestic and foreign competition. Those remaining may reduce the number of products they offer. b) Determining Marketing Strategies: Some firms will abandon declining markets earlier than others. b) Product Modification: Managers also try to stimulate sales by modifying the product's characteristics through quality improvement.g. ii) More usage per occasion: try to interest users in using more of the product on each occasion. There are many reasons for sales decline including technological advances. c) Marketing-Mix Modification: Product managers might also try to stimulate sales by modifying other marketingmix elements. The product-review committee examines this information and makes a recommendation for each dubious product leave it alone.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan a) Market Modification: The company might try to expand the market for its mature brand by working with the two factors that make up sales volume. or rapid. and they may cut their promotion budget and reduce their prices further. R&D. volume or early purchase discounts. a company faces a number of tasks and decisions. Sales may polunge to zero or they may petrify at a low level. i) Quality Improvement: Aims at increasing the products functional performance its durability. 1 The company can try to expand the number of brand users in three ways: i) Convert Nonusers: The company can try to attract nonusers to the product. MARKET EVOLUTION: Firms while viewing product life cycle pay particular attention to product or brand rather than to the overall market. increased price outing. or style improvement. they should ask the following questions: i) Prices: Includes a price cut to attract new tries and users. or easier credit terms? Or the raise the price to signal higher quality? ii) Distribution: Obtain more product support and display in the existing outlets. iii) New and more varied uses: The company can try to discover new product uses and convince people to use the product in more varied ways. taste etc. ii) Enter new market segments: Try to enter new segments that use the product but not the brand. The remaining firms will enjoy increased sales and profits. warranties. which products are dubious. The controllers office supplies data. v) Personal Selling: Increase the quality or number of sales-people. and profit erosion. a) Identifying the Weak Products: The first task is to establish a system for identifying weak products. with and without any changes in marketing strategy. If so should the list price be lowed or lowered through price specials. manufacturing. it faces further decisions. The demand / technology life cycle requires to take a broader look at the whole market. shifts in consumer tastes. If the fir can't find any buyers. it must decide whether to liquidate the brand quickly or slowly. size. more outlets be penetrated. This attitude yields the product-oriented picture rather than a market-oriented picture. speed. freight cost absorption. and finance. The manager responsible for the dubious products fill out the ratting forms showing where they thin sales and profits will go. The committee develops the system for identify weak products. introduce product into new distribution channel. As sales decline. additives etc. All lead to overcapacity. It must also decide on how much parts inventory and service to maintain for past customers. rebates. Increase the sales force incentives. iii) Win competitors' Customers: Try to attract the competitors' customers or adopt the brand. STAGES IN MARKET EVOLUTION: Like product market evolve through four stages: emergence. It might be slow. frequency or size of add be changed? iv) Sales Promotion: Making trade deals. and credit facility. the company can probably sell it to another firm. MARKETING STRATEGIES DURING THE DECLINE STAGE: In handling its aging products. safety or convenience. Firms may appoint a product-review committee with representatives from marketing . cents-off-coupons. feature improvement. or drop it. iii) Advertising: Increase the advertising expenditure. ii) Feature Improvement: aims at adding new features e. gifts and contests. weight. growth. c) The Drop Decision: When a company decides to drop a product.

iv) COUNTEROFFENSIVE DEFENSE: Most market leaders. one share point is worth tens of millions of rupees. i) New Users: Finding new users for the product and exploring the new markets. ii) New Uses: Expanding market by discovering and promoting new uses for the product iii) More Usage: Convincing people to use more of the product per use occasion. new uses. 3 Try to increase its market share further even if market size remains constant. Their forces are spread too thin. and Nichers A firm can occupy any of the following six competitive positions in the target market. The firm must change or els exit. The leader cannot remain passive in the face of a competitor's price cut. It is not market abandonment but rather giving up the weaker territories. and lower ranked firms are often called runner up or trailing they can adopt one of the two postures: 1) Attack the leader and other competitors in an aggressive bid for further market share (called market challengers). Followers. Most market challengers strategic objective is top increase their market share. The leader has the strategic choice of meeting the attacker frontly. In many markets. Sustained. product improvement. Or it could try to achieve a grand market envelopment. the leader stretches its domain over new territories that can serve as future centers for defense and offense. 2) They can play ball and not rock the boat (market followers). Planned contraction is a move to consolidate one's competitive strength in the market and concentrate mass at pivotal positions. will respond with a counterattack. Defending the Market Share: While trying to expand total market size. v) MOBILE DEFENCE: It involves more than the leader aggressively defending its territory. like waging guerrilla action against the market by hitting one competitor here. or launching a pricer movement to cut off the attacking formations from their base of operation. third. 2 Defend its current market share through good defensive and offensive actions. vi) CONTRACTION DEFENSE: Large companies sometimes recognize that they can no longer defend all of their territory.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan CHAPTER-13 Designing Marketing Strategies for Market Leaders. A company can launch a preemptive defence in several ways. 5 Weak: have unsatisfactory performance but an opportunity exists for improvement. 3 Expanding Market Share: Market leaders can improve their profitability by increasing their market share. promotion blitz. 3 Favorable: Have a exploitable strength and a better-than-average opportunity to improve its position. 2 Strong: Can take action (without putting in danger its long-term position) regardless competitors action. but first it have to decide as to whom to attack. or sales-territory invasion. MARKET CHALLENGER STRATEGIES: Second. high-pressure strategies and at retaining the initiative at all times and keeping the competition always on the defensive. another there and keep everyone off balance. These are summarized bellow: i) POSITION DEFENCE: The most basic idea is to build an impregnable fortification around one's territory. and competitors are nibbling away on several fronts. Expanding the total Market: Expansion can be made by way of new users. an effective counterattack is to invade the attacker's main territory so that it will have to pull back some of its troops to defend its territory. It requires a decision to attack. ii) FLANK DEFENCE: The market leader should not only guard its territory but also erect outposts to protect a weak front or possibly serve as an invasion base for counterattacking. and reassigning resources to stronger territories. In mobile defense. The best fours of action then appears to be planned contraction (called strategic withdrawal). 4 Tenable: Performing at a sufficiently satisfactory level to continue business but exist in the sufferance of another dominant company and has a less than average opportunity to improve its position. When a market leader's territory is attacked. Challengers. MARKET LEADER STRATEGIES: If a dominant firm want to remain number one it have to take three actions: 1 Find way to expand total market demand. more usage. 1 Dominant: Control the behavior of other competitors and has a wide choice of strategic option. the dominant firm must continuously defend it s current business against rival attacks The leader is like a large elephant being attacked by a swarm of bees. There are six defense strategies that dominant firm can use. Or it could begin sustained price attacks. iii) PREEMPTIVE DEFENCE: A more aggressive defense maneuver is to launch an attach on the enemy before the enemy starts its offense against the leader. Defending the Strategic Objectives and Opponent(s) First of all a market challenger have to define his strategic objectives. 40 1 2 . 6 Nonviable: Unsatisfactory performance and no opportunity to improvement. maneuvering against the attacker's flank. when attacked.

so that the enemy must protect its front. but one that does not ignite competitive relation. thus giving buyer more choice. sides.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan i) Attack the Market Leader: This is a high risk but potentially high-payoff strategy and makes good sense if the leader is "falls leader" who is not serving the market. Take the leader's products and adapt or improve them. iii) Attack small and regional firms which are not doing the job well. iii) Prestige-goods Strategy: Launch a higher-quality product and charge a higher price than the leader. and so on. Market challengers can choose from several specific attack strategies: i) Price-discount Strategy: Selling a comparable product at a lower price. The strategy offers three lines of approaches diversifying into unrelated products. so that the offer is unrefusable. and use lower costs to price more aggressively to gain market share. It means by passing the enemy and attacking easier markets to broaden one's resource base. The aim is to harass and demoralize the opponent and eventually secure permanent footholds. Choosing a Specific Attack Strategy: The above five strategies are very broad. A market follower must know how to hold current customers and win a fair share of new customers. ii) Cloner. Its success depends on combining several principles to improve its position over time. ix) Intensive advertising promotion: Some challengers attack the leader by increasing their expenditure on advertising and promotion. MARKET-NICHER STRATEGIES: 41 . v) Product-innovation strategy: The challenger might pursue product innovation to attack the leader's position. ii) Attack firms of Its own size: That are not doing the sob and are under-financed. The aggressor may offer the market everything the opponent offers and more. and rear simultaneously. A follower is often a major target of attach by challengers. what options are available in attacking an enemy? We can make progress by imaging at opponent who occupies a certain market territory. iii) Imitator: copies some thing from the leader but maintain differentiation in terms of packaging advertising. But leaders never take lightly any effort to draw away their customers. diversifying into new geographical markets and leapfrogging into new technologies to supplant existing products. and endurance. A challenger can rarely improve its market share by relying only one strategy. distribution advertising. It must also enter new markets as they open up. iv) Product-proliferation Strategy: Challenger attack the leader by launching a larger product variety. it must keep its manufacturing costs low and its product quality and services high. 3 ENRICHMENT ATTACK: An attempt to capture a wide slice of the enemy's territory through a comprehensive blitz attack. viii) Manufacturing-cost-reduction strategy: Pursuing lower manufacturing costs than the competitors through more efficient purchasing. The out come depends on who has the more strength. Follower ship is usually not the same as being passive or a carbon copy of the leader. 4 BYPASS ATTACK: Consist of most indirect strategies. The major principle of modern offensive warfare is concentration of strength against weakness. and occasional legal actions. and are under financed. lower labor costs. intense promotional blitzes. vi) Improved-Services Strategy: Offering new or better services to customers. 5 GUERRILLA ATTACK: Consist of small intermittent attacks on the opponent's different territories. Each follower tries to bring distinctive advantages to its target market. This is not to say that market followers lack strategies. ii) Cheaper-goods strategy: The challenger can offer an average or low-quality product at a much lower price. improved service or additional product features. The challenger must put together a total strategy consisting of several specific strategies. The follower has to define a growth path. The guerrilla aggressor uses both conventional and unconventional means to attack the opponent. Choosing a General Attack Strategy: Given clear opponents an objective. In such a case a substantial segment that is unnerved or poorly served provide an excellent strategic target. iv) Adapter. Four broad followership strategies can be distinguished: i) Counterfeiter. MARKET FOLLOWER STRATEGIES: Many runner-up / followers companies prefer to follow rather than challenge the market leader. pricing. Enrichment makes sense where the aggressor commands superior resources and believes that a swift enrichment will break the opponent's will. But often the adopter grows into the future challenger. Follower duplicates the leader's product and package and sells it on the black market or through disputable leaders. It involves launching a grand offensive or several fronts. vii) Distribution-innovation strategy: Discovering or developing new channels of distribution. therefore. These include selective price cuts. The adapter may choose to sell to different markets to avoid direct confrontation with the leader. 2 FLANK ATTACK: When the company attacks the others weak points. We distinguish among five attack strategies: 1 FRONTAL ATTACK: When a company attacks the opponents strengths rather than its weaknesses. and so on. the leader can quickly match these to diffuse the attack. or modern production equipment. The aggressor may attack the strong side to tie up the defender's troops but will launch the real attack at the side or rear. If the runner-up's take any action like lower prices. The cloner emulates the leader's products.

