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

· They must check that customers have received proper instructions. and technical assistance.Notes on Marketing Management Prepared by Muhammad Akhlaq Khan IMPLEMENTING TOTAL QUALITY MARKETING: Total Quality Marketing (TQM) is an organization-wide approach to continuously improving the quality of all the organization’s processes. Quality is the totality of features and characteristics of a product or service having ability to satisfy stated or implied needs. · They must stay in touch with customers after the sale to ensure that they are satisfied and remain satisfied. 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 are making their specific contributions to total quality management and customer satisfaction. products and services. training. Marketing must be the customer’s watchdog or guardian. · they must make sure that the customers’ orders are filled correctly and on time. and must constantly hold up the standard of giving the customer the best solution. 5 . · They must communicate customer expectations correctly to product designers. 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 bear the responsibility for correctly identifying the customers’ needs and requirements.

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

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

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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.

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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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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. Product category positioning: Here the product is positioned as the leader in a certain product category. price. Use / application positioning: This involve positioning the product as best for some use or application. Confused Positioning: Buyers might have a confused image of the brand resulting to many claims or changing the brand's positioning too frequently. The brand is seen just as just an other entry in a crowded marketplace. 32 . number or years in existence. Competitors Positioning: Here the product positions itself as better in some way than a named or implied competitor. User positioning This involves positioning the product as best for some user group. That he deems it as high standard than his capabilities. The different positioning strategies that a company can adopt are given bellow: Attribute positioning: This occurs when a company positions itself on an attribute. Doubtful Positioning: Buyer may found it hard to believe the brand claims in view of the product's features. such as size. or manufacturer. Benefit positioning: Here the product is positioned as the leader in a certain benefit. 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. Buyers don't really sense anything special about it.

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

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

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

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

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

Firms have to watch for the on set of the decelerating rate in order to prepare new strategies. iii) A Rapid Penetration Strategy: Launching a product at low price and spend heavily on promotion. Marketers should systematically consider strategies of market product and marketing-mix modification. III) Declining Maturity: The absolute level of sales starts to decline. and it poses formidable challenges to marketing management. Maturity stage can be subdivided in to three phases. MARKETING STRATEGIES IN THE MATURITY STAGE: Some company abandon their weak products. retail outlets. and expensive. MARKETING STRATEGIES IN THE INTRODUCTION STAGE. v) Shifting from product awareness advertising to product preference advertising. Assumptions are: Market is large. ii) Add new models and flanker products iii) Enters new market segments. The Growth Stage: Marked by rapid climb in sales. vi) Low down the price to attract the next layer of price-sensitive buyers. Market is unaware of the product.most buyers are price sensitive Strong potential competition. MARKETING STRATEGIES THROUGHOUT THE PRODUCT LIFE CYCLE: Each stage of the product life cycle have an appropriate marketing strategy. .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. This combination is expected to skim lot of profit from the market. Introduction Stage: The introduction stage starts when the new product is launched. The high promotion acts to accelerate the rate of market penetration. Most of the market is aware of the product.manufacturing cost falls with scale of production and accumulated manufacturing expenses. The reasons for slow growth may be i) delay in the expansion of production capacity. The introduce the new product features and expand the distribution chain. ii) A Slow Skimming Strategy: Launching a product at high price and low promotion.those who become aware of the product are eager to have it and pay the asking price. Seeing the attractive market opportunities competitors enter in the market. . 38 .Market is of limited size. and customers start switching to other products. distribution. 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. Maturity Stage: Here the product's rate of sales growth will slow down. promotion.the firm faces potential competition and wants to build brand preference. The rate of growth eventually changes from an accelerating rate to decelerating rate. This strategy make sense under the following assumptions: . ii) delay in obtaining adequate distribution i. This strategy promises to bring about fastest market penetration and the largest market share. High price helps to recover much profit per-unit and low promotion keeps the marketing expenses down. sales growth is slow at this stage. product quality). marketing management can set a high or a low level for each marketing variable (price.a large part of the potential market is unaware of the product . 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. and . Companies maintain their promotional expenses. In launching a new product. This stage normally lasts longer than the previous stages. This strategy makes sense when . 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. iv) Increase its distribution coverage and enters new distribution channels. 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. or brand strength. II) Stable Maturity: Sales flatten on a per capital basis because of market saturation.e. and iii) customer reluctance to change established behaviors. Because it takes time to roll out the product in several markets and to fill the dealer pipelines. or to come in later which would make sense that the firm can bring superior technology. there are no new distribution channels to fill. I) Growth maturity: The sales growth rate starts to decline. quality. 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. The early adopters like to adopt the product and additional costumers start to buy the product.

