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01 Marketing Management
Question No. 1 Part (a)
Marketing management is a business discipline focused on the practical application of marketing techniques and the management of a firm's marketing resources and activities. Marketing managers are often responsible for influencing the level, timing, and composition of customer demand in a manner that will achieve the company's objectives.
• • • • • • Marketing research and analysis Marketing strategy Implementation planning Project, process, and vendor management Organizational management and leadership Reporting, measurement, feedback and control systems
Marketing research and analysis: In order to make fact-based decisions regarding marketing strategy and design effective, cost-efficient implementation programs, and firms must possess a detailed, objective understanding of their own business and the market in which they operate. In analyzing these issues, the discipline of marketing management often overlaps with the related discipline of strategic planning. In company analysis, marketers focus on understanding the company's cost structure and cost position relative to competitors, as well as working to identify a firm's core competencies and other competitively distinct company resources. Marketing managers may also work with the accounting department to analyze the profits the firm is generating from various product lines and customer accounts. The company may also conduct periodic brand audits to assess the strength of its brands and sources of brand equity. Marketing managers may also design and oversee various environmental scanning and competitive intelligence processes to help identify trends and inform the company's marketing analysis.
Marketing Strategy: Once the company has obtained an adequate understanding of the customer base and its own competitive position in the industry, marketing managers are able to make key strategic decisions and develop a marketing strategy designed to maximize the revenues and profits of the firm. The selected strategy may aim for any of a variety of specific objectives, including optimizing short-term unit margins, revenue growth, market share, long-term profitability, or other goals. To achieve the desired objectives, marketers typically identify one or more target customer segments which they intend to pursue. Customer segments are often selected as targets because they score highly on two dimensions: 1) The segment is attractive to serve because it is large, growing, makes frequent purchases, is not price sensitive (i.e. is willing to pay high prices), or other factors; and 2) The company has the resources and capabilities to compete for the segment's business, can meet their needs better than the competition, and can do so profitably. In fact, a commonly cited definition of marketing is simply "meeting needs profitably." Implementation Planning: After the firm's strategic objectives have been identified, the target market selected, and the desired positioning for the company, product or brand has been determined, marketing managers’ focus on how to best implement the chosen strategy. Traditionally, this has involved implementation planning across the "4Ps" of marketing: Product management, Pricing, Place (i.e. sales and distribution channels), and Promotion. Taken together, the company's implementation choices across the 4Ps are often described as the marketing mix, meaning the mix of elements the business will employ to "go to market" and execute the marketing strategy. The overall goal for the marketing mix is to consistently deliver a compelling value proposition that reinforces the firm's chosen positioning, builds customer loyalty and brand equity among target customers, and achieves the firm's marketing and financial objectives. Project, process, and vendor management: Once the key implementation initiatives have been identified, marketing managers work to oversee the execution of the marketing plan. Marketing executives may therefore manage any number of specific projects, such as sales force management initiatives, product development efforts, channel marketing programs and the execution of public relations and advertising campaigns. Marketers use a variety of project management techniques to ensure projects achieve their objectives while keeping to established schedules and budgets. More broadly, marketing managers work to design and improve the effectiveness of core marketing processes, such as new product development, brand management, marketing communications, and pricing. Marketers may employ the tools of business process reengineering to ensure these processes are properly designed, and use a variety of process management techniques to keep them operating smoothly.
Reporting, measurement, feedback and control systems: Marketing management employs a variety of metrics to measure progress against objectives. It is the responsibility of marketing managers -- in the marketing department or elsewhere -- to ensure that the execution of marketing programs achieves the desired objectives and does so in a cost-efficient manner. Marketing management therefore often makes use of various organizational control systems, such as sales forecasts, sales force and reseller incentive programs, sales force management systems, and customer relationship management tools (CRM). Recently, some software vendors have begun using the term "marketing operations management" or "marketing resource management" to describe systems that facilitate an integrated approach for controlling marketing resources. In some cases, these efforts may be linked to various supply chain management systems, such as enterprise resource planning (ERP), material requirements planning (MRP), efficient consumer response (ECR), and inventory management systems.