viii) Job-shop Specialist: The firm customize its products for individual customers. vi) Product or product-line specialists: The firm carries or produces only one product or product line. xi) Channel Specialists: The firm specializes in serving only one channel of distribution. The following specialists roles are open to nichers: i) End-user Specialist: The firm specializes in serving one type of end-use customer. Many nichers specialize in serving small customers who are neglected by the majors. is to be a leader in a small market. region or area of the world. 42 . iv) Specific-customer specialists. iii) Customer-size Specialist: The firm concentrates on selling to either small. ii) Vertical-level Specialists: The firm specials at some vertical level of the production-distribution value chain. vii) Product-feature specialist: The firm specials in producing a certain type of product feature. Niching carries a major risk in that the market niche might dry up or be attacked. medium-size.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan An alternative. The firm limits its selling to one or a few major customers. Niche Specialization: The key idea in nichemanship is specialization. v) Geographic Specialists: The firms sells only in a certain locality. Small firms commonly avoid competing with larger firms by targeting small markets of littler or no interest to the larger firms. or large customers. ix) Quality / price specialists: the firm operates at the low-or high-quality ends of the market. x) Service specialist: The firm offers one ore more services not available from other firms. of being a follower in a large market. The company is then stuck with highly specialized resources that may not have high-value alternative uses.

population and income size and growth are high in the initial countries chosen and Dominant foreign firms can establish high barriers to entry. 5 The foreign country might change its commercial laws. 3 Might underestimate foreign regulations and incur unexpected costs. themselves. I DOMESTIC-BASED EXPORT MERCHANT: Who buyers the manufacturer's products and then sells them abroad. II OVERSEAS SALES BRANCH OR SUBSIDIARY: which handles the sales and distribution and might handle warehousing and promotion as well. DECIDING WHETHER TO GO ABROAD: Most companies prefer to remain domestic if their domestic market were large enough. DECIDING WHICH MARKET TO ENTER: The company has to define its international marketing objectives and policies. There are four types of intermediaries. It often serves as a display center and customer-service center. Before going abroad the company must weigh several risks given bellow: 1 The company might not understand the foreign customers preferences an fail to offer competitively attractive products. What proportion of foreign to total sales will it seek? Most companies start small when the venture abroad. IV FOREIGN BASED DISTRIBUTORS OR AGENTS: Highiring foreign based distribution and sales agents. trade secrete or other items of value for a fee or royalty. and direct investment. or undergo a political revolution and expropriate foreign property.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan CHAPTER-14 Designing and Managing Global Marketing Strategies The world is rapidly shrinking with the advent of faster communication. viewing foreign operations as a small part of their business. costs and reputation that are not available to purely domestic competitors. negotiate with them and receives commission it includes trading companies. In it the investment and the risk are somewhat greater but so is the potential return. a company which decides to operate in fewer countries can do so with deeper commitment and penetration in each. joint ventures. Licensing: In it the licenser licenses a foreign company to use a manufacturing process. 4 To reduce firms dependence on any one market. patent. II DOMESTIC-BASED EXPORT AGENT: Who seeks foreign purchasers. devalue its currency. Various methods of licensing are: I MANAGEMENT CONTRACT: When the company exports management services by appointing a manager to help the management of foreign country. Direct Export: Companies may deiced to handle their exports. direct exporting. Indirect Export: It is exporting through independent intermediaries. DECIDING HOW TO ENTER: After deciding the target countries. A GLOBAL INDUSTRY: means an industry in which the position of competitors ( in geographic or national markets) are fundamentally affected by their overall global position. transportation and financial flaws. Some plan to stay small. A company should enter fewer countries when Market entry and control costs are high. trademark. A GLOBAL FIRM: is a firm that operates in more than one country and captures (production. 5 Customer going abroad requires international services. III TRAVELING EXPORT SALES REPRESENTATIVE: The company can send home-based sales representatives abroad to finds business. The company must decide whether to market in a few countries or many countries. 43 B C 1 2 3 . The ways of direct export are given bellow: I DOMESTIC BASED EXPORT DEPARTMENT OR DIVISION: and an export sales manager carries on the actual selling. IV EXPORT MANAGEMENT COMPANY: A company who agrees to manage a company's export activities for a fee. They might be given exclusive rights to represent the manufactures in that country or only limited rights. Its broad choices are indirect exporting. Product and communication adoption costs are high. III CORPORATIVE ORGANIZATION: The export goods on behalf of several producers and are partly under the control of those producers. Generally speaking. Yet there are several factors that might draw a company into international arena: 1 Global firms attach the company's domestic market and the company wants to counterattack these competitors in their home markets to tie up their resources. licensing. 2 Might not understand the foreign country’s business culture or know how to deal effectively with foreign nationals. 4 Company may lacks in managers with international experience. 2 Higher profit opportunities in foreign market than domestic market. 3 When firm needs a larger customer base to achieve economics of scale. it has to determine the best mode of entry.

They creates an international division to handle international activities. 2 Export via independent representative. Promotion: Either adopting some advertising campaigns used in the home market or change them for the local market. It may be of two types a) Backward Invention: re introducing earlier product. A company can produce a a) Regional version: naming it on the basis of the region northern version etc. iii) Product Innovation i) STRAIGHT EXTENSION: Introducing the product in the foreign market without any change. Price: Multinationals face several problems in pricing. They have three choices i Setting a uniform price everywhere in local as well as foreign countries. as to how much adopt the marketing strategy mix to local conditions. Place: Deciding as how the product will reach to the final users. How many intermediaries will be involved in the distribution process. and b) Forward Invention: Creating a new product to meet the needs of an other country. International Division: Involving in several markets by different way. locally in the country in which they are to be soled. DECISION OF MARKETING ORIGINATION: Depending upon the level of involvement in the international arena. There are several levels of adaptation. Global Origination: When it becomes impossible to control through international division then they become global organization. V DIRECT INVESTMENT: Also called direct owner ship of foreign based assembly or manufacturing facilities.) as they enters foreign markets. IV JOINT VENTURES: Foreign and local investors join together by investing and sharing ownership and control. iii Setting a cost based price in each country. They must had to deal with Price escalation. price etc. THE INTERNATIONALIZATION PROCESS In the internationalization process a firm moves through four stages given bellow: 1 No regular export activity. III FRANCHISING: A complete form of licensing. The potential adoptions that firms might make (in respect of their product. ii) PRODUCT ADOPTION: Involves altering the product to meet local conditions or preferences. Let us consider them one by one. ii) Product Adoption. transfer prices dumping charges and gray markets.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan II D 1 2 3 4 E 1 2 3 CONTRACT MANUFACTURING: The manufacturer engages a local manufacturer to product the product on behalf of the company. It can take two forms that are well adapted to a foreign country's needs. DECIDING ON THE MARKETING PROGRAM International companies must have to decide. promotion. 3 Establishing one or more subsidiaries. Product: There are five different product strategies that companies can adopt are i) Straight Extension. licenses to other still make joint venture in the third. 44 . or b) Country Version: iii) PRODUCT INNOVATION: It consists of creating something new. companies may arrange their marketing activities in three ways Export Department: Begins simply by shipping out its goods. The franchiser offers a franchisee a complete brand concept and operating system In return the franchisee invests in the business and pays certain fee to the franchiser. Export to one. ii Setting a market based price in each country. 4 Establishing of production facilitates abroad. The process is called communication adoption. When international sales expand the company organizes an export department consisting of sales manager and a few assistants.

price. newspapers. Supplies and Business Services: Short lasting goods and services helps in developing and managing the finished products. Basic Benefit: Marketers converts the core benefit into basic product the core benefit in getting a hotel room is the buyer rest & sleep while core benefits include a bed. 2 Tangibility.g. Each product type has an appropriate marketing-mix strategy. Specialty Goods: Goods with unique characteristics and for which the buyer habitually willing to make a special purchasing effort e. PRODUCT-LINE DECISIONS: A product line consist of various product lines. Consumer Goods Classification: Consumer buy a vast array of goods we can classify them among convenience. desk etc.e. characteristically compares on such bases as suitability. sociality.g. Augmented Product: That meets the customer's desires beyond their expectations. A consumer buying drill is actually buying a hole. in the process of selection and purchase. adding more product variants and deepen its product mix or pursue more product-line consistency or less. 2) equipment. raw materials and manufactured materials and parts. Product Type: A group in product line that share one of several possible forms of a product. soap. depending upon whether it wants to acquire a strong reputation in a single field or participate in several fields. bathroom. by adding new product lines. Capital Items: Long lasting goods facilitates developing and managing finished products including two groups 1) Installations. men’s suits. towels. Product Line: A group in product class performing some functions. 45 1 2 3 . They fall into two classes. lengths. PRODUCT MIX DECISIONS A product Mid is the set of all products and items that a particular seller offers for sale to buyers. or some other way. A companies product mix has a certain width. immediately. shopping. e. The Depth: refers to how many variants are offered of each product in the line. clothing used cars etc. Material and Parts: goods that enter the manufacturer's product completely. and with a minimum of-effort. PRODUCT CLASSIFICATION: Marketers traditionally classified product on the basis of the varying product characteristic i. inseparable. The Consistency of the product mix refers to how closely related the various product lines are in end use. e. Services: Intangible. 1 Durability. Industrial Goods Classification: Industrial goods can be classified in terms of how they enter the production process and their relative coastlines. depth. and consistency. furniture. like. The Width refers of product mix refers to how many different product lines the company caries. Brand: The name associated with one or more products in the product line. and unsought goods. quality. refrigerator. are soled to the same customer groups. PRODUCT HIERARCHY: It stretches from basic needs to particular items that satisfy needs. size. There are seven levels of product hierarchy. clothing machine etc.e. Consumption System: The way the purchaser performs trying to accomplish the benefits by using the product. consumed by one or few uses. These four dimensions of the product mix provide the handles for defining the company's product strategy. Product Family: All the product classes that can satisfy the core need.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan CHAPTER-15 Product Lines Brands & Packing 1 2 3 4 5 1 2 3 4 5 6 7 FIVE LEVELS OF THE PRODUCT: These five levels constitute consumer value hierarchy: Core Benefit: Is the fundamental benefit that customer really buying. Durability and Tangibility: According to durability and tangibility there are three groups Nondurable Goods. etc. Unsought Goods: Consumer does not know about and not normally think to buy. The Length of product mix refers to the total number of items in its product mix. etc. The can expand its business in four ways i. etc.. A product line is a group of products that are closely related because they perform a similar function.g. production requirements. Product Class: A group of products within the product family. capital items. or fall within given price ranges. variable and perishable. Need Family: The core need that under lies the existence of a product family. Convenience Goods are those goods that the customer usually purchases frequently. fancy goods like cars. and 3 Use. salt etc. Expected Product: A set of characteristics a buyer normally expects while purchasing a product. are marketed through the same channels. Item: A distinct unit in a brand or product line distinguishable by price. and supplies & business services. Shopping Goods: That the consumer. and style e. Tangible. They can be classified in three coups materials and parts. Durable Goods: They are tangible and normally survive many uses. soap. distribution channels.g.

