This action might not be possible to undo. Are you sure you want to continue?
can actually outsource a lot of the marketing tasks and projects that seem to cross your desk every day. -
Mr. Nishant Singhai
Module I: Understanding Marketing Management Marketing Tasks, Marketing Concepts and Tools, Company Orientation towards Market Place Building Customer Satisfaction, Value and Retention Winning Markets: Market Oriented Strategic Planning, Corporate and Division Strategic Planning, Business Strategic Planning, Market Process Module II: Analyzing Market Opportunities Gathering Information and Measuring Market Demand: Components of Modern Marketing Information System Scanning Marketing Environment: Demographic, Economic, Natural, Technological, Political-Legal, Social-Cultural environments. Analyzing Consumer Markets and Buyer Behaviour: Major Factors influencing Buyer behaviour; cultural, social, personal, psychological; Buying Decision Process; Stages of Buying Decision Process Analyzing Business Markets and Business Buying Behaviour: What is organizational buying, Participants in Business Buying Process, Purchasing-Procurement Process, Institutional and Government Markets Dealing with Competition: Identifying Competitors, Analyzing Competitors, Designing Competitive Intelligence System, Designing Competitive Strategies Module III: Developing Marketing Startegies Positioning the Market Offering Through the Product Life Cycle: Differentiation Tools, Developing and Communicating Positioning Strategy, Product Life-Cycle Marketing Strategies, Market Evolution
Marketing Tasks 5 Marketing Concepts and Tools 9
Company Orientation towards Market Place 14 Building Customer Satisfaction, Value and Retention 21 Market Oriented Strategic Planning, 29
Corporate and Division Strategic Planning, 29 Business Strategic Planning, Market Process 30 30
Module II: Analyzing Market Opportunities Components of Modern Marketing Information System36 Scanning Marketing Environment 49 Analyzing Consumer Markets and Buyer Behaviour 61 78
Analyzing Business Markets and Business Buying Behaviour
Module III: Developing Marketing Startegies Product Life-Cycle Differentiation Tools, 95 101
Developing and Communicating Positioning Strategy 104 Marketing Strategies 113
Module I Understanding Marketing Management Page 4 .
Boston Beer recently began a $15 million television advertising campaign. Today his business pulls in nearly $200 million. Marketing Tasks Whether you‘re a small business owner just starting out or you‘ve been an entrepreneur for a long time.2 2. They form buyers clubs. poring over the latest ratings. we can distinguish three stages through which marketing practice might pass: 1. founder of Boston Beer Company. started out in 1984 carrying bottles of Samuel Adams from bar to bar to persuade bartenders to carry it. and operating large marketing departments. craft beer market. Radical Marketing. While you may want to keep a close eye on your overall plan. Entrepreneurial marketing: Most companies are started by individuals who visualize an opportunity and knock on every door to gain attention. The company now employs more that 175 salespeople and has a marketing department that carries on market research. Formulated marketing: As small companies achieve success. For 10 years. praises companies such as Harley-Davidson for succeeding by breaking all of the rules of marketing. these companies stretch their limited resources.A recent book. whose Samuel Adams beer has become a topselling ―craft‖ beer. 3. spending huge sums on advertising. making it the leader in the U. It seems that not all marketing must follow the P&G model. Entrepreneurial marketing: Many large companies get stuck in formulated marketing. trying to finetune dealer relations and advertising messages. marketing is made up of a whole list of Page 5 . scanning research reports.S. you can actually outsource a lot of the marketing tasks and projects that seem to cross your desk every day. and focus on delivering quality products to win long-term customer loyalty. Instead of commissioning expensive marketing research. These companies lack the creativity and passion of the guerrilla marketers in the entrepreneurial stage. live close to their customers. they inevitably move toward more formulated marketing. Their brand and product managers need to start living with their customers and visualizing new ways to add value to their customers‘ lives. use creative public relations. In fact. and create more satisfying solutions to customers‘ needs. Jim Koch. adopting some of the tools used in professionally run marketing companies. he sold his beer through direct selling and grassroots public relations.
Generating a list can be a time-consuming project. 7. Some are even willing to Twitter for you on a daily basis. as well as putting your press release project up for bid on sites such as Elance. and reach of potential advertising slots can be tedious. bloggers. 10. you can track mentions of both online by setting up alerts through Google Alerts. 2. Website Design: Every business — and even most individuals — need a website these days. a virtual assistant can handle emailing out releases along with personalized messages. Finding Media Contacts: There are beat reporters. In many Page 6 . You can hire such a writer yourself. there are thousands of firms willing to take it on in a heartbeat. 9. sizes. Bringing in a web designer to handle setting up and maintaining the site can free up some time. it‘s a task that a virtual assistant can easily handle: just ask for a report of the findings. and members of the media that cover every niche — the key is finding the ones in your niche. 3. such as PRWeb. in print. or on the radio. you may want to respond to it. as well as PR specialists. Social Networking: Filling out profiles (and keeping them up to date) on all those social networking sites is time consuming. But there are actually virtual assistants. 6. Customer Relations: When your name pops up on a blog or someone leaves a comment about your website. like Twilert for Twitter. 1. 4. Tracking Your Name: Whether you‘re working under your own name or using a company name.small steps that can be done efficiently and effectively by someone other than yourself. Blogging: You may find that blogging guarantees constant visitors to your website and improves your sales. Placing Advertisements: Whether you advertise online. 5. If you have specific media contacts that you want to send your release to. Many freelance writers will create content for your blog. 8. Writing Press Releases: Many companies hand their press releases off to professional PR writers.Marketing Research: No matter what your marketing research project is. Distributing Press Releases: There are several websites that will distribute press releases for you automatically. but takes up a lot of time. either under their own names or as ghostwriters. but a virtual assistant with research skills can get it off your plate. as well as sites that offer more specific tracking. who have made social networking a major part of their services. comparing prices. You can bring in a community manager or customer relations specialist (or a virtual assistant able to take on those roles) to handle such responses. However.
18. However. Tools like Sales Force can organize all of your leads (and current customers) quickly. 7 .Creating Expertise: With your expertise in your field. it can be difficult to convince bloggers and other website owners to promote your products. it‘s time to outsource that task to a company with better software options. 15.Affiliate Marketing: Even if you set up affiliate marketing campaign on your own. 16. there are thousands of firms ready to turn out professional-quality advertising for you.Database Management: If you rely on a database of existing and past customers — or you‘ve built a database of individuals you think could become future customers — you may want to turn that database over to a virtual assistant before you do anything with it: you‘ll want to have your database checked to make sure addresses and other information are still correct. While a PR firm can connect you to some reporters.Crisis Management: When a company finds itself in trouble. at least in part. you might make a great source for a member of the media — and getting your name in an article can promote your business. Even if you‘re only thinking about a small event. it‘s worth bringing in a professional event organizer. 12.Sales Leads: If you‘ve been trying to track your sales leads on a spreadsheet. an event organizer can handle all of the details. 13.Event Organization: When it comes to planning an event.Ad Design: Advertising projects are particularly easy to outsource — whether you‘re looking for web banners or to have a television commercial made. An affiliate marketing manager can get the best affiliates to offer your products and manage your affiliate program. 14.Page cases. 11. professional researchers even have access to resources that you might not know about. Outsourcing your search engine optimization to a SEO specialist can ensure that your website ranks well for your niche. Such an individual knows every step necessary for getting an event going and can do it in half the time. whether internal or external. 17. on getting good search engine results. it can often be easier to have an external PR person manage discussions of the crisis — if only to let the regular staff take care of the actual issue.SEO: Modern marketing relies. it‘s important to make arrangements for a crisis management specialist before any problems pop up. you can get great results for less time and less money by asking a virtual assistant to respond to requests on Help A Reporter Out that fit your experience and knowledge.
19. but they can also take significant time and energy.Finding New Marketing Ideas: The field of marketing is growing. The other is to agree to sponsor a particular non-profit or charity. designers. 24. just as you might hire a freelance writer for another project. 22. 23. 20. There are two ways to outsource cause marketing. and citing you as an expert. from finding a cause to marketing the relationship.Newsletter Management: Newsletters can provide a good way to stay in touch with your existing customers. But all parts of a newsletter. but you can easily contract with designers who are specialists in such projects — and you can even outsource finding such a specialist to your virtual assistant! 25. and other subcontractors. from writing the articles to managing the recipients‘ list can be outsourced. creating a report that boils down all your marketing information into what you actually need to know. Page 8 . can help market your company online.Article Writing: Distributing articles about your company‘s niche. brochures. with the understanding that it‘ll take responsibility for making your sponsorship known. 21.Cause Marketing: Associating your company with a particular charity or cause can help promote your product or service. and other marketing materials are a necessity for most businesses. The first is to give the project. to a marketing firm specializing in such projects. linking to your site. The simplest way to do so is to outsource the project as a whole and let a project manager find writers.Surveys: Conducting surveys and compiling results can be outsourced to one of many online survey services. You can hire a writer to create just a few such articles or a large batch.Marketing Materials: Business cards.Analyzing Marketing: Many marketing firms offer services that assess your marketing efforts and determine just how well they‘re working. Contracting with a marketing specialist to find new ways of marketing your business lets you focus on your work but still get the benefits of new options. such as Survey Monkey. especially in its online options.
marketing is a societal process by which individuals and groups obtain what they need and want through creating. irrespective of their background. Not everyone likes the same things in the same way. which anybody and everybody would agree will be Marketing is selling a product with a value addition. the firm develops market offering. They will offer different quality and quantity of the same product in different markets at different prices in different way. But the basic idea of marketing these days. marketing should result in a customer who is ready to buy. But if we try to understand the managerial aspect of the definition. The offering is positioned in the minds of the target buyers as delivering some central benefit(s). for each target market. Volvo. according to a social definition. For example. promotion. different scholars define the term in diverse manner. which one has to understand. therefore. When we talk about Marketing. then the shortest words would be marketing as the art of selling products. Ideally. and services to create exchanges that satisfy individual and organizational goals. and exchanging products and services of value freely with others. to operate in any market. Now there are more core concepts. goods. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. positions its car as the safest a customer can buy. Now if we go in diversifying the term.Marketing Concepts and Tools. Page 9 . pricing. and distribution of ideas.‖ The American Marketing Association offers this managerial definition: Marketing (management) is the process of planning and executing the conception. offering. That is why marketers segment the market. Like I said before. Volvo develops its cars for the target market of buyers for whom automobile safety is a major concern.
In marketing. a purchase. Understanding needs and wants is an issue in the fields of politics. It is often expressed as the equation: Value = Benefits / Cost Page 10 . only a few are able and willing to buy one. a vote. called the prospect. On a societal level. such as dysfunction or death. a product is anything that can be offered to a market that might satisfy a want or need. or they can be subjective and psychological. In retailing. Companies must measure not only how many people want their product. a product is anything that can be offered to a market that might satisfy a want or need. products are the formal definition of the project deliverables that make up or contribute to delivering the objectives of the project. A marketer is someone who is seeking an answer (attention. and philosophy. such as the need for self-esteem. social science. In manufacturing. Demand is the desire to own anything and the ability to pay for it and willingness to pay. but a commodity can also be anything widely available in the open market. products are purchased as raw materials and sold as finished goods. Needs are distinguished from wants because a deficiency would cause a clear negative outcome. Formally it may be conceptualized as the relationship between the consumer's perceived benefits in relation to the perceived costs of receiving these benefits. products are called merchandise. The value of a product is the mental estimation a consumer makes of it. In marketing.Another core concept is the distinction between marketers and prospects. but a commodity can also be anything widely available in the open market. If two parties are seeking to sell something to each other. Needs can be objective and physical. In retailing. In manufacturing. products are the formal definition of the project deliverables that make up or contribute to delivering the objectives of the project. Many people want a Mercedes. products are called merchandise. Commodities are usually raw materials such as metals and agricultural products. products are purchased as raw materials and sold as finished goods. both are marketers. needs are sometimes controversial. In project management. A need is something that is necessary for organisms to live a healthy life. but also how many would actually be willing and able to buy it. Demands are wants for specific products backed by an ability to pay. a donation) from another party. Commodities are usually raw materials such as metals and agricultural products. such as food and water. In project management.
Exchange. For a firm to deliver value to its customers. percentages. Value in marketing can be defined by both qualitative and quantitative measures.e. 4. involves obtaining a desired product from someone by offering something in return. economic. There are parallel's between cultural expectations and consumer expectations. both benefits and cost must be positive values). . 5. product benefits. On the quantitative side. On the qualitative side.. There are at least two parties. For an individual to deliver value. value is the actual gain measured in terms of financial numbers. Thus pizza in Japan might be topped with tuna rather than pepperoni. For exchange potential to exist. and dollars.Value is thus subjective (i." This includes the reputation of the organization. value is the perceived gain composed of individual's emotional.. getting paid for a job). cultural and environmental factors. Each party is free to accept or reject the exchange offer. and technological characteristics as compared to competitors' market offerings and prices. they must consider what is known as the "total market offering. the core of marketing. mental and physical condition plus various social. a function of consumers' estimation) and relational (i. as pizza might be in the US. five conditions must be satisfied: 1. 3.. Each party has something that might be of value to the other party. Each party believes it is appropriate or desirable to deal with the other party. staff representation. the value in the marketplace varies from place to place as well as from market to market. one has to grow his / her knowledge and skill sets to showcase benefits delivered in a transaction (e. 2. Page 11 Transaction marketing is part of a larger idea called relationship marketing.e. Each party is capable of communication and delivery. Value can thus be defined as the relationship of a firm's market offerings to those of its competitors.g.
magazines. posters. A marketing network consists of the company and its supporting stakeholders (customers. The marketer also uses selling channels to effect transactions with potential buyers.Relationship Marketing was first defined as a form of marketing developed from direct response marketing campaigns which emphasizes customer retention and satisfaction. employees. and the Internet. rather than a dominant focus on sales transactions. Social Media and Application Development. billboards. The marketer uses distribution channels to display or deliver the physical product or service(s) to the buyer or user. distributors. CDs. This includes tools for managing relationships with customers that goes beyond simple demographic and customer service data. PR. fliers. With the growth of the internet and mobile platforms. university scientists. As a practice. telephone. audiotapes. Increasingly. The marketer uses three kinds of marketing channels. Selling channels include not only the distributors and retailers but also the banks and insurance companies that facilitate transactions. Page 12 . with the profits going to the company that has the better network. Relationship Marketing has continued to evolve and move forward as technology opens more collaborative and social communication channels. They include newspapers. The ultimate outcome of relationship marketing is the building of a unique company asset called a marketing network. mail. Relationship Marketing differs from other forms of marketing in that it recognizes the long term value of customer relationships and extends communication beyond intrusive advertising and sales promotional messages. and others) with whom it has built mutually profitable business relationships. competition is not between companies but rather between marketing networks. Relationship Marketing extends to include Inbound Marketing efforts (a combination of search optimization and Strategic Content). Communication channels deliver messages to and receive messages from target buyers. television. radio. suppliers.