Question No. 2 Part (a)
Marketing is process of customer orientation. Elaborate thus statement.
Manufactured, outsourced business services companies (MOBSC) provide their client organizations with services that have a substantial manufacturing base. They source data from their client firms, deliver a range of service solutions to these same organizations and deliver manufactured outputs of their services directly to the customers of their client organizations. Considerable research has been undertaken in establishing viable measurement techniques suitable for market orientation surveys. However, consequent strategies for improving the firm’s market orientation have been directed largely at the intangible resources of the firm – in marketing, research and knowledge management. Through its failure to demonstrate how the tangible resources of the firm, such as manufacturing and logistics, might participate in this construct, market orientation theory has been criticized as operationally impractical (Chase and Stewart, 1994). In light of the critical importance of manufacturing operations to MOBSC in the value creation process, this gap in the literature illustrates the need for new explanations for market orientation in outsourced services firms. Proposition 1: While acknowledging the value creating potential residing in other Stakeholders, a market oriented firm will place its highest priority on Customers and the delivery of superior customer value.
Market-oriented companies use information acquisition, market sensing, shared diagnosis, and inter-functional decision making to deliver superior value to customers and to pre-empt competitors (Cravens, Greenley, Piercy and Slater, 1998; Day, 1994a, 1994b; Morgan, 1992). Jaworski and Kohli (1993) concluded that organizational systems were antecedents to a market orientation. They were particularly concerned with intradivisional ‘connectedness’ and the impact of incentive schemes, training programmes and inter-departmental communication practices on market orientation. In exploring Proposition 1, time series analysis of documented management decisions over seven years showed that during that period 50 management decisions had an impact on the firm’s business orientation during the period of the study. Approaches to Re-position the Orientation of the Firm
Nomenclature Total Quality Management The Customer Comes Second Customer-focused Quality Strategically Driven Quality Journey Market-oriented Strategic Alignment Customer-driven Company Customer-oriented Ideology Increased Customer Value Market-oriented Ideology Direction Internal Internal Internal Internal Internal External External External External Focus on Systems Employees Systems Systems Resources Customer Customer Customer Market Benefit to Firm Firm Customer Market Market Customer Customer Customer Market Attempts 4 2 9 2 13 3 6 1 1
Question No. 2 Part (b)
How can marketer focus customer value and satisfaction? And how will he attract and retain customer? It's hardly news that customer satisfaction and customer loyalty are imperatives in the banking business. The Charlotte, N.C.-based Wachovia Corp. has taken those concepts a bit further, however. The company already scores at the top of the annual Customer Satisfaction Index compiled by the University of Michigan, but it is now embarking on a new initiative to define and promote customer equity. "Consulting companies are saying you should be interested in customer lifetime value, and they'll give you an average value for those customers," said Dan Thorpe, senior vice president, and statistics and modeling director of Wachovia's Customer Analysis Research and Targeting (CART) Group. "We are calculating individual estimates for each of our households. We really think households drive customer value." That's no small task. Wachovia has more than 13 million customers and breaking them down into households requires understanding the relationships within a household, which
may include more than just checking accounts and mortgages for a husband and wife, but a brother or sister and a business as well. Thorpe's CART team plans to have the estimates for household customer equity complete by the end of the year, when the company can begin applying it to customer contact campaigns. "Rather than just the responses to a campaign or products a customer uses, we want to look at what it does for customer lifetime value," Thorpe said. For example, a household may have a checking account and a credit card with Wachovia and may be a candidate for a home equity loan. But before making that loan offer and looking at just the value of the one loan, Wachovia will be able to see how that affects all the products the customer might be eligible for now and in the future. Also, the data will be used to optimize customer contacts, not just blasting out messages but showing whom to contact when, and what is the best value. Further down the line, Thorpe hopes to use the models to test advertising and sponsorship programs. Thorpe has a 10-person statistics and modeling team working on the customer equity calculations. The team works within the CART Group, which acts in collaboration with Wachovia's marketing unit. The calculations are done with sophisticated data mining, survival analysis, and multistage modeling with technology from the Cary, N.C.-based SAS Institute Inc., Wachovia's longtime technology vendor. "SAS is the only language out there," Thorpe said. He maintains a strong relationship that he formed with the company's research and development team when he was with W.L. Gore and Associates, the makers of GORE-TEX, two years before coming to Wachovia. Wachovia uses SAS to provide customer analysis for each unique channel and banking group, including wholesale banking, Wachovia Direct, and the e-commerce division. "Banking data tends to have 30 deviations for spread. A lot of your simple statistics are not accurate. Having SAS's strength allows us to put the correct summary in place." Back in 1999, Wachovia began placing an emphasis on customer satisfaction, and the focus on customer equity has evolved from that. In fact, customer loyalty is one of the company's top seven priorities over the next five years, according to a spokesperson. It's long been a priority at Wachovia, and CEO Ken Thompson continues to push for it. "We recognize you just can't relax on this; that's why loyalty is the next step on satisfaction, and lifetime equity is the next step in profitability," Thorpe said. "When we do presentations to senior executives, I always include lifetime customer value equity calculations as I would with customer acquisition.