Few customers are brand-loyal. The weak items can be identified through sales and cost analysis. trademark. Line Stretching: When a company lengthen its product line beyond its current range. A brand can convey up to six levels of meanings. upward. stoves. The brand marketer must figure out the specific groups of buyers who are seeking these values. A brand is a seller's promise to consistently deliver a specific set of features. The manager should concentrate on producing the higher-margin items. or a combination of them. a brand identifies the seller or maker. the seller has to confront the branding decision. 4 Culture: The brand may represent a certain culture . 5 Customer is devoted to the brand. they are buying benefits. 1 Attributes: A brand first bring some characteristics of the product. CHALLENGES IN BRANDING: Banding poses several challenges to the marketer. advertising. The concept and measurement of Brand Equity: Brands vary in the amount of power and value they have in the marketplace. The key decisions are discussed in the following section. term.. Branding Decision: The Brand or Not To Brand: While branding the products the management have to review two things the costspackaging. The other occasion for product pruning is when the company is short of production capacity. 3 Value: The brand also conveys something about the producers values. Line Modernization: Even when product-line length is adequate. or design. which have expiration dates. Managers might feature low-end promotional models to service as traffic builders. BRAND DECISIONS: In developing a marketing strategy for individual products. 5 Personality: The brand can also project certain personality. the line might need to be modernized. Under the trademark law. There are two occasions for pruning. or both ways. High brand equity provides a number of competitive advantages: 1 The company will enjoy reduced marketing costs because of the high level of consumer brand awareness and loyalty. sign. Product Line Length: The product line manager should have to maintain a the optimal product-line length. benefits. 2 Customer is satisfied. It may be an overhaul by piecemeal or all at once. 3 Customer is satisfied and would incur costs by changing brand. since customers expect them to carry the brand. Line Pruning: Product-line managers must periodically review items for pruning. 2 Benefits: A brand is more that a set of attributes. Or may feature a high-end item to lend prestige to the product line. in mind of the buyer. logo. No reason the change the brand. 3 The company can charge a higher price that its competitors because the brand has higher perceived quality. labeling. Product-Line Market Profile: The product line manager must also review how the product line is positioned against competitors' product lines. washing machines. Branding is a major issue in product strategy. One is when the product line includes deadwood that is depressing profit. 4 Customer values the brand and sees it as a friend. Customers are not buying attributes . 5 The brand offers the company some defense against fierce price competition. and other appliance. The best brand convey a warranty of quality. especially for price reasons No brand loyalty. WHAT IS A BRAND: A brand is a name. In essence. 46 . A product line is too short if the manager can increase profits by adding times. 6 User: The brand suggest the kind to consumer who buyouts or uses the product. symbol. Five levels of customer attitude towers their brand from lowest to highest: 1 Customer will change brands.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan Each product line is usually managed by a different executive. Product Line Analysis: The product line manager needs to know the percentage of total sales and profits contributed by each item in the line. the seller is granted exclusive rights to the use of the brand name in perpetuity. The company can stretch its line downward. Thus it differs from other assets like patents and copyrights. 4 The company can more easily launch brand extensions since the brand name carries high credibility. The company uses one ore more of these attributes to advertise the product. 2 The company will have more trade leverage in bargaining with distributors and retailers. It can be a name. or other symbol. Intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors. and services to the buyers. Examples or product line are a company manufacturing Consumer Appliances like refrigerators. the line is too long if the manager can increase profit by dropping items. Line Featuring: The product line manager typically selects one or a few items in the line to feature. legal protection and the risk that the product may prove unsatisfying to the user? On the other hand branding gives the user several advantages: 1 Brand name makes it easier for the seller to process orders and track down problems.

cartons crates. protection.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan 2 The sellers brand name and trademark provide legal protection of unique product features. brand extensions. New brands: When a company launches products in a new category. 3 Company and Brand Image: Companies are recognizing the power of well-designed packages to contribute to instant recognition of the company or brand. the company may have to reposition it later. 2 Consumer Affluence: Rising consumer affluence means consumers are willing to pay a little more for the convenience. In recent times packaging has become a potent marketing tool. protection and identification of the product. and prestige of better packages. if any. PACKAGING: PACKAGING includes the activities of designing and producing the container or wrapper for a product. such as new flavors. marine engines. to establish different features or appeal to different buying motives. and make a favorable overall impression. making it easier to launch new brands and gain acceptance by distributors and consumers. 47 . create consumer confidence. large commercial users or industrial consumers. package sizes. which competitors would otherwise be likely to copy. Brand loyalty gives sellers some protection from competition and greater control in planning their marketing program. a can or and container which goes alongwith the product into the hands of the ultimate users. etc. and snowmobiles. It may be a box. Well-designed packages can create convenience value for the consumer and promotional value for the producer. lawnmowers. 3 Branding gives the seller the opportunity to attract a loyal and profitable set of customers. Or customer preferences may shift. Various tools have contributed to the growing use of packaging as a marketing tool: 1 Self-service: An increasing number of products are sold on a self-service basis in super markets and discount houses. In broader sense. motorcycles. It is the immediate wrapping or covering provided alongwith the product to facilitate handling. etc. and so on. 5 Strong brands help build the corporate image. appearance. Brand-Sponsor Decision: A manufacturer has several options with respect to brand sponsorship The product may be launched as a manufacturer's brand (sometimes called nationals brand) a distributor's brand (also called retailer. a bottle. Line Extensions: When the company introduces additional items in the same product category under the same brand name. distribution and identification of products in commercial quantities. Brand-Repositioning Decision: However well a brand is positioned in a market. snow-bowers. It must attract attention. A competitor may launch a brand next to the company's brand and cut into its market share.) for handling. (boxes. Multi brands: A company will often introduce additional brands in the same product category. leaving the company's brand with less demand. 4 Innovation opportunity: Innovative packaging can bring large benefits to consumers and profits to producers. each brand hopes it might be reaching a new audience by associating with the other brand. In the case of co-packaged products. PACKAGING AND LABELING DECISIONS: Many marketers have called packaging a fifth P alongwith price. Various motives are there for it i. product place and promotion. Each brand sponsor expects that the other brand name will strengthen band preference or purchase intention. The package must perform many of the sales tasks. When the present brand image is not likely to help the new product. it may find that non of its current brand names are appropriate. packaging also includes the label and inserts. multi brands. Co-brands: A rising phenomenon is the appearance of co-branding (also called dual branding). is which two or more will-know brands are combined in an offer. colors. house or private brand) or a licensed brand name Brand Name Decision Manufacturer who decide to band their products must choose which brand names to use. For example Honda uses its company name to cover such different products as its automobiles. and some treat it as an element of product strategy. PACKING: refers to the providing overall container. added ingredients. meant for the members of distribution channels. forms. Four strategies are available here: 1 Individual Brand names 2 Blanket family name for all products 3 Separately family names for all products 4 Company trade name combined with individual product names Brand Strategy Decision: A company have five choices when it comes to brand strategy. 4 Branding helps the seller segment markets.e. However these two terms are being used interchangeably. dependability. companies are better off creating new brand names. The company can introduce line extensions. store. usually with new features. describe the product's features. Brand Extensions: Using existing brand name to launch a product in a new category. new brands and co-brands.

introduce a novel dispensing method. characteristics.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan Developing an effective package for a new product requires several decisions. origin. specifications. Once a packaging concept has be determined. The first task is to establish packaging concept. color. It is a piece of written communication informing the user of the product about its name. text and brand mark. maintaining or servicing the product. Secondary Package (Cardboard box) or shipping package( containing dozens of packages of packed product) Labeling: It is a subset of packaging. model or the method of using. size. suggest certain qualities about the product or the company.e. decisions must be made on additional packaging elements i. Not many labels are to carry all this information at one place. Even if the seller prefers a simple label. Packaging concept defines what the package should be or do for the particular product. 48 . or something else. the law may require additional information. handling. type. quality. size. color. Should the package's main function be to offer superior product protection. The label may be a simple tag attached to the product or an elaborately designed graphic that is part of the package. materials . The label might carry only the brand name or a great deal of information. Sellers must label their products. shape. Package might include up to three levels of material Primary package (like bottle).

maximum current profit. they can use several methods. maximum sales growth. There are six types of objectives a company can pursue survival. or product-quality leadership. we will describe a six step procedure for price setting: 1) selecting the pricing objective. and 6) selecting the final price. and offers. iii) Difficult Comparison Effect: Buyer is less sensitive if they cannot compare the quality of product with other product. knowing that it must rely on private gifts and public grants to cover the remaining costs. However it is only a short run objective the firm must have to lean as how to add value. 2) determining demand. c) The high initial price does not attract more competitors to the market d) the high price communicates the image of a superior product. maximum current revenue. vi) Shared-Cost Effect: Buyer is less price sensitive when part of the cost is born by other parties. ii) MAXIMUM CURRENT PROFIT: Many companies set the price that will maximize current profit. In a normal case they are inversely related. Factors affecting price Sensitivity : The demand curve shows the market’s purchase rate at alternative prices. They cut prices to keep the plant running and the inventories turnover. ii) Substitute Awareness Effect: Buyer is less sensitive if he knows less about substitutes. It is also called market penetration pricing. A nonprofit hospital may aim for full cost recovery in its pricing. i) SURVIVAL: If the company is working with over capacity. v) MAXIMUM MARKET SKIMMING: Means setting high prices to "skim" the market. vii) OTHER PRICING OBJECTIVES: Non profit and public organizations may adopt a number of other pricing objectives. and 3) when it enters or bids on new contract work. vii) Sunk Investment Effect: Buyer is less price sensitive when the product its to be used in connection with asset previously bought. ix) Inventory Effect: Buyers are less price sensitive when they cannot store the product. 3) estimating costs. They set the lowest price. Selecting the Pricing Objective: The company first has to decide what it wants to accomplish with particular product offer. The first step in estimating demand is thus understanding the factors that affect the buyers price sensitivity: i) Unique Value Effect: Buyers is less price sensitive if the product is more distinctive. If the objectives of the organization are clear it will be easy to set price. prestige or exclusiveness. assuming the market is price sensitive. prices. Methods of Estimating Demand Curves: Most companies make some attempt to measure their demand curves. the companies stay in business. 2) When it introduces its regular product in a new distribution channel or geographical area. Many managers believe that revenue maximization will lead to long-run profit maximization and market share growth. As long as prices covers the variable cost and some portion of fixed cost. The firm has to consider many factors in setting its pricing policy. 5)selecting a pricing method. 1) First time when it develops new product.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan CHAPTER-17 Designing Pricing Strategies and Programs SETTING PRICE: A firm must have to set its price on three occasion. To do so. In the following paragraphs. Then its major objective shall be to survive. and other factors to estimate their relationship. quantities sold. iv) MAXIMUM SALES GROWTH: Some companies want to maximize unit sales they believe that a higher sales volume will lead to lower unit costs and higher long-run profit. They examine the estimated demand under different price levels and set that price at which the profit or cash inflow is maximum. vi) PRODUCT QUALITY LEADERSHIP: A company might aim to be the product quality leader in the market. i) Statistically analyzing the existing data on past prices. It makes sense under the following conditions a) a sufficient number of buyers have a high current demand: b) the unit cost of producing a small volume are not so high that they cancel the advantage of charging what the traffic will bear. v) End-benefit effect: Buyers are less price sensitive if the expenditure is smaller as compare to the total end benefit of the product. or in intense competition or changing consumer wants. A university aims for partial cost recovery. 4) analyzing competitors' costs. maximum market skimming. iii) MAXIMUM CURRENT REVENUE: Revenues maximization requires estimating only the demand function. Determining Demand: Each price will lead to different level of demand. 49 1 2 . iv) Total Expenditure Effect: Buyer is less sensitive for price if the amount of expenditure is less as a part of their total income. viii) Price Quality Effect: Buyers are less price sensitive when the product is assumed to have more quality. Is sums the reactions of many individuals who have different price sensitivities. Profits are less important than survival.

