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

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

· They must stay in touch with customers after the sale to ensure that they are satisfied and remain satisfied. and technical assistance. products and services. and must constantly hold up the standard of giving the customer the best solution. Quality is the totality of features and characteristics of a product or service having ability to satisfy stated or implied needs.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. 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. They bear the responsibility for correctly identifying the customers’ needs and requirements. 5 . Marketers play several roles in helping their company in defining and delivering high quality goods and services to target customers. The marketer must complain like the customer complains when the product or the service is not right. · they must make sure that the customers’ orders are filled correctly and on time. · They must check that customers have received proper instructions. Marketing must be the customer’s watchdog or guardian. · They are making their specific contributions to total quality management and customer satisfaction. · They must communicate customer expectations correctly to product designers.

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

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

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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.


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

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

d) Target Market also called served market is the part of qualified available market the company decide to pursue. prediction and testing. Companies Sales Potential It is the sales limit approached by company demand as company marketing effort increases relative to competitors. 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. 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. Sales Budget: is a conservative estimate of the expected volume of sales and is used primarily for making current purchasing. production. Potential Market is the set of consumers who has shown a sufficient level of interest in a defined market offer. Marketing is responsible to prove sales forecasts which are based on demand. Managers need to define carefully what they mean by market demand. The absolute limit of company demand is. A Vocabulary for Demand Measurement. Scientific Method: is careful observation. Market demand can be measured for six different product levels. Market Potential The market forecast shows expected market demand not maximum market demand. e) Penetrated Market the set of customers who have already bought the product of the company. 1 All sales. formulation of hypotheses. of course. The two would be equal if the company achieved 100% of the market. To assess market potential we have to visualize the market demand for a “very high” level of industry marketing expenditure. where further increase in marketing effort would have little effect in stimulating further demand. b) Available Market the set of consumer who have interest. 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. After completing research company evaluate each opportunity before choosing target market. c) Qualified available Market: the set of consumers who have qualifications of available market and also qualification for the particular market offer. 12 . Company Demand: is the companies estimated share of the market demand at alternative levels of company marketing effort. Keeping in view this definition a market may be sub-divided in to following ways. Companies sales Forecast expected level of company sales based on a chosen marketing plan and on assumed marketing environment. MEASURES OF MARKET DEMAND: As a part of their planning companies prepare many estimates of market size. 4 Product line sales 5 Product Form sales 6 Product item sales. AN OVERVIEW OF FORECASTING AND DEMAND MEASUREMENT Companies undertake marketing research to identify market opportunities. Definition of Market: A market is a set of all actual and potential buyers of a product. Sales Quota the sales goal set for a product line. and cash-flow decisions. 2 Industry Sales 3 company 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. 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. 4 Marketing Decision Support System:(MDSS) MDSS is a coordinated collection of data. income and access to a particular market offer. division or sales representative. d) Interdependence of Models and Data: e) Value and Cost of Information: f) Healthy Skepticism: g) Ethical Marketing. It is primarily a managerial device for defining and stimulating sales effort. the market potential. Market Forecast The market demand corresponding to the level of expenditure actually occurred is called the market forecast.