Permanently competing on price is for many companies not a very sensible approach. Direct Sales. Internet. Although competing on price is as old as Financing. . Logistics. selling. Product Historically. or 7) variables in an optimal way. sales promotions. Public Relations. Available at the right place. Message. of the pricing strategy. Promotion has become the most important P to focus on. Packaging. etc. Public Relations. the thinking was: a good product will sell itself. in the right Channel members. Therefore the question on product has become: does the organization create what its intended customers want? Define the characteristics of your product or service that meets the needs of your customers. Market come about by changing Place. Leasing mankind. telephones.do not let it just happen! Even if you decide not to ask (enough) money for a product or service.What is the Marketing Mix? Description The Marketing Mix model (also known as the 4 P's) can be used by marketers as a tool to assist in defining the marketing strategy. Support. Budget. Advertising. Promotion Direct Marketing. Service. Sales. Media. at the right time. Locations. Marketing managers use this method to attempt to generate the optimal response in the target market by blending 4 (or 5. It is important to understand that the Marketing Mix principles are controllable variables. Price has also an irrational side: something that is expensive must be good. Allowances. quantities? Some of the recent major changes in business have Channel Motivation. Functionality. Mobile.advertising. Discounts. Price How much are the intended customers willing to pay? Here we decide on a pricing strategy . While the other three P's have lost much of their meanings in today's markets. However there are no bad products anymore in today's highly competitive markets. and special offers. Place Page 13 (How) are the chosen target groups informed or educated about the organization and its products? This includes all the weapons in the marketing armory . Think of the Internet and mobile Coverage. Brand. Appearance. you must realize that this is a conscious decision and forms part List Price. Quality. The Marketing Mix can be adjusted on a frequent basis to meet the changing needs of the target group and the other dynamics of the marketing environment. Service Levels. Warranty. the consumer is often still sensitive for price discounts Options. Plus there are many laws giving customers the right to send back products that he perceives as bad.
selling concept. but simultaneously to maximize the performance of the organization. Clearly. and socially responsible marketing. it was also detrimental to the environment. Unfortunately. and the company increased its market share while virtually eliminating hazardous waste. In fact. The production concept was the idea that a firm should focus on those products that it could produce most efficiently and that the creation of a supply of low-cost products Page 14 . COMPANY ORIENTATIONS TOWARD THE MARKETPLACE Marketing management is the conscious effort to achieve desired exchange outcomes with target markets. But what philosophy should guide a company‘s marketing efforts? What relative weights should be given to the often conflicting interests of the organization. there are five competing concepts under which organizations conduct marketing activities: production concept. the materials in this paper accounted for 98 percent of Dexter‘s hazardous wastes. So while Dexter‘s product was popular with customers. buyers prefer goods and services which are cheap and widely available. one of Dexter Corporation‘s most popular products was a profitable grade of paper used in tea bags. Dexter assigned an employee task force to tackle this problem. marketing concept. There have been many attempts to increase the number of P's from 4 to 5P's in the Marketing Mix model. and societal marketing concept. The Production Concept There was this idea of production concept some decades ago. customers. The task force succeeded.The function of the Marketing Mix is to help develop a package (mix) that will not only satisfy the needs of the customers within the target markets. The production concept prevailed from the time of the industrial revolution until the early 1920's. which states as. This concept is the oldest of the concepts in business. and society? For example. product concept. marketing activities should be carried out under a well-thought-out philosophy of efficient. effective.
Managers focusing on this concept concentrate on making superior products and improving them over time. therefore. They assume that buyers admire well-made products and can appraise quality and performance. or innovative features. However. believing that a better mousetrap will lead people to beat a path to its door. Virtually everything that could be produced was sold easily by a sales team whose job it was simply to execute transactions at a price determined by the cost of production. It also assumes that the company has a whole battery of effective selling and promotional tools to stimulate more buying. these managers are sometimes caught up in a love affair with their product and do not realize what the market needs. The key questions that a firm would ask before producing a product were: * Can we produce the product? * Can we produce enough of it? At the time. Their aim is to sell what they make rather than make what the market wants. Most firms practice the selling concept when they have overcapacity. The organization must.would in and of itself creates the demand for the products. Management might commit the ―better-mousetrap‖ fallacy. This concept assumes that consumers typically show buying inertia or resistance and must be coaxed into buying. The Selling Concept This is another common business orientation. will ordinarily not buy enough of the selling company‘s products. undertake an aggressive selling and promotion effort. The Product Concept This orientation holds that consumers will favor those products that offer the most quality. the production concept worked fairly well because the goods that were produced were largely those of basic necessity and there was a relatively high level of unfulfilled demand. performance. if left alone. Page 15 . It holds that consumers and businesses. The production concept prevailed into the late 1920's.
Its central tenets crystallized in the 1950s. the variety of products increased and hard selling no longer could be relied upon to generate sales. which involves: * Focusing on customer needs before developing the product * Aligning all functions of the company to focus on those needs * Realizing a profit by successfully satisfying customer needs over the long-term This is a business philosophy that challenges the above three business orientations. Page 16 . integrated marketing and profitability. it dictates. and communicating customer value to its selected target customers. Therefore. The marketing concept rests on four pillars: target market. delivering. the selling concept says that if customers are left to themselves. and these needs were not immediately obvious. The key questions became: * What do customers want? * Can we develop it while they still want it? * How can we keep our customers satisfied? In response to these discerning customers. The Marketing Concept After World War II. customer needs. It holds that the key to achieving its organizational goals (goals of the selling company) consists of the company being more effective than competitors in creating. they will not make the effort to buy the firm's products. the firm must be aggressive in pushing its sales. With increased discretionary income. firms began to adopt the marketing concept.In lay mans words. customers could afford to be selective and buy only those products that precisely met their changing needs.
The Societal Marketing Concept This concept holds that the organization‘s task is to determine the needs. The marketing concept relies upon marketing research to define market segments. Since the entire organization exists to satisfy customer needs. While this expanded sales department structure can be found in some companies today. To satisfy those needs. they typically set up separate marketing departments whose objective it was to satisfy customer needs. The Sales Concept focuses on the needs of the seller. The Marketing Concept represents the major change in today‘s company orientation that provides the foundation to achieve competitive advantage. and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors (this is the original Marketing Page 17 . The Marketing Concept focuses on the needs of the buyer. This philosophy is the foundation of consultative selling. 2. and their needs. The Marketing Concept has evolved into a fifth and more refined company orientation: The Societal Marketing Concept. The Sales Concept is preoccupied with the seller‘s need to convert his/her product into cash.When firms first began to adopt the marketing concept.everybody must be concerned with customer satisfaction. Distinctions between the Sales Concept and the Marketing Concept: 1. their size. nobody can neglect a customer issue by declaring it a "marketing problem" . many firms have structured themselves into marketing organizations having a company-wide customer focus. Often these departments were sales departments with expanded responsibilities. wants. This concept is more theoretical and will undoubtedly influence future forms of marketing and selling approaches. The Marketing Concept is preoccupied with the idea of satisfying the needs of the customer by means of the product as a solution to the customer‘s problem (needs). the marketing team makes decisions about the controllable parameters of the marketing mix.
wants. This orientation arose as some questioned whether the Marketing Concept is an appropriate philosophy in an age of environmental deterioration. Are companies that do an excellent job of satisfying consumer wants necessarily acting in the best long-run interests of consumers and society? The marketing concept possibly sidesteps the potential conflicts among consumer wants. The hamburgers have a high fat content. explosive population growth. Yet some firms and industries are criticized for satisfying consumer wants at society‘s expense. and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the consumer‘s and the society‘s well-being. and neglected social services. Are companies that successfully satisfy consumer wants necessarily acting in the best. world hunger and poverty. consumer interests. long-run interests of consumers and society? The marketing concept sidesteps the potential conflicts among consumer wants. which leads to much waste. world hunger and poverty. We propose calling it the societal marketing concept. The products are wrapped in convenient packaging.Concept). and long-run societal welfare. Just consider: The fast-food hamburger industry offers tasty buty unhealthy food. explosive population growth. In satisfying consumer wants. and long-run societal welfare. these restaurants may be hurting consumer health and causing environmental problems. which holds that the organization‘s task is to determine the needs. two products high in starch and fat. Page 18 . resource shortages. Such situations call for a new term that enlarges the marketing concept. it holds that this all must be done in a way that preserves or enhances the consumer‘s and the society‘s well-being. Additionally. Some have questioned whether the marketing concept is an appropriate philosophy in an age of environmental deterioration. and the restaurants promote fries and pies. and neglected social services. resource shortages. consumer interests.
operations. In successful organizations. 1. finance and other groups. as well as the heritage of culture and organizational purpose. with lean. balanced scorecard/performance management. Mobilization of all employees behind this identity and value. it typically also depends on the input of sales. 2. organization development. 3. this has sometimes been described as "living the brand" (ref). This has also been described as the DNA of the organization. It therefore draws on the assistance of HR. it should not be confused with it. operational and service management functions and processes. In marketing circles. This is basically a challenge of implementation and performance management. core competencies. brand equity and market positioning. Identification and maintenance of the organization‘s or brands coherent identity. coherence and high levels of performance throughout the organization. Although this is a key area for the marketing team. product designs. Although closely linked to integrated marketing communications (IMC).Integrated marketing (IM) is a management strategy and meta-discipline focused on the organization-wide optimization of unique value for stakeholders. Influential characteristics of the organization include the business model. which is a reflection of the way it is structured and operated to provide differentiated value. positioning. as well as related concepts such as media neutral planning (MNP) and experience management. achieving integration. The logic of integrated marketing has been described as the management of three interconnected business drivers. but success draws on that subtly modifies such well-established disciplines as lean. Internal uniqueness of the association lead to external actions that become the basis of the brand. valuefocused processes and appropriate resources. Integrated contact management (integrated communications. and brand. with consequences for future organization development. creating important experiences for customers). these come together to create differentiated value for customers. Page 19 . This is where IMC fits. service management and internal marketing.
Page 20 . 6. Warn friends about the product and or seller. or governmental agencies. Buys more as the company introduces new products and upgrades existing products. 3. This may be explained by few below mentioned options. Complain to business. Take no action. 5. b. a highly satisfied customer 1. What a highly satisfied customer brings along: 1. Stop buying product/ brand or boycott seller. b. Now. 2. 3. the next question arises is how does a firm tracks or measure customer satisfaction. Talks favorably about the company and its products. But when there is case of dissatisfaction. Stays loyal longer 2. Offers product/ service ideas to the company.Customer Satisfaction Customer satisfaction may be defined as a level of a person‘s felt state resulting from comparing a product‘s perceived performance in relation to the person‘s expectations. Pays less attention to competing brands and advertising and is less sensitive to price. Take legal action to obtain redress. public. 4. Cost less to serve than new customer transactions are routinized. Or may take some form of public action: a. Take some form of private action: a.
and Toyota treat the various activities that support value creation as a portfolio with three different approaches (Figure 1). At the same time. they expand the value proposition at the boundaries by changing the rules of engagement. The problem. Cisco. How do top companies consistently grow customer value? Our research shows that companies like Virgin. But companies that persistently focus on continuously improving the existing value proposition will grow their customer Page 21 . Third. Yet for many companies. it‘s no surprise that customer satisfaction and loyalty are the nuts and bolts of business growth. these ingredients are in short supply—and could grow scarcer as economic uncertainty continues. Building Customer Value Strengthen your foundation with customers—and grow your bottom line In an era of increasingly demanding consumers. Lost customer analysis. 3. Ghost shopping. Customer satisfaction survey. however. 2. They do the right things better to keep advancing the competitiveness of their current value proposition. One reason for this scarcity stems from the way companies address the challenge of growing customer value—their effectiveness at helping customers achieve their goals or desires. is that because these activities are conducted independently of each other. they do not ensure the consistent delivery of superior value that‘s needed to beat the competition. they create entirely new and sustainable sources of value to buttress their long-term superior position with customers. most companies build customer value through a number of disparate activities such as value-added services and customer satisfaction measurement programs. Doing the Right Things Better All too often we‘ve seen companies that developed popular products and services grow complacent and rest on their laurels—and all too often we‘ve seen their customers migrate to the competition.1. 4. Complaint and suggestion systems. In our experience.
S.satisfaction—and reap substantial financial rewards. Sunil Mithas. 3-14). Krishnan. M. Morgeson III. Low Risk. pp. ―Customer Satisfaction and Stock Prices: High Returns. indices during the period 1997 to 2003.‖ Journal of Marketing.S. January 2006. Forrest V.‖ the many ways they interact with the customer to add value. Its returns were nearly double those of the Dow Jones Industrial Average. A stock portfolio of companies whose customer satisfaction levels grew faster than the competition performed significantly better than major U. And they know how these interactions vary across different customer segments. these companies have a keen understanding of the ―total customer experience. Page Companies that excel at delivering value to the customer tend to have some things in common. and more than quadruple the returns of NASDAQ (Claes Fornell. triple those of the S&P 500. They are able to identify and communicate the value of their basic product or service to the customer. At the same time. Claes Fornell illustrated how higher customer satisfaction can translate into financial success. How do companies acquire this understanding? By 22 .
