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

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

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

Notes on Marketing Management

Prepared by Muhammad Akhlaq Khan

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

Notes on Marketing Management

Prepared by Muhammad Akhlaq Khan

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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