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

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

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

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

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

see friends who have purchased that product etc. 5) Post purchase behavior. and choice set. consideration set. and engages in other activities to learn about the product. e. Information Search: An aroused consumer will be inclined to search for more information. The extent of search depends upon the strength of the drive. Marketers can convert low involvement products into one of high involvement by four ways given bellow: link product to some involving issue e. and advertising that presents reasons for trying something new. 18 4 1 2 3 . These five stages are 1) Problem recognition. displays. 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. · Add an important product feature to a low involvement product. salespersons. • Public sources Mass medial. The external need aroused by an external source. infrequent and risky. salt. and the ease of obtaining additional information. · significant brand differences · consumers can do a lot of brand switching. VARIETY SEEING BUYING BEHAVIOR: This type of buying behavior is characterized by: Low consumer involvement. deals. our coffee taken early in the morning shake of sleepiness. Problem Recognition: Buying process begins when buyer recognizes the problem or need. examining. ii) He is looking for certain benefits from the product solution. In this case the buyer will shop around to learn what is available but will buy fairly quickly. A need may arise either internally or externally. • Experiential sources: Handling. using the product. for example a person passes a bakery and saw bread and biscuits that stimulates his hunger. coupons. Through gathering information. packaging. e. arise to a thresh hold level and becomes a drive. phones friends. like ads of the product. the consumer learns about competing sets of brands and their features. free samples. In such a situation the market leader try to encourage habitual buying behavior by dominating the shelf space. 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 value he gives to the additional information and the value of satisfaction he obtains from the search. neighbors. Generally a buyer while making buying decision passes through 5 different stages. THE STAGES OF THE BUYING DECISION PROCESS:` Smart companies keep an eye on the buying decision process involved in their product category. The Milder search and the active information search.g.g. 3 HABITUAL BUYING BEHAVIOR: Many products are bought under conditions of low consumer involvement and the absence of significant brand differences. 2) Information Search.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan · purchase is expensive . thirst. Marketers need to identify the circumstances that trigger a particular need. He should also identify the consumers information sources and evaluate their relative importance. 4) Purchase Decision. tea. Challenger firms will encourage variety seeking by offering lower prices. perhaps responding primarily to a good price or to purchase convenience. • Commercial sources: Advertising. Evaluation of Alternatives: There is no single and simple valuation process used by all consumers in all situations. toothpaste resisting cavity. consumer-rating organizations. Consumer may can get information from the following four sources: • Personal sources: Family.g. Some basic concepts will help us to understand consumer evaluation process: i) Consumer is trying to satisfy a need. At this stage the consumer simply pays more attention to information's about the desired product. The selling company must strategies to get its product into the awareness set. toothpaste etc. · advertise to trigger strong emotions related to personal values or defence. THE MILDER SEARCH: It may also be called as heightened attention. friends. the amount of information he already has. · link product to some involving personal situation. The consumer will be alert to the information to justify his decision of purchase. avoiding out-of-stock conditions. sex etc. The company must also identify the other brands in the consumer's choice set so that it can plan its competitive appeals. 3) Evaluation of Alternatives. acquaintances. Internal needs are like hunger. THE ACTIVE INFORMATION SEARCH: At this stage he actually looks for reading material. dealers. We may distinguish between two levels of arousal. then they develop the marketing strategies that trigger consumer interest. and sponsoring frequent reminder advertising.

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

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

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

ii) Quantity needed. Much of it also applies to the buying practices of institutional and government organizations. PERFORMANCE REVIEW: When all is done the buyer reviews the performance of the chosen supplier. Above given stages are for the new task buying situation. In modified-re-buy or straight-re-buy situations. The buying center also decide as to how many suppliers to use. 22 . ORDER-ROUTINE SPECIFICATION: After selection of supplier the buyer negotiate final order listing the i) Technical specifications. Three methods are commonly used. 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.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan 7 8 reputation are highly important. 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. iii) expected time of delivery. their certain special feature found in these markets. 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. etc. iv) return policies. The purchaser also do not wants to make a large purchase order ( and thus decreasing number of orders). Then the buying center attempt to negotiate with its preferred suppliers for better prices and terms before making the final selection. INSTITUTIONAL AND GOVERNMENT MARKETS: So far our discussion is about the profit seeking organizations. 1) the buyer may contact the end user and ask for evaluation. However. v) warrantees. Furthermore these companies want each chosen supplier to be responsible for a larger component system. Writing a new purchase order each time is expensive and time consuming.