‖ he once said. They grow their customer relationships by moving considerably beyond the original core offerings. The most successful players do more than offer brand extensions.mapping the customer experience for all customer interfaces—that is. But time and time again. Virgin Atlantic. CEO of the Virgin Group and a master at improving existing products and services to optimize the customer experience and enhance customer value. won new fans by providing individual TVs for business-class passengers. Customer Connections: New Strategies for Growth. Take Richard Branson. and those that provide support. the Virgin Group today boasts revenues of more than $20 billion. Harvard Business School Press. Page 23 . it was first to launch features that improved the customer experience in very tangible ways. Cole. Wayland and Paul M. For example. in today‘s marketplace that approach is insufficient. but will definitely enhance your understanding of the total customer experience and inform your ability to improve customer value. As products and services become commoditized. retail. sustainable advantage depends on expanding the value proposition. and the Upper Class Suite first-class service. ―At Virgin. 1997). Try taking an outside-in view by ―walking‖ through all interfaces of the customer experience with your company along the internal value stream. the points where a customer comes into contact with the company—along the value stream. Virgin was certainly not the first to move into air travel. Consisting of over 200 branded companies. 1999). Include the departments that interact directly with the customer. Work inward to identify which departments and business processes play a role in customer interaction. A particularly helpful framework for understanding this dynamic is the ―value compass‖ illustrated in Figure 2 (Robert E. which focuses on high quality and value. Changing the Rules of Engagement Although all companies need to focus on ways to improve the existing value proposition. ―we have a strategy of using the credibility of our brand to challenge the dominant players in a range of industries where we believe the consumer is not getting value for the money‖ (Des Dearlove. mobile telephony. premium economy service. Business the Richard Branson Way. How effective is each? Your findings may be surprising. and a host of other market spaces.
Cisco has begun offering advanced proactive services where the business margins have the potential to be larger. As the relationship expands. And to differentiate itself in services delivery. Value proposition design reflects the scope of the offerings the company uses to deliver value to the customer. According to our analysis. the company is also developing new subscription-based services that focus on optimal network performance. Moving out along this dimension. While addressing customers‘ immediate needs with maintenance services. Moving out from the center. coordinating how other providers deliver value to the customer. Close to the center of the compass. At this point. the firm is the product manager. value is provided through a discrete product or service. and Cisco than for other competitors that have not strategically differentiated their services positions. so does its financial reward. Sun. HP. Near the center of the compass. a discrete transaction takes place between the company ―selling‖ a product or service and the customer. the company takes on the responsibility for delivering greater value for each transaction. Applying the value compass approach to the high-technology industry. As the company‘s risk increases.Companies that wish to expand their customer relationships can do so along four distinct dimensions: Customer portfolio management represents the level of ―customization‖ of the value proposition that is delivered in the customer relationship. Cisco‘s strategy has been to focus on the value proposition design axis. value is delivered at levels that are increasingly tailored to the customer. Reward and risk sharing address the economic relationship between customers and companies—and how that relationship connects to customer value delivery. With a focus on total lifecycle support. Traditionally. the company expands the offering. and its relationship with customers. to provide complete solutions. At the farthest point on the compass. service revenue represents a larger percent of total revenues for Sun. Near the center of the compass. all customers within the market are presented with essentially the same value proposition. and HP have each expanded their compass in a unique way for sustainable advantage. we‘ve seen how Cisco. the company becomes the network manager. the risk is neutral for both sides. Value-added role refers to the extent of engagement between the company and the customer‘s operations. Cisco has simplified Page 24 . near the center of the compass. in charge of ensuring that the basic offerings deliver on their promise.
Expanding its value-added role. By heavily leveraging various services—professional services. HP has positioned itself to be the IT partner of choice for its customers. Its strategy is to add in its own equipment and integrate it with the equipment of other companies Page Taking a different customer value trajectory. In addition to assisting users with their processes. HP actively helps manage customers‘ IT networks. and connected services offerings—the company is able to offer total solutions that are completely personalized for the individual customer 25 .the sales process. better leveraged its partners‘ services. and developed direct relationships with large accounts HP has focused on a different dimension of the value compass. managed services. Sun focuses on the customer-portfolio management and value proposition design axes.
with the Prius. Though the exact timing would have been difficult to predict. ―An Inconvenient Truth. few companies have succeeded in developing innovations that generated entirely new sources of value for the customer and company alike. Toyota was already improving automotive performance in the traditional sense. its hybrid electric automobile. Toyota banked on the inevitability of two distinct but reinforcing value drivers coming together. however. In reality. Some may perceive that Toyota got lucky with such events as Al Gore‘s movie. by extension. Toyota transformed its customer relationships and created a strong source of growth in the face of market decline. Toyota made the commitment to develop technologies and capabilities for hybrid cars. One that stands out is Toyota. Looking ahead.‖ or the recent run up in oil prices. Many years ago. Toyota likely made its investments based on the belief that some events as well as Page 26 . How do Toyota and like-minded companies make these leaps into new areas of value? They align their vision for value creation with a long-term view of markets. Taking center stage was the relationship of the Prius owners to their ―green‖ cars and the environment— and. Support the vision with strong technology innovation and marketing. By changing the fundamental measures of value. technologies. but by investing in hybrid technology it went one step further and redefined the customer value proposition in its industry. management recognized that the consumers‘ increasing concerns about the environment and energy costs would provide a robust foundation for cars that consumed less gas and produced fewer emissions—while also continuing to provide the comfort and style that were the historical source of competition.Creating New Sources of Value Over the past decade or two. and capabilities. to Toyota for making it all happen. Develop a strong customer-value vision that is supported by long-term trends.
Such systems ―close the loop‖ for Page 27 . At the top firms. Leading companies fully incorporate the customer-value perspective into their operational strategies. we‘ve found it helpful to keep three principles in mind: Ensure the entire organization—top to bottom—deeply understands value from the customer perspective. enables companies like Toyota to play a whole new customer value game—and beat its competitors in the process. Assess every operational investment in terms of its impact on overall customer value and compare them to other initiatives in the value creation portfolio. if an initiative to make the supply chain more flexible and responsive would be truly valued by the customer. or if it would be better to focus on other types of initiatives that would be valued more. Measure customer value effectively and tie it to the motivational systems of the enterprise. senior executives are involved in determining whether their organizations are delivering value to their customers. It‘s important to ask. companies that make it a point to operate with a customer-value focus are significantly more effective in creating customer satisfaction and loyalty. include customer-value metrics in the organization‘s performance management systems so that all organizational units and individuals are assessed this way. The key is to design measurement systems so that internal operational metrics such as service effectiveness and new product performance are directly linked to customer satisfaction and customer referral scores. they then use this knowledge to guide the organization in improving and expanding on that value proposition. It requires completely changing the way you view the customer—and translating that view into action. Make the “customer-value” benefit central to all operational strategy decisions. Equally important. only a small number of people come to know the customer through direct interaction. This type of bold vision. Though many companies try to use customer satisfaction or other value metrics as a way to manage business priorities. however. combined with strong technology innovation and marketing. In our work across a range of industries. In many companies. In our experience.government regulations would ultimately drive greater interest in green cars. Making It Happen Expanding customer value is not a strategy that can be implemented overnight. for example. few really succeed in using these metrics to improve business performance. Like Virgin‘s Branson. when selling an offering or providing service after the sale is completed.
Whereas. profitability. Defensive marketing warfare strategies are a type of marketing warfare strategy designed to protect a company's market share. from a target competitor. This is how we can define a Customer Development Process. product positioning. It requires much effort and cost to induce satisfied customers to switch away from their current suppliers. firms that focus on enhancing their customer value will leave a lot less up to chance. usually market share. Then also just to recapitalize Offensive marketing typically costs more than defensive marketing. Offensive marketing is designed to obtain an objective. Retaining Customer Everybody would have understood for the need of retention now. Page 28 . Meeting the needs of increasingly demanding customers will likely be a central focus for any company looking for growth over the long term.understanding customer value and for ensuring the effectiveness of organizational activities designed to grow that value. or mind share. While it may be difficult to predict which way economic winds will blow in the future.
In most large companies. each business unit develops a business unit strategic plan. skills. Market-oriented strategic planning is the managerial process of developing and maintaining a viable fit among the organization‘s objectives. The aim of strategic planning is to shape the Page 29 . and resources and its changing market opportunities. each division establishes a division plan for each business unit within the division. diagnose problems. and controlling marketing activities as they follow marketing results closely. Guided by the corporate strategic plan. Highperformance firms must hone their expertise in organizing. implementing.Winning Markets Market Oriented Strategic Planning How do companies compete in a global marketplace? One part of the answer is a commitment to creating and retaining satisfied customers. However. the managers of each product line and brand within a business unit develop a marketing plan for achieving their objectives. Finally. and take corrective action when necessary. the ability to effectively manage the marketing process— beginning to end—has become an extremely important competitive advantage. CORPORATE AND DIVISION STRATEGIC PLANNING Marketing plays a critical role in corporate strategic planning within successful companies. In today‘s fast-paced business world. the development of a marketing plan is not the end of the marketing process. in turn. We can now add a second part: Successful companies know how to adapt to a continuously changing marketplace through strategic planning and careful management of the marketing process. corporate headquarters is responsible for designing a corporate strategic plan to guide the whole enterprise and deciding about resource allocations as well as starting and eliminating particular businesses.
In this view. The first area is managing a company‘s businesses as an investment portfolio. Companies that subscribe to this traditional view have the best chance of succeeding in economies marked by goods shortages in which consumers are not fussy about quality. and goals. establishing the framework within which the divisions and business units will prepare their plans. and business levels is an integral part of planning for the marketing process. preferences. THE MARKETING PROCESS Planning at the corporate. Some corporations allow their business units a great deal of freedom in setting sales and profit goals and strategies. all strategic plans are based on the corporate mission. strategy. Others set goals for their business units but let them develop their own strategies. or style. The ―mass market‖ is actually splintering into numerous micro markets. The traditional view is that the firm makes something and then sells it (Figure 1-8). policy. Corporate headquarters starts the strategic planning process by preparing statements of mission. marketing takes place in the second half of the value-delivery process. The traditional view assumes that the company knows what to make and that the market will buy enough units to produce profits for the company. features. we must first look at how a company defines its business. And the third area is the development of strategy. Regardless of the degree of involvement. Still others set the goals and get involved heavily in the individual business unit strategies. each with its own wants. There are at least two views of the value-delivery process. perceptions. The smart competitor therefore must design the offer for well-defined target markets. Strategic planning calls for action in three key areas. division. But the traditional view of the business process will not work in more competitive economies in which people face abundant choices. Page 30 . To understand that process fully. The task of any business is to deliver value to the market at a profit. a game plan for achieving long-term objectives. The second area involves assessing each business‘s strength by considering the market‘s growth rate and the company‘s position and fit in that market.company‘s businesses and products so that they yield target profits and growth and keep the company healthy despite any unexpected threats that may arise. and buying criteria.
and needs. and sales areas. To transform marketing strategy into marketing programs. marketing mix. assess buyer wants and needs. and controlling the marketing effort. Smart firms also pay close attention to competitors and look for major segments within each market that they can profitably serve. and promotion. 2. Analyzing market opportunities. Planning marketing programs. In this step (discussed later in this chapter). marketers organize the firm‘s marketing resources to implement and control the marketing plan.Steps in the Marketing Process The marketing process consists of analyzing market opportunities. implementing. price. Developing marketing strategies. The second decision is how to divide the total marketing budget among the various tools in the marketing mix: product. To evaluate its various opportunities. channels. Because of surprises and disappointments as marketing plans are implemented. The first decision is about the level of marketing expenditures needed to achieve the firm‘s marketing objectives. The four steps in the marketing process are: 1. designing marketing strategies. place. 4. The marketer‘s initial task is to identify potential long run opportunities given the company‘s market experience and core competencies. Managing the marketing effort. and marketing allocation. and gauge market size. planning marketing programs. In this step.19 And the third decision is how to allocate the marketing budget to the various products. perceptions. researching and selecting target markets. and designs and markets its services. marketing managers must make basic decisions on marketing expenditures. Next. the company also needs feedback and control. the marketer prepares a positioning strategy for each new and existing product‘s progress through the life cycle. makes decisions about product lines and branding. the firm needs a marketing research and information system. the firm studies consumer markets or business markets to find out about buying behavior. and organizing. 3. wants. promotion media. Page 31 .
Total customer value Customer gains Customer perceived value Total customer cost 2 . Which of the following is not a tool for tracking and measuring customer satisfaction? Complaint and suggestion systems Customer satisfaction surveys Ghost shopping All of the above 4 . ___________ companies are increasingly focusing on the need to manage core business processes such as new-product development. Question 2 Customers develop their expectations about a product they will purchase from all of the following sources except: peers past experience friends unread e-mail 3 . and order fulfillment.Module end Quizes 1 . customer attraction and retention. High-performance High-profile Big Highly competitive Page 32 . _________________ is the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering as compared to the perceived alternatives.
Which of the following are not resources that are needed by companies to carry out its business processes? commercials labor materials information 6 . communicate to their employees. _______________ companies are acknowledged as the industry leaders and widely admired. culture organization rules policies 7 . A company’s _________ consists of its structures. Visionary Utopian Encouraging Comparison 8 . and embrace a high purpose beyond making money. they set ambitious goals. all of which can be dysfunctional in a rapidly changing business environment.5 . and corporate culture. policies. The primary activities that represent creating value for customers as part of the value chain tool include all of the following except: technology inbound logistics marketing and sales operations Page 33 .
9. Which of the following descriptions would best characterize a highly satisfied customer? Try other brands to make sure they are loyal to a company Visits competitors on a regular basis Buys more products and services Would not complain so they can appear to remain loyal Page 34 . Some of the ways that a company can seek to increase their profits and sales by searching for new customers include all of the following except: phone calls direct mail ads reading the obituaries 10 .
Module II Analyzing Market Opportunities Page 35 .
What information do you need to make these decisions.Modern Marketing Information System Set of procedures and sources used by marketing management on a regular and continuing basis to obtain information relevant to marketing planning and strategy. Marketing is actually becoming a battle based on more on information than on sales power . So everyone will ask these questions to themselves: ? ? ? ? What decisions do they regularly make. Now these days we have to focus on more on an information system in place to make your marketing not only easy but effective too. Therefore marketers will always focus on a marketing research. What special studies do you periodically request. Page 36 . What information do you regularly get. But the question lies what does a marketer needs to know.
they failed to a very high extent. feedback and control that converts data resources into information. output. The products might be their hottest selling in America. monthly or yearly. but learning through experience curve. which any company would not like to do. but in India. Components of Information Systems An information system has the following components: 1. Everybody must have read a case study of McDonalds. This was just a simple case of no market research. They did not do research on the market they were selling. 3. Hardware ( machines and media) Software (program and procedures) Data ( data and knowledge) Network ( communication Media) People ( end user and specialists) All five components and arranged and interrelated to perform input. 2. The reason was just simple. The figure shows interrelation between these components Page 37 . ? What information would you want daily. When they entered decades ago in India with there brand and business concept. process. 4. India has there reluctance to beef because of religion and they launched beef products. this is not the case. 5.? What information would you want that you are not getting now. weekly.