Question No. 3 Part (a)
Describe marketing process. How marketing information system help a firm to run a business successful?
The Marketing Process:
Under the marketing concept, the firm must find a way to discover unfulfilled customer needs and bring to market products that satisfy those needs. The process of doing so can be modeled in a sequence of steps: the situation is analyzed to identify opportunities, the strategy is formulated for a value proposition, tactical decisions are made, the plan is implemented and the results are monitored. Situation Analysis | V Marketing Strategy | V Marketing Mix Decisions | V Implementation & Control
Marketing Information System:
The Functions of Management: Clearly, information systems that claim to support managers cannot be built unless one understands what managers do and how they do it. The classical model of what managers do, espoused by writers in the 1920's, such as Henry Fayol, whilst intuitively attractive in itself, is of limited value as an aid to information system design. The classical model identifies the following 5 functions as the parameters of what managers do: 1 Planning 2 Organizing 3 Coordinating 4 Deciding 5 Controlling Managerial Roles: Mintzberg suggests that managerial activities fall into 3 categories: interpersonal, information processing and decision making. An important interpersonal
role is that of figurehead for the organization. Second, a manager acts as a leader, attempting to motivate subordinates. Lastly, managers act as a liaison between various levels of the organization and, within each level, among levels of the management team. A second set of managerial roles, termed as informational roles, can be identified. Managers act as the nerve centre for the organization, receiving the latest, most concrete, most up-to-date information and redistributing it to those who need to know. A more familiar set of managerial roles is that of decisional roles. Managers act as entrepreneurs by initiating new kinds of activities; they handle disturbances arising in the organization; they allocate resources where they are needed in the organization; and they mediate between groups in conflict within the organization. Decision Making: Decision making is often seen as the centre of what managers do, something that engages most of a managers time. It is one of the areas that information systems have sought most of all to affect (with mixed success). Decision making can be divided into 3 types: strategic, management control and operations control. Strategic decision making: This level of decision making is concerned with deciding on the objectives, resources and policies of the organization. A major problem at this level of decision making is predicting the future of the organization and its environment, and matching the characteristics of the organization to the environment. This process generally involves a small group of high-level managers who deal with very complex, non-routine problems. Management control decisions: Such decisions are concerned with how efficiently and effectively resources are utilized and how well operational units are performing. Management control involves close interaction with those who are carrying out the tasks of the organization; it takes place within the context of broad policies and objectives set out by strategic planners. Components of a marketing information system: A marketing information system (MIS) is intended to bring together disparate items of data into a coherent body of information. An MIS is, as will shortly be seen, more than raw data or information suitable for the purposes of decision making. An MIS also provides methods for interpreting the information the MIS provides. Moreover, as Kotler's1 definition says, an MIS is more than a system of data collection or a set of information technologies: "A marketing information system is a continuing and interacting structure of people, equipment and procedures to gather, sort, analyze, evaluate, and distribute pertinent, timely and accurate information for use by marketing decision makers to improve their marketing planning, implementation, and control". • Internal reporting systems • Marketing research systems • Marketing intelligence systems • Marketing models
Question No. 3 Part (b)
Give an overview of forecasting and demand measurement?