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

technological leadership. history. cash flow. and place in the large organization. All these sources help a company decide whom to attack in the programmable-controls market. For example steel making involves heavy manufacturing and raw-materials cost. vertically integrated firms can manipulate their prices and costs in different segments of their business to earn profit where taxes are low. 3 THE TIGER COMPETITOR: A competitor that react swiftly and strongly to any assault on its terrain. IDENTIFYING COMPETITORS' STRATEGIES: A company's closest competitors are those pursuing the same target markets with the same strategy. If the competitor is not critical to its parent company. return on investment. 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. iii) Share of heart: The percentage of customers who named the competitor in responding to the statement. or a new-product introduction). suppliers. 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. Degree of Globalization: Some industries are highly local others are global.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.g. Two of the most common shrinkage barriers are contract commitments and suborns management. Most competitors fall into one of following four categories. may face lack of funds to react. A group of firms following the same strategy in a given target market is called a strategic group. new investments and capacity utilization. slow in noticing the move. it is important to know whether the parent company is running it for growth or milking it. Some industries are characterized by relative accord among the competitors. Name the first company that comes to mind in this industry. each competitor has a certain philosophy of doing business. a certain internal culture. 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. A competitors objectives are shaped by many things. A company must continuously monitor its competitors' strategies and revise their strategies through time depending upon the competitors strategy. 2 If a single major factor is the critical factor. profit margin. and certain guidelines beliefs. In addition. Companies normally learn about their competitors position through secondary data. 24 . Here are some of the observations about the likely state of competitive relations. 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. and hearsay. ii) Share of mind: The percentage of customers who named the competitor in responding to the statement. 4 THE STOCHASTIC COMPETITORS: A competitor that does not exhibit a predictable reaction pattern. current management. Estimating Competitors Reaction Patterns: Identification of competitors strangest and weaknesses help managers to anticipate the competitors likely reactions to other companies' strategies (e. The reasons may vary. personal experience. Finally a company must also monitor its competitors expansion plans. it could be attacked more readily. then competitive equilibrium is unstable. It might respond to price cuts but not to advertising expenditure increases. Firms will pay the greatest attention to their greatest costs and will strategies to reduce these costs. market shale. The companies try to reduce the shrinkage barriers to help their ailing competitors get smaller gracefully. and others by contrast fighting. history. financial situation. including data on sales. including its 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. and alternative assumption is that they pursues a mix of objectives : current profitability. 1 If competitors are nearly identical and make their living in the same way then their competitive equilibrium is unstable. If a competitor is part of a larger company. 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. a promotion step-up. market share growth cash flow. or any thing else. while toy manufacturing involve heavy distribution and marketing cost. The laid back competitors may feel their customer are loyal. 1 THE LAID BACK COMPETITORS: A competitor that doesn't react quickly or strongly to a rival's move. Moreover. 2 THE SELECTIVE COMPETITORS: A competitor that react to only certain types of attacks and not to others. a price cut. They can augment their knowledge by conducting primary marketing research with customers. Cost Structure: Each industry has a certain cost mix that drive much of its strategic conduct. Name the company from whom you would prefer to buy the product. service leadership and son on. and dealers.

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

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

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

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

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

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

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

Use / application positioning: This involve positioning the product as best for some use or application. Overpositioning: Buyers may have too narrow an image of the brand. Quality / Price positioning: Here the product is positioned as offering the best value for the price. 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. User positioning This involves positioning the product as best for some user group. 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. Competitors Positioning: Here the product positions itself as better in some way than a named or implied competitor. Benefit positioning: Here the product is positioned as the leader in a certain benefit. 32 . or manufacturer. such as size. Product category positioning: Here the product is positioned as the leader in a certain product category. number or years in existence. Confused Positioning: Buyers might have a confused image of the brand resulting to many claims or changing the brand's positioning too frequently. Buyers don't really sense anything special about it. 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.

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

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

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

It have more influence on late adopters than early adopters and it is more important in risky situation than is safe situation. 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. v) Laggards: They are suspicious of changes and adopt the innovation only when it takes on a measure for tradition itself. scientific credibility. Its significance is greater in some situations and for some individuals than for others. LIKE PEOPLE ORGANIZATIONS VARY IN THEIR READINESS TO ADOPT AN INNOVATION: 36 . Factors Influencing Adoption Process: It is sometimes harder to generalize about consumers. Other characteristics that influence the rate of adoption are cost. iv) The innovation's Divisibility: The degree to which it can be tried on a limited basis. PERSONAL INFLUENCE PLAYS A LARGE ROLE IN THE ADOPTION OF A PRODUCT: Personal influence is the effect. 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 is an important factor. v) The innovation's Communicability: The degree to which its beneficial results are observable or describable to others. THE CHARACTERISTICS OF THE INNOVATION PRODUCT EFFECTS ITS RATE OF ADOPTION: Some products gain attention immediately while others take long time to gain acceptance. It is more important in the evaluation stage of the adoption process than in the other stages. risk and uncertainty. However. iii) The innovation's Complexity: The degree to which it is relatively difficult to understand or use. and social approval.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. iv) Skeptical: They adopt a product after a majority of people have tried it. Five characteristics are especially important in influencing the rate of adoption of an innovation. on others attitudes. the more quickly it will be adopted. one person have. iii) Deliberates: They adopt new ideas before the average persons. ii) The innovation's compatibility: The degree to which it is relatively difficult to understand or use. They rarely are leaders. i) Innovations relative advantages: The degree it appears superior to the existing products. 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.