Databases includes data and knowledge base. People includes operating Personal and System specialists. Five basic operating elements of Information system are: a. 4.From the figure it can be concluded that: 1. Software c. Network includes communication media and network devices. reports. People 2. Network e. Page 38 . process inquiries. I/O devices. process. a. OUTPUT – Transaction documents and screen reports. output. Database are processed to get the desired information for end user. operating system and media devices. 3. Hardware includes processor. Information processing consists of input. Software includes programs and procedures. INPUT – Data and instruction b. Hardware b. interactive dialogues c. Databases d. data storage and control. Process – Maintain master files.
significantly (by 100-200 times) reducing transaction costs for all market players: growers. it determined that further development of the horticultural sector of Ukraine‘s agribusiness sector. in turn. Based on the market information received through the numerous contacts with market players as well as official statistics. processors. traders. which was based on many small and medium sized growers provided nearly 35% of all Page 39 . create new jobs and increase incomes of rural population. It. Andriy Yarmak. making horticultural market of the country more transparent and predictable. Abstract: The Market Information System (MIS) created by the Agricultural Marketing Project (AMP) jointly with its Ukrainian subcontractor APK-Inform helped boost sales and profits of small and medium sized growers. It resulted in about $20 in additional benefits to farmers for each $ spent and became selfsufficient in 3 years from its launch. Although 95% of farmers did not have access to the Internet. Problem statement When the AMP team started working in Ukraine in 2003. has lead to the increased amount of investments into the industry. Inc. Market Information Specialist and Deputy Chief of Party Institution: USAID-funded Ukraine Agricultural Marketing Project implemented by Land O’Lakes.CASE STUDY Modern Market Information System boosts incomes of Ukraine’s small & medium sized growers Author’s name: Mr. AMP analysts have created a flow of analytical information. helped create additional production. thanks to AMP experts they managed to sale most of their produce with higher profits through publications and web-portal created by AMP. and attracted significant investments. Sr. trade and processing opportunities. input suppliers and supermarkets. The portal itself quickly became the largest virtual wholesale market in the Eastern Europe.
Growers did not know where and how to sell fruits & vegetables and consumers paid relatively high prices for these products due to a large number of very small intermediaries and completely chaotic marketing and complete lack of market transparency. while landlines were of poor quality and one could only reach them trough the landline very early in the morning or late in the evening. to support farmers and it worked. Instead. Creation of a web-site in this situation sounded as a completely useless exercise at first but only if the web-site was created for farmers. it meant that this was a really useful thing for them. which we had to monitor. To understand the markets our analysts had to consider the interests of many market participants. according to AMP professionals‘ was to develop a system. buyers and sellers of key products and their offers & bids. input and equipment suppliers. Yes another problem we faced was a large number of different types of fruits & vegetables. wholesale traders.revenues to rural inhabitants. colors. As we proceeded with our idea. we created a web-portal for buyers. Page 40 . was hampered by the lack of market infrastructure. etc. we would be able to help create many new job and improve incomes of people involved in these industries as well as living standards of rural population overall. etc. This was a great tool by itself as it guided us in our decisions. market reports and market forecasts. we thought about its sustainability. One of the major challenges for us was in trying to get the information flowing. which would allow all market players to receive easy and fast access. varieties. On the other hand we realized that if we succeed in helping this industry become more efficient. to information about market prices in various regions of Ukraine. processors. including different types of growers. as most farmers (more than 95%) did not have Internet connection and a major part of them did not have cell phones. From the very first steps of creating our own MIS. retail chains. we discovered several other problems on our way. all of which are very important. shapes. helping choose only options that would generate a real interest of our clients. as this sector of agribusiness has a significant number of products. Lack of widely recognized standards for the fruits & vegetables was another significant challenge as the fruits & vegetables have a great variability of sizes. market news. If we created something people were ready to pay money for. The AMP team only had 3 years to resolve this problem and the quickest way to do it.
As I type. where we discussed what‘s really essential to know about the markets to be successful based on the opinion of various market players. At that point we started collecting weekly farm-gate 41 . Since we had 8 offices and we planned to create a web-portal. We explained that otherwise they would not be able to improve sales of their produce because buyers will have no way of reaching them. It is also true that we have been improving the database ever since we created it. we decided to focus our first efforts at the most important things. it was easy to see the progress of contacts collection and determine who of the employees needed additional help with this process. Page After the wave of the seminars most farmers did buy mobile phones as they were becoming really inexpensive. The first few months our people spent in meetings with clients. Pooling it all together. the next step was to fill it our with industry contacts. We started monitoring retail markets in most regions of Ukraine by sending our enumerators there or collecting price information from the markets‘ administrations over the phone. complete lack of information about market prices and trends motivated us to start market monitoring. we have discovered that most market players had many things in common. Still. First of all. searching for industry contacts and entering them into the database. During the numerous meetings with farmers we explained them our intentions and convinced them to purchase cell phones.Creating MIS step by step We started creating the MIS from several brainstorming sessions. Thus. Since we had all the database statistics online. we are trying to implement some more improvements. We trained the Project Staff to use it and explained why it is important to keep all of the contacts in this common database. The database allowed us to track the markets and also monitor overall Project‘s activities. Therefore. It was also a very simple decision to determine where to start implementing the MIS. the structure of the database itself is not enough to make it successful. we chose Oracle to create the database and our subcontractors‘ programmers did all of the work based on our vision of what this system should be able to do. we needed a modern on-line database that would allow many people to access it at the same time. In the meanwhile we have polled many clients to determine their problems and this information helped us develop efficient ways to resolve them. as successful information system is impossible without a good database.
they entered information directly into the on-line database linked directly to a web-portal. were able to look evaluate various options. as offers & bids appeared on-line on the web-portal as they spoke. in exchange. Farmers who previously had very few opportunities to sell suddenly started getting several phone calls per day. All of the valuable comments provided by farmers were included in special internal section of the database. started publishing weekly magazine and sending it to all market players who expressed their interest and we continued to build and improve our database and train our clients. At this point in time we have received many phone calls from potential buyers (processors. We also invited buyers (processors. traders. provided them with the free advertisement as well and provided contacts of farmers who had products of their interest for sale. we came around and explained how to use them. Prior to that we have trained our Market Information Specialists in how to determine prices. have been able to sell their produce quickly and the highest price offered. farmers really appreciated the support they were getting from us. traders and supermarket chains) who wanted to find suppliers of fruits & vegetables. From the very beginning of the project we kept telling farmers to grow what‘s in the demand instead of trying to sell what they have grown. supermarkets) Page 42 . in most cases. Many clients received phone calls from potential buyers or suppliers few minutes after their conversations with the MIS specialists. They shared their market information with us and we. We did a lot of work explaining all market participants the importance of contract growing for further industry development.prices for the key products from farmers included in our database via the phone. There were many things we did simultaneously at this point: we created a webportal. To motivate farmers provide this information we gave them free of charge advertising in our publications and web-site as we placed products they wanted to sell in the offers & bids section. Usually we did 5-6 hour trainings for 20-40 farmers were they were able to try all of the options available. who also provided consultation and advise. Most active farmers who came to such seminars later on transferred the knowledge they gained to their colleagues. Once the farmers got their first weekly magazines. When our MI specialists talked to a client. Farmers were happy to provide the information and. they determined offer price when talking to our MI specialists. After many years of receiving no attention from the government or anybody else. had a possibility to call and consult with us and thus.
This made our web-portal the largest virtual Page 43 . We collected. processed. storage and packing technologies. processing and distribution of technological. which helped both: processors and growers. It is very difficult to create a good system without letting users of this system impact it. We also published numerous articles on these issues in our magazines. in our publications and on the web site. legal. Processing slowly was becoming a major market for fruits & vegetables and we decided to create a system that allows farmers to offer their produce to processors. Share of contract farming in this sector has started growing but most of the production was still sold on spot market. called us on the phone and we told them what was the price at certain market today and explained them price trends. To do this we identified the key wholesale markets in Ukraine. We explained farmers that they now needed to think about Internet access if they wanted to access daily prices and many farmers did get computers and Internet. At this point we were getting more than 5. We published this information in various manuals. we have held many field days and demonstrated modern production. post harvest handling. how should it be packaged and delivered. etc.000 hits on our web-site every day and many market players said that a weekly price is not enough as they would like to be able to track prices on a daily basis. Our role was limited to moderation. Our production and price forecast for all key fruits & vegetables published every spring and updated two or three times per year has helped many farmers who read it make very profitable planting decisions. market and other useful information for farmers. At one point when we needed to grow the system further we decided to let users do part of our job. whenever approached by potential buyers. We allowed companies to place offers & bids by themselves as well as register in our database. Thus. our MIS was more than just market information system. which were used as a price reference among market participants and started collecting daily information from these markets.to all of our seminars and let them tell farmers what kind of product do they need. when. Others. We have trained them to do this and this allowed us to expend the system and improve the quality of our information. it became a system for collection. structured and shared information about what key processors are ready on a weekly basis. how much. To make sure farmers are able to grow what‘s demanded by the markets.
marketplace in the region as every week we had registered around 1,500 entries for around $10mn and this helped attract even more users to the system. Three other donor projects, which had to create their own MIS, decided to join ours instead. We have trained their specialists and granted them access to the system, which increased its value significantly. One of the projects that joined forces with us was from the country Georgia. Our cooperation has boosted the horticultural trade between the two countries. Although we did a lot of trainings and seminars, there was a need for a nationwide or international meeting of all key industry participants to discuss the strategic industry perspectives and opportunities. AMP jointly with APK-Inform has initiated, organized and held the First International Conference: ―Fruits & Vegetables of Ukraine 2004: Market of New Opportunities‖, which has later grown into a large international event. It now includes a specialized international exhibition and is the largest industry meeting in the Eastern Europe. Moreover, past year we were asked to help organize the first such event in Russia and we did with a success. Our MIS has played a very significant role in promoting investments into the industry. This was in large achieved through our PR activities. Since we generate a lot of interesting information and made it publicly available through our web portal and other sources, we have attracted many journalists who talked to us and wrote news and stories about the sector. We never paid a penny to publish such articles but they got re-printed and re-quoted a lot and our specialists gave many interviews to press. Every three months there have tracked at least 1mn copies of newspapers and magazines that have published or re-printed our information or interviews. We estimated that we only captured only around 20% of the quotations. And this does not include Internet outreach. During the years of MIS operation we had many potential investors that came to our office through the information they found in the press and on the web-portal. Several of them are now among the largest and most important industry players doing really well. Although our Project is nearly closed now, we have plans to further development of the MIS for the next two years. Among the planned products we would like to establish a weekly report on Russian and Ukrainian horticultural markets in English to allow further development of international trade in Fruits & Vegetables. We have also recently added mushrooms to our monitoring system and are working on the first international conference for the mushroom industry in
Ukraine. Shortly we are planning to make price data available to our clients through an SMS services.
How AMP’s MIS is used in practice
We have determined that MIS cannot be created one time and forever – it has to be a living, learning and developing system because the market is changing very rapidly. There are many ways to use our MIS to farmers and other market participants‘ advantage. Let me describe several most frequent ways to demonstrate how much farmers and others gained from this. A farmer, who was very pessimistic about MIS and did not want to get any offers placed in our system, came to one of our regional offices to complain about lack of interest for his cabbage. He had around 100 tons in stock and the wholesaler who told him he would buy it from him has disappeared. We recommended placing an offer in our system, which he reluctantly did. We also gave him one of our latest magazines with a list of buyers interested in cabbage and he started calling this list from our office. 20 minutes later he had identified two buyers interested in purchasing most of his cabbage and just when he was about the leave the office he received a phone call from another potential buyer who found his offer on the Internet. As a result the farmer has sold all of his cabbage during 2-3 weeks for $10,000. One of the top processing companies was searching for a large amount of good quality carrots but in the area where it usually procured carrots a serous shortage of this vegetable was observed. Managers have found our web portal through the Internet and discovered around 30 farmers offering carrots during this week. They were not sure this was true and called us on the phone. When we confirmed this information and told them that in the western part of Ukraine there was a significant over-production of carrots, they started calling the farmers. In one week they have reportedly included contracts to supply enough carrots to satisfy their processing plans. Farmers were very happy with the price and processors were very happy to be able to fulfill their contracts. One of our farmers decided to expend planting area under onions motivated by high prices for this crop in the past season. When he was about to buy the seeds, he read our production and price forecast, which suggested a high probability of very low prices for onions. He consulted with us and changed his mind. We also
suggested that prices for eggplants, cucumbers and early cabbage may be higher and told him that it would be better to focus on early onions if he wanted to plant any. He made the planting decisions based on our recommendations and got very high prices for the products he planted (including early onions) while these who did plant late onions had serious difficulties selling it. Another example continues the previous story. Since onion prices were really low due to over-production, we have started searching for way to effectively help our growers. Ukraine has never exported onions but we found out that during this very year there was a significant shortage of this production in Poland, Holland and several other EU countries. We published several articles providing information about this opportunity to all market players along with export requirements. We received several phone calls from wholesalers who got interested and four weeks later several farmers reported improving demand for the onions. It turned out that wholesalers have started shipping onions to Poland and other countries, which supported prices and helped farmers avoid losses. Three months later the number of counties buying onions from Ukraine has increased to around 15 and Ukraine became one of the largest exporters of onions on the region. Many farmers have used the information we provided in our publications about new crops, niche products and new technologies to their advantage. One of the examples could be lettuce. While not popular or almost unknown in Ukraine just 5 years ago, lettuce has become a significant cash crop for many farmers in various regions Ukraine as we helped one of our clients establish a pre-processing, packing and distribution of various types of salads. Our farmers supplied salads to McDonalds in Ukraine and Russia as well as to hundreds of supermarkets in many regions of Ukraine through the client company. It was also interesting to learn that most nationwide supermarket chains fresh produce managers start their day from checking our daily wholesale prices. Moreover, most key supermarkets, wholesalers and processors assign specialists to check offers & bids, catalogue, analytics, prices and other parts of our web-portal on a regular basis.