Almost every decision a manager takes needs a forecast. If he has an idea of what will happen in the future, he can make appropriate management decisions. He also needs to assess the effect of his present decisions on the future so that the right decisions are made today to create a desired condition tomorrow. Fertilizer is capital intensive and, therefore, cost sensitive. If we know what fertilizer types are likely to be demanded, where and when, we can improve the quality of decisions concerning production, procurement, placement and promotion. Consequently, we can minimize funds tied up in inventories, save interest costs, conserve foreign exchange, avoid running out of stock and, generally, increase sales and improve profits. This manual looks at major concepts in demand measurement and describes different methodologies. The significance of forecasts both where there is market competition and where there is a parastatal monopoly and the relative advantages of different techniques will be presented. Even though some of the forecasting models are too complex to be relevant to all countries, brief outlines have been provided to facilitate further study by those who wish to try applying them to their specific situations. The purpose is to provide practical advice on fertilizer forecasting methods to improve marketing efficiency at the company level and strengthen the supply management system at national level.
Reasons for Demand Forecasting:
Because fertilizer demand depends on a variety of agro-economic factors it is not stable nor is it amenable to accurate prediction. The choice of forecasting methodologies is thus particularly important, both for successful operation of fertilizer companies and for the formulation of appropriate policies by governments. To arrange timely supplies of the right fertilizer types in thousands of villages, it is necessary to have an assessment of the likely demand for each fertilizer type at numerous locations at different times in both the short and medium terms. Effective demand forecasting can enable importers to take full advantage of world market price fluctuations. Required storage, transport, staffing, credit, financial and foreign exchange arrangements are dependent on demand. If actual fertilizer demand is less than the fertilizer produced in or imported into a country, heavy financing costs and product losses will be the result. Considering that fertilizer procured but not sold may have to be kept for a year before it finds a buyer and that a storage duration of a year can cause high quantity and quality losses, the importance of demand forecasting can be readily appreciated. If the actual demand is larger than forecast, this leads to shortages, lower agricultural production and, often, political implications.
All plans of fertilizer manufacturing or marketing companies should be derived directly or indirectly from the demand forecast. From a national demand forecast a company's expected sales can be estimated by assessing its market share in each area of the country. The sales forecast tells the production department what to produce, how much and when. For imported fertilizer, the sales forecast is the basis for the procurement schedule. The finance department is able to prepare, based on the sales forecast, a plan of cash inflow and outflow, assess the working capital gap and arrange necessary support from the bank. The marketing department is guided by the forecast in deploying sales staff, arranging storage at appropriate locations, contracting for wagons and trucks and activating a wholesale and retail network to cope with the expected volume of business. With the help of a detailed sales estimate by region and month, it is possible to identify primary storage locations in such a manner as to optimize transport cost, minimize storage duration and avoid wasteful inter-store movements.
Fertilizer forecasting can be divided into three stages complementary to each other, i.e. (i) assessment of potential, (ii) forecast of demand and (iii) forecast of sales. To the government the first two stages are significant. To marketing organizations, the second and third stages are relevant. The government wishes to know the gap between potential and demand to determine what it needs to do to transform part of the potential into effective demand. A company wishes to know what the effective demand is and what share of it can be met through the company's sales. As regards the technique employed, forecasting methods fall into one of four basic approaches:• • • • measurement of potential through need-oriented or agronomic method time series analysis and projection causal models Qualitative approach.
Question No. 4 Part (a)
Explain consumer behavior with the help of model. Also explain major factors influencing buying behavior.
Consumer behavior is the study of how people buy, what they buy, when they buy and why they buy. It blends elements from psychology, sociology,
sociopsychology, anthropology and economics. It attempts to understand the buyer decision making process, both individually and in groups. It studies characteristics of individual consumers such as demographics, psychographics, and behavioral variables in an attempt to understand people's wants. It also tries to assess influences on the consumer from groups such as family, friends, reference groups, and society in general.