Notes on Marketing Management Prepared by Muhammad Akhlaq Khan 3 4 5 i) ii) iii) iv) v) vi) 6 ii Conduct price experiments. Systematically carry the prices of several products sold and observed the results. the firm can charge more than the competitor.. for market leaders and for low-cost product. Markups vary considerably amend different goods. The pricing method will then lead to a specific price. If the firm’s offer is inferior the firm is not able to charge more than the competitors. PERCEIVED VALUE PRICING: In it marketer see the buyers perception of value not the sellers cost as a key to pricing. Price Elasticity of Demand: Marketers need to know how responsive. Some wants daily delivery some wants weakly and some wants monthly with the consideration of saving which results the company in different costs. They are collectively called as total cost and when they are divided in to units are called average cost. then the firm will have to price close to the competitor or lose sales. The firm which is making more production can charge low costs because of the expertness of the workers. SEALED-BID PRICING: In it the firm basis its price on expectations of how competitors will price their products. b) Brand with high relative quality and high relative advertising obtained the highest prices. buy competitors' product and take it apart. Analyzing competitors Costs Prices and Offers: Within the range of possible prices determined by the market demand and costs competitors' costs. MARK UP PRICING: A most elementary pricing method is to add a standard markup to the product's cost. They also change as a result of a concentrated effort by the company's designers. slower moving items. Following are the price setting methods. Then they set the competitive price of the product from this they deduct profit margin and this leaves the target cost they must have to achieve. it can use them a s an orienting point for its own pricing. GOING RATE PRICING: Basing price on competitors price. TARGET RETURN PRICING: A price which yields organization target rate of return on investment. demand would be to a change in price. Therefore a company have to make activity-based cost accounting instead of standard cost accounting. Selecting a Pricing Method: Now the organization will be ready to select a price. and demand-inelastic items. including a fair return for its effort and risk. ii) The influence of Other Marketing Mix Elements on Price: The final price must take into account the brands quality and advertising relative to competition. fixed and variable. The company can send out comparison shoppers to price and assess competitors' offers. If the firm’s offer is similar to a manor competitor's one . Target Costing is a Japanese technique. Markups are generally higher on seasonal items ( to cover the risk of not selling). Once the company is aware of competitors' prices and offers. Conversely brands with low quality and low advertising charred the lowest prices. items with high storage and handling costs. COST BEHAVIORS: At different product ion Levels: Management should know how cost vary with different levels of production. specialty items. or elastic. 50 . The company wants to charge a price that covers its costs of producing. and alternative approach is to charge different prices in similar territories to see how sales are affected. iii) Asking buyers to state how many units they would buy at different proposed prices. prices and possible price reactions help the firms establishing where to set its prices. In considering the final price following additional factors should be considered. Selecting the Final Price: Pricing methods arrows the pricing range. Estimating Costs: Demand sets a ceiling of the price while costs sets the floor. Companies also charge when hidden or highly variable costs are involved. With research they determine product desired functions. a) Brands with average quality but high relative advertising budgets were able to charge premium prices. distributing. There are three major considerations in price setting 1) cost 2) competitors prices and 3) prices of substitutes. and selling the product. acquire competitors' price lists. and purchasing agents to reduce them. Target costing: Costs change with production scale and experience. i) Psychological Pricing: Many consumers use price as an indicator of quality. Company may select any pricing method that includes one or more of these three considerations. It will be some where between one that is too low to produce profit and that is too high to produce enough demand. It say that the price should represent the high value offered to consumers. engineers. c) The positive relationship between high prices and high advertising held most strongly in the later stages of the product life cycle. As a Function of Differentiated Marketing Offers: Different buyers want different terms. VALUE PRICING: Charge a fairly how price for a high quality offering. If the firm's offer is superior. TYPES OF COSTS: A company's costs take two forms. As a Function of Accumulated Production: Change of costs due to different levels of production. and ask buyers how they perceive the price and quality of each competitor's offer.

d) Low Interest Financing: Instead of decreasing price the company offer customers low-interest financing. f) Warranties and service contracts: The company can promote sales by adding a free warranty offer or service contract.g. How will the distributors and deals feel about it? will the company sales force be silting to sell at that price or complain that the price is too high? How will competitors react to Adopting the Price: Companies usually not set a single price but sets a pricing structure reflecting i) GEOGRAPHICAL PRICING: Pricing in different location. a) Cash discounts: For early payment. c) Captive product pricing: Some products require the use of ancillary or captive product. Pricing these options is sticky problem. COUNTERTRADE FORMS: 1 Barter: Direct exchange of goods. 2) optional-feature pricing. b) Quantity Discount: Discount allowed for large purchases. in any of the following ways.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan iii) 7 Companies Pricing Policy: The contemplated price must be consistent with company pricing policies. d) Seasonal Discount: For out of season products. They charge a fixed fee plus a variable usage fee. Either to charge high price to distant customers or low price to increase the volume of sales. Management must decide on pricing steps to establish from one line to the next. 4)two-part pricing. iv) Impact of Price on Other parties: Management should also consider the reaction of parties to the contemplated price. g) Psychological Discounting: Putting an artificially high price on product and then offering it at substantial savings. e. e) Allowances: Are other types of reductions from price such as at the time of launching new product. selling and record keeping. or hour. e) Time pricing: Prices are varied by season. Many companies set up a pricing department to develop pricing policies and establish approve pricing decisions. 3) captive-product pricing. Moreover whether the price will be revived in hard cash or in other items in payment which cause counter trade. We can distinguish six situations involving product-mix pricing: 1) product line pricing. razor and blades camera and camera films etc. day. 5) byproduct pricing. d) Location Pricing: When same product is priced differently at different locations even though the cost of offering at each location is the same. V) PRODUCT PRICING MIX: The pricing logic must be modified when the product is a part of productmix. The techniques are : a) Loss Leader Pricing: Selling at less than cost to increase sales. b) Product Form Pricing: Different versions of the product are priced differently. rather than single product. It can take several forms: a) Customer Segment pricing: Different customer groups are charged different prices for the same product. and competitors’ prices. and 6) product-bundling pricing. c) Functional Discount: For performing certain functions such as storing. 51 . 4 Offset: Seller received full amount in cash but agrees to spend a substantial amount of that in that country. b) Special-event pricing: Like Eid and Christmas c) Cash Rebates: for a special time period. 2 Compensation Deal: Some percentage is received in cash and remaining in goods. ii) PRICE DISCOUNT ALLOWANCE: Most companies reward customers for 1) early payment 2) volume purchased and 3) off season buying.. because companies must have to decide which item is to include in the sticker price and which to offer as options. iv) DISCRIMINATORY PRICING: When company sells one product at two or more prices that do not reflect a proportional difference in costs. a) Product line Pricing: Companies normally develop product lines.g. e. iii) PROMOTIONAL PRICING: Companies uses several pricing techniques to stimulate early purchase. Manufacturers of main product often price them low and set high markups on the supplies. customer evaluations of different features. d) Two-part pricing: Service firms often engage in this type of pricing. Thus telephone users pay a minimum monthly fee plus charges for calls beyond a certain limit. b) Optional-feature pricing: Many companies offer optional products or features alongwith their main product. lower admission fee for children and higher for the senior citizens. cities and countries. In such a case the firm searches for a set of prices that maximize the profits on the total product mix. The price steps should take into account cost differences between different lines. c) Image pricing: Pricing same product at two different levels based on image differences. e) Longer Payment Terms: Sellers stretch their loans over longer periods and thus lower monthly payments. 3 Buyback Arrangement: The seller sells the plant and technology and agrees to accept partial in cash and partial payment in the products manufactured with that equipment.

this practice is called anticipatory pricing. Since customers may not have planned to buy all of the components. Customers will shift to another lower-price firm that comes along. v) Using less expensive packaging material or promoting larger package size to keep down packaging cost. f) Product-building Pricing: When the sellers bundle their products at a set price with some saving. This strategy also involves high risks: i) Low quality trap: Consumers will assume that the quality is below that of the higher priced competitors. The possibilities include the following: I) Shrinking the amount of product instead of raising the price. to restore their market they have to decries their price. Reactions to Price Changes: Any price change can effect the customers. Any income earned on the byproducts will make it easier for the company to charge a lower price on its main product. ii) Fragile-market-share trap: A low price buys market share but not market loyalty. or may do both. and suppliers and may provoke government reaction as well. or ration supplies to customers. Customers are most price sensitive to products that cost a lot and are bought frequently. If the by-products have value to the customer group. Companies often raise prices by more than the cost increase in anticipation of further inflation or government price controls. The circumstances provoking price increases are: a) Cost Inflation: Rising costs unmatched by productive gains squeeze profit margins and lead companies to regular round to increase prices. e) Try to Dominate the Market through Lower Cost: and to increase their market share. Other ways of Responding High Costs: There are some ways that a company can respond to high costs or demand without raising prices. ii) Substituting less-expensive materials or ingredients. COMPETITORS REACTIONS: A firm changing its price had to be worried about competitors’ as well as customers’ reactions. INITIATING AND RESPONDING TO PRICE CHANGES: After developing price strategies. iii) Unbundling of goods and services: The company maintains its price but removes or prices separately one or more elements that were par of the former offer. vii) Creating new economy brands. competitors. vi) Reducing the number of models offered. iii) Shallow-pockets trap: High priced competitors may also cuts their price and may have longer staying power because of deeper cash reserves. Competitors are most likely to react where the number of firms in the industry is small the 52 e) . They may treat it as a decrease in quality or strength of the company. While passing on price increases to the customers. Initiating Price Cuts: There are many circumstances which lead a firm to cut its prices: a) Excess Plant capacity: and additional revenues cannot be generated without price reduction. it can raise its prices. such as free delivery or installation. Initiating Price Increases: Successful price increase can increase profits considerably if the sales volume is unaffected. the company needs to avoid the image of a price gouge. CUSTOMERS’ REACTIONS: Customers often question about the motive behind the reduction or increase in price. iv) Reduction of discounts: The company instructs its sales force not to offer its normal cash and quantity discounts. or long warranties. because customer will turn against the price gougers when the market softens. iii) Reducing or removing product features to reduce cost. On the other hand an increase in price may seem them that the item is hot and might be unobtainable if it is not bought soon. then they should be priced on their value. if competitors forces it to do so.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan By-product pricing: The production of certain products often results in the development of by-products. b) Declining Market Share: When companies found that they are loosing their market share. the savings on the price bundle must be substantial enough to induce them to buy the bundle. such as installation. A company might also have to decide whether to raise the price sharply on a one-time basis or to raise it by small amounts several times. while they hardly notice higher prices on low-cost items that they buy infrequently. distributors. iv) Removing or deducing product service. companies will face situations where they need to cut or raise prices. In over demand situation price can be increased in several ways: i) Adoption of delayed quotation pricing: When company does not fix the price of its product until it is finished or delivered. A seller can charge more than competitors and still get the business if the customer can be convinced that the products total lifetime costs are lower. b) Over Demand: When a company cannot supply all of its customers. free delivery. ii) Use of escalator clauses: When company requires the customers to pay today’s price and all or any part of inflation increase that takes place before delivery.