Presently we estimate that our system has resulted in about $20 in additional benefits to farmers for each $ spent. We also expect it to be fully self-sufficient and profitable to all market participants in the future. The web-portal presently attracts
making their sales more profitable. which frequently. including: Poland. Georgia. Hungary. market prices (wholesale and retail) in all major regions of Ukraine. storage and marketing recommendations and many other useful features. PHH. Holland. The number of full-service wholesale companies has increased from virtually zero to around 30 and many mid-size companies were created.02 to $0. We are now trying to include Russia in our monitoring and presently around 30% of the MIS users are from this country. produce production. The same transaction through AMP‘s MIS would be equal to the cost of the phone call. he or she would spend from $0.around 30. was initiated by AMP.000 unique visitors every month and a significant share of Ukraine‘s fruits & vegetables gets sold through our portal. The MIS helped lower the transaction costs to farmers. Price and production forecasts provided each spring and updated 2 times per year helped farmers plan production of crops that were in strong demand on the market and thus. The number of fruit & vegetable processors increased from 15 in 2003 to about 125 in 2006. transaction costs for farmers were reduced by 100-200 times. Moldova. At the same time that growers‘ incomes at least Page 47 . UK and many others. Price information from various regions within the country helped them improve their marketing decisions and sell products to regions where highest margins were observed. excluding costs of his or her time. The farmers. who used AMP‘s MIS. while boosting yields and quality of the final product produced. We also have visitors from all of the countries in the region. storage and. PHH. If an average farmer had to take a trip to the closest large wholesale market. Thanks to the bids published in the weekly magazine farmers could use several alternative marketing channels. offers & bids. Belarus. This allowed farmers to improve their technologies and develop a stronger negotiating position when talking to buyers. By having information about alternative input suppliers farmers saved money and managed to lower production costs. Thus.10/kg of produce brought to the market. packing. have more than doubled the area under fruit & vegetable production and many millions of dollars have been invested into production. Farmers were also provided with a weekly magazine. for higher prices and greater revenues. Information about investment opportunities in the fruit and vegetable sector published freely on the web-portal attracted many foreign and domestic investors to Ukraine‘s horticultural sector. which included key market news.
it is enough for them to have access to a phone to have the benefits of modern market technologies work for them. we learned that even if farmers do not have access to the Internet. thousands of on-farm and off-farm seasonal and permanent jobs were created. consumers received lower prices for higher quality fresh produce. Ukraine. Thus. in 2006 became a net exporter of many of these products. which prior to AMP‘s interventions imported fruits & vegetables from Poland and other neighboring countries. Also. Page 48 . Yes.doubled. we had to train farmers but they learned quickly realizing that these technologies can create a major difference in their lives and those of their families.
2.g.S. costs the U. Taxes It is not uncommon for a country to be incorporated in one place. managed the flow of people into and out of its boundaries. Political Risk In political risk the risk of a change in government policy that would adversely impact a company‘s ability to operate effectively and profitably can deter a company from investing abroad. a country is more likely to attract investment. U.S. It regulated trade. The Page 49 .S. do business in another. E. and the courts in one country will not sit in judgment on the acts of government of another done within its territory. the greater the political risk. foreign companies reduce earnings by making loans to U.it has been estimated that tax avoidance by foreign companies doing business in the U.THE POLITICAL ENVIRONMENT 1. government several billion dollars each year in lost revenue. Nation -States and Sovereignty Sovereignty can be defined as supreme and independent political authority. the less developed a country. called earnings stripping. activities. In one approach. The level of political risk is inversely proportional to a country‘s stage of economic development: All other things being equal.‖ A sovereign state was considered free and independent.S.‖Every sovereign state is bound to respect the independence of every other sovereign state. 3. and maintain its corporate headquarters in a third. Supreme Court Chief Justice Fuller said. When the perceived level of political risk is lower. This type of diverse geography activity requires special attention to tax laws. Many companies make efforts to minimize their tax liability by shifting the location of income. A century ago. It had the right.S. and exercised undivided jurisdiction over all persons and property within its territory. authority and ability to conduct its domestic affairs without outside interference and use its international power and influence with full discretion. affiliates rather than using direct investment to finance U.
Today. property occurred when Fidel Castro became the leader in Cuba & later when Shah Of Iran was overthrown. albeit ineffective. where the govt. & Domestication confiscation. is expropriation. Less drastic. It occurs when host countries gradually cause the transfer of foreign investments to national control & ownership through a series of govt.-run entity). countries often require prospective investors to agree to share ownership. Expropriation. Confiscation. enter into labor & management agreements. A third type of risk is domestication. seizes an investment but some reimbursement for the assets is made. Confiscation was most prevalent in the 1950‘s & 1960‘s when many underdeveloped countries saw confiscation. expropriation and nationalization have often led to nationalized businesses that were inefficient.S.S.. Rather than a quick answer to economic development. The ultimate goal of domestication is to force foreign investors to share more of the ownership & management with nationals than was the case before domestication. Page 50 . use local content.e. as a means of economic growth. & non-competitive in world markets. the seizing of a company‘s assets without payment. takeover. but still severe. thereby reducing tax burdens. 4. decrees by mandating local ownership & greater national involvement in a company‘s management. subsidiary can deduct the interest it pays on such loans.U. & share participation in export sales as a condition of entry. Risks of confiscation & expropriation have lessened over the last decade b‘coz experience has shown that few of the desired benefits materialize after govt. The two most notable recent confiscation of U. technologically weak. that is. it becomes a govt. Often the expropriated investment is nationalized (i.
contending that UOL has failed to purchase some specialty shampoos as agreed. business and economic activities in the EU will provide additional substance to international law. Revlon citied the presence of a UOL sign above the entrance to the offices of a New York company in which UOL has a 50% ownership interest. citizens of one country must be assured that they will be treated fairly in another country. Page 51 .S. Commercial treaties provide one with privilege.g. The court may examine whether the foreign company maintains an office. to engage in business activities in other than one‘s own country. The formulation of governance rules for trade. solicits business. district court for the Southern District of the New York. These agreements provide US citizens right to nondiscriminatory treatment in trade. e.. claiming the lack of jurisdiction.(UOL). US citizens for example are forbidden by the Foreign Corrupt Practice Act to give bribes to an official of a foreign government or political party. in the U. in fact. UOL. the creation of the Single Market now assures that citizens from member nations get fair treatment with regard to business and economic activities carried out within the Common Market. Revlon countered with the argument that UOL was. In recent case Revlon Inc. The court denied UOL‘s motion to dismiss. subject to the court‘s jurisdiction . The US signed the treaty of friendship. 2)Jurisdiction Company personnel working abroad should understand the extent to which they are subject to the jurisdiction of the host country courts. even if bribes are customary for conducting business in that country. the reciprocal right to establish a business and particularly to invest. sued United Overseas Ltd. In Western Europe. maintains bank accounts or other property or has agents or or other employees in the state in question. commerce and navigation with more than 40 countries. not the right to. asked the court to dismiss the complaint. Revlon charged the British company with breach of contract.SIDESTEPPING LEGAL PROBLEMS: IMPORTANT BUSINESS ISSUES 1) Establishment To transact business.
videotapes. the Democratic Peoples Republic(North Korea). the Republic of Korea. Japan. the advantage is that the application will be subject to only one procedure of grant. France. Germany and Belgium. trademarks and copyrights are registered with the Federal Patent Office. computer programs. In France. A third type of counterfeiting is piracy. ‖Champagne‖ and other geographic names are protected trademarks in the U. the Netherlands. Piracy is particularly damaging to the entertainment and software industries. Saint Laurent proceeded to launch Champagne in the U. Switzerland. An applicant can file a single patent application covering all of the convention states. the unauthorized publication or reproduction of copyrighted work.S. An associative counterfeit. designer Yves Saint Laurent was barred from marketing a new luxury perfume called Champagne because French laws allow the name to be applied only to sparkling wines produced in the Champagne region. the former Soviet Union and the United States. Germany. the perfume is sold without a name. England. Whereas national patent laws remain effective 52 . cassettes and compact discs are particularly easy to duplicate illegally.S. uses a product name that differs slightly from a well known brand but is close enough that consumers will associate it with the genuine product. Counterfeiting is the unauthorized copying and production of a product. In France. the patent holder retains all rights for the life of the patent even if the product is not produced or sold.. In the US states. Trademark and copyright infringement is a critical problem in global marketing and one that can take a variety of forms. Brazil. The members constitute a union that provides certain technical services and cooperates in the filing. including Australia. or imitation. so global marketers must ensure that patents and trademarks are registered in each country where business is conducted. where patents. There are two treaties made for the patent agreement: The Patent Cooperation Treaty(PCT) has 39 signatories.3)Intellectual property: Patents and Trademarks Page Patents and trademarks that are protected in one country are not necessarily protected in another. searching and examining of patent applications in all member countries.
S. The duration of the licensing agreement and the amount of royalties a company can receive are considered a matter of commercial negotiation between licensor and licensee. allocating markets or any other scheme designed to limit or avoid competition. trademarks. The law makes it easier for companies to register new trademarks.. trade secrets. approved patents are effective in all member countries for a period of 20 years from the filing date. limiting production. including fixing prices. In many countries these elements of licensing are regulated by government agencies. restrict and distort competition. In the U. also known as the Lanham Act. 5)Licensing and Trade Secrets Page 53 Licensing is a contractual agreement in which a licensor allows a licensee to use patents.under this system. technology or other intangible assets in return for royalty payments or other forms of compensation. trademarks are covered by the Trademark Act of 1946. Antitrust intended to maintain free competition by limiting the concentration of economic power. 4)Antitrust Antitrust laws are designed to combat restrictive business practices and to encourage competition. . and there are no government restrictions or remittances of royalties abroad. The Sherman Act of 1890 prohibits certain restrictive business practices. The European Commission prohibits agreements and practices that prevent.
Cyberterrorism: .Important consideration in licensing include analysis of what assets a firm may offer for license. a terrorist. designs and customer lists. Terrorism has many different goals. What happens if a licensee gains knowledge of the licensor’s trade secrets? Trade secrets are confidential information or knowledge that has commercial value.In addition to economic risks. Although in its infancy. whether to grant only the right to ―make‖ the product or to grant the rights to ―use‖ and ―sell‖ the product as well. Economic Risks 1. such as the terrorist attacks on September 11 did. 6. & to inflict terror within a country. Exchange Controls Local-Content Laws Import Restrictions Tax Controls Price Controls Labor Problems Political Sanctions: . & its relationship with firms. Page 54 .Although not usually initiated. how to price the assets. 3. & to use as pawns in political or social disputes not related to them. to generate funds by kidnapping executives to finance terrorism goals. violence is another related risk for multinational companies to consider in assessing the political vulnerability of their activities. Trade secrets include manufacturing processes. is not in the public domain. or by a hacker as a prank. formulas. one or a group of nations may boycott another nation. the licensing of unpatented trade secrets should be linked to confidentiality contracts with each employee who has access to the protected information. 5. Violence & Terrorism: . Multinational corporations are targeted to embarrass a govt. One problem in tracing a cyberterrorist is that it us hard to determine whether a cyber attack was launched by a rouge state. and for which steps have been taken to keep it secret. To prevent disclosure. 4. 2. the Internet is a vehicle for terrorist attacks by foreign & domestic antagonists wishing to inflict damage on a company with little change of being caught.New in the horizon is the potential for cyberterrorism. thereby stopping all trade between the countries. or may issue sanctions against the trade of specific products.
loss of the merchandise was sustained & delivery could not be made. the same agreement may be binding so long as proof of the agreement can be established. ownership is determined by registration. acts of god are not limited solely to acts of nature but are extended to include ―unavoidable interference with performance. the legal system is generally divided into three separate codes: commercial. & similar occurrences are generally considered acts of God. is based on an all-inclusive system of written rules (codes) of law. floods. past practices.LEGAL ENVIRONMENT International Law Common & Code Law Page The basis for common law is traditional. certain agreements may not be enforceable unless properly notarized or registered. whether resulting from forces of nature or unforeseeable human acts. & criminal. In the second case. civil. past rulings. Under code law. Under common law. Hence. such as some extraordinary happenings of nature not reasonably anticipated by either party of a contract. before the seller could make delivery an earthquake caused the destruction of the cloth & compliance was then impossible.‖ Code law. lightning. In some code-law countries. on the other hand. Under code law. pipes in the sprinkler system where the material was stored froze & broke. ownership is established by use. Common law is recognized as not being all-inclusive. Consider the following situations: A contract was entered into deliver a specific quantity of cloth.‖ including such things as labor strikes & riots. under code law. in a common-law country. Common law seeks ―interpretation through the past decisions of higher courts which interpret the same statutes or apply established & customary principles of law to a similar set of facts. Under common law in the United States. In one case. it is fairly clear that impossibility of performance does not necessarily excuse compliance with the provisions of a contract unless it is impossible to comply for reasons of an act of god. Were the parties In these cases absolved of 55 . earthquakes. spilling water on the cloth & destroying it. Laws governing intellectual property offer the most striking differences between common law & code law systems. In each case. legal legislation. & legal precedents set by the courts through interpretations of statutes. whereas code law is considered complete.
economic decision making. 56 . Broadly speaking Islamic law defines a complete system that prescribes specific patterns of social & economic behavior for all individuals. In the second situation. It encompasses religious duties & obligations as well as the secular aspect of law regulating human acts. gambling. In the first situation. Among the unique aspects of Islamic law is the prohibition against the payment of interest. The over-riding objective of the Islamic system is social justice. & types of economic freedom. & thus release from compliance with the contract could be obtained. other principles of Islamic doctrine advocate risk sharing. However. property rights. ISLAMIC LAW Page The basis for the Shari‟ah (Islamic law) is interpretation of the Koran. & casinos would be prohibited. Therefore.their obligations under the contract b‘coz of the impossibility of delivery? The answer depends on the system of law invoked. In code-law countries. & religious dimensions to enhance equality & fairness for the good of society. the earthquake would be considered an act of God under both common & code law. which is defined as unlawful advantage by way of excess of deferment. & the sanctity of contracts. The Islamic system places emphasis on the ethical. & impossibility of performance would excuse compliance under the contract. Prohibiting the receipt & payment of interest is the nucleus of the Islamic system. that is. courts in common law countries would probably rule the bursting of the water pipes did not constitute an act of God if it happened in a climate where freezing could be expected. where the scope of impossibility of performance is extended considerably. The Islamic law of contracts states that any given transaction should be devoid of riba. the destruction might very well be ruled an act of God. For example. interest or usury. social. It includes issues such as property rights. Another principle of the Islamic legal system is the prohibition against investment in those activities that violate the shari‟ah. any investment in a business dealing with alcohol. individuals‘ rights & duties. moral. impossibility of delivery would not necessarily excuse compliance with the provisions of the contract.
