You are on page 1of 33

Concepts in Marketing

1. Production Concept ü D>>S ü Sole Supplier ü Many Customers

2. ü ü ü ü 3.

Product Concept D>S Many Suppliers Few Customers Undifferentiated Products

Selling Concept ü Products, even good ones, don't necessarily sell themselves. Customers must be convinced to buy products. ü D<<S


Marketing Concept

Philosophy of conducting business would be one of filling the identified needs of its customers, rather than bending the will of the customer to fit the needs of the company.

5. Societal Concept Marketers should take care of themselves, the customers and also the society. Ex: Selling Banned substance takes care of Seller, Customer but NOT SOCIETY!!!


Ecological Concept

Marketers should be responsible towards ecology and environment. 7. Holistic Concept

The Ansoff Model
The Ansoff Matrix was first published in the Harvard Business Review in 1957, and has given generations of marketers and business leaders a quick and simple way of thinking about growth. Sometimes called the Product/Market Expansion Grid, the matrix (see Figure 1 below) shows four ways that businesses can grow, and helps people think about the risks associated with each option.

The Matrix essentially shows the risk that a particular strategy will expose you to, the idea being that each time you move into a new quadrant (horizontally or vertically) you increase risk. · The Corporate Ansoff Matrix Looking at it from a business perspective, the low risk option is to stay with your existing product in your existing market: you know the product works, and the market holds few surprises for you. However, you expose yourself to a whole new level of risk by either moving into a new market with an existing product, or developing a new product for an existing market. The new market may turn out to have radically different needs and dynamics than you thought, and the new product may just not be commercially successful. And by moving two quadrants and targeting a new market with a new product, you increase your risk to yet another level! · Personal Ansoff Looking at this idea from a personal perspective, just staying where you are is often a low risk option. Switching to a new role in the same company or industry, or changing to a similar job in a new industry is a high-risk option. And switching to a new role in a new industry has an even higher level of risk!

Here you might: · Extend your product by producing different variants. Youre trying to sell more of the same things to different people. youre targeting new markets. Product Development Here. and suchlike). or new areas of the market. or to use more of it. or improve customer service or quality. genders or demographic profiles from your normal customers. · The table below helps you think about how you might classify different approaches. a domestic plumbing company might add a tiling service after all. Here you might: · Advertise. shorten your time to market. perhaps with different age groups. such as online or direct sales if you are currently selling through the trade. then it can be well worth taking quite large risks. because you are trying to sell completely different products or services to different customers The main advantage of diversification is that. · Increase your sales force activities. youre selling more things to the same people. Here you might: · Target different geographical markets at home or abroad. by researching carefully. or packaging existing products it in new ways.Tip 1: Interpret this according to your circumstances. · Use different sales channels. should one business suffer from adverse circumstances. For example. making contingency plans. But a salesman doing this may lose contacts that would take years to rebuild. youre trying to sell more of the same things to the same people. the other may not be affected. Target different groups of people. · Introduce a loyalty scheme. if customers who want a new kitchen plumbed in are quite likely to need tiling as well!) · In a service industry. . to encourage more people within your existing market to choose your product. · Buy a competitor company (particularly in mature markets). building appropriate skills. Market Penetration With this approach. · Develop related products or services (for example. Tip 2: Don't be too scared by risk if you manage it correctly (for example. · Diversification This strategy is risky: Theres often little scope for using existing expertise or for achieving economies of scale. · Launch price or other special offer promotions. Market Development Here. an accountant may find it easy to switch from one industry to another.

then new competitors canquickly enter your market and weaken your position. For example. and so on. services or businesses have the potential to be profitable. powerful buyers. theyll go elsewhere. and they offer equally attractive products and services. · You have firstly thought through what you have to do if things don't work out. This is useful. or if you have little protection for your key technologies. people may substitute by doing the process manually or by outsourcing it. the more powerful your suppliers are. The fewer the supplier choices you have. 4. the uniqueness of their product or service. If it costs little in time or money to enter your market and compete effectively. · How to use the tool: Five Forces Analysis assumes that there are five important forces that determine competitive power in a situation. If substitution is easy and substitution is viable. then you can preserve a favorable position and take fair advantage of it . With a clear understanding of where power lies. then you can often have tremendous strength. On the other hand. This makes it an important part of your planning toolkit. Supplier Power: Here you assess how easy it is for suppliers to drive up prices. Threat of Substitution: This is affected by the ability of your customers to find a different way of doing what you do for example. and the more you need suppliers' help. 3. and avoid taking wrong steps. If you deal with few. if you're switching from one quadrant to another. their strength and control over you. · You build the capabilities needed to succeed in the new quadrant. this is driven by the number of buyers. then this weakens your power. These are:1. if no-one else can do what you do. if you supply a unique software product that automates an important process. because it helps you understand both the strength of your current competitive position. Again. they are often able to dictate terms to you. then youll most likely have little power in the situation. if there are few economies of scale in place. the importance of each individual buyer to your business. To use the tool to understand your situation. Porter's Five Forces Model Assessing the Balance of Power in a Business Situation · Why use the tool? The Porters Five Forces tool is a simple but powerful tool for understanding where power lies in a business situation. and are learning what makes the new market tick.2. and so on. · You've got plenty of resources to cover a possible lean period while you're learning how to sell the new product. look at each of these forces one-by-one. the cost to them of switching from your products and services to those of someone else. This is driven by the number of suppliers of each key input. Competitive Rivalry: What is important here is the number and capability of your competitors if you have many competitors. make sure that: · You research the move carefully. you can take fair advantage of a situation of strength. 5. and that failure won't "break" you. 2. Buyer Power: Here you ask yourself how easy it is for buyers to drive prices down. If you have strong and durable barriers to entry. . the cost of switching from one to another. Conventionally. and the strength of a position youre looking to move into. However it can be very illuminating when used to understand the balance of power in other situations. the tool is used to identify whether new products. If suppliers and buyers dont get a good deal from you. improve a situation of weakness. Threat of New Entry : Power is also affected by the ability of people to enter your market. Manage risk appropriately.