Basic model of consumer decision making
Stage Problem recognition Information search Alternative evaluation Purchase decision Post-purchase evaluation Brief description The consumer perceives a need and becomes motivated to solve a problem. The consumer searches for information required to make a purchase decision The consumer compares various brands and products Attitude formation The consumer decides which brand to purchase Integration The consumer evaluates their purchase decision Learning.
Major factors influencing buying behavior:
Cultural Factors In a diversified country like India cultural factors exert the broadest and deepest influence on consumer behavior; we will look at the role played by the buyer’s culture, subculture, and social class. Culture: Culture is the most fundamental determinant of a person’s wants and behavior. Whereas lower creatures are governed by instinct, human behavior is largely learned. The child growing up in a society leans a basic set of values, perceptions, preferences and behaviors through a process of socialization involving the family and other key institution .Thus a child growing up in America is exposed to the following values: Achievement and success, activity , efficiency and practicality, progress, material comfort, individualism, freedom, external comfort, humanitarianism, and youthfulness. Subculture: Each culture contain smaller group of subculture that provide more specific identification and socialization for its members. Four types of subculture can be distinguished .Nationality groups such as the Irish, polish, Italians, and Puerto Ricans are found with in large communities and exhibits distinct ethnic tastes and Jews represent subculture with specific culture preference and taboos. Social Class: Virtually all human societies exhibit social stratification. Stratification sometimes takes the form of a caste system where the members of different caste are reared for
certain roles and cannot change their caste membership .More frequently; stratification takes the form of social classes. Social Classes have several characteristics. First, Person with in each social class tends to behave more alike than persons from two different social classes. Second, persons are perceived as occupying inferior or superior positions according to their social class. Third, a person’s social class is indicated by a number of variables, such as occupation, income, wealth, education , and value orientation, rather than by any single variable , fourth, individuals are able to move from one social class to another up or down during their lifetime. The Extent of this mobility varies according to the rigidity of social stratification a given society. Social Factors: A consumer’s behavior is also influenced by social factors, such as the consumer’s reference group, family, and social roles and statuses. Reference Group: A person’s behavior is strongly influenced by many group .A persons reference group are those groups that have a direct (face to face) or indirect influence on the person’s attitudes or behavior. Group having a direct influence on a person are called membership group. These are group to which the person belongs and interacts. Some are primary groups. With which there is fairly continuous interaction, such as family, friends, neighbors, and co-workers. Primary group tend to be informal. The person also belong to secondary group, which tend to be more formal and where there is less continuous interaction: they include religious organizations, professional associations, and trade unions. Family Group: Members of the buyer’s family can exercise a strong influence on the buyer’s behavior. We can distinguish between two families in the buyer’s life . The family of orientation consists of one’s parents. From parents a persons acquires an orientation towards religious, politics, and economics and a sense of personal ambitions, self –worth, and love. Even if the buyer no longer interacts very much with his or her parents, the parents influence on the unconscious behavior of the buyer can be significant. In countries where parents continue to live with their children, their influence can be substantial.
Question No. 4 Part (b)
Differentiate consumer market from institutional and government market. The market environment is a marketing term and refers to all of the forces outside of marketing that affect marketing management’s ability to build and maintain successful relationships with target customers. The market environment consists of both the macro environment and the microenvironment.