INTERNATIONAL DISPUTE RESOLUTION 1. conciliation should be tried. The Chinese believe that when a dispute occurs. some Chinese companies may avoid doing business with companies that resort first to arbitration. clarify. Unlike arbitration & litigation. informal. Conciliation (also known as mediation) is a nonbinding agreement between parties to resolve disputes by asking a third party to mediate differences. Mortgages for property are difficult b‘coz payment of interest is forbidden under Islamic law. In fact.Prohibition against the payment of interest affects banking & banking practices severely. Page 57 . there are acceptable practices that adhere to Islamic law & permit the transaction of business. if that fails. Conciliation is considered to be especially effective when resolving disputes with Chinese business partners b‘coz they feel threatened by conciliation than arbitration. conciliation can be an important first step in settling a dispute. the statements made by the parties may not be disclosed or used as evidence in any subsequent litigation or arbitration. Conciliation can be either formal or informal. Buyers of real property have to use a financier. Instead of charging interest a financier either sells the property at a higher price or sells it at the same price & takes additional payments to cover what would have been interest. friendly negotiations should be used first to solve the problem. & discuss the various practical options & possibilities for a solution with the intent that the parties will agree on a solution. however. The function of the mediator is to carefully listen to each party & to explore. The track record for the conciliation process is excellent. with a majority of disputes reaching settlement & leading to the resumption of business between the disputants. However. who buys the property & then sells it to them in return for repayments of the capital. When resolution is not forthcoming. CONCILIATION Most disputes that arise in commercial transactions are settled informally. Both sides agreeing on a third party to mediate can establish informal conciliation. conciliation sessions are private & all conferences between parties & the mediator are confidential.
select Arbitration) Page 58 . most arbitration is conducted under the auspices of one of the more formal domestic & international arbitration groups organized specifically to facilitate the resolution of commercial disputes. an arbitration clause should be included in all conciliation agreements. Some of the more active are the following: The Inter-American Commercial Arbitration Commission The Canadian-American Commercial Arbitration Commission (for disputes between Canadian & U. 2. Although conciliation may be the friendly route to resolving disputes in China. a conciliation statement based on the signed agreement is recorded. Experience has shown that having an arbitration clause in the conciliation agreement makes it easier to move to arbitration if necessary. which assigns one or two conciliation to mediate.Formal conciliation is conducted under the auspices of some tribunal such as the Beijing Conciliation Center. The popularity of arbitration has led to a proliferation of arbitral centers established by countries. If agreement is reached. Although informal arbitration is workable. When all else fails. it is not legally binding.iccwbo. In most countries. businesses) The London Court of Arbitration (decisions are enforceable under English law & English courts) The American Arbitration Association (www. ARBITRATION If conciliation is not used or agreement cannot be reached.org/) The International Chamber of Commerce (www. decisions reached in formal arbitration are enforceable under the law. All have adopted standardized rules & procedures to administer cases.adr.S. the next step is arbitration. thus. The usual arbitration procedure is for the parties involved to select a disinterest & informed party or parties as referee to determine the merits of the case & make a judgment that both parties agree to honor. These groups have formal rules for the process & experienced arbitrators to assist. organizations & institutions.org/. arbitration rather than litigation is the preferred method for resolving international commercial disputes. & each has its strengths & weaknesses.
The relatively high cost & time required when bringing legal action. a billion-dollar manufacturer of heating & air-conditioning systems. & finally. The Rheem Manufacturing Company. Other deterrents to litigation are the following: Fear of creating a poor image & damaging public relations. Page 59 .Litigation Lawsuits in public courts are avoided for many reasons. The final step is typically taken only when all other methods fail. Unlike arbitration & conciliation proceedings that are confidential. for instance. & litigating is breach of contract between private parties can take a decade or more. Arbitration under the rules of the International Chamber of Commerce (ICC) affords an excellent example of how most organizations operate. it has reduced the time & cost of commercial-dispute resolution by half. 3. this advice is probably wise whether one is involved in an international dispute or a domestic one. Loss of confidentiality. & extended aggravation that these cases produce are by far more oppressive than any matter of comparable size. One authority suggests that the settlement of every dispute should follow four steps: first. litigate. litigation is public. frustrating delays. Actually. arbitrate. Most observers of lawsuits between citizens of different countries believe that amount all victories are spurious b‘coz the cost. Fear of unfair treatment in a foreign court. the process of arbitration is started. if possible. estimates that by using arbitration over litigation. If this fails. if this does not work. try to placate the injured party. conciliate. The best advice is to seek a settlement. the chamber first attempts conciliation between the disputants. rather than sue.The procedures used by formal arbitration organizations are similar. In India. there is backlog of more than three million cases. Difficulty in collecting a judgment that may otherwise have been collected in a mutually agreed settlement through arbitration. When an initial request is received.
companies are caught in the middle: if they trade with Israel. From doing business with companies that do business with Israel & a tertiary boycott bans. candidates. is a common business custom in many countries. U. However. employees.S. they are required to report any request to cooperate with a boycott. Stiff penalties can be assessed against company officials. they will be in violation of U. When companies do not comply with the Arab League‘s boycott directives. from doing business with companies that do business with companies doing business with Israel. or political parties. the Arab League will nit do business with them.S. further. FOREIGN CORRUPT PRACTISES ACT Foreign Corrupt Practices Act (FCPA) makes it illegal for companies to pay bribes to foreign officials. law. ANTIBOYCOTT LAW Under the antiboycott. U. Page 60 . directors. Arab govts. a secondary boycott bars Arab govts. & if they refuse to do business with the Israel in order to trade with an Arab League member.S. or agents found guilty of paying a bribe or of knowingly participating in or authorizing the payment of a bribe. The Arab League boycott of Israel has three levels: a primary boycott bans direct trade between Arab states & Israel. their names are placed on a blacklist & they are excluded from trade with members of the Arab League. The antiboycott law was a response to the Arab League boycott of Israeli businesses. which can range lubricating to extortion. also recall that bribery. companies are forbidden to participate in any unauthorized foreign boycott.
perceptions. Many subcultures make up important market Page 61 . religions. subculture and social class are particularly important. The growing child acquires a set of values. Culture is the most fundamental determinant of a person‘s wants and behavior. Each culture consists of smaller subcultures that provide specific identification and socialization for its members. preferences and behaviors through his or her family or other key institutions. and be in front of them. The roles played by the buyer‘s culture. racial groups. and geographical regions. Subcultures include nationalities.Analyzing Consumer Markets and Buyer Behavior: What is relationship between marketing stimuli & consumer response? The most important thing is to forecast where customers are moving . Influencing Buyer Behavior CULTURAL Factors Cultural factors exert the broadest and deepest influence on consumer behavior.
& behaviors subculture . Upper Lowers Upper lowers are working. and marketers often design products and marketing programs tailored to their needs.includes nationalities. lowers) The following table describes the seven social classes identified by social scientists in the US. religions. not on welfare. Average-pay white. culture . education. middle. Often they buy products that are popular to keep up with trends. They are home oriented and enjoy entertaining friends and clients. Very poorly paid or they are (9%) striving toward a higher class. furniture and appliances. Lower Uppers Persons who have earned high income or wealth through (about 2%) exceptional ability in the profession or business. They are the quality market for good (12%) homes. While small as a group. The ambition of these is to be accepted in the upper-upper stratum.set of values. (38%) Depends heavily on relatives for economic and emotional support. & residence (uppers. & geographical region social class . although their living standard is just above poverty. for advice on purchases and for assistance in times of trouble. Working Class Average-pay blue collar workers and those who lead a workingclass lifestyle. Are primarily concerned with career.and blue-collar workers who live on the Middle Class(32%) better side of town and try to do the proper things. Lower lowers are on welfare. Upper Uppers The social elite who live on inherited wealth and have well(less than 1%) known families. preferences. a status that is more likely to be achieved by their children than themselves. The middle class believes in spending more money on worthwhile experiences for their children and aiming them toward a college education. whatever their income school background or job. visibly poverty stricken and Lower Page 62 . Upper Middles Possess neither family status nor unusual wealth. occupation.reflects income. perceptions. they serve as a reference group for others to the extent that their consumption decisions trickle down and are imitated by the other social classes. for tips on job opportunities. clothes. working. racial groups.segments.
up or down during their lifetime. First. Groups having a direct influence on a person are called Membership groups. education. 2. some are not interested in finding a permanent job and most are dependent on public aid or charity for income. People are significantly influenced by their reference groups in at least three ways. education. home furnishings. professional and trade-union groups which tend to be more formal and require less continuous interaction. which are hierarchically ordered and whose members share similar values. family and roles and statuses. Social classes have different characteristics. People also belong to secondary groups such as religious. neighbors. rather than by any single variable. Social classes differ in their dress. Second. income.Lowers(7%) unusually out of work. interests and behavior. They also influence the person‘s attitudes and self-concept. and area of residence. Social classes show distinct product and brand preferences in many areas including clothing. and value orientation. Page 63 . speech patterns. recreational preferences and many other characteristics. SOCIAL Factors Social classes are relatively homogeneous and enduring divisions in a society. friends. Fourth individuals can move from one social class to another. and co-workers with whom the person interacts fairly continuously and informally. In addition to cultural factors. Third. A person‘s Reference groups consist of all the groups that have a direct or indirect influence on the person‘s attitudes or behavior. Some membership groups areprimary groups. They expose an individual to new behaviors and styles. persons are perceived as occupying inferior or superior positions according to their social class. wealth. persons within each social class tend to behave more alike than persons from two different social classes. The extent of this movability varies according to the rigidity of social stratification in a given society. a consumer‘s behavior is influenced by such social factors as reference groups. leisure activities and cars. such as family. Social classes do not reflect income alone but also other indicators such as occupation. a person‘s social class is indicated by a cluster of variables for example. occupation. 1.
They appear to strongly influence both product and brand choice only in the case of cars. TV s Wife dominant : Washing machines.And they create pressures for conformity that may affect the person‘s actual product and brand choices. carpeting. The family of orientation consists of one‘s parents and siblings. Marketers are interested in the roles and relative influence of the husband. Marketers try to identify their target customers‘ reference groups. Outside entertainment 64 . and directing messages at the opinion leaders. cars. Here are the traditional product patterns. Family members constitute the most influential primary reference group. the parents‘ influence on the buyer‘s behavior can be significant. An opinion leader is the person in informal product-related communictions who offers advice or information about a specific product or product category. Even if the buyer no longer interacts with his or her parents. such as which of several brands is best or how a particular product may be used. Marketers try to reach opinion leaders by identifying demographic and psychographic characteristics associated with opinion leadership. However. mainly brand choice in furniture and clothing. identifying the media read by opinion leaders. A dissociative group is one whose values or behavior an individual rejects. A more direct influence on everyday buying behavior is one‘s family of procreation namely one‘s spouse and children. People are also influenced by groups in which they are not members : aspirational groups. wife and children in the purchase of a large variety of products and services. and color TV s. We can distinguish between 2 types of families. kitchenware Page Equal : Housing. Manufacturers of products and brands where group influence is strong must determine how to reach and influence the opinion leaders in these reference groups. and product choice in beer and cigarettes. Often it is the matter of who has more power or expertise. o o o Husband dominant : Life insurance. The family is the most important consumer-buying organization in society. furniture. the influence level varies among products and brands.
Marketers often choose life-cycle groups as their target market. Full Nest III : older Financial position still better. child under six Dissatisfied with financial position and amount of money saved. due to the rise in employment of women. especially in nontraditional jobs. Hard to influence with advertising. High children average purchase of durables. Bachelor stage : young. PERSONAL Factors A buyer‘s decisions are also influenced by personal characteristics. 3. Another shift in buying patters is the increasing amount of influence wielded by childrens and teens. economic circumstances. The following table lists 9 stages of the family life cycle. These include the buyer‘s age and stage in the life cycle. A role consists of the activities that a person is expected to perform. Liquid assets low. Fashion opinion leaders. 2. Page 65 . Stage in Family Life Cycle 1. single people not living at home. Marketers also target single households. Newly married couples : young. Less influenced by child six or over advertising. Highest purchase rate and highest average purchase of durables. Better off financially than they will be in the near future. Full Nest I : youngest Home purchasing at peak. People buy different goods and services over their lifetime. Roles and statuses. no children Buying or Behavioral Factors Few financial burdens. Marketers are aware aware of the status symbol potential of products and brands. Full Nest II : youngest Financial position better. People choose products that communicate their role and status in society. gay households. Recreation oriented.These patterns are gradually changing however. occupation. lifestyle and personality and self-concept. Each role contains a status. and cohabitor households. Interested in new products. The person‘s position in each group can be defined in terms of role and status. 4. But it should be added that target households are not always family based. 5. Some children get married couples with dependent jobs. Consumption is also shaped by the family life cycle. Age and stage in the life cycle. Like advertised products.
Not interested in new products. savings and interest rates. widowhood. Same medical and product needs as other retired group. Solitary survivor in labor force 9. interest and opinions. Marketers pay close attention to changing life circumstances – divorce. Empty Nest I : older married couples. Interested in travel. savings and assets. Solitary survivor retired Home ownership at peak. debts. A person‘s Lifestyle is the person‘s pattern of living in the world as expressed in the person‘s activities. Empty Nest II : older married. Marketers of income-sensitive goods pay constant attention to trends in personal income. Some recent work has identified psychological life-cycle stages.6. Lifestyle portrays the whole person interacting with his or her environment. A company can even specialize its products for certain occupational groups. drastic cut in income. If economic indicators point to a recession. Most satisfied with financial position and money saved. borrowing power and attitude toward spending versus saving. remarriage – and their effect on consumption behavior. Keep home. Economic circumstances People‘s economic circumstances consist of their spendable income. and reprice their products so they continue to offer value to target customers. head of household in labor force 7. Page 66 . reposition. Drastic cut in income. Make gifts and contributions. Adults experience certain ―passages‖ or ―transformations‖ as they go through life. marketers can take steps to redesign. Marketers search for relationships between their products and lifestyle groups. Marketers try to identify occupational groups that have above-average interest in their products and services. no children living with them. Occupation A person‘s occupation also influences his or her consumption pattern. head of household retired 8. recreation and self-educaation. No children living at home. Income still good but likely to sell home. Two frameworks that have been used to develop lifestyle classification are the AIO framework and the VALS 2 framework.