however use this as a framework for thinking through what you could change toincrease your power with respect to each force. To use the tool to understand your situation. and summarize the size and scale of the forceon the diagram. Then mark the key factors on a diagram like the one above.· · Brainstorm the relevant factors for your market or situation. or --" for a force strongly against you (you can see this in the example below). Bear in mind that few situations are perfect. Bear in mind that few situations are perfect. or --" for a force strongly against you (you can see this in the example below). An easy way of doing this is to use. Brainstorm the relevant factors for your market or situation. Then look at the situation you find using this analysis and think through how it affects you. and then check against the factors listed for the force. a single + sign for a force moderately inyour favor. · · · · · The Value Chain . An easy way of doing this is to use. Then look at the situation you find using this analysis and think through how it affects you. and summarize the size and scale of the forceon the diagram. a single + sign for a force moderately inyour favor. Then mark the key factors on a diagram like the one above. for example. however use this as a framework for thinking through what you could change toincrease your power with respect to each force. for example. look at each of these forces one-by-one. and then check against the factors listed for the force in the diagram above.

Value chain analysis describes the activities within and around an organization. BCG Matrix . marketing and sales. This idea was built upon the insight that an organization is more than a random compilation of machinery. Porter distinguishes between primary activities and support activities. operations. technology development (including R&D). outbound logistics. Porter argues that the ability to perform particular activities and to manage the linkages between these activities is a source of competitive advantage. finance. and relates them to an analysis of the competitive strength of the organization. There are four main areas of support activities: procurement. quality.The term Value Chain was used by Michael Porter in his book "Competitive Advantage: Creating and Sustaining superior Performance" (1985). Only if these things are arranged into systems and systematic activates it will become possible to produce something for which customers are willing to pay a price. The value chain analysis describes the activities the organization performs and links them to the organizations competitive position. They can be grouped into five main areas: inbound logistics. Each of these primary activities is linked to support activities which help to improve their effectiveness or efficiency.). In other words. The basic model of Porters Value Chain is as follows: The term Margin implies that organizations realize a profit margin that depends on their ability to manage the linkages between all activities in the value chain. and infrastructure (systems for planning. information management etc. human resource management. Therefore. the organization is able to deliver a product / service for which the customer is willing to pay more than the sum of the costs of all activities in the value chain. it evaluates which value each particular activity adds to the organizations products or services. Primary activities are directly concerned with the creation or delivery of a product or service. people and money. equipment. and service.

but because they have low market shares they dont generate much cash. However. . It helps a company think about its products and services and make decisions about which it should keep. Stars Stars generate large sums of cash because of their strong relative market share. If a star can maintain its large market share it will become a cash cow when the market growth rate declines. and eventually a cash cow when the market growth slows. These units should be milked extracting the profits and investing as little as possible. A question mark has the potential to gain market share and become a star. So the cash being spent and brought in approximately nets out. If it doesnt become a market leader it will become a dog when market growth declines. They provide the cash required to turn question marks into market leaders. Cash Cows As leaders in a mature market. Dogs Dogs have a low market share and a low growth rate and neither generate nor consume a large amount of cash. cash cows exhibit a return on assets that is greater than the market growth rate so they generate more cash than they consume. Question marks need to be analysed carefully to determine if they are worth the investment required to grow market share. Question Marks Question marks are products that grow rapidly and as a result consume large amounts of cash. The result is a large net cash consumption. dogs are cash traps because of the money tied up in a business that has little potential. but also consume large amounts of cash because of their high growth rate.The Boston Consulting Group (BCG) Matrix is a simple tool to assess a companys position in terms of its product range. Such businesses are candidates for divestiture. which it should let go and which it should invest in further.

pioneered the nine cell strategic business screen illustrated here.The GE 9 cell matrix Description of the model The General Electric Company. . The suggested strategy is that management should begin to make plans to exit the industry. Management must therefore exercise caution when making additional investments in this product/service. The Yellow Zone consists of the three diagonal cells from the lower left to the upper right. Both axes are divided into three segments. yielding nine cells. If your enterprise falls in this zone you are in a favorable position with relatively attractive growth opportunities. A position in the red zone is not attractive. with the aid of the Boston Consulting Group and McKinsey and Company. A position in the yellow zone is viewed as having medium attractiveness. The nine cells are grouped into three zones: The Green Zone consists of the three cells in the upper left corner. The circle on the matrix represents your enterprise. The suggested strategy is to seek to maintain share rather than growing or reducing share. The Red Zone consists of the three cells in the lower right corner. This indicates a "green light" to invest in this product/service.

adjusting your input until you are satisfied your description accurately characterizes your enterprise.Characterize your enterprise The vertical axis represents the industry attractiveness. It includes an analysis of: § § § § the value and quality of the offering market share staying power experience You can trace through the supporting analysis and its conclusions. The expert system will position your enterprise on the chart based upon your description of: § § § § § bargaining power of the buyers bargaining power of the suppliers internal rivalry the threat of new entrants the threat of substitutes The horizontal axis represents the firm's competitive strength or ability to compete in the industry. .

Medium Attractiveness Average Competitive Position The strategy advice for this cell is to selectively invest for earnings. You should exit the market or prune the product line. Consider th e following strategies: § § invest heavily in selected segments. if you can't strengthen your enterprise you should exit the market. Consider the following strategies: § § § provide maximum investment diversify consolidate your position to focus your resources accept moderate near-term profits to build share High Attractiveness Average Competitive Position The strategy advice for this cell is to invest for growth. Consider the following strategies: § segment the market to find a more attractive position Medium Attractiveness Weak Compe titive Position The strategy advice for this cell is to preserve for harvest. harvest or divest. Consider the following strategies: § act to preserve or boost cash flow as you exit the business seek an opportunistic sale seek a way to increase your strengths establish a ceiling for the market share § you wish to achieve ?seek a ttra cti ve new segmen ts to apply strengths § make contingency plans to protect § your vulnerable position § Low Attractiveness Strong Competitive Position The strategy advice for this cell is to selectively invest for earnings. Consider the following strategies: § make only essential commitments prepare to divest shift resources to a more attractive segment Low Attractiveness Weak Competitive Position The advice for this cell is to harvest or divest. Consider the following strategies: § § build selectively on strength define the implications of challenging for market leadership fill weaknesses to avoid vulnerability High Attractiveness Weak Competitive Position The strategy advice for this cell is to opportunistically invest for earnings. However. Consider the following strategies: § § § ride with the market growth seek niches or specialization seek an opportunity to increase strength through acquisition § § Medium Attractiveness Strong Competitive Position The strategy advice for this cell is to selectively invest for growth.Analysis of Your Enterprise Position High Attractiveness Strong Competitive Position The strategy advice for this cell is to invest for growth. Consider the following strategies: § § defend strengths shift resources to attractive segments ?examine ways to revitalize the industry Low Attractiveness Average Competitive Position The strategy advice for this cell is to restructure. § § § .