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

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

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

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

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

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

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. DECIDING WHICH MARKET TO ENTER: The company has to define its international marketing objectives and policies. Direct Export: Companies may deiced to handle their exports. 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. patent. What proportion of foreign to total sales will it seek? Most companies start small when the venture abroad. it has to determine the best mode of entry. 2 Higher profit opportunities in foreign market than domestic market. III TRAVELING EXPORT SALES REPRESENTATIVE: The company can send home-based sales representatives abroad to finds business. devalue its currency. or undergo a political revolution and expropriate foreign property. IV FOREIGN BASED DISTRIBUTORS OR AGENTS: Highiring foreign based distribution and sales agents. II OVERSEAS SALES BRANCH OR SUBSIDIARY: which handles the sales and distribution and might handle warehousing and promotion as well. The company must decide whether to market in a few countries or many countries. licensing. DECIDING HOW TO ENTER: After deciding the target countries. 4 To reduce firms dependence on any one market. Generally speaking. 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. A company should enter fewer countries when Market entry and control costs are high. It often serves as a display center and customer-service center.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. negotiate with them and receives commission it includes trading companies. Indirect Export: It is exporting through independent intermediaries. A GLOBAL FIRM: is a firm that operates in more than one country and captures (production. IV EXPORT MANAGEMENT COMPANY: A company who agrees to manage a company's export activities for a fee. joint ventures. direct exporting. costs and reputation that are not available to purely domestic competitors. DECIDING WHETHER TO GO ABROAD: Most companies prefer to remain domestic if their domestic market were large enough. 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. There are four types of intermediaries. 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. 4 Company may lacks in managers with international experience. In it the investment and the risk are somewhat greater but so is the potential return. viewing foreign operations as a small part of their business. 2 Might not understand the foreign country’s business culture or know how to deal effectively with foreign nationals. trademark. I DOMESTIC-BASED EXPORT MERCHANT: Who buyers the manufacturer's products and then sells them abroad. 3 When firm needs a larger customer base to achieve economics of scale. transportation and financial flaws. Some plan to stay small. and direct investment. They might be given exclusive rights to represent the manufactures in that country or only limited rights. 43 B C 1 2 3 . II DOMESTIC-BASED EXPORT AGENT: Who seeks foreign purchasers. III CORPORATIVE ORGANIZATION: The export goods on behalf of several producers and are partly under the control of those producers. 5 Customer going abroad requires international services. 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. Licensing: In it the licenser licenses a foreign company to use a manufacturing process. a company which decides to operate in fewer countries can do so with deeper commitment and penetration in each. trade secrete or other items of value for a fee or royalty. Product and communication adoption costs are high. themselves. Its broad choices are indirect exporting. 3 Might underestimate foreign regulations and incur unexpected costs.

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

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

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

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

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

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

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

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

such as installation. iii) Reducing or removing product features to reduce cost. 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. INITIATING AND RESPONDING TO PRICE CHANGES: After developing price strategies. 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. vi) Reducing the number of models offered. this practice is called anticipatory pricing. then they should be priced on their value. if competitors forces it to do so. ii) Fragile-market-share trap: A low price buys market share but not market loyalty. The possibilities include the following: I) Shrinking the amount of product instead of raising the price. free delivery. Initiating Price Increases: Successful price increase can increase profits considerably if the sales volume is unaffected. iv) Removing or deducing product service. COMPETITORS REACTIONS: A firm changing its price had to be worried about competitors’ as well as customers’ reactions. 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. This strategy also involves high risks: i) Low quality trap: Consumers will assume that the quality is below that of the higher priced competitors. 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. iii) Shallow-pockets trap: High priced competitors may also cuts their price and may have longer staying power because of deeper cash reserves. b) Declining Market Share: When companies found that they are loosing their market share. Reactions to Price Changes: Any price change can effect the customers. competitors. Customers will shift to another lower-price firm that comes along. companies will face situations where they need to cut or raise prices. 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. to restore their market they have to decries their price. 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. Any income earned on the byproducts will make it easier for the company to charge a lower price on its main product.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. 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. or long warranties. While passing on price increases to the customers. or ration supplies to customers. or may do both. such as free delivery or installation. f) Product-building Pricing: When the sellers bundle their products at a set price with some saving. vii) Creating new economy brands. 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. Since customers may not have planned to buy all of the components. Customers are most price sensitive to products that cost a lot and are bought frequently. Companies often raise prices by more than the cost increase in anticipation of further inflation or government price controls. 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. because customer will turn against the price gougers when the market softens. They may treat it as a decrease in quality or strength of the company. while they hardly notice higher prices on low-cost items that they buy infrequently. b) Over Demand: When a company cannot supply all of its customers. iv) Reduction of discounts: The company instructs its sales force not to offer its normal cash and quantity discounts. the company needs to avoid the image of a price gouge. ii) Substituting less-expensive materials or ingredients. the savings on the price bundle must be substantial enough to induce them to buy the bundle. Competitors are most likely to react where the number of firms in the industry is small the 52 e) . CUSTOMERS’ REACTIONS: Customers often question about the motive behind the reduction or increase in price. distributors. it can raise its prices. and suppliers and may provoke government reaction as well. If the by-products have value to the customer group. v) Using less expensive packaging material or promoting larger package size to keep down packaging cost.