It classifies all US adults into eight consumer groups based on their answers to 35 attitudinal and 4 demographic questions. Makers – Favor only products with a practical or functional purpose. music. functionality and value in products. 67 . Achievers – Favor established. Strugglers – Cautious consumers who are loyal to favorite brands. the data are analyzed to find distinctive lifestyle groups. which asks them to agree or disagree. (AIO). The system identifies persons‘ VALS 2 types by scoring responses to the VALS 2 questionnaire. the marketers state the target lifestyle group. In this approach. respondents are presented with long questionnaires designed to measure their activities. Many of the questions are in the form of agreeing or disagreeing with such statements. SRI International‘s Values and Lifestyles (VALS) framework has been the only commercially available psychographic segmentation to gain widespread acceptance. o o o The major tendencies of the four groups with fewer resources are : o o Believers – Favor familiar products and established brands. interests and opinions. VALS. movies and video. fast food. The major tendencies of the four groups with greater resources are : o Actualizers – Purchases often reflect cultivated tastes for relatively upscale. Experiencers – Spend a comparatively high proportion of their income on clothing. When developing an advertising campaign. prestige products that demonstrate success to their peers. niche-oriented products. Once collected. o o Page VALS 2 combines general personality theory with research on product diffusion. VALS 2 focuses more explicitly on explaining and understanding consumer behavior.The AIO Framework. and the ad people develop an ad appealing to the AIO characteristics of the group(s). Introduced in 1978. Fulfilleds – Favor durability. Strivers – Favor stylish products that emulate the purchases of those with greater material wealth.
Motivation A person has many needs at any given time. Related to personality is a person‘s self-concept or self-image. Marketers try to develop brand images that match the target market‘s self-image. perception. They use various ―projective techniques‖ to throw the ego off guard. Psychologists have developed theories of human motivation. PSYCHOLOGICAL factors A person‘s buying choices are influenced by four major psychological factors . It is possible that the actual self concept (how she views herself)differs from her ideal self-concept (how she would like to view herself) and from her others-self concept (how she thinks others see her). Page 68 . Freud‟s Theory of Motivation. sociability. Abraham Maslow. defensiveness and adaptability. Thus a person cannot fully understand his or her motivations. and Frederick Herzberg – carry quite different implications for consumer analysis and marketing strategy. By personality. they arise from psychological states of tension such as the need for recognition. thirst. and beliefs and attitudes. deference. Other needs are psychogenic. provided that personality types can be classified accurately and that strong correlations exist between certain personality types and product or brand choices. Freud assumed that the real psychological forces shaping people‘s behavior are largely unconscious. A need becomes a motive when it is aroused to a sufficient level of intensity. Personality can be a useful variable in analyzing consumer behavior. Some needs are biogenic. Motivation researchers collect ―in-depth interviews‖ with a few dozen consumers to uncover deeper motives triggered by a product. motivation. autonomy. Three of the best known – the theories of Sigmund Freud. we mean a person‘s distinguishing psychological characteristics that lead to relatively consistent and enduring responses to his or her environment. dominance. esteem or belonging. they arise from physiological states of tension such as hunger. Personality is usually described in terms of such traits as self confidence.Personality and Self-concept. discomfort. A motive is a need that is sufficiently pressing to drive the person to act. learning.
People can emerge with different perceptions of the same object because of 3 perceptual processes : selective attention. Here are some findings : o o o People are more likely to notice stimuli that relate to a current need. The absence of dissatisfiers is not enough . there are physiological needs. Frederick Hertzberg developed a two-factor theory of motivation that distinguishes dissatisfiers and satisfiers. sellers should do their best to avoid dissatisfiers. and self-actualization needs. As a result people may not necessarily see or hear the message that marketers want to send. that need will cease being a current motivator. When a person succeeds in satisfying an important need. esteem needs. Perception is the process by which an individual selects. the manufacturer should identify the major satisfiers or motivators of purchase in the market and then supply them. Abraham Maslow sought to explain why people are driven by particular needs at particular times. most stimuli will be screened out – a process called selective attention. social needs. organizes and interprets information inputs to create a meaningful picture of the world. People are more likely to notice stimuli whose deviations are large in relation to the normal size of the stimuli. from the most pressing to the least pressing. goals and lives of potential consumers. selective distortion and selective retention. and the person will try to satisfy the next-important need. rather. Perception depends not only on the physical stimuli but also on the stimuli‘s relation to the surrounding field and on conditions within the individual. satisfiers must be actively present to motivate a purchase. People are more likely to notice stimuli that they anticipate. The real challenge is to explain which stimuli people will notice. In their order of importance. Selective Attention. This theory has two implications. safety needs. Because a person cannot possibly attend to all stimuli. Page 69 . Second. Hertzberg‟s Theory of Motivation. Maslow‘s answer is that human needs are arranged in a hierarcy. First.More recent practicing motivational researchers hold that each product is capable of arousing a unique set of motives in consumers. Maslow‟s Theory of Motivation. This theory helps marketers understand how various products fit into the plans.
Unfortunately. there is not much that marketers can do about selective distortion. and providing positive reinforcement. emotional feelings. An attitude is a person‘s enduring favorable or unfavorable evaluations. Or the company might design its brand to appeal to a different set of drives and offer strong cue inducements to switch (discrimination). Page 70 . where. Even people who are in the market may not notice a message unless it stands out from the surrounding sea of stimuli. using motivating cues. These beliefs make up product and brand images. Cues are minor stimuli that determine when. and how the person responds. and action tendencies toward some object or idea. Selective Distortion is a people‘s tendency to twist information into personal meanings and interpret information in a way that will support rather than challenge their preconceptions. Their messages will be lost on most people who are not in the market for the product. Most human behavior is learned. A belief is a descriptive thought that a person holds about something. A new company can enter the market by appealing to the same drives that competitors use and providing similar cue configurations because buyers are more likely to transfer loyalty to similar brands than to dissimilar brands (generalization). Learning involves changes in an individual‘s behavior arising from experience. A drive is a strong internal stimulus impelling action. cues. and people act on their images. stimuli. If some beliefs are wrong and inhibit purchase. Selective retention explains why marketers use drama and repetition in sending messages to their target market. responses and reinforcement. Learning theory teaches marketeers that they can build up demand for a product by associating it with strong drives. Selective Retention. the manufacturer will want to launch a campaign to correct these beliefs. A company has several options when its products are competitively priced but their place of origin turns off consumers. Beliefs and Attitudes. The drive becomes a motive when it is directed toward a particular drivereducing stimulus. People will forget much that they learn but will tend to retain information that supports their attitudes and beliefs.Selective Attention means that marketers have to work hard to attract consumers‘ notice. Learning theorists believe that learning is produced through the interplay of drives.
Assael distinguished 4 types of consumer buying behavior based on the degree of buyer involvement and the degree of differences among brands. how to buy. Influencer : A person whose view or advice influences the decision. Attitudes put them into a frame of mind of liking or disliking an object. the types of buying decisions. Buyer : The person who makes the actual purchase. The Buying Process Marketers must identify who makes the buying decision. what to buy. But marketers must be careful in making targeting decisions because buying roles change. music. Attitudes lead people to behave in a fairly consistent way toward similar objects. food and so on. HIGH INVOLVEMENT LOW INVOLVEMENT Page Significant Differences Between Brands Complex buying behavior Variety seeking buying 71 . Buying Roles It is easy to identify the buyer for many products. or where to buy. o o o o Buying Behavior Consumer decision making varies with the type of buying decision. Decider : A person who decides on any component of a buying decision – whether to buy. We can distinguish 5 roles people might play in a buying decision: o Initiator : A person who first suggests the idea of buying the product or service. A person‘s attitudes settle into a consistent pattern.People have attitudes toward almost everything : religion. politics. moving toward or away from it. and the steps in the buying process. clothes. and to change a single attitude may require major adjustments in other attitudes. User : A person who consumees or uses the product or service.
Dissonance-Reducing Buying Behavior. the consumer does not know much about the product category and has much to learn. the consumer is highly involved in a purchase but sees little difference in the brands. 1. After the purchase. Page 72 . perhaps responding primarily to a good price or to purchase convenience. Typically. The consumer will be alert to information that justifies his or her decision. The buyer develops beliefs about the product 2. Makes a thoughtful purchase choice The marketer of a high-involvement product needs to develop strategies that assist the buyer in learning about the product‘s attributes and their relative importance and that call attention to the high standing of the company‘s brand on the more important attributes. the buyer will shop around to learn what is available but will buy fairly quickly. The high involvement is based on the fact the purchase is expensive. Sometimes. risky and highly selfexpressive.behavior Few Differences Between Dissonance-reducing buying Habitual buying behavior Brands behavior Complex Buying Behavior. Develops attitudes about the product 3. This involves a 3-step process. In this case. bought infrequently. Thus marketing communications should aim at supplying beliefs and evaluations that help the consumer feel good about his or her brand choice. the consumer might experience dissonance that stems from noticing certain disquieting features of the carpet or hearing favorable things about other carpets. Consumers engage in complex buying behavior when they are highly involved in a purchase and aware of significant differences among brands. This is usually the case when the product is expensive. infrequent and risky.
since buyers are not highly committed to any brand. They might design their advertising to trigger strong emotions related to personal values or ego defense. Many products are bought under conditions of low consumer involvement and the abscence of significant brand differences. They can link the product to some involving issue. 3. for low involvement products the buying process begins with brand beliefs formed by passive learning and is followed by purchase behavior. rather. avoiding out-of-stock conditions. They can link the product to some involving personal issue. Consumers do not form a strong attitude toward a brand.Habitual Buying Behavior. which may be followed by evaluation. Consumers do not search extensively for information about the brands. The market leader and the minor brands in this product category have different market strategies. 4. They might add an important product feature to a low-involvement product. 1. evaluate their characteristics and make a weighty decision on which brand to buy. Variety Seeking Buying Behavior. Ad repetition creates brand familiarity rather than brand conviction. With low-involvement products. Thus. and sponsoring frequent reminder advertising. Some buying situations are characterized by low consumer involvement but significant brand differences. 2. Challenger firms will encourage variety seeking by Page 73 . There is good evidence that consumers have low involvement with most low-cost. frequently purchased products. they select it because it is familiar. Here consumers often do a lot of brand switching. These strategies at best raise consumer involvement from a low to a moderate level. consumer behavior does not pass through the normal belief/attitude/behavior sequence. Marketers use 4 techniques to try to convert low-involvement product into one of higher involvement. Marketers find it effective to use price and sales promotions to stimulate product trial. they do not propel the consumer into highly involved buying behavior. The market leader will try to encourage habitual buying behavior by dominating shelf space.
is active information search. Problem Recognition The buying process starts when the buyer recognizes a problem or need. Of key interest to the marketer are the major information sources to which the consumer will turn and the relative influence each will have on the subsequent purchase decision. We can distinguish between two levels of arousal. marketers can identify the most frequent stimuli that spark an interest in a product category. Consumers may skip or reverse some stages. simply more receptive to information. The need can be triggered by internal or external stimuli. friends. The Stages of the Buying Decision Process Smart companies research the buying decision process involved in their product category. They can think how they themselves would act (introspective method). At the next level.offering lower prices. acquaintances Page 74 . neighbors. deals. The buyer senses a difference between his or her actual state and a desired state. The marketer can then develop marketing strategies that trigger consumer interest. The following figure shows a stage model of the typical buying process. Or they can ask consumers to describe the ideal way to buy the product(prescriptive method). By gathering information from a number of consumers. They can interview a small number of recent purchases. The milder search state is heighetened attention. Marketers need to identify the circumstances that trigger a particular need. coupons. free samples and advertising that presents reasons for trying something new. They can locate consumers who plan to buy the product and ask them to think out loud about going through the buying process (prospective method). Each method yields a picture of the steps in the consumer buying process. It‘s not always the case to pass sequentially through all the five stages in buying a product especially with lowinvolvement products. Information Search An aroused consumer will be inclined to search for more information. Consumer information sources fall into four groups : o Personal sources : Family. asking them to recall the events leading to their purchase (retrospective method).
the consumer receives the most information about a product from commercial sources – that is market dominated sources. they see the consumer as forming product judgments largely on a conscious and rational basis. There are several decision evaluation processes. Through gathering information. dealers. The brands in the choice set might all be acceptable. consumer-rating organizations Experiential sources : Handling. In addition. only a few will remain as strong contenders (choice set). The consumer makes the final choice from this set. They will pay the most attention to the attributes that deliver the sought benefits. The set of beliefs about a brand make up the brand image. A company must strategize to get its brand into the prospect‘s awareness set. and the relative importance of the different information sources. the company should identify the consumer‘s information sources and evaluate their relative importance. the most current models of which see the consumer evaluation process as cognitively oriented. The consumer will come to know only a subset of these brands (awareness set). salespersons. and choice set. packaging. The company must also identify the other brands in the consumer‘s choice set so that it can plan its competitive appeals. Some brands will meet the consumer‘s initial criteria (consideration set). There is no simple and single evaluation process used by all consumers or by one consumer in all buying situations. displays Public sources : Mass media. Consumers should be asked how they first heard about the brand. At first we have total set of brands available to the consumer. consideration set. Consumers differ as to which product attributes they see as most relevant as well as on the importance of weights they attach to each attribute. examining. That is. using the product o o Generally speaking. The consumer develops a set of brand beliefs about where each brand stands on each attribute. The answers will help the company prepare effective communications for the target market. But the most effective sources comes from personal sources. Evaluation of Alternatives. The consumer‘s brand image will vary with his or her Page 75 . the consumer learns about competing sets of brands and their features.o Commercial sources : Advertising. what information came in later. As the consumer gathers more information.