which determines where the business competes and choice of differential advantage which it wants to project over its competitor ü It deals not with how the product is but how the company wants its target customers to perceive it.B Features.Segmenting-Targeting-Positioning Segmenting Find segmentation base or variables in broad market Group customers with similar needs into separate segments Prepare segment profile.(Geographical. Select the attractive segment matching companys competence to offer DA over rivals Prepare Brand Segment Strategy Communicate to the buyer Positioning strategy: ü The choice of TMS. Physiological & Behavioral Targeting Compare segments for relative attractiveness Positioning List all F. Demographical. Applications and Benefits sought by the selected TMS Create USP and find the UBP.A. .

Most Advanced Technology Steps in developing value proposition statement: 1. What is target customer profile In Geographic. fastest.1 positions . Demographic. 2. Psychographic including life style and Techno-savviness parameters? . Safest. Co name? and Product name? 2.Ways to position: By attribute By benefit By use or application By user By competitor By product category by quality and price Developing a positioning strategy: A) Select target market segments: Identify the broad market identify bases for segmentation develop profiles of segments measure segments attractiveness B) Create a differential advantage Identify benefits sought USP: Measure competitor positioning Create reason for preference · Unique selling point: An attribute to tout as No. Most Customized.1 · Common No. Best Service.Best Quality. Lowest Price. Most Convenient. Best Value.

6. unambiguous and easily understoodNeither too long nor too short. creates an atmosphere of shared joy in the nation and provides good value for money.Right value position 7 repositioning options 1. 4. 7. healthy and tasty everyday treat for consumers of all ages which spreads cheer amongst the people. compact. Introduce new brands Change existing brands Alter beliefs about brands Alter beliefs about competing brands Alter attributes importance Introduce new or neglected attributes Find new market segment 4 positioning errors to avoid 1. 3. Good day biscuits by Britannia are a popular. What is customers perception of Benefit to price ratio? Expressed asToo high a price for the benefit?--Moderately high price for the benefit?Just right price for the benefit?Moderately low price for the benefit 5. 2. Repositioning Strategy ü Positioning in this map determines the value for the customer. 4. One unique benefit that is distinctly different from others? Other normal benefits? 4. Eg: Good Day biscuits 7. Eg: New entrant. 5. ü Value to be provided based on how the company is entering/targeting the market. 2.3. 3. Make a value proposition statementAn artistic statement. Under positioning Over positioning Confused positioning Doubtful positioning .but covering the salient aspects of all the above 4 points 6.

7. 6.Ps of marketing 1. 4. 2. customer dell ü Performance Quality eq BMW ü Durability eg nokia handsets being most durable ü Reliability. delivery time. Products can be differentiated in ü Form: shapes. drucker) Physical Evidence People Process Product: It need not be tangible it can be in the form of ü ü ü ü Physical good (durable goods like jewellery & non-durables like soaps . 8. information (consultancy) or ideas. 3. properties. Product Price Place Promotion Pace (by Peter F. Note: In case of services ordering ease. 5. entertainment Events. sizes. different packaging ü Features: eg dove differentiates itself from other soap by adding moisturising milk thus conveying its a moisturiser and not just soap ü Customization. colour. apparels etc. food products) Services telecomm networks Experience movies. installation. etc can be points of differentiation Product Strategies: .eg people are willing to pay more for fruits and vegetables available in Natures Basket knowing that they keep genuine organic food products ü Style eg Harley Davidson motorcycles ü Design particularly important in marketing retail services.

resources are shared. length. Down market stretch. and later bringing mid-low priced classmate 2. Up market stretch. 6 packing size. low degree eg ITC. Tata Merits: Synergy is nigh. depth refers to no. Two way stretch eg titan going for Raga and fast track. packing material. a lot of cost will be spent in keeping the inventory . Merits: it will provide market coverage thus economies of scale and large loyal customer base Demerits: if line is too long customer may get confused and there will be cannibalisation Product Depth Strategy: eg lux has 2 forms (solid and liquid). distribution channel etc Product mix width personal care Lux lifebuoy Product line length liril breeze dove pears laundry skin care hair care oral care surf rin wheel Ponds vaseline fair & lovely sunsilk clinic plus closeup deo axe rexona Eg HUL Product Mix width Strategy Merits: ü ü ü ü Even if one product doesnt do well. Product line length Strategy: It can be done in 3 ways 1. depth and consistency Width of product mix refers to how many different product lines the company carries. production techniques. consistency of product refers to how closely related the various product lines in terms of their end use. employee skills eg Himalaya. length refers to total ITC launching high end stationery product brand named papercraft. of items in the mix.A companys product mix has certain width. provides competitive advantage Demerits: Sometimes firms have to say No to a particular product line which is inconsistent even if these lines may have huge growth opportunities.5 fragrances ie 2*6*5 would be the product depth Merits: helps in meeting the needs of sub segment Demerits: if product depth is too high. technology used. cost is low. raw materials. the others come for the rescue Economies of scale Large loyal customer base Prevent Competitive entry in market Demerits: If mix width is too wide. of variants each product tata motors from economy segment going to premium by launching SX4 3. company often fall short of resources Product Mix consistency Strategy high degree of closeness in raw materials. P&G .