The leader at this point has several options: 1. 2. It could improve its product. Reduce Price: The leader might drop its price to the competitor’s price.. If it cannot find any way it have to meet the price reduction. The company under attack has to consider • the product’s stage in the life cycle. • the competitor’s intentions and resources. • the behavior of costs with volume. and c) it would be hard to rebuild market share one it is lost. 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. 53 . 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. • its importance in the company’s product portfolio. 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. 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. and c) it could regain market share when necessary. It could stress the relative quality of its product over that of the low-price competitors. This is necessary if the particular market segment being lost is price sensitive. b) it would lose market share because the market is price sensitive. the firm has little choice but top meet a competitor’s price cut. The firm should search for ways to enhance its augmented product. believing that: a) It would lose too much profit if it reduced its price b) it would not loose to much market share. When there are several competitors the company must estimate each close competitor’s likely reaction. When the attacking firms product is comparable to the leaders. Raise perceived quality: The leader could maintain price but strengthen the value of its offer. Increase price and improve quality: The leader might raise. services. and the buyers are highly informed. and • the company’s alternative opportunities. its price and introduce new brands to market the attacking brand. • the market price and quality sensitivity. When it believes a) its cost fall with volume. its lower price will cut into the leader’s share.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan product is homogeneous. and communications. 5. Maintain price: The leader maintain its price and profit margin . The best response varies with situation. 3. 4.

Channel normally describe a forward movement of products. recycling centers. 1 Analyzing Customers’ Desired Service Output Levels: Understanding (what. It is the recycling of solid wastes. competitors and other actors. softdrink intermediaries. 3 Negotiation: The attempt to reach final agreement on price and other terms so that transfer of ownership or possession can be effected. telemarketing.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. 6 Physical possession: The successive storage and movement of physical products from raw materials to the final customers. 2 Promotion The development and dissemination of persuasive communications designed to attract customers to the offer. Channel Levels: Each intermediary that performs work in bringing the product and its title closer to the final buyer constitutes a channel level. 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. Several intermediaries play a role in backward channels e. 2)establishing channel objectives. 8 Title: The actual transfer of ownership from one organization or person to another. Its major types are door-to door sales. 1 They have lack of financial resources to carry out direct marketing. they are part of every channel. By using the number of intermediary levels we designate the length of a channel.g. selling and manufacturer-owned stores. 5 Risk taking: The assumption of risks connected with carrying out the channel work. and 3) identifying and evaluating the major channel activities. A one-level channel One selling intermediary. place. when and how target customers buy) is the first step in designing the marketing channel. A two-level channel contains two intermediaries. A zero-level channel (Also called direct marketing). 54 . The smaller the size. the greater the service output level that the channel must provide. 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). It overcomes the time. 4 Financing: The acquisition and allocation of funds required to finance inventories at different levels of the marketing channel. Why Intermediaries Used: Producers gain several advantages you the use of intermediaries. Designing of a channel system calls for: 1)analyzing customer needs. and possession gaps that separate goods and services from those who need or want them. 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. 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. One can also talk about backward channels. They are also called trade channel or distribution channel. mail order. manufactures have to decide what is ideal. 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. where. trash collection specialists. what is feasible. consist of a manufacturer selling directly to the final customer. ii) WAITING TIME: The average time that customers of that channel wait for receipt of the goods. iv) PRODUCT VARIETY: The assortment breadth provided by the marketing channel. why. Channel Functions and Flows: A marketing channel performs the work of moving goods from producers to consumers. In consumer markets they are typically a wholesaler and a retailer. such as retailer. CHANNEL-DESIGN DECISIONS: In designing marketing channels. TV. 7 Payment: Buyers’ payment of their bills to the sellers through banks and other financial institutions. Since the produce and the final customer both perform work. trash-recycling brokers etc. The market intermediaries make up a marketing channel. A three-level channel involving three levels of intermediaries. iii) SPECIAL CONVENIENCE: The degree to which the marketing channel makes it easy for customers to purchase the product. Obviously different channels are set up for household buyers and the resale purpose buyers. and what is available.