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

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

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

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

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

Place: Deciding as how the product will reach to the final users. 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. 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. Let us consider them one by one. Promotion: Either adopting some advertising campaigns used in the home market or change them for the local market. They must had to deal with Price escalation. licenses to other still make joint venture in the third. Product: There are five different product strategies that companies can adopt are i) Straight Extension. Global Origination: When it becomes impossible to control through international division then they become global organization. III FRANCHISING: A complete form of licensing. price etc. iii) Product Innovation i) STRAIGHT EXTENSION: Introducing the product in the foreign market without any change. The potential adoptions that firms might make (in respect of their product. 4 Establishing of production facilitates abroad. ii) Product Adoption. Price: Multinationals face several problems in pricing. V DIRECT INVESTMENT: Also called direct owner ship of foreign based assembly or manufacturing facilities. ii) PRODUCT ADOPTION: Involves altering the product to meet local conditions or preferences. or b) Country Version: iii) PRODUCT INNOVATION: It consists of creating something new. The process is called communication adoption. How many intermediaries will be involved in the distribution process. ii Setting a market based price in each country. promotion. locally in the country in which they are to be soled. iii Setting a cost based price in each country. Export to one. International Division: Involving in several markets by different way. 3 Establishing one or more subsidiaries. companies may arrange their marketing activities in three ways Export Department: Begins simply by shipping out its goods. They creates an international division to handle international activities. transfer prices dumping charges and gray markets. 2 Export via independent representative. as to how much adopt the marketing strategy mix to local conditions. When international sales expand the company organizes an export department consisting of sales manager and a few assistants. It may be of two types a) Backward Invention: re introducing earlier product.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. They have three choices i Setting a uniform price everywhere in local as well as foreign countries. IV JOINT VENTURES: Foreign and local investors join together by investing and sharing ownership and control.) as they enters foreign markets. DECIDING ON THE MARKETING PROGRAM International companies must have to decide. There are several levels of adaptation. A company can produce a a) Regional version: naming it on the basis of the region northern version etc. It can take two forms that are well adapted to a foreign country's needs. DECISION OF MARKETING ORIGINATION: Depending upon the level of involvement in the international arena. 44 .

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

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

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

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

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

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

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

b) Over Demand: When a company cannot supply all of its customers. this practice is called anticipatory pricing. 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. 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. iii) Shallow-pockets trap: High priced competitors may also cuts their price and may have longer staying power because of deeper cash reserves. because customer will turn against the price gougers when the market softens. 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. free delivery.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. if competitors forces it to do so. Customers are most price sensitive to products that cost a lot and are bought frequently. ii) Substituting less-expensive materials or ingredients. or long warranties. such as installation. it can raise its prices. CUSTOMERS’ REACTIONS: Customers often question about the motive behind the reduction or increase in price. INITIATING AND RESPONDING TO PRICE CHANGES: After developing price strategies. or ration supplies to customers. Initiating Price Increases: Successful price increase can increase profits considerably if the sales volume is unaffected. ii) Fragile-market-share trap: A low price buys market share but not market loyalty. the savings on the price bundle must be substantial enough to induce them to buy the bundle. vii) Creating new economy brands. If the by-products have value to the customer group. Reactions to Price Changes: Any price change can effect the customers. competitors. and suppliers and may provoke government reaction as well. Competitors are most likely to react where the number of firms in the industry is small the 52 e) . The possibilities include the following: I) Shrinking the amount of product instead of raising the price. 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. COMPETITORS REACTIONS: A firm changing its price had to be worried about competitors’ as well as customers’ reactions. e) Try to Dominate the Market through Lower Cost: and to increase their market share. then they should be priced on their value. companies will face situations where they need to cut or raise prices. Any income earned on the byproducts will make it easier for the company to charge a lower price on its main product. the company needs to avoid the image of a price gouge. iv) Removing or deducing product service. distributors. 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. While passing on price increases to the customers. iv) Reduction of discounts: The company instructs its sales force not to offer its normal cash and quantity discounts. such as free delivery or installation. f) Product-building Pricing: When the sellers bundle their products at a set price with some saving. or may do both. while they hardly notice higher prices on low-cost items that they buy infrequently. 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. Companies often raise prices by more than the cost increase in anticipation of further inflation or government price controls. v) Using less expensive packaging material or promoting larger package size to keep down packaging cost. b) Declining Market Share: When companies found that they are loosing their market share. vi) Reducing the number of models offered. to restore their market they have to decries their price. Customers will shift to another lower-price firm that comes along. 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. Since customers may not have planned to buy all of the components. This strategy also involves high risks: i) Low quality trap: Consumers will assume that the quality is below that of the higher priced competitors. They may treat it as a decrease in quality or strength of the company. Other ways of Responding High Costs: There are some ways that a company can respond to high costs or demand without raising prices. 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. iii) Reducing or removing product features to reduce cost.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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