7.**Product life cycle 8 steps of New product development 1. Market Analysis [STP & idea generation] Idea screening Concept development & testing Market strategy formation Business analysis Prototypes development & testing [lab testing] Test market Commercial launch . 8. 5. 4. 3. 6. 2.

also called Extensive Decision Making ü Message must feature performance and economic benefits ü Full and detailed information. .**Marketing communication strategies based on Consumer buying behaviour Complex buying behavior eg purchase of house ü ü ü ü ü High value brand or product Requires extensive collection of data Based on facts and figures Comparison Analysis and Choice Post Purchase Discomfort Reduction Buying Behavior eg tanishq ü ü ü ü ü ü Expensive product purchase Infrequent buying and less experience of product High buyer involvement in purchase Perception of high-risk purchase Few perceived differences in brands Reassurance by using some leadership advantage Variety Seeking Buying Behavior eg lays chips ü ü ü ü Individual likes to shop around and experiment with different products Low consumer involvement in purchase SignificaAnt perceived brand differences Consumers willing to try diversity of brands for variety and to avoid boredom Habitual Buying Behavior eg surf excel ü ü ü ü ü ü Low consumer involvement in buying Consumer buys a product out of habit Buying of cheap frequently purchased items Few significant brand differences Considerable brand loyalty based on high customer satisfaction with previous purchases of the brand Little perceived difference between available offerings and no other incentive Extensive Problem Solving ü Buying situations which require considerable effort because the buyer has had no previous experience with the product or suppliers.

posters Less emphasis on factual information Branding Strategies These 4 brand strategies arise because of 2 choices that a Brand Manager has. new product is developed in existing line b.e. new product can choose a completely new name . prices. new product is developed in new line 2. Product Category a. product options. 1.e. Exotic Scotch.Limited Problem Solving eg reva electric car ü ü ü ü ü Purchaser has had some previous experience but is unfamiliar with suppliers. Impulsive buying behavior eg Chocolates ü ü ü ü Seeing is buying Spontaneous See and Buy decisions Communication must use creative idea to attract customers through display.e. New i. etc A choice process involving a moderate degree of cognitive and behavioral effort A purchase involves some degree of conscious information searching and analysis Involves moderately high priced goods which are not purchased too frequently Emphasis on USP of a product Routine Problem Solving eg clinic all clear removing dandruff ü ü ü ü A buying situation in which the buyer has had considerable past experience Also called Automatic Response Behavior or Habitual Response Behavior Habit is determinant Various Discounts given Image buying behavior eg rolex ü ü ü ü Expensive products Products represents personality and lifestyle Status symbol Promotional strategy emphasizes on rich lifestyle of consumer sensual buying behavior eg axe deodorants ü Desire for pleasure ü Convey pleasure sensually ü Ex: Perfumes. New i. fair and lovely.e. a new product has a name with a prefix or suffix of existing name b. Existing i. Existing i. Use of Brand Name a.

Product category was new i.e. Line Extension Strategy New product in existing product category using existing brand name. Example Lux Shampoo. Example Lux launched Lux International. Lux Handwash named after Lux Soap. Product category was soap which was already existing and use of the existing brand name Lux. 2. Success of mother company rubs off to the children and growth is very fast for the children.New 1. Brand Extension Strategy New product in new product category using existing brand name. . shampoo and handwash but use of already existing brand name Lux. Success of mother company rubs off to the children and growth is very fast for the children.

conscious customers. maximum market share. It works only if the marked-up price actually brings in the expected level of sales. the demand would be to a change in price(price elasticity). Marketers need to know how responsive. Estimating Costs: The company wants to charge a price that covers its cost of producing. prices and offers: if the firms offer contains features not offered by the nearest competitor. The key is to deliver more value than the competitor and to demonstrate this to prospective buyers. New Unique Brand New product in new product category using new brand name. · Value Pricing: It basically deals with complete reengineering the companys operations to become a low-cost producer without sacrificing quality. · Target Return Pricing: the firm determines the price that would yield its target rate of ROI. Lux. · Perceived Value Pricing: Companies base their price on the customers perceived value. 2. 3. maximum market skimming and product quality relationship. Determines the value of product perceived in the minds of the consumer. distributing and selling the product. Analyzing competitors costs. 2. 4. Multi Brand Strategy New product in existing product category using new brand name. maximum current profit. Knoor Soup. Kwality Walls icecream of HUL 2nd P of Marketing. to attract a large number of value. price experiments and statistical analysis. Perceived value is made up of buyers image of the product performance. 3. Penetration: Here the target is middle and low segment and is highly price sensitive. Example Lux Soap. the warranty worthiness and suppliers reputation. Setting the pricing policy: A 6 step procedure:1. An . 4. 3 Important pricing strategies are: Skimming : in this strategy set the price high and to catch up with the needs of small segment at the top end of the market who seek higher quality product and willing to pay proportionately higher price for it. Price is fixed so attractively low that a large proportion of the market is deeply and quickly penetrated to get a large volume of sales.Price It is most important because of the following reasons: 1. high quality). Indirectly determines the cost/unit of producing and marketing a product. or elastic. Hybrid : skimming the whole market layer by layer over a period of time by offering the same high quality product at lower prices.3. 5. the channel deliverables. 4. Determining demand: Here demand has to be estimated using the price sensitivity and by various methods such as surveys. Used when all different brands in similar category have dissimilar images and are meant to address different purposes. Selecting a pricing method: · Markup Pricing: in this a standard markup is added to the products cost. Example Pears. including a fair return for its effort and risk. Dove. Selecting the pricing objective: Five major objectives are survival. It determines demand elasticity of the product in market. it should evaluate their worth to the customer and add that value to the competitors price and vice versa. Determines the perceived quality of product(high price.