b) it would lose market share because the market is price sensitive. Before reacting the firm need to consider the following issues: 1) Why did the competitors change the price? 2) Does the competitor plan to make the price change temporary or permanent? 3) What will happen to the company’s market share and profits if it does not respond? 4) What are the other competitors and other firms’ responses likely to be to each possible reaction? Market leaders often face aggressive price cutting by smaller firms trying to build market share. Increase price and improve quality: The leader might raise. and the buyers are highly informed. The company under attack has to consider • the product’s stage in the life cycle. • the market price and quality sensitivity. Raise perceived quality: The leader could maintain price but strengthen the value of its offer.. and • the company’s alternative opportunities. 3. This is necessary if the particular market segment being lost is price sensitive. When the attacking firms product is comparable to the leaders. 53 . 5. Maintain price: The leader maintain its price and profit margin . Launch low-price fighter line: One of the best responses is to add lower-price items to the line or to create a separate lower-price brand. It could improve its product. The firm should search for ways to enhance its augmented product. 2. the firm has little choice but top meet a competitor’s price cut. The problem is complicated because the competitor can put different interpretations on a company price cut and take such action which may surprises the company. If it cannot find any way it have to meet the price reduction. • the competitor’s intentions and resources. and communications. The best response varies with situation. • the behavior of costs with volume. It could stress the relative quality of its product over that of the low-price competitors. Reduce Price: The leader might drop its price to the competitor’s price. believing that: a) It would lose too much profit if it reduced its price b) it would not loose to much market share. services. its price and introduce new brands to market the attacking brand.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan product is homogeneous. and c) it could regain market share when necessary. Responding to Competitors’ Price Changes: How should a firm respond to a price change initiated by a competitor? In markets characterized by high product homogeneity. • its importance in the company’s product portfolio. The leader at this point has several options: 1. 4. its lower price will cut into the leader’s share. When it believes a) its cost fall with volume. When there are several competitors the company must estimate each close competitor’s likely reaction. and c) it would be hard to rebuild market share one it is lost.

g. The market intermediaries make up a marketing channel. A zero-level channel (Also called direct marketing). such as retailer. CHANNEL-DESIGN DECISIONS: In designing marketing channels. 54 . 2 Promotion The development and dissemination of persuasive communications designed to attract customers to the offer. 1 They have lack of financial resources to carry out direct marketing. manufactures have to decide what is ideal. iii) SPECIAL CONVENIENCE: The degree to which the marketing channel makes it easy for customers to purchase the product. Members of the marketing channel perform a number of dye functions: 1 Information: The collection and distribution of marketing research information about potential and current customers. Its major types are door-to door sales. It overcomes the time. recycling centers. A three-level channel involving three levels of intermediaries. Why Intermediaries Used: Producers gain several advantages you the use of intermediaries. the greater the service output level that the channel must provide. The smaller the size. 3 Negotiation: The attempt to reach final agreement on price and other terms so that transfer of ownership or possession can be effected.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan CHAPTER-18 Selecting and Managing Marketing Channels Between the producer and the final user stands the marketing channel. and possession gaps that separate goods and services from those who need or want them. where. TV. selling and manufacturer-owned stores. A one-level channel One selling intermediary. when and how target customers buy) is the first step in designing the marketing channel. mail order. 2 If direct marketing is not feasible 3 The producers who establish their own channels can often earn a greater return by increasing their investment in their main business (Production of the goods). competitors and other actors. iv) PRODUCT VARIETY: The assortment breadth provided by the marketing channel. trash collection specialists. place. Channel Levels: Each intermediary that performs work in bringing the product and its title closer to the final buyer constitutes a channel level. and what is available. They must also understand the service output levels desired by the customers the types and levels of services that people want and expect when they purchase a product. 2)establishing channel objectives. Obviously different channels are set up for household buyers and the resale purpose buyers. 5 Risk taking: The assumption of risks connected with carrying out the channel work. 8 Title: The actual transfer of ownership from one organization or person to another. WHAT ARE THE MARKETING CHANNELS: Marketing channels are the sets of interdependent organizations involved in process of making a product or service available for use. 6 Physical possession: The successive storage and movement of physical products from raw materials to the final customers. They are also called trade channel or distribution channel. Channels produce five channel out puts: I) LOT SIZE: It is the number of units that the marketing channel permits a typical customer to purchase on a occasion. consist of a manufacturer selling directly to the final customer. Several intermediaries play a role in backward channels e. 4 Financing: The acquisition and allocation of funds required to finance inventories at different levels of the marketing channel. 1 Analyzing Customers’ Desired Service Output Levels: Understanding (what. One can also talk about backward channels. what is feasible. 7 Payment: Buyers’ payment of their bills to the sellers through banks and other financial institutions. In consumer markets they are typically a wholesaler and a retailer. why. trash-recycling brokers etc. By using the number of intermediary levels we designate the length of a channel. A two-level channel contains two intermediaries. Channel normally describe a forward movement of products. ii) WAITING TIME: The average time that customers of that channel wait for receipt of the goods. It is the recycling of solid wastes. Designing of a channel system calls for: 1)analyzing customer needs. and 3) identifying and evaluating the major channel activities. telemarketing. they are part of every channel. softdrink intermediaries. Since the produce and the final customer both perform work. Channel Functions and Flows: A marketing channel performs the work of moving goods from producers to consumers.

b) Selective Distribution: It involves the use of more than a few but less than all of the intermediaries. a) Price Policy: the producer establish a price list and schedule of discounts that the intermediaries see as equitable and sufficient. 1 Selecting Channel Members: 55 . When the consumer requires a great deal of location convenience. the greater the work provided by the channel. product training and promotional support. The greater the service backup. credit. They are of following three types: a) Company Sales Force: Expand the companies direct sales force. c) Intensive Distribution: The manufacturer places the goods or services in as many outlets as possible. b) Distributors’ territorial Rights: Distributors want to know where and under what terms the producer will enfranchise other distributors. This strategy is generally used for convenience items. Channel arrangements must also be modified over time. These commitments invariably lead to a decrease in the producer’s ability to respond to a changing marketplace. It is used to maintain a great deal of control over the service level and service outputs offered by the revelers.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan v) SERVICE BACKUP: The added services like. CHANNEL-MANAGEMENT DECISIONS: After choosing a channel alternative. making sure that each channel member is treated respectfully and given the opportunity to be profitable. b) selective distribution. Most marketing managers believe that company sales force will sell more and some believes that sales agency could conceivably sell more than a company sales force. individual intermediaries must be selected. b) Manufacturers’ Agency: Higher manufacturers’ agents in different regions or en-use industries to sell the new test equipment. Each alternative needs to be evaluated against economic. 4 Evaluating the Major Channel Alternatives: The producer may identify several channel alternatives and have to determine the one best suited to its needs. Used by the old and new companies seeking to obtain distributors. who will buy and audio device. or services. Assign sales representatives to territories to contact all prospects in the areas. 2 Establishing the Channel Objectives and Constraints: Channels objectives should be stated in terms of targeted service output levels. c) Mutual services and responsibilities: must be carefully spelled out. provided by the channel. Several market segments desire differing service outputs. control and adaptive criteria. In rapidly changing or uncertain product markets. adequate margins. delivery. or to develop the different sales force for different industries. conditions of sale territorial rights. ii) CONTROL CRITERIA: The produce must take into account control issues. A channel alternative is described by three elements i)the types of available intermediaries. because it is an independent business firm seeking to maximize its profit. the producer needs to seek channel structures and policies that maximize control and ability to change marketing strategy swiftly. ii) TERMS AND RESPONSIBILITY OF CHANNEL MEMBERS: The producer must determine the rights and responsibilities of the participating channel members. not necessarily of the manufacturer’s goods. c) Industrial Distribution: Find distributors in different regions and end-use industries. Using a sales agency poses a control problem. especially in franchised and exclusive-agency channels. motivated and evaluated. iii) the terms and responsibilities of each channel participant. who are willing to carry a particular product. ii) the number of intermediaries needed. a) Exclusive Distribution: Severely limiting the number of intermediaries handling the company’s goods. repairs. i)TYPES OF INTERMEDIARIES: The firm needs to identify the types of intermediaries available to carry on its channel work. the channel members must make some degree of commitment to each other for a specified period of time. i) ECONOMIC CRITERIA: Each channel can produce different level of sales and costs. Under competitive conditions. installation. 3 Identifying the major channel Alternatives: After defining the target market and desired positioning it should identify its channel alternatives. iii) ADAPTIVE CRITERIA: To develop a channel. channel institutions should arrange their functional tasks so as to minimize total channel costs with respect to desired levels of service outputs. The first step is to determine whether a company sales force or sales agency will produce more sales. Give them exclusive distribution. and specific services to be performed by each party. The main elements in the trade relations mix are price policies. Three strategies are available a) exclusive distribution. ii) NUMBER OF INTERMEDIARIES: Companies have to decide the number of intermediaries to use at each channel level. and c) intensive distribution. The agents may concentrate on the customers who buy the most. Effective channel planning requires determining which market segments to serve and the best channels to use in each case.

Some producers have no trouble in recruiting intermediaries. v) REFERENT POWER: occurs when the manufacturer is so highly respected that intermediaries are proud to be identified with it.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan 2 3 4 1 Different producers attract qualified intermediaries differently within the chosen channel. Following are some ways to motivate them: I) COERCIVE POWER: When the manufacturer threatens to withdraw a resource or terminate a relationship if intermediaries fail to cooperate.. this basis of power weakens The manufacturer must continue to develop new expertise so that the intermediaries will want to continue cooperating. average inventory levels. even if this goal reduces profit for the system as a whole. or the retailer. The system will require periodic modification to meet new conditions in the marketplace. Modifying Channel Arrangements: A producer must do more than design a good channel system and set it into motion. and e) reputation. A vertical marketing system (VMS). c) Franchise Organizations: A channel member called a franchiser might link several successive stages in the production-distribution process. Manufacturers of a dominant brand are able to secure strong trade cooperation and support from revelers. Motivating Channel Members: A manufacturer must have to motivate the intermediaries to do their best fob. the wholesaler. iii) CONTRACTUAL VERTICAL MARKETING SYSTEM: It is consist of independent firms at different levels of production and distribution integrating their programs on a contractual basis to obtain more economise and sales impact than they could achieve alone. The producer has to determine the required characteristics of better intermediaries. iii) LEGITIMATE POWER: When the manufacturer requires a behavior that is warranted by the contract. Each is a separate business entity seeking to maximize its own profits. d) cooperativeness. ii) administered. It is a professionally managed and centrally programmed networks. They will want to evaluate intermediaries on the basis of : a) Number of years in business. b) the other lines carried by them. CHANNEL DYNAMICS: Distribution channels do not stand still. It produces better results than coercive power but can be overrated. The VMS can be dominated by the producer. and new channel systems evolve. wholesaler(s). i) CORPORATE VERTICAL MARKETING SYSTEM: Combining successive stages of production and distribution under single ownership. by contrast. 2)horizontal. c) growth and profit records. consumer buying patterns change. ii) REWARD POWER: When the manufacturer offers intermediaries an extra benefit for performing specific acts or functions. comprises the producer. New wholesaling and relating institutions emerge. 56 . This is an effective form of power. and 3) contractual. whole seller(s) and retailer(s) acting as a unified system. ii) ADMINISTERED VERTICAL MARKETING SYSTEM: Coordinate successive stages of production and distribution not through common ownership but through the size and power of one of the members. and retailer(s). Modification becomes necessary when existing channel is not working as planned. pre-engineered to achieve operating economies and maximum market impact. innovative distribution channel emerge and the product moves into later stages in the product life cycle. a promise of exclusive or selective distribution will draw a sufficient number of applicants and some producers have to work hard to get qualified intermediaries. treatment of damaged and lost goods. Evaluating Channel Members: The producer must periodically evaluate intermediaries’ performance against such standards as sales-quota attainment. The manufacturer feels it has this right and the intermediaries have this obligation. and 3)multi-channel marketing systems. We will see how these systems cooperate. customer delivery time. new competitions arises. b) Retailer Cooperatives: Retailer might take the initiative and organize a new business entity to carry on wholesaling and possibly some production. Recently the market channels have grown as 1) vertical. One channel member owns the others or franchises them or has so much power that they all cooperate. and cooperation in promotional and training programs. This power is quit effective if the intermediaries are highly dependent upon the manufacturer. Vertical Marketing Systems: It is a challenge for the conventional marketing channels. and compete. if intermediaries would perform poorly without this help. Contractual VMSs are of three types: a) Wholesaler sponsored voluntary chains: Wholesales organize voluntary chains of independent retailers to help them compete with large chain organizations. the market expands. d) solvency of the intermediary. conflict. iv) EXPERT POWER: Can be applied when the manufacturer has special knowledge that the intermediaries value. Once the expertise is palled on to the intermediaries. There are three types of VMS: I) corporate. It is favored by companies that desire a high level of control over their channels. A conventional marketing channel comprises an independent producer.