The microenvironment refers to the forces that are close to the company and affect its ability to serve its customers. It includes the company itself, its suppliers, marketing intermediaries, customer markets, competitors, and publics. The company aspect of microenvironment refers to the internal environment of the company. This includes all departments, such as management, finance, research and development, purchasing, operations and accounting. Each of these departments has an impact on marketing decisions. For example, research and development have input as to the features a product can perform and accounting approves the financial side of marketing plans and budgets. The suppliers of a company are also an important aspect of the microenvironment because even the slightest delay in receiving supplies can result in customer dissatisfaction. Marketing managers must watch supply availability and other trends dealing with suppliers to ensure that product will be delivered to customers in the time frame required in order to maintain a strong customer relationship. Marketing intermediaries refers to resellers, physical distribution firms, marketing services agencies, and financial intermediaries. These are the people that help the company promote, sell, and distribute its products to final buyers. Resellers are those that hold and sell the company’s product. They match the distribution to the customers and include places such as Wal-Mart, Target, and Best Buy. Physical distribution firms are places such as warehouses that store and transport the company’s product from its origin to its destination. Marketing services agencies are companies that offer services such as conducting marketing research, advertising, and consulting. Financial intermediaries are institutions such as banks, credit companies and insurance companies. Another aspect of microenvironment is the customers. There are different types of customer markets including consumer markets, business markets, government markets, international markets, and reseller markets. The consumer market is made up of individuals who buy goods and services for their own personal use or use in their household. Business markets include those that buy goods and services for use in producing their own products to sell. This is different from the reseller market which includes businesses that purchase goods to resell as is for a profit. These are the same companies mentioned as market intermediaries. The government market consists of government agencies that buy goods to produce public services or transfer goods to others who need them. International markets include buyers in other countries and includes customers from the previous categories. Competitors are also a factor in the microenvironment and include companies with similar offerings for goods and services. To remain competitive a company must consider who their biggest competitors are while considering its own size and position in the industry. The company should develop a strategic advantage over their competitors. The final aspect of the microenvironment is publics, which is any group that has an interest in or impact on the organization’s ability to meet its goals. For example, financial publics can hinder a company’s ability to obtain funds affecting the level of credit a company has. Media publics include newspapers and magazines that can publish articles of interest regarding the company and editorials that may influence customers’ opinions. Government publics can affect the company by passing legislation and laws that put restrictions on the company’s actions. Citizen-action publics include environmental groups and minority groups and can question the actions of a company and put them in
the public spotlight. Local publics are neighborhood and community organizations and will also question a company’s impact on the local area and the level of responsibility of their actions. The general public can greatly affect the company as any change in their attitude, whether positive or negative, can cause sales to go up or down because the general public is often the company’s customer base. And finally, the internal publics include all those who are employed within the company and deal with the organization and construction of the company’s product. The macro environment refers to all forces that are part of the larger society and affect the microenvironment. It includes concepts such as demography, economy, natural forces, technology, politics, and culture.
Question No. 5 Part (a)
Discuss new product development process. Idea Generation: • Ideas for new products can be obtained from customers (employing user innovation), designers, the company's R&D department, competitors, focus groups, employees, salespeople, corporate spies, trade shows, or through a policy of Open Innovation. Ethnographic discovery methods (searching for user patterns and habits) may also be used to get an insight into new product lines or product features. • Formal idea generation techniques can be used, such as attribute listing, forced relationships, brainstorming, morphological analysis and problem analysis. Idea Screening: • The object is to eliminate unsound concepts prior to devoting resources to them. • The screeners must ask at least three questions: o Will the customer in the target market benefit from the product? o Is it technically feasible to manufacture the product? o Will the product be profitable when manufactured and delivered to the customer at the target price? Concept Development and Testing: • Develop the marketing and engineering details o Who is the target market and who is the decision maker in the purchasing process?
What product features must the product incorporate? What benefits will the product provide? How will consumers react to the product? How will the product be produced most cost effectively? Prove feasibility through virtual computer aided rendering, and rapid prototyping o What will it cost to produce it? Test the concept by asking a sample of prospective customers what they think of the idea. o o o o o
Business Analysis: • Estimate likely selling price based upon competition and customer feedback • Estimate sales volume based upon size of market • Estimate profitability and breakeven point Beta Testing and Market Testing: • Produce a physical prototype or mock-up • Test the product (and its packaging) in typical usage situations • Conduct focus group customer interviews or introduce at trade show • Make adjustments where necessary • Produce an initial run of the product and sell it in a test market area to determine customer acceptance. Technical Implementation: • New program initiation • Resource estimation • Requirement publication • Engineering operations planning • Department scheduling • Supplier collaboration • Logistics plan • Resource plan publication • Program review and monitoring • Contingencies - what-if planning Commercialization: • Launch the product • Produce and place advertisements and other promotions • Fill the distribution pipeline with product • Critical path analysis is most useful at this stage
Question No. 5 Part (b)
What is PLC (Product Life Cycle)?