point-of-sale assignment or retailing. value is created in the supply chain management and reducing the cost of production. 6. distributors. After all if you are selling products for old people. retail).g. 3rd P of marketing place Following questions need to be considered 1.Type Pricing: because of internet. Dutch Auctions( one seller and many buyers or one buyer and many sellers). to which division (young adults. Comparison of value pricing method with perceived value method: ü In both the methods. companys pricing policies. gain and risk sharing pricing and the impact of price on other parties. location and methods of getting the product to the customer. Where do buyers look for your product or service? 2. Selecting the Final Price: The final price must take into account the brands quality and advertising. also referring to how the surroundings in which the product is sold in can influence sales. this is becoming popular. ü In perceived value. ü In perceived value. logistics and the potential use of the internet to sell products directly to consumers. etc. more or less. Just have a national website and you will be sorted. or both? Or online? Or direct via a catalogue? 3.Refers to how the product gets to the buyer. This includes the location of your business. the Selling Price of the product increases whereas in value pricing the cost decreases and hence the Selling Price also decreases. shop front. This third P has furthermore at times been called Place. value is created by forming a completely new innovative product with more features and applications whereas in value pricing. what kind? A specialist boutique or in a supermarket. then you cannot promote your product on matrimony website. Sealed. families. Internet and the Third P: Today when internet has made it to every urban household the whole concept of place has changed drastically. Major types are: English Auctions( 1 seller and many buyers). Isnt it? . How can you access the right distribution channel? auctions( suppliers can submit only 1 bid and cannot know the other bids). which geographic region or industry. business citizens). Place is in regards to distribution. company employees are challenged to create additional value and pass on part of the benefit to customers.Rate Pricing: in this the firm charges its price largely on competitors prices. due to increase in quality and benefits. · Auction. What do competitors do? And how can you learn that and /or differentiate? 6. In case of shop how ambience would be? What Does Kotler Say? Place: . However promoting the website as per the target market is a tough task. referring to the channel by which a product or service is sold (e. online vs. Today there is no need to sell a product in a store and hence there is no need to worry about where the store needs to be placed. either same.important type of value pricing is ELDP(Everyday low pricing) in which a constant low price is charged with little or no price promotions and special sales. Do you need to use a sales force? Or attend trade fairs? Or make online submissions? Or send samples to catalogue companies? 5. If they look in a store. for instance. · Going.

displays. Direct marketing is direct mail. services) and ideas by identified sponsors through various media. as opposed to paid space--usually in print. electronic or Internet media. events/experiences and more. telemarketing. Advertising. direct mail. person or organization.Promotion Overview Promotion is the coordination of all seller-initiated efforts to set-up channels of information and persuasion to sell goods and services or to promote an idea. Securing editorial space. sales promotion. public relations/publicity. about products (goods. the Internet. usually paid for and usually persuasive in nature. (Belch and Belch) The communication element includes personal and non-personal communication activities. Collateral Materials--Booklets. database management. magazines. communicate the merits of the overall product. radio. plus direct marketing and Internet/interactive media. tie-ins. brochures. service. catalogues. mail order catalogues. goods. lobbying. promotional products and annual reports. idea. publicity. allowances. which include: · · Activities that · · · · · Personal Selling/ Sales Force Advertising--Mass or non-personal selling: TV. films. PR involves a variety of programs designed to promote or protect a companys image/reputation or individual products. direct selling. premiums. Media and More Ads can be a cost-effective way to disseminate messages. newspaper. coupons. . samples. outdoor/out of-home (OOH). sales kits. Includes Interactive/Internet/web Events and Experiences Public Relations--press releases. online Advertising is structured and composed of non-personal communication of information. sweepstakes. Marketing. and direct response ads through direct mail. telemarketing. whether to build a brand preference or to educate people. p-o-p. Promotion. Sales Promotion--Trade deals. Direct Marketing (also referred to as Action or Direct Response Advertising)--online. personal selling. and direct-response ads. database marketing. IMC. place. and various media. or services by an identified sponsor. sales rep contests. catalogues. (Belch and Belch)Promotional Mix includes advertising. Promote or hype a product. internal communication. Advertising is any paid form of non-personal presentation and promotion of ideas. trade shows.

and public relations a company uses to pursue its advertising and marketing objectives. The products design. stories. building up a good corporate image. Personal selling: Personal presentation by the firms sales force to make sales and build customer relationships. and incentive programs. and public rela. radio.cast. Advertising Any paid form of non personal presentation and promotion of ideas. Advertising includes print. and other forms. Public relations Building good relations with the companys publics by obtaining favourable publicity. discounts. These new technologies have encouraged more companies to move from mass commu. as well as its newer forms (fax machines. e-mail. outdoor. goods. although the promotion mix is the companys primary communication activity. and other non-personal tools to communicate directly with specific con. Direct marketing Direct communications with carefully targeted individuals to obtain an immediate response. Each type of promotion has its own tools. and demonstrations. sales promotion. Direct marketing: Direct communications with carefully targeted individual consumers to obtain an immediate responsethe use of mail. Thus.nication to more targeted communication and one-on-one dialogue. communication goes beyond these specific promotion tools. building up a good corporate image. sales promotion. and handling or heading off unfavourable rumours. A companys total marketing communications mix.munication impact. Sales promotion includes point-of-purchase dis. pagers.tions tools that the company uses to pursue its advertising and marketing objec. price. fax. the shape and colour of its package. and events. Sales promotion: Short-term incentives to encourage the purchase or sale of a product or service. marketers can now communicate through traditional media (newspapers. personal favourable publicity.Marketing communications mix (or promotion mix) The specific mix of advertising.tives. and placemust be coordinated for greatest com. specialty advertising. Thanks to technological breakthroughs. premiums. telephone. coupons. or promotion mix. personal selling. fax transmissions. telemarketing. or services by an identified sponsor. Personal selling Personal presentation by the firms sales force to make sales and build customer relationships. and the Internet. . goods. cellular phones. trade shows. the entire marketing mix promotion and product. and handling or heading off unfavourable rumours. broad. Sales promotion Short-term incentives to encourage purchase or sale of a product or service. Direct marketing includes catalogues. Public relations: Building good relations with the companys publics by obtain. The five major types of promotion are:2 Advertising: Any paid form of non-personal presentation and promotion of ideas. Personal selling includes sales presentations. and events.sumers or to solicit a direct response. consists of the specific blend of advertising. At the same time. and television). stories. telephone. its price.plays. and computers). and the stores that sell itall communicate something to buyers. or services by an identified sponsor.