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

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

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

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

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. implementing. 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. The number of stocking locations must strike a balance between customer service levels and distribution cost. The company has to decide the number of stocking locations. 4) Transportation. 3) Inventory. The storage function helps to smooth discrepancies between desired quantities and timing to the market. The longer the cycle takes. A storage facility is necessary because production and consumption cycle rarely mach. INVENTORY: It is a major market logistics which effect the customers satisfaction. Physical distribution starts at the factory. this objective provides little practical guidance. It is necessary to shorten the order-toremittance cycle. on-time delivery performance.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. and the condition of the goods when they arrive. WAREHOUSING: Every company has to store its finished goods until they are sold. 2) Warehousing. Market-Logistics Decisions: There are four major decisions that must be made with regard to market logistics 1) Ordering Process.” Unfortunately. the lower the customer’s satisfaction and the lower the company’s profits. all of which will affect customer satisfaction 59 . ORDERING PROCESS: Market logistics begins with a customer order. TRANSPORTATION: Transportation choices will affect product pricing. Market Logistics: involves planning. 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.

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

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

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

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. A related form of advertising is reinforcement advertising which seeks to assure current purchasers that they have made the right choice. Organizations handle their advertising in different ways. MARKET SHARE AND CONSUMER BIAS: High-market-share brands usually requires less advertising expenditure as a percentage of sales to maintain their share. A large company will often set up its own advertising department. a brand must advertise more heavily to be heard above the noise in the market. 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. STAGE IN THE PRODUCT LIFE CYCLE: New product typically receive large advertising budgets to build awareness and to gain consumer trial. Setting the Objectives: Prior to setting objectives decisions on the target market. 63 1 2 3 a) . 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. 5. In small companies. PRODUCT SUBSTITUTABILITY: Brands in accommodate class (e. Over time. The role of advertising is to increase the demand of the product. c) REMINDER ADVERTISING: is highly important with mature products. They builds share by increasing market size requires larger advertising expenditures. Established brands usually are supported with lower advertising budgets as a ration to sales. 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. ADVERTISING FREQUENCY: The number of repetitions needed to put across the brand’s message to consumers has an important impact on the advertising budget. In developing and advertising program. 3. 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. Advertising objectives can be classified according to whether their aim is to inform persuade. especially if consumers are seeking new or different benefits format the product. Advertising go through four steps to develop a creative strategy: a) message generation. a) INFORMATIVE ADVERTISING: Carried out heavily in the pioneering stage of a product category.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan CHAPTER . and d) message social responsibility review. who works with and advertising agency. Choice of objectives should be based on a thorough analysis of the current marketing situation. where a company’s objective is to build selective demand for a particular brand. 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. Sales Promotion. Even simple clutter from advertisements not directly competitive to the brand creates a need for heavier advertising. 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. Comparative advertising works best when it elicits cognitive and affective motivations simultaneously. or services by an identified sponsor. market positioning and marketing mix are to be made. Deciding on the Advertising Budget: After setting objectives the company can proceed to establish its advertising budget for each product. adv. b) PERSUASIVE ADVERTISING: It is important in the competitive stage. Most advertising falls into this category. Advertising is also important when a brand can offer unique physical benefits or features. cigarettes. the marketer might want to change the message without changing the product.g. c) message execution. marketing managers must always start by identifying the target market and buyer motives. is handled by someone in the sales or marketing department. where the objective is to build primary demand. 2. goods. Then they can proceed to make the five major decisions in developing an advertising program. It may be defined as follows: → ADVERTISING is any paid form of nonpersonal presentation and promotion of ideal. or remind. In using comparative advertising. The market positioning and marketing mix strategies define the job that advertising must do in the total marketing program. 4.21 Managing Advertising. The company wants to spend the amount required to achieve the sales goal. whose manager reports to the vice president of marketing. b) message evaluation and selection.