and 3) is the more customized selling. 2) the channel cost will be lower. 1) increased market coverage. By adding more channels companies can gain three important benefits. production or marketing resources to venture alone. Multi-channel Marketing System: It occurs when a single firm uses two or more marketing channels to reach one or more customer segments. know-how. Each company lacks the capital. The companies might work with each other on a temporary or permanent basis or create a separate company. or it is afraid of the risk.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan 2 3 Horizontal Marketing Systems: In it two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity. (See Lesson Notes for this chapter at page 24) 57 .

Warehousing: He hold inventories. It is a key tool for differentiating one store from another. PROMOTION DECISION Retailers use a vide range of promotion tools to generate traffic and purchases. Retailers in most product categories can position themselves as offering one of four levels of services. wholesalers are used when they are more efficient in performing one or more of the following functions: Selling and promoting: They provide a sales force who helps the producer to reach many small business customers at a relatively low cost. Management Services and Consultancy They help retailers in improving their operations. Retailer Marketing Decisions: Retailers have to make marketing decisions about 1) target market.19 Managing Retailing. Wholesalers differ from retailers in a number of ways: First: Wholesalers pay less attention to promotion. atmosphere. the product-and-service-assortment mix. 5) price. PLACE DECISION: There are three keys to the success are location. discount stores. but usually the two do not go together. Risk Bearing: Wholesaler absorb some risk by taking title and bearing the cost of theft. All retailers would like to charge high markups and achieve high volumes. and Retail Organizations. and wholesalers usually cover a large trade area than retailers. Each retailer. and competition. off-price retailers. runs special sales.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan Chapter . and increasing number are falling under some form of corporate retailing. 58 1 2 3 1 2 3 4 5 6 1 2 3 4 5 6 7 8 9 . Types of Retailers: Store retailing.. thereby reducing the inventory costs and risks to suppliers and customers. or downscale shoppers? Do they want variety assortment depth. midscale. Buying and assortment building: Wholesalers are able t select items and build the assortments where customers need. training their employees and telling them about layouts and displays. NONSTORE RETAILING: It is growing much faster than store rtailing. 2) direct marketing. Why are whole-salers used ? Manufacturers could by pass them and sell directly to retailers or final consumer. They may also help their supplier by providing training and technical services. In general . Third: the government deals with wholesalers and retailers differently in regard to legal regulations and taxes. super stores. issue money-saving coupons. and location because they are dealing with business customers rather than final consumers. 3) automatic vending. SERVICE AND STORE ATMOSPHERE DECISION: Retailer must also decide on the services mix to offer customers. 3)Limited-service retailing and 4) Full. 6) promotion and 7) place. New store types emerge to meet widely different consumer preferences for service levels and specific services.ASSORTMENT AND PROCUREMENT DECISION: The product assortment must match the target . RETAIL ORGANIZATIONS Although many retail stores are independently owned.service retailing. Wholesaling excludes manufacturers and farmers because they are engaged primarily in production. Non store retailing. supermarkets. 2) Self-selection retailing. Financing: They finance their customers by granting them credit. thus saving the customers considerable work. etc. damage. Second: Wholesale transactions are usually larger than retail transactions. STORE RETAILING: The most important retail-store types fall into eight categories specialty stores. PRICE DECISION: It is the key positioning factor and must be decided in relation to the target market. and finance their supplier by ordering early and paying their bills on time. 21) product assortment and procurement. must use promotion tools that support and reinforce its image positioning.arlet’s shopping expectations. 3) services and store atmosphere. location and location. 1) Selfservice retailing. Wholesaling. and Market logistics RETAILING: Retailing includes all the activities involved in selling goods or services directly to final consumers for their personal. Market Information: Supply information to the manufacturer and the customers. department stores. TARGET MARKET DECISION: Should the store focus on upscale. WHOLESALING: Wholesaling includes all the activities involved in selling goods or services to those who buy for resale or business use. Transportation: They provide quicker delivery to buyers because they are closer to the buyers than the manufacturer. and obsolescence. They place ads. spoilage. and catalog showrooms. Bulk Breaking: He achieve savings for their customers through buying in large carload lots and breaking the bulk into smaller units. Non-store retailing falls into four major categories: 1) direct selling. and it excludes retailers. A retailer or Retail Store is any business enterprise whose sales volume comes primarily from retailing. and 4)buying services. convenience stores. Retail organizations achieve many economies of scale. nonbusiness use. or convenience? PRODUCT .

on-time delivery performance. The company has to decide the number of stocking locations. Managers try to choose a set of whorehouses and transportation carriers that will deliver produced goods to final destinations in the desired time and at the lowest total cost. Market Logistics: involves planning. Objectives of Market Logistics: Some companies state their market-logistics objectives as “getting the right goods to right places at the right time for the least cost. and the condition of the goods when they arrive. this objective provides little practical guidance. implementing. Market-Logistics Decisions: There are four major decisions that must be made with regard to market logistics 1) Ordering Process. The number of stocking locations must strike a balance between customer service levels and distribution cost. 2) Warehousing. A storage facility is necessary because production and consumption cycle rarely mach. The longer the cycle takes. The storage function helps to smooth discrepancies between desired quantities and timing to the market. all of which will affect customer satisfaction 59 . 4) Transportation. ORDERING PROCESS: Market logistics begins with a customer order. WAREHOUSING: Every company has to store its finished goods until they are sold. the lower the customer’s satisfaction and the lower the company’s profits. 3) Inventory. Physical distribution starts at the factory. It is necessary to shorten the order-toremittance cycle.” Unfortunately. and controlling the physical flows of materials and final goods from points of origin to points of use to meet customer requirements at a profit. TRANSPORTATION: Transportation choices will affect product pricing. INVENTORY: It is a major market logistics which effect the customers satisfaction.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan 1 2 3 4 MARKET LOGISTICS: The process of getting goods to customers has traditionally been called physical distribution.

arouse desire and elicit action. the marketer may want its target audience to know about the organization and the product. management search for an appeal.20 Designing and managing integrated marketing communications DEVELOPING EFFECTIVE COMMUNICATION: There are eight steps in developing an effective total communication and promotion program. c) how to say it symbolically (message format). preference. If the message is written the communicator has to decide on the headline. 4) select the communication channels. how they feel about it? If they look favorably it is necessary to find out why and then develop a communication compaign to shore up favorable feelings. In determining the best message content. b) Knowledge: When the target audience might have product’s awareness but not much more. hold interest. The communicator must lead these consumers to take the final step. how to say it. i) Rational Appeals: to the audience’s self interest. c) Linking: If the target members know the product. current users.. the communicator’s task is to build awareness. theme. idea. liking. They may weight for information or plan to act later. IMAGE ANALYSIS: Image is the set of beliefs. emotional. the message should gain attention. and favorable word-of-mouth. particular publics or the general public. e) Conviction: A target audience might prefer a particular product but not develop a conviction about buying it. There are three types of appeals rational. such as a cleaner environment. which may be a purchase. and who should say it (message source MESSAGE CONTENTS. Determining the Communication Objectives: The marketing communicator must decide on the desired audience response. where and to whom to say. which may be potential buyers of the product. identification. some members of the target audience might have conviction but not quit get around to making the purchase. Designing the Message: Having defined the desired audience response. the communicator has to choose words. value. knowledge. In this case the communicator must try to build consumer preference. MESSAGE STRUCTURE: The effectiveness of the message depends upon its structure as well as its contents. and aid to the disadvantaged. • If the issue is simple or the audience is intelligent. They are often used to exhort people to support social causes. that the product is their best choice.. a) Awareness: When most of the audience is aware of the object. and moral. Conclusion drawing might cause negative reactions in the following situation: • If the communicator is untrustworthy. Some early experiments supported stating conclusions for the audience rather than allowing the audience to reach its own conclusions. This amounts to formulating some kind of benefit. 2) how to say it logically (message structure). or influencers. the communicator move to developing an effective message. performance. ideas and impressions that a person holds regarding an object. 3) design the message. or reason why the audience should think about or investigate the product. If the message is to be carried of the radio. Presenters have to pay attention to 60 1 2 3 a) b) c) . or unique selling proposition. high satisfaction. They show that the product will produce the claimed benefits. then all of the above elements plus body language have to be planned. voice qualities etc. and 8) manage and coordinate the integrated marketing communication process. The marketing communicator must 1) identify the target audience. MESSAGE FORMAT: The communicator must develop a strong format for the message. and other features. 5) establish the total promotion’s results. motivation. conviction and purchase. and color. The communicator can check on the compaign’s success by measuring audience preferences again after the compeign. ii) Emotional Appeals: Attempt to stir up negative or positive emotions that will motivate purchase. Here we will discuss the marketers behavior in six buyer-readiness states  awareness. The communicator’s job is to build conviction among interested customers. better race relations. People’s attitude and actions toward an object are highly conditioned by that object’s image. groups. If the message is to be carried on television or in person. This task can be accomplished with simple messages repeating the product’s name. equal right for women. d) Preference: The target audience might like the product but not prefer it to others. copy. Ideally. when to say.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan CHAPTER . The target audience will critically influence the communicator’s decisions on what to say. f) Purchase: Finally. 2) determine the communication objectives. The communicator will promote the product’s quality. Formulating the message will require solving four problems: 1) what to say (message contents). Identifying the Target Audience: A marketing communicator must start with a clear target audience in mind. iii) Moral Appeals: are directed to the audience’s sense of what is right and proper. The audience could be individuals. • if the issue is highly personal.