FIGURE 132 Elements in the communication process .

or consumers write or call HP praising or criticizing the ad or HPs products. choose the media through which to send the message. or does nothing.function machine ad. or know little about it. how it will be said. how do they feel about it? Once potential buyers know about the Infiniti. which results in the receivers getting a different message than the one the sender sentthe consumer is distracted while reading the magazine and misses the HP ad or its key points.ence may be deci. the specific magazines that HP selects. and who will say it. special line. Noise: The unplanned static or distortion during the communication process. knowl. Nissans marketers want to move them through successively .ing exposed to the messageany of hundreds of possible responses. and purchase (see Figure 13-3). preference. I d e n t i f y i n g t h e Ta r g e t A u d i e n c e A marketing communicator starts with a clear target audience potential buyers or current users. the stages that consumers typically pass through on their way to making a purchase. liking. actually buys an HP multifunction ma. groups. But purchase is the result of a long process of consumer decision making. The marketing communicator must: identify the target audi.ence. Encoding: The process of putting thought into symbolic formHPs advertising agency assembles words and illustrations into an advertisement that will convey the intended message. The audience may be individuals. where it will be said. the marketing communicator must decide what response is desired. choose a message.sion or those who influence or the general public. such as the consumer is more aware of the attributes of HP multifunction machines. determine the response sought.ber the ad. In most cases. Receiver: The party receiving the message sent by another partythe home office or business customer who reads the HP multifunction ma. Response: The reactions of the receiver after be. know only its name. Feedback: The part of the receiver s response communicated back to the senderHP research shows that consumers are struck by and remem. select the message source. audience will affect the communicators decisions on what will it will be said. it began with an extensive teaser advertising campaign to create name familiarity. Initial ads for the Infiniti created curiosity and awareness by showing the cars name but not the car. Message: The set of symbols that the sender transmitsthe actual HP multi. Media: The communication channels thr ough which the message moves from sender to receiverin this case. The marketing communicators target market may be totally unaware of the product. S t ep s i n D e ve l o p i n g E f f e c t i v e C o m m u n i c a t i o n We now examine the steps in developing an effective integrated communications and promotion program. when After defining the target audience.A Vi e w o f t h e C o m m u n i c a t i o n P r o c e s s IMC involves identifying the target audience and shaping Sender: The party sending the message to another partyhere. The communicator must first build awareness and knowledge. The target be said. The market. conviction. These stages are awareness. Later ads created knowledge by informing potential buyers of the cars high quality and many innovative features.chine. When Nissan introduced its Infiniti auto. The target audience may be in any of six buyer readiness stages. communicator needs to know where the target audience is now and to what stage it needs to be moved. Decoding: The process by which the receiver as. and collect feedback.signs meaning to the symbols encoded by the sendera consumer reads the HP multifunction machine ad and interprets the words and illustrations it contains. D e t e rm i n i ng t h e D e s i r ed R e s p o n s e in mind.edge.chine ad. those who make the buying it. the final response is purchase. The audi. Assuming target consumers know the product.

the communicator turns to devel. They can communicate face to face. and events. But other per.itive feelings and conviction. The company controls some personal communication channels directly. and fashion often go beyond massmedia sources to seek the opinions of knowledgeable people. In practice. . The communicator must lead these consumers to take the final step. Ideally. Potential Infiniti buyers may decide to wait for more information or for the economy to improve. rebates. and display media (billboards. broadcast media (radio.pany salespeople. known as word-of-mouth influence.ers. Dealer salespeople tell buyers about options. and others making statements to target buy. C h o o s in g M e d i a The communicator now must select channels of communication. Major media include print media (newspapers. actors. In putting together the message. or premiums. some members of the target market might be convinced about the prod. how to say it logically (message struc. These stages include liking (feeling favourable about the Infiniti). com. direct mail). Press releases and other public relations activities stress the cars innovative features and performance. posters).stronger stages of feelings toward the car. preference (preferring Infiniti to other car brands). inviting them to visit the dealership for a special showing. There are two broad types of communication channels personal and non-personal. Messages delivered by highly credible sources are more persuasive. and associates talking to target buyers. signs. television). friends. for example. N on . or even through the mail or e-mail. Therefore. magazines. over the telephone.sonal communications about the product may reach buyers through channels not directly controlled by the company. Finally.peting brands. and even cartoon charactersto deliver their messages. For example. hold interest. P er s on a l Co m m u ni ca t ion Ch annel s In personal communication channels. arouse desire.siderable effect in many product areas. family members. home decor.P er so n a l Co m m u nic a tio n Chan nel s Non-personal communication channels are media that carry messages without per. and how to say it symbolically (message format). Atmospheres are designed environments that create or reinforce the buyers leanings toward buying a product. D e s i g n i n g a M e s s ag e Having def ined the desired audience response. Personal communication channels are effective because they allow for personal addressing and feedback. They include major media. This last channel. Or they may be neighbours.ture). but not quite get around to making the purchase. but the AIDA framework suggests the qualities of a good message. risky. Advertising extols the Infinitis advantages over com. Infiniti marketers can use a combination of the promotion mix tools to create pos. contact buyers in the target market. few messages take the consumer all the way from awareness to purchase.get audience is affected by how the audience views the communicator.sonal contact or feedback. marketers hire celebrity endorsers well-known athletes. has con. atmospheres.uct. Salespeople may call or write to selected customers. two or more people communicate directly with each other. Actions may include offering special promotional prices.oping an effective message. S e l e c t i n g t h e M e s s ag e S o u r c e In either personal or non-personal communication. buyers of automobiles. and after-sale service. Personal influence carries great weight for products that are expensive. value for the price. the messages impact on the tar. the message should get attention. These may be independent experts consumer advocates. consumer buying guides. and obtain action (a framework known as the AIDA model ). and conviction (believing that Infiniti is the best car for them). the marketing communicator must solve three problems: what to say (message content). or highly visible.