Product Life Cycle:
A product's life cycle (PLC) can be divided into several stages characterized by the revenue generated by the product. If a curve is drawn showing product revenue over time, it may take one of many different shapes, an example of which is shown below:
When the product is introduced, sales will be low until customers become aware of the product and its benefits. Some firms may announce their product before it is introduced, but such announcements also alert competitors and remove the element of surprise. Advertising costs typically are high during this stage in order to rapidly increase customer awareness of the product and to target the early adopters. During the introductory stage the firm is likely to incur additional costs associated with the initial distribution of the product. These higher costs coupled with a low sales volume usually make the introduction stage a period of negative profits.
During the introduction stage, the primary goal is to establish a market and build primary demand for the product class. The following are some of the marketing mix implications of the introduction stage: Product - one or few products, relatively undifferentiated Price - Generally high, assuming a skim pricing strategy for a high profit margin as the early adopters buy the product and the firm seeks to recoup development costs quickly. In some cases a penetration pricing strategy is used and introductory prices are set low to gain market share rapidly. Distribution - Distribution is selective and scattered as the firm commences implementation of the distribution plan. Promotion - Promotion is aimed at building brand awareness. Samples or trial incentives may be directed toward early adopters. The introductory promotion also is intended to convince potential resellers to carry the product.
The growth stage is a period of rapid revenue growth. Sales increase as more customers become aware of the product and its benefits and additional market segments are targeted. Once the product has been proven a success and customers begin asking for it, sales will increase further as more retailers become interested in carrying it. The marketing team may expand the distribution at this point. When competitors enter the market, often during the later part of the growth stage, there may be price competition and/or increased promotional costs in order to convince consumers that the firm's product is better than that of the competition. During the growth stage, the goal is to gain consumer preference and increase sales. The marketing mix may be modified as follows: Product - New product features and packaging options; improvement of product quality. Price - Maintained at a high level if demand is high, or reduced to capture additional customers. Distribution - Distribution becomes more intensive. Trade discounts are minimal if resellers show a strong interest in the product. Promotion - Increased advertising to build brand preference.
The maturity stage is the most profitable. While sales continue to increase into this stage, they do so at a slower pace. Because brand awareness is strong, advertising expenditures will be reduced. Competition may result in decreased market share and/or prices. The competing products may be very similar at this point, increasing the difficulty
of differentiating the product. The firm places effort into encouraging competitors' customers to switch, increasing usage per customer, and converting non-users into customers. Sales promotions may be offered to encourage retailers to give the product more shelf space over competing products. During the maturity stage, the primary goal is to maintain market share and extend the product life cycle. Marketing mix decisions may include: Product - Modifications are made and features are added in order to differentiate the product from competing products that may have been introduced. Price - Possible price reductions in response to competition while avoiding a price war. Distribution - New distribution channels and incentives to resellers in order to avoid losing shelf space. Promotion - Emphasis on differentiation and building of brand loyalty. Incentives to get competitors' customers to switch.
Eventually sales begin to decline as the market becomes saturated, the product becomes technologically obsolete, or customer tastes change. If the product has developed brand loyalty, the profitability may be maintained longer. Unit costs may increase with the declining production volumes and eventually no more profit can be made. During the decline phase, the firm generally has three options: Maintain the product in hopes that competitors will exit. Reduce costs and find new uses for the product. Harvest it, reducing marketing support and coasting along until no more profit can be made. The marketing mix may be modified as follows: Product - The number of products in the product line may be reduced. Rejuvenate surviving products to make them look new again. Price - Prices may be lowered to liquidate inventory of discontinued products. Prices may be maintained for continued products serving a niche market. Distribution - Distribution becomes more selective. Channels that no longer are profitable are phased out. Promotion - Expenditures are lower and aimed at reinforcing the brand image for continued products.
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