Advertising is able to carry on only a monologue in front of. c) Amplified expressiveness: Advertising provides opportunities for dramatizing the company and its product throughout the artful use of print. 1) personal and non personal Win each are found many sub channels: I) PERSONAL COMMUNICATION CHANNELS: It involves two or more persons communicating directly with each other. c) COMPETITIVE-PARITY METHOD: Some companies set their promotion budget to achieve share-of voice parity with their competitors. 6 Deciding on the Promotion Mix: Companies face the task of distributing the total promotion budget over the five promotional tools  i)advertising. scent. They include media. over the telephone or through the mails. Selecting the Communication Channel: The communicator must select efficient channels of communication to carry the message. Their are four common methods used to set a promotion budget a) the affordable method. • Dramatization: Like advertising. • Incentive: They incorporate some concession. b) Persuasiveness: It is a pervasive medium that permits the seller to repeat a message many times.” 61 . gestures. they all offer three distinctive benefits. It have three distinctive benefits: • Personal confrontation: It involve an interactive relationship between two or more persons. c)competitive-parity method. public relations has the potential for dramatizing a company or product. a) AFFORDABLE METHOD: Setting promotion budget at what company think that it can afford. determining the tasks that must be performed to achieve these objectives. the communicator has to pay attention to color. The sum of these costs is the proposed promotion budget. and color.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan their facial expression. size and shape. It leads to an uncertain annual promotion budget. Communication channels are of two broad types. b) PERCENTAGE-OF-SALES METHOD: any companies set their promotion expenditures at a specified percentage of sales or of the sales price. Each party is able to observe the others’ needs and characteristics at close hand and make immediate adjustments. not a dialogue with the audience. inducement. Personal communication channels derive their effectiveness through the opportunities for individualizing the presentation and feedback. and action. and d)objective-and-task method. Media: Consist of print media. d) Impersonality: Cannot be a compelling as a company sales representative. and estimating the costs of performing these tasks. I) ADVERTISING: Qualities of advertising are a) Public presentation: A highly public mode of communication. person to audience. ranging from a matter-of-fact selling relationship to a deep personal friendship. 5 Establishing the total Promotional Budget: A most difficult marketing decision. Most non personal messages come through paid media. even if the response is a polite “thank you. ii)sales promotion. broadcast media. • Invitation: They include a distinct invitation to engage in the transaction now. If the message is carried by the product or its packaging. This method of setting budgets completely ignores the role of promotion as an investment and the immediate impact of promotion on sales volume. The message gets to the buyers as news rather than as a sales-directed communication. texture. It also allows the buyer to receive and compare the message of various competitors. electronic media and display media. particularly in building up the customers preference. d) 4 MESSAGE SOURS: Message delivered by attractive or popular sources achieve higher attention and recall. dress. d) OBJECTIVE-AND-TASK METHOD: In it the marketers develop their promotion budgets by defining their specific objectives. or respond. The audience does not feel obligated to pay attention. • Response: It makes the buyer feel under some obligation for having listened to the sales talk. In many cases many different channels must be used. posture. The buyer has a greater need to attend and respond. • Ability to catch buyers off guard: Public relations can reach many prospects who prefer to avoid sales people and advertisements. iii) PUBLIC RELATIONS AND PUBLICITY: The appeal of public relations and publicity is based on their three distinctive qualities: • High credibility: News stories and features are more authentic and credible to readers than ads. conviction. Industries and companies vary considerably in how much they spend on promotion. and v) direct marketing. iii)public relations and publicity. ii) SALES PROMOTION: Although the sales-promotion tools are highly diverse. which makes long-range market communication planning difficult. II) NONPERSONAL COMMUNICATION CHANNELS: They carry messages without personal contact or interaction. • Communication: Gain attention and usually provide information that may lead the consumer to the product. or contribution that gives value to the consumer. • Cultivation: Personal selling permits all kinds of relationship to spring up. sound. and events. atmospheres. iv) PERSONAL SELLING: is the most cost-effective tool at later stages of the buying process. They might communicate face to face. b)percentage-of-sales method. and heir style. iv) sales force.

Measuring the Promotion’s Results: After implementing the promotional plan. advertising personal selling. and their previous and current attitudes toward the product and company. Different strategies are: • In the introduction stage. followed by personal selling to gain distribution coverage and sales promotion to induce trail. each requiring its own communication approach. the communicator must measure its impact on the target audience. 5 COMPANY MARKET RANK: Top ranking brands drive more benefits from advertising than sales promotions. 4 PRODUCT-LIFE-CYCLE STAGE: Promotional tools also vary in their cost effectiveness at different stages of the product life cycle.. • Interactive The message can be altered depending on the person’s response. advertising and publicity have the highest cost effectiveness. • In the growth stage. expensive. advertising and public relations in that order. Factors in setting the promotion Mix: Companies must consider several factors in developing their promotion mix. much more important than the roles played by “cold calls” from sales representatives or by sales promotion. In general personal selling is more heavily used with complex. 62 . 2 PUSH VERSUS PULL STRATEGY: A push strategy involves manufacturers making activities (primarily sales force and trade promotion) directed at channel intermediaries. sales promotion. the type of product market in which they are selling. how they felt about the message. adv. • In the maturity stage. telemarketing. all the tools can be toned down because demand has its own momentum through word-ofmouth. • In decline stage. and risky goods and in markets with fewer and larger sellers. Managing and Coordinating Integrated Marketing Communications: Many companies still rely primarily on one or two communication tools to achieve their communication aims This practice persists in spite of the disintegration of mass markets into a multitude of mini-markets. The goal is to induce the intermediaries to order and carry the product and promote it to en users. how ready consumers are to make a purchase. Business-goods companies spend on personal selling. • Customized: The message can be customized to appeal to the addressed individual. Consumergoods companies spend on sales promotion.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan v) DIRECT MARKETING: Although their are many forms of direct marketing direct mail. Ad and publicity play the most important roles in the awareness stage. and personal selling all grow more important in that order. and the growing sophistication of consumers. what points they recall. sales promotion continues strong. whether to use a push or pull strategy. This involve asking the target audience whether they recognize or recall the message. and public relations in that order.. The purpose is to induce them to ask intermediaries for the product and thus induce the intermediaries to order the product from the manufacturer. sales promotion. 3 BUYER-READINESS STAGE: Promotional tools vary in their cost effectiveness at different stages of buyer readiness. how many times they says it. 1 TYPE OF PRODUCT KARATE: Promotional tools vary between consumer and business markets. the product’s stage in the product life cycle and the companies market rank. electronic marketing. the proliferation of new types of media. • Up-to-date: A message can be prepared very quickly for delivery to an individual. A pull Strategy: involves marketing activities (primarily advertising and consumer promotion) directed at end users. adverting and publicity are reduced and sales people give the product only minimal attention. and so on they all share four distinctive characteristics Direct marketing is: • Nonpublic: The message is normally addressed to a specific person.

cigarettes. b) message evaluation and selection. Over time.g. Comparative advertising works best when it elicits cognitive and affective motivations simultaneously. The role of advertising is to increase the demand of the product. A large company will often set up its own advertising department.21 Managing Advertising. MARKET SHARE AND CONSUMER BIAS: High-market-share brands usually requires less advertising expenditure as a percentage of sales to maintain their share. and Public Relations DEVELOPING AND MANAGING AN ADVERTISING PROGRAM: It is the most common tool used by the organizations to direct persuasive communications to target buyers and publics. Choice of objectives should be based on a thorough analysis of the current marketing situation. especially if consumers are seeking new or different benefits format the product. Established brands usually are supported with lower advertising budgets as a ration to sales.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan CHAPTER . 4. Advertising objectives can be classified according to whether their aim is to inform persuade. who works with and advertising agency. Then they can proceed to make the five major decisions in developing an advertising program. PRODUCT SUBSTITUTABILITY: Brands in accommodate class (e. Setting the Objectives: Prior to setting objectives decisions on the target market. MESSAGE GENERATION: In principle the product’s message major benefits that the brand offers should the be decided as part of developing the product concept. a company should make sure that it can prove its claim of superiority and that it cannot be counterattacked in an area where the other brand is stronger. whose manager reports to the vice president of marketing. market positioning and marketing mix are to be made. a) INFORMATIVE ADVERTISING: Carried out heavily in the pioneering stage of a product category. In small companies. where a company’s objective is to build selective demand for a particular brand. marketing managers must always start by identifying the target market and buyer motives. ADVERTISING FREQUENCY: The number of repetitions needed to put across the brand’s message to consumers has an important impact on the advertising budget. 3. But how does a company know it is spending the right amount? There are five specific factors to consider when setting the advertising budget: 1. Most advertising falls into this category. or services by an identified sponsor. and d) message social responsibility review. the marketer might want to change the message without changing the product. c) REMINDER ADVERTISING: is highly important with mature products. adv. 63 1 2 3 a) . Sales Promotion. where the objective is to build primary demand. 2. or remind. COMPETITION AND CLUTTER: In a market with a large number of competitors and high advertising spending. soft drinks) require heavy advertising to establish a differential image. goods. A related form of advertising is reinforcement advertising which seeks to assure current purchasers that they have made the right choice. The company wants to spend the amount required to achieve the sales goal. 5. Even simple clutter from advertisements not directly competitive to the brand creates a need for heavier advertising. Advertising is also important when a brand can offer unique physical benefits or features. c) message execution. STAGE IN THE PRODUCT LIFE CYCLE: New product typically receive large advertising budgets to build awareness and to gain consumer trial. Deciding on the Advertising Budget: After setting objectives the company can proceed to establish its advertising budget for each product. In using comparative advertising. a brand must advertise more heavily to be heard above the noise in the market. The market positioning and marketing mix strategies define the job that advertising must do in the total marketing program. b) PERSUASIVE ADVERTISING: It is important in the competitive stage. They builds share by increasing market size requires larger advertising expenditures. know as the five Ms: • Mission: What are the advertising objectives? • Money: How much can be spent? • Message: What message should be sent? • Media: What media should be used? • Measurement: How should the results be evaluated? These decisions are further described in the following sections. In developing and advertising program. Advertising go through four steps to develop a creative strategy: a) message generation. Organizations handle their advertising in different ways. Choosing the Advertising Message: Advertising compaigns differ in their creativity which is more important than the number of dollars spent Only after gaining attention can a commercial help to increase the brand’s sales. is handled by someone in the sales or marketing department. It may be defined as follows: → ADVERTISING is any paid form of nonpersonal presentation and promotion of ideal.