S e t t i n g t h e To t a l P r o m o t i o n B u d g e t a n d M i x We have examined the steps in planning and sending communications to a target audience.uct and company. how they felt about the message.and-task method. it supposedly creates competitive stability because competing firms tend to spend about the same percentage of their sales on promotion. the competitive-parity method. First. the percentage-of-sales method has little to justify it. Unfortunately. How does a company decide on its promotion budget? We look at four com. It also helps management think about the relationship between promotion spending. once said: I know that half of my advertising is wasted. It wrongly views sales as the cause of promotion rather than as the result.mon methods used to set the total budget for advertising: the affordable method.get audience.lion for advertising. what points they recall. The strongest brands had the highest sales and could afford the biggest investments in advertising!15 The budget is based on availability of funds rather than on opportunities. S e t t i n g t h e To t a l P r o m o t i o n B u d g e t One of the hardest marketing decisions facing a company is how much to spend on promotion. it more often results in under · P e rcent age . This involves asking the target audience members whether they remember the message. But how does the company decide on the total promotion budget and its division among the major promotional tools to create the promotion mix? We now look at these questions. when the new Boston Market restaurant chain enters new market areas. setting their promotion bud. selling price. John Wanamaker. It tends to place advertising last among spending priorities. Finally. I spent $2 mil. how many times they saw it. not cause and effect. however.centage of the unit sales price. Feedback on marketing communications may suggest changes in the promotion program or in the product offer itself.o f -S a l e s Me tho d Other companies use the percentage-of-sales method. Despite these claimed advantages. Therefore. or visited the store. and profit per unit. Although the affordable method can result in overspending on advertis. using this method means that promotion spending is likely to vary with what the company can afford. and their past and present attitudes toward the prod. The percentage-of-sales method has a number of advantages. deduct operating expenses and capital outlays. Or they budget a per.C o l l e c t i n g Fe e d b a c k After sending the message. which makes long-range market planning difficult. the percentage-of-sales method. For example.get at a certain percentage of current or forecasted sales. Small businesses often use this method. and then devote some portion of the remaining funds to advertising. and I dont know if that is half enough or twice too much. the communicator must research its effect on the tar. talked to others about it. Promotion spending may be 20 to 30 percent of sales in the cosmetics industry and only two or three percent in the industrial machinery industry. reasoning that the company cannot spend more on advertising than it has. it uses television advertising and coupons in newspaper inserts to inform area consumers about the restaurant and to lure them in. It may prevent the increased . but I dont know which half. even in situations in which advertising is critical to the firms success. A study in this area found good correlation between investments in advertising and the strength of the brands concernedbut it turned out to be effect and cause.14 · A f f o r d abl e Me tho d Some companies use the affordable method: They set the promotion budget at the level they think the company can afford. the department-store magnate. and the objective. The communicator also wants to measure behaviour resulting from the messagehow many people bought a product. They start with total revenues. Within any industry. it is not surprising that industries and companies vary widely in how much they spend on promotion. this method of setting budgets completely ignores the effects of promotion on sales. both low and high spenders can be found. It leads to an uncertain annual promotion budget.

First. S e t t i n g t h e O v e r a l l P r o m o t i o n Mi x The company now must divide the total promotion budget among the major pro. Television advertising. Unfortunately. there is no evidence that budgets based on competitive parity prevent promotion wars. It is often hard to determine which specific tasks will achieve specific objectives. The objective-and-task method forces management to spell out its assumptions about the relationship between dollars spent and promotion results. More than 127 million North Americans tune in to the Super Bowl.6%). and each has its own special promotion needs.spending sometimes needed to turn around falling sales. T h e N a t ur e o f E ac h P r o mo ti o n Too l Each promotion tooladvertising. Because the budget varies with year-toyear sales. Advertising can reach masses of geographically dispersed buyers at a low cost per exposure and enables the seller to repeat a message many times. spending what competitors spend helps prevent promotion wars. But it is also the most difficult method to use.7%). It must blend the promotion tools carefully into a coordinated promotion mix. personal selling. public rela. long-range planning is difficult. and about 78 million people watched at least part of the past Academy Awards broad.5%).an d . the method does not provide any basis for choosing a specific percentage.tion mixes. There are no grounds for believing that the competition has a better idea of what a company should be spending on promotion than does the company itself. and estimating the costs of performing these tasks. competitors budgets represent the collective wisdom of the industry. If you want to get to the mass audience.motion tools advertising. says a media services executive. They monitor competitors advertising or get industry promotion spending estimates from publications or trade associations. except what has been done in the past or what competitors are doing. and direct marketinghas unique characteristics and costs. personal selling.tions. For example. suppose Sony wants 95 percent awareness for its latest camcorder model during the six-month introductory period. a new campaign. and public relations. and then set their budgets based on the industry average. sales promotion. Marketers must understand these characteristics in selecting their tools.thing who has to lasso an audience in a hurrya new product. French networks (17.4%).Pa ri ty M eth od Still other companies use the competitive-parity method.Ta s k Me tho d The most logical budget setting method is the objective-and-task method. Avon spends most of its promotion funds on personal selling and direct marketing. This budgeting method entails defining specific promotion objectives. reaches huge audiences. neither argument is valid. Two arguments support this method. whereas Revlon spends heavily on consumer advertising. Second. Cana.dian Global and independents (17. and US conventional and superstations (17. even though they are hard to answer. What specific advertising messages and media schedules should Sony use to attain this objective? How much would these messages and media schedules cost? Sony management must consider such questions. Finally. 77 percent of Canadians view television at least once. Finally. · O b j e c tive .cast. Ad v ertising. sales promotion. This viewership may be split between Canadian national networks (19. a new · . For anybody introducing any. whereby the company sets its promotion budget based on what it wants to accomplish with promotion. for example. He adds. Broadcast TV is where you have to be. setting their promotion budgets to match competitors outlays. For example. · C o mp e t i t ive . The sum of these costs is the proposed promotion budget. determining the tasks needed to achieve these objectives. On an average day. Companies within the same industry differ greatly in the design of their promo. Companies differ greatly.