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

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

samples. • building trail among nonusers. • offsetting competitive promotions. For retailers objectives include • persuading retailers to carry new items and higher levels of inventory. objects includes. There is a danger Sales promotions yield faster and more measurable responses in sales than advertising does. ii) Allowance: An amount offered in return for the retailer’s agreeing to feature the manufacturer’s products in some way. Trade Promotion Tools: Persuading the retailer or wholesaler to carry the brand. coupons. then what they need to spend in consumer promotion Whatever is left they will budget for advertising. Its major tools are: I) Price off: A straight discount off the list price on each call purchased during a stated time period. cash refund offers prices off. competitive conditions.) trade promotion (prices off. select the tools. 66 . vi) Prizes: offers of the chance to win cash.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan Advertising offers a reason to buy while sales promotion offers an incentive to buy. • encouraging stocking of related items. xi) Cross promotion: Involve using one hand to advertise another noncompeting brand. advertising appears to be capable of deepening brand loyalty. point-of-purchase displays and demonstrations etc. implement and control it and evaluate the results. • building brand loyalty. For the sales force objectives include: • encouraging support of a new product or model • encouraging more prospecting. 2 SELECTING THE SALES-PROMOTION TOOLS: Many sales-promotion tools are available. refunds and contests to increase their pulling power. which are derived from more basic marketing objectives developed for the product. xii) Point-of-Purchase Displays and Demonstrations. prizes. more than the normal amount.g. cross promotions. 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. The promotion planner should take into account the type of market. warranties. free trials. Loyal brand buyers tend not to change their buying patterns as a result of competitive promotion. Sales promotions do not tend to yield new. 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. develop the program protest the program. long-term buyers in mature markets because they attract mainly del-prone consumers who switch among brands as deal become available. • encouraging off-season buying . 1 ESTABLISHING THE SALES-PROMOTION OBJECTIVES: Sales promotion objectives are derived from broader promotion objectives. advertising and display allowances. many marketing managers firs estimate what they need to spend in trade promotion. • attracting Switchers away from competitors’ brands. • encouraging purchase of larger-size units.) Purpose of Sales Promotion: Sales promotion tools vary in their specific objectives a free sample stimulates consumer trial. x) Tie-in Promotions: Two or more companies that team up or coupons. iii) Cash refund (by the manufacturer to consumer who proves that he has purchased the product). ii) coupons(certificates to provide buyer some gift who fill and mail the coupon). Major Decisions in Sales Promotion: In using sales promotion. Sales promotion includes tools for consumer promotion (e. tie-in promotions. Consumer-Promotion Tools: The main consumer promotion tools are I) samples. and specialty advertising. a company must establish its objectives. patronage rewards. contests for sales reps. and free goods) and business and sales force promotion (trade shows and conventions. and stimulating off-season sales. sales promotion objectives. trips. and • gaining entry into new retail outlets. Today. For consumer. vii) Patronage Aware: Values in cash or other form that are proportional to one’s patronage of a certain vendor or group of vendors. and each tool’s cost effectiveness. The specific objectives set for sales promotion vary with the target market. or merchandise as a result of purchasing something. while a free management-advisory service aims at cementing a long-term relationship with a retailer.

This includes advising in the event of a product mishap when the public confidence in a product is shaken. Product publicity: Sponsoring various efforts to publicize specific products. ii) Sales Contests: a contest involving the sales force or dealer. Counseling: Advising management about public issues and company positions and image. Its major tools are I) Trade Shows and Conventions: Organize annual trade shows. not all of which support marketing objectives. 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. Corporate Communication: Promoting understanding of the organization with internal and external communications.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. 3. Sales people give these items to prospects. 67 . 5. 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. aimed at including them to increase their sales results over a stated period. Press relations: Presenting news and information about organization in the most positive light. Lobbying: Dealing with legislators and government officials to promote or defeat legislation and regulation. 2. Public relations departments perform the following five activities. iii) Specialty Advertising: consist of useful low-cost items bearing the combines name and address and sometimes advertising message. 1. 4. Public Relations (PR) involves a variety of programs designed to promote and or protect a company’s image or its individual products.

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