Theme Creative Copy 7-up is not a cola “The Un-Cola” Let us drive you in our bus instead of driving your car. A minor rearrangement of mechanical elements within the ad can improve its attention-getting power. though not necessarily by as much as their difference in cost. Finally. Words: Memorable and attention-getting works must be found. “Let your fingers do the walking. super stores. sensory. “Take the bus an leave the driving to us. Tone: The Communicator must also choose an appropriate tone for the ad. the message must be believable or provable. while intended use or in incidental use. equally mundane products. color. b) MESSAGE EVALUATION AND SELECTION: The advertisers needs to evaluate the alternative messages. and impact. deciding on media timing. Some proceed inductively by talking to the consumers. In contrast. frequency. The following themes listed on the left would have had much less impact without the creative phrasing on the right. • Personality symbol: Creates a character that personifies the product.” more for our customers.” Shop by turning the pages of the telephone directory. tone. Other companies use emotions to set the tone. d) SOCIAL-RESPONSIBILITY REVIEW: Advertisers and their agencies must make sure that their “creative” advertising doesn’t overstep social and legal norms. focus on a hurorous situation rather than on the products themselves. 64 . • Fantasy: Creates a fantasy around the product or its use. Format: The elements such as ad six. frequency and impact. c) MESSAGE EXECUTION: The message’s impact depends not only upon what is said but also on how it is said. 4 Deciding on the Media: The next task is to choose advertising media to carry it. • Scientific Evidence: Presents survey or scientific evidence that the brand is preferred over or outperforms other brands. exclusiveness. • Mood or image: Evokes a mood or image around the product. radio and television are the most effective media for reaching teenagers. Some creative people user deductive framework for generating advertising message. experts.” We don’t rent as many cars. or combinations of them. and format of executing message. such as beauty. in the adds for staples office-supply. • Testimonial evidence: This features a highly credible. Style : A message can be presented in any of the following different styles. rational. Buyers are expecting one of the four types of rewards form a product i. • Life style: Emphasize how a product fits in with a lifestyle.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan Creative people use several methods to generate possible advertising appeals. Exposures mean the seeking a certain response from the target audience. and deciding on geographical media allocation. social or ego satisfaction. and public policy makers have developed a substantial body of laws and regulations to govern advertising. Some ads aim for rational positioning and others for emotional positioning. Most marketers work hard to communicate openly and honestly with consumers. Still. and believability. Some companies uses positive tone and almost always avoid humors so as not to take attention away from the message. abuses may occur. and pride in making the product. likable. • Slice of Life: Shows one or more persons using the product in a normal setting. and illustration will make a difference in an ad’s impact as well as its cost. The advertisers can generate a theme for each of the 12 cells as possible messages for the product. dealers. clean) or real (Marlboro man). the most important of which are the following: • Target-audience media habits: for example. experience. or expert source endorsing the product. No claim is made about the product except through suggestion. choosing among major media types. • Musical: Uses background music or shows one or more persons or cartoon characters singing a song involving the product. He might visualize (experience) these rewards after intended use. love or serenity. so we have to do “We try harder.e. The message must also say something exclusive or distinctive that does not apply to every brand in the product category. The character might be animated (Mr. Larger-size ads gain more attention. Media planner make their choice among these media categories by considering several variables. All of these elements must deliver a cohesive image and message. A good ad normally focuses on one core selling proposition. CHOOSING AMONG MAJOR MEDIA TYPES: The media planner has to know the capacity of the major media types to deliver reach. AND IMPACT: Media selection involves finding the most cost-effective media top deliver the desired number of exposures to the target audience. The selection of media depends upon desired reach. and competitors. • Technical expertise: Shows the company’s expertise. selecting specific media vehicles. Crossing these four types of rewards with three types of experiences generates 12 types of advertising messages. The message must first say something desirable or interesting about the product. Creative people must also find a style. FREQUENCY. DECIDING ON REACH. words. The message should be rated on desirability.

Their recall level indicates and ad’s ability to stand out and to have its message understood and remembered. The effect of surroundings: Ads may be more effective when their message is congruent with their surroundings. SALES PROMOTION: It is a key ingredient in marketing compaigns. knowledge. price. affective. A message containing a great deal of technical data might require specialized magazines or mailings. aided or unaided by the interviewer. 3. Most advertisers try to measure the communication effect of an ad that is. and Polaroid cameras are best demonstrated on television. i. There are three major methods of advertising pretesting. The effect of positive versus negative messages: Consumers may sometimes respond more to negative messages than to positive messages. Yet both can be searched. DECIDING ON GEOGRAPHICAL MEDIA ALLOCATION: A company has to decide how to allocate its advertising budget over space as well as over time. heavy amount during the famous programs and lesser amount at other times. Evaluating Advertising Effectiveness: Good planning and control of advertising depends critically on measures of advertising effectiveness. availability and competitors’ actions. 2. the easier it is to measure advertising’s effect on sales. The media planner relies on media-measurement services that provide estimates of audience size. yet the amount of fundamental research on ad effectiveness is appallingly small. cognitive. The company makes “national buys” when it places ads on national TV networks or in nationally circulated magazines. The fewer or more controllable these others factors are. professional researchers have drawn some general conclusions that are useful to marketers. Advertising versus sales promotions: In a recent study a market-research firm studying the effects of advertising found that 70% of the ad compaigns boosted sales immediately. Impact of Ad on Brand Switching: Advertising appears effective in increasing the volume purchased by loyal buyers but less effective in winning new buyers. These tests measure an ad’s attention-getting power but re reveal nothing about its impact on beliefs. 65 . or intentions. it can be done before an ad is put into media and after it is printed or broadcast. or preference. features. DECIDING ON MEDIA TIMING: In deciding the types of media to use the advertiser faces macro scheduling problem and a micro scheduling problem. SELECTING SPECIFIC MEDIA VEHICLES: The media planner must next search for the most cost-effective media vehicles within each chosen media type. composition. SALES-EFFECT RESEARCH: Communication-effect advertising research helps advertisers assess advertising’s communication effects but reveals little about its sales impact. attitudes.e.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan • 5 1 2 3 Product: Women’s dresses are best shown in color magazines. These ratings are used to evaluate an ad’s attention. Advertising appears to be unlikely to have some cumulative effect that leads to loyalty. such as the product’s features. rather. its potential effect on awareness. The direct rating method asks consumer to rate alternative ads. Micro scheduling Problem: It calls for allocating advertising expenditures within a short period to obtain the maximum impact. What counts is the cost-per-thousand exposures rather than the total cost. while newspaper advertising is relatively inexpensive. COMMUNICATION-EFFECT RESEARCH: seeks to determine whether an ad is communicating effectively. • Cost: Television is very expensive. Portfolio test: ask consumers to view and listen to a portfolio of advertisements. the advertiser who decides to buy 30 seconds of advertising on network television can pay different amounts in relation to program timings. but that the effect was strong only in 30% of the cases. and behavior strengths. Sales Promotion consist of a diverse collection of incentive tools. For example. Advertising Effectiveness: A summary of Current Research: Although companies need to do more research into ad effectiveness. Laboratory Tests: use equipment to measure consumers’ physiological reactions to an ad. and especially price have a stronger impact on response that dose advertising. Only 46% of the compaigns appeared to result in a long-term sales boost. Macro scheduling Problem: It calls for deciding how to schedule the advertising in relation to seasonal and business-cycle trends. Advertising’s sales effect is generally harder to measure that its communication effect. What sales are generated by an ad that increases brand awareness by 20% and brand preference by 10%. 4. consumers are then asked to recall all the ads and their content. taking as much time as they need. Also called copy testing. 1. designed to stimulate quicker and greater purchase of particular products/services by consumers or the trade. read through. and media cost. Sales are influenced by many factors besides advertising. Audience size has several possible measures. • Message A message announcing a major sale tomorrow will require radio or newspaper. They would also like to measure the Ad’s sales effect but often feel it is too difficult to measure. displays. mostly short term.

tie-in promotions. many marketing managers firs estimate what they need to spend in trade promotion.) Purpose of Sales Promotion: Sales promotion tools vary in their specific objectives a free sample stimulates consumer trial. iv) Price packs: Offering by jointing many units in one place at discounted price v) Premium: (Gift) Providing goods at reasonably low price as an incentive to purchase a particular product. cross promotions. Sales promotions do not tend to yield new. Today. or merchandise as a result of purchasing something. The promotion planner should take into account the type of market. trips. Its major tools are: I) Price off: A straight discount off the list price on each call purchased during a stated time period. prizes. then what they need to spend in consumer promotion Whatever is left they will budget for advertising. which are derived from more basic marketing objectives developed for the product. 1 ESTABLISHING THE SALES-PROMOTION OBJECTIVES: Sales promotion objectives are derived from broader promotion objectives. xi) Cross promotion: Involve using one hand to advertise another noncompeting brand. advertising and display allowances. contests for sales reps. Major Decisions in Sales Promotion: In using sales promotion. There is a danger Sales promotions yield faster and more measurable responses in sales than advertising does. iii) Cash refund (by the manufacturer to consumer who proves that he has purchased the product). and free goods) and business and sales force promotion (trade shows and conventions. • encouraging off-season buying . For retailers objectives include • persuading retailers to carry new items and higher levels of inventory. objects includes. develop the program protest the program. a company must establish its objectives. point-of-purchase displays and demonstrations etc. vii) Patronage Aware: Values in cash or other form that are proportional to one’s patronage of a certain vendor or group of vendors. long-term buyers in mature markets because they attract mainly del-prone consumers who switch among brands as deal become available.) trade promotion (prices off. ii) Allowance: An amount offered in return for the retailer’s agreeing to feature the manufacturer’s products in some way. warranties. • attracting Switchers away from competitors’ brands. coupons. and each tool’s cost effectiveness. advertising appears to be capable of deepening brand loyalty. • building brand loyalty. The specific objectives set for sales promotion vary with the target market. sales promotion objectives. ii) coupons(certificates to provide buyer some gift who fill and mail the coupon). Consumer-Promotion Tools: The main consumer promotion tools are I) samples. Trade Promotion Tools: Persuading the retailer or wholesaler to carry the brand. more than the normal amount. 66 . and • gaining entry into new retail outlets. cash refund offers prices off. 2 SELECTING THE SALES-PROMOTION TOOLS: Many sales-promotion tools are available. while a free management-advisory service aims at cementing a long-term relationship with a retailer.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan Advertising offers a reason to buy while sales promotion offers an incentive to buy.g. • building trail among nonusers. implement and control it and evaluate the results. • encouraging purchase of larger-size units. Sales promotion includes tools for consumer promotion (e. x) Tie-in Promotions: Two or more companies that team up or coupons. free trials. and stimulating off-season sales. xii) Point-of-Purchase Displays and Demonstrations. refunds and contests to increase their pulling power. samples. For consumer. • offsetting competitive promotions. • encouraging stocking of related items. and specialty advertising. viii) Free Trails: Invite prospective purchasers to try the product without cost in the hope that they will buy the product ix) Product Warranties: Explicit or implicit promises by sellers that the product will prefer as specified or that the seller will fix it or refund the customer’s money during a specified period. For the sales force objectives include: • encouraging support of a new product or model • encouraging more prospecting. vi) Prizes: offers of the chance to win cash. select the tools. Loyal brand buyers tend not to change their buying patterns as a result of competitive promotion. patronage rewards. competitive conditions.

not all of which support marketing objectives. Sales people give these items to prospects. This includes advising in the event of a product mishap when the public confidence in a product is shaken. Press relations: Presenting news and information about organization in the most positive light. iii) Specialty Advertising: consist of useful low-cost items bearing the combines name and address and sometimes advertising message. Public Relations (PR) involves a variety of programs designed to promote and or protect a company’s image or its individual products. Product publicity: Sponsoring various efforts to publicize specific products. 3 PRESENTING THE SALES-PROMOTION PROGRAM: Al 4 IMPLEMENTING AND CONTROLLING THE SALES PROMOTION PROGRAM: 5 EVALUATING THE RESULTS: PUBLIC RELATIONS: A public is any group that has an actual or potential interest in or impact on a company’s ability to achieve its objectives. 4. Its major tools are I) Trade Shows and Conventions: Organize annual trade shows. 67 .Notes on Marketing Management Prepared by Muhammad Akhlaq Khan iii) Free goods: Offers of extra causes of merchandise to intermediaries who buy a certain quantity or who feature a certain flavor or size. Corporate Communication: Promoting understanding of the organization with internal and external communications. aimed at including them to increase their sales results over a stated period. 2. ii) Sales Contests: a contest involving the sales force or dealer. Counseling: Advising management about public issues and company positions and image. Business and Sales Force Promotion Tools: These tools are used to gather business leads impress and reward customers and motivate the sales force to greater effort. 5. 1. Lobbying: Dealing with legislators and government officials to promote or defeat legislation and regulation. Public relations departments perform the following five activities. 3.

Sign up to vote on this title
UsefulNot useful