with personal selling. P ersonal coupons. costing industrial companies an average of over $275 per sales call. but it is hard to change the size of a sales force. Buy it now.Personal selling is the most effective tool at certain stages of the buying process. sales promotion says.sumers tend to view advertised products as more legitimate. In addition. and events seem more real and believable to readers than ads do. such as network TV advertising. other forms. Buy our product. print. large-scale advertising says something positive about the sellers size. The many forms of direct marketing direct mail. features. For the most part. Personal selling also allows all kinds of relationships to develop. Sales promotion can be used to dramatize product offers and to boost sagging sales. Yet a well-planned public relations campaign used with other pro. · Direct Mark eting. includ.directed communication. and othersshare four distinctive characteristics.motion mix elements can be very effective and economical. however. And. telemarketing. And sales promotions invite and reward quick response. Advertising also has shortcomings. On the other hand. Finally. electronic marketing. contests. advertising can be very costly. advertising can be used to build a long-term image for a product (such as Coca-Cola ads). particularly in building up buyers preferences. popularity. con. Personal selling is also the companys most expensive promotion tool. Because of advertisings public from a matter-of-fact selling relationship to a deep personal friendship. Therefore. Sales promotion effects are usually short lived. Direct marketing is non-public: The message is normally addressed to a specific person.16 Beyond its reach. can be done on small budgets. cents-off deals. and colour. · Public Rela tions. however. Finally.17 · Sales Pr omotion. · . require very large budgets. like advertising. Although some advertising forms. Where advertising says. and the audience does not feel that it must pay attention or respond. and actions. and premiums such as buy 10 products. direct marketing is interactive: It allows a dialogue between the marketer and consumer. such as newspaper and radio advertising. advertising is impersonal and cannot be as persuasive as company salespeople. The effective salesperson keeps the cus. and messages can be altered depending on the consumers response. It is very believable: news stories. Compared to advertising. direct marketing is well suited to highly targeted marketing efforts and to building one-on-one customer relationships. online marketing. A sales force requires a longer-term commitment than does advertising: A company can turn on and off its advertising. Direct marketing is also immediate and customized: Messages can be prepared very quickly and can be tailored to appeal to specific consumers. Although it reaches many people quickly. convictions. advertising can trigger quick sales (such as Sears weekend sale ads). public relations can dramatize a company or product. the buyer usually feels a greater need to listen and respond. Sales promotion includes a wide assortment of tools. Public relations also can reach many prospects who avoid salespeople and advertisements the message gets to the buyers as news rather than as a sales. and get one free. Marketers tend to underuse public relations or to use it as an afterthought. They offer strong incentives to purchase by providing inducements or contributions that give additional value to consumers. Advertising is also very expressive.moviethe networks are still the biggest show in town. On the one hand. personal selling has several unique qualities. These attract consumer attention and provide information that may lead to a purchase. Public relations offers several benefits. It involves personal interaction between two or more people. It allows the company to dramatize its products through the artful use of visuals. sound. and are not effective in building long-run brand preference. Companies use sales promotion tools to create a stronger and quicker response.tomers interests at heart to build a long-term relationship. so each person can observe the others needs and characteristics and make quick adjustments. These qualities come at a cost. even if the response is a polite no thank you. and success. rang. advertising can carry on only a one-way communication with the audience.

Most large companies use some combination of both. whereas sales promotion can be reduced because fewer incentives are needed.keting activities (primarily advertising and consumer promotion) toward final consumers to induce them to buy the product. Thus. some direct.sumers then will demand the product from channel members. sales promotion might continue to be strong. putting more of their funds into advertising. advertising. personal selling. sales promotion is useful in promoting early trial.list for integrating the firms marketing communications. under a pull strategy. who will in turn demand it from producers. In the growth stage. advertising is kept at a reminder level. public relations is dropped. and personal selling must be used to get the trade to carry the product. putting more of their funds into personal selling. In the introduction stage. advertising and public relations continue to be powerful influences.P r om ot i o n Mi x S tr a t egie s Marketers can choose from two basic promotion mix strategies push promotion or pull promotion. the producer directs its mar. In general. advertising and public relations are good for producing high awareness. and salespeople give the product only a little attention. For example. Companies consider many factors when developing their promotion mix strate.gies. followed by sales promotion. however. Frito-Lay uses mass-media advertising to pull its products. followed by sales promotion. business-to-business marketers tend to push companies use only pull. sales promotion again becomes important relative to advertising: Buyers know the brands. and advertising is needed only to remind them of the product. Some small industrial goods companies use only push strategies. Figure 13-4 contrasts the two strategies. If the pull strategy is effective. including type of product-market and the product life cycle stage. consumer demand pulls the product through the channels. and public relations. con. A push strategy involves pushing the product through distribution channels to final consumers.mine the strengths and weaknesses . In the mature stage. In recent years. I n t e gr a t in g t h e P r o m o t i o n M i x Having set the promotion budget and mix. This is a check. and then public relations. The effects of different promotion tools also vary with stages of the product life cycle. In contrast. Deter. personal selling is used more heavily with expensive and risky goods and in markets with fewer and larger sellers. In the decline stage. The producer directs its marketing activities (primarily personal selling and trade promotion) toward channel members to induce them to carry the product and to promote it to final consumers. Using a pull strategy.ple.18 Analyze trendsinternal and externalthat can affect your companys ability to do business: Look for areas where communications can help the most. and a large sales force and trade promotions to push its products through the channels. the importance of different promotion tools varies between consumer and busi ness markets. Consumer goods companies usually pull more. For exam. the company must take steps to see that all of the promotion mix elements are smoothly integrated. consumer goods companies have been decreasing the pull portions of their promotion mixes in favour of more push.

Create performance measures that are shared by all communications elements: Develop systems to evaluate the combined impact of all communications activities. tones. Develop a combination of promotional tactics based on these strengths and weaknesses. Identify all contact points for the company and its brands: Work to ensure that communications at each point are consistent with your overall communications strategy and that your communications efforts are occurring budgeting process. and quality across all communications media: Make sure each element carries your unique primary messages and selling points. Include customers. Reassess all communications expenditures by product. where. Audit the pockets of communications spending throughout the organization: Itemize the communications budgets and tasks and consolidate these into a sin. Appoint a director responsible for the companys persuasive communications ef. This consistency achieves greater impact and prevents the unnecessary duplication of work across functions.of each communications function. and other stakeholders at every stage of communications planning.forts: This move encourages efficiency by centralizing planning and creating shared performance measures. and how your customers want them. By Junior Team Smark!! . suppliers. stage of the life cycle. Team up in communications planning: Engage all communications functions in joint planning. and observed effect. promotional tool. Create compatible themes.