A consumer‘s decision to modify. Vendor decision 3. In executing a purchase intention. The second factor isunanticipated situational factors. Payment method decision Postpurchase Behavior. and prefernce for national brand names and warranties. others will be indifferent to the flaw. Purchase decision. However. such as decision avoidance. The buyer‘s satisfaction is a function of the closeness between the buyer‘s product expectations and the product‘s perceived performance. and some may even see the flaw as enhacing the product‘s value. selective distortion and selective retention. These may erupt to change the purchase intention. The larger the gap between expectations and Page 76 .experiences as filtered by the effects of selective perception. a consumer may detect a flaw. 1. Quantity decision 4. A buyer‘s preference for a brand will increase if someone he or she likes favors the same brand strongly. information gathering from friends. The consumer arrives at preferences towards the various brands through an attribute evaluation process. Brand decision 2. Consumers develop routines for reducing risk. The influence of others become complex when several people close to the buyer hold contradictory opinions and the buyer would like to please them all. Thus preferences and even purchase intentions are not completely reliable predictors of purchase behavior. Some buyers will no longer want the flawed product. The consumer may also form an intention to buy the most preferred brand. After purchasing a product. The first factor is the attitudes of others. the consumer may make up to five purchase subdecisions. the consumer forms preferences among the brands in the choice set. two factors can intervene between the purchase intention and the purchase decision. postpone or avoid a purchase decision is heavily influenced by perceived risk. In the evaluation stage. Timing decision 5.
the marketer needs to know how they dispose of it. especially if it can hurt the environment. new product sales will be depressed. in their closet. and word-of-mouth will not be strong. They may take public action such as by complaining to the company. if the consumer is satisfied. The satisfied customer will also tend to say good things about the brand to others. the greater the consumer‘s dissatisfaction. he or she will exhibit a higher probability of purchasing the product again. Marketers should also monitor how the buyers use and dispose of the product. They may seek information that confirms its high value. The importance of postpurchase satisfaction suggests that sellers must make product claims that truthfully represent the produt‘s likely performance. If consumers throw the product away. going to the lawyer or complaining to other groups. Private actions include making a decision to stop buying the product (exit option) or warning friends (voice option). If they sell or trade the product.performance. marketers should advertise these uses. They may abandon or return the product. If consumers find new uses for the product. The consumer‘s satisfaction or dissatisfaction wit the product will influence subsequent behavior. If consumers store the product. the product is probably not very satisfying. Marketers can and should take steps to minimize the amount of consumer postpurchase dissatisfaction. Dissatisfied consumers respond differently. Page 77 .
The Business Market versus the Consumer Market The business market consists of all the organizations that acquire goods and services used in the production of other products or services that are sold. Industries such as petroleum. business marketers need to monitor regional shifts of certain industries. Business markets have several characteristics that constrast sharply with consumer markets. The business marketer normally deals with far fewer buyers than the consumer marketer does. Most agricultural output comes from relatively few states. o o o Page 78 . At the same time. we observe close relationships between customers and suppliers in business markets.ANALYZING BUSINESS MARKETS AND BUSINESS BUYING BEHAVIOR What is Organizational Buying? Organizational buying is the decision-making process by which formal organizations establish the need for purchased products and services and identify. Contracts go to those suppliers who cooperate with the buyer on technical specifications and delivery requirements. Many business markets are characterized by a high buyerconcentration ratio. Because of the smaller customer base and the importance and power of the large customers. o Fewer buyers. Suppliers are frequently expected to customize their offerings to individual business customer needs. This geographical concentration of producers helps to reduce selling costs. rubber and steel show an even greater geographical concentration. Large buyers. A few large buyers do most of the purchasing in such industries as aircraft engines and defense weapons. Geographically concentrated buyers. Close supplier-customer relationship. rented or supplied to others. evaluate and choose among alternative brands and suppliers.
The demand for business goods and services tends to be more volatile than the demand for consumer goods and services. and requirements. so will the demand for all the business goods entering into their production. Buying committees consisting of technical experts and even senior management are common in the purchase of major goods. requests for quotations. Inelastic demand. Several buying influences. However. Economists refer to this effect as the acceleration effect. Demand is especially inelastic in the short run because producers cannot make quick changes in their production methods. and purchase contracts – are not typically found in consumer buying. This is especially true of the demand for new plant and equipment. producers may switch their eyelets supplier in response to price differences. business marketers have to send well-trained sales reqpresentatives and often sales teams to deal with the well-trained buyers. Consequently. Business goods are purchased by trained purchasing agents who must follow the organization‘s purchasing policies. the business marketer must closely monitor the buying patterns of ultimate consumers. and publicity play an important role in the business promotional mix. Professional purchasing. More people typically influence business buying decisions than consumer buying decisions. If the demand for these consumer goods slackens. Demand is also inelastic for business goods that represent a small percentage of the item‘s total cost. For this reason. sales promotion. Although advertising. Fluctuating demand. personal selling usually o o o o Page 79 . that is not much affected by price changes. This sales volatility has led many business marketers to diversify their products and markets to achieve more balanced sales over the business cycle. proposals. The demand for business goods is ultimately derived from the demand for consumer goods.o Derived demand. Many of the buying instruments – for example. The total demand for many business goods and services is inelastic. A given percentage increase in consumer demand can lead to a much larger percentage increase in the demand for plant and equipment necessary to produce the additional output. constraints.
giving weight to its past buying satsifaction with the various suppliers. Reciprocity. Business marketers also need to remember that women and minorities now account for a significant share of purchase decision makers. Page 80 . Modified rebuy. The out-suppliers see an opportunity to propose a better offer to gain some business. getting the seller‘s latest products. A situation in which the buyer wants to modify product specifications. The buyer chooses from suppliers on its ―approved list‖. delivery requirements or other terms. They often propose automatic reordering systems so that the purchasing agent will save reordering time. and gaining some tax advantages. prices. The lessee gains a number of advantages : conserving capital. Business buyers often select suppliers who also buy from them. The insuppliers become nervous and have to protect the account. Many industrial buyers lease their equipment instead of buying it. especially those items that are technically complex and /or expensive. Usually involves additional decision participants on both the buyer and seller sides. The ―out-suppliers‖ attempt to offer something new or to exploit dissatisfaction with a current supplier. Out-suppliers try to get a small order and then enlarge their purchase share over time. Robinson and others distinguish three types of buying situations : 1. Leasing. The ―in-suppliers‖ make an effort to maintain product and service quality. The lessor often ends up with a larger net income and the chance to sell to customers who could not afford ouright purchase. Straight rebuy. A buying situation in which the purchasing department reorders on a routine basis. o o Buying Situations The business buyer faces many decisions in making a purchase. o Direct purchasing.serves as the main marketing tool. Business buyers often buy directly from manufacturers rather than through intermediaries. The number of decisions depends on the type of buying situation. receiving better service. 2.
3. A variant on systems selling is systems contracting. evaluation. The new-task situation is the marketer‘s greatest opportunity and challenge. In the latter. many companies use a missionary sales force consisting of their best salespeople. The customer benefits from reduced costs because the seller maintains the inventory. interest. The government would solicit bids from prime contractors. Systems buying and selling. acceptable suppliers and the selected supplier. salespeople have their greatest impact at the interest stage. Mass media are most important during the initial awareness stage. Savings also result from reduced time spent on supplier selection Page 81 . trial and adoption. Sellers have increasingly recognized that buyers like to purchase in this way and many have adopted systems selling as a marketing tool. operating) supplies. delivery terms and times. price limits. A buying situation in which a purchaser buys a product or service for the first time. New task. who would assemble the package or system. The prime contractor would thus provide a ―turnkey solution‖ so called because the buyer simply had to turn one key to get the job done. Because of the complicated selling involved in the new task. The marketer tries to reach as many key buying influences as possible and provide helpful information and assistance. repair. where a single supply source provides the buyer with his or her entire requirement of MRO (maintenance. and technical sources are the most important during the evaluation stage. The greater the cost and/or risk. this practice originated with government purchases of major weapons and communication systems. Communication tools‘ effectiveness varies at each stage. The contractor who was awarded the contract would be responsible for bidding out and assembling the system‘s subcomponents from second-tier contractors. service terms. New-task buying passes through several stages : awareness. Many business buyers prefer to buy a total solution to their problem from one seller. order quantities. The business buyer makes the fewest decisions in the straight-rebuy situation and the most in the new-task situation. the buyer has to determine product specs. the larger the number of decision participants and the greater their information gathering – and therefore the longer the time to decision completion. Called systems buying. payment terms.
5. 6. Gatekeepers. the buyers might include high-level managers participating in the negotiations. Approvers. Influencers. In many cases. People who decide on product requirements and/or on suppliers. To target their efforts properly. The seller benefits from lower operating costs because of a steady demand and reduced paperwork. They may be users or others in the organization.and from price protection over the term of the contract. business marketers have to figure out : Who are the major decision participants ? What decisions do they influence ? What is their level of influence ? What evaluation criteria do they use ? Page 82 . 7.‖ The buying center includes all members of the organization who play any of the seven roles in the purchase decision process. People who authorize the proposed actions of deciders or buyers. Buyers. People who have the power to prevent sellers or information from reaching members of the buying center. 3. Initiators. In more complex purchases. 4. Users. who share some common goals and the risks arising from the decisions. Those who will use the product or service. Deciders. Buyers may help shape product specifications. 2. People who influence the buying decision. 1. the users initiate the buying proposal and help define the product requirements. People who have formal authority to select the supplier and arrange the purchase terms. They often help define specifications and also provide information for evaluating alternatives. but they play their major role in selecting vendors and negotiating. Participants in the Business Buying Process Webster and Wind call the decision-making unit of a buying organization the buying center. Those who request that something be purchased. The buying center is composed of ―all those individuals and groups who participate in the purchasing decision-making process.
They will sign long-term contracts with suppliers to ensure a steady flow of materials. Larger sellers go for multi-level in-depth selling to reach as many buying participants as possible. however. Rather companies will have to rely more heavily on their communications program to reach hidden buying influences and keep their current customers sold. equipment and inventories. much less call on. Business marketers who work in global markets must also be aware of business buying practices internationally. and individual. the business marketer will not have the time or resources to reach all of them. determine how they will affect buyers. the influences on business buyers can be classified into four main groups : environmental. and competitive developments in the environment. Companies that fear a shortage of key materials are willing to buy and hold large inventories.When a buying center includes many participants. the economic outlook and the interest rate. socially responsible buying is rarely initiated by purchasing departments but rather comes about either through the actions of a policy enterpreneur or because the organization is already dedicated to being socially responsible. As buying teams become more prevalent. In a recession economy. The business marketer Page 83 . all of the individuals involved in the purchasing decision. salespeople will find it increasingly difficult to locate. business buyers reduce their investment in plant. Business marketers must periodically review their assumptions of the roles and influence of different decision participants. and try to turn problems into opportunities. policies. Major influences on Business Buyers In general. Buyers in socially responsible organizations will put pressure on suppliers to be socially responsible as well. organizational. The business marketer has to monitor all of these forces. political/regulatory. Each buying organization has specific objectives. Business buyers are also affected by technological. Small sellers concentrate on reaching the key buying influencers. procedures. Interestingly. Environmental factors. Business buyers are heavily influenced by factors in the current and expected economic environment. organizational structures and systems. interpersonal. such as the level of demand for their product. Organizational factors. Their salespeople virtually ―live‖ with their high-volume customers.
This revolution has come about through the availability of corporate purchasing cards issued by credit-card organizations. Headquarters identifies materials purchased by several divisions and buys them centrally. this development means dealing with fewer and higher-level buyers. they are also decentralizing some purchasing operations by empowering employees to purchase small-ticket items such as duplicate keys. In addition many companies are looking for top buying talent and offering higher compensation. Centralized purchasing. These systems are o o o o Page 84 . Decentralized purchasing of small ticket items. coffee makers or Christmas trees. in addition. At the same time that many companies are centralizing their purchasing processes. is that with less time to spend on paperwork. business marketers are supplying electronic data interchange (EDI) to their customers. Purchasing-performance evaluation and buyers‟ professional development.has to be familiar with all of these. but in general centralized purchasing produces substantial savings for the company. The individual divisions can buy from another source if they can get a better deal. Many companies have set up incentive systems to reward purchasing managers for good buying performance. thereby gaining more purchasing bust. for both buyers and suppliers. Business marekters should be particularly aware of the following organizational trends in the purchasing area : o Purchasing-department upgrading : Recent competitive pressures have led many companies to upgrade their purchasing departments and elevate their administrators to vice-presidential status. Long-term contracts. The additional benefit. purchasing departments have more time for building partnerships. Business buyers are increasingly initiating or accepting long-term contracts with reliable suppliers. These departments have been changed from old-fashioned ―purchasing departments‖ with an emphasis on buying at the lowest cost to ―procurement deparments‖ with a mission to seek the best value from fewer and better suppliers. For the business marketer.
have identified eight stages of the industrial buying process and called them buyphases. perceptions and preferences. although whatever the information he or she can discover about the personalities and interpersonal factors would be useful. income. The emergence of JIT production systems promises to have a major impact on organizational purchasing policies. Supplier search 5. The buying center usually includes several participants with different interests.leading purchasing managers to increase their pressure on sellers for the best terms. job position. Individual factors. . Performance review NEW TASK YES YES YES YES YES YES YES YES MODIFIED REBUY MAYBE MAYBE YES MAYBE MAYBE MAYBE MAYBE YES CLASSES STRAIGHT REBUY NO NO YES NO NO NO NO YES Page 85 This model is called the buygrid framework. and ―wanteverything-done‖ buyers. empathy and persuasiveness. ―want-the-best‖ buyers. The business marketer is not likely to know what kind of group dynamics take place during the buying decision process. business buyers move through a purchasing/procurement prcess. personality. These stages are : BUY 1. These are influenced by the participant‘s age. Supplier selection 7. Buyers definitely exhibit different buying styles. The eight steps for the typical newtask buying situation are as follows. status. Even factors that seem consistent across one country or culture can vary drastically in another country or culture. authority. Proposal solicitation 6. attitudes towards risk and culture. Robinson et al. Some younger highly educated buyers are computer experts who conduct rigorous analyses of competitive proposals before choosing a supplier. General need description 3. Problem recognition 2. ―own-expert‖ buyers. There are ―keep-itsimple‖ buyers. Order-routine specification 8. The Purchasing/Procurement Process To buy the needed goods. Interpersonal factors. Each participant in the buying process has personal motivations. education. Product specification 4.
Internally. Suppliers. see an ad. A purchasing manager senses an opportunity to obtain lower prices or better quality. and the company searches for another supplier. Problem recognition can occur as a result of internal or external stimuli. For complex items. the buyer may get new ideas at a trade show. Once a need is recognized. After general needs are identified. price and/or other attributes. Page 86 . Often the company will assign a product-value-analysis (PVA) engineering team to the project. For standard items. durability. PVA is an approach to cost reduction in which components are carefully studied to determine if they can be redesigned or standardized or made by cheaper methods of production. this is not a very involved process. Business marketers can stimulate problem recognition by direct mail. the buyer proceeds to determine the needed item‘s general characteristics and quantity needed. The buying process begins when someone in the company recognizes a problem or need that can be met by acquiring a good or a service. General Need Description. The business marketer can assist the buyer in this phase by describing how his or her products fit the organization‘s general needs. Purchased material turns out to be unsatisfactory. o o o Externally. telemarketing. the buyer will work with others to define the general characteristics that the product must have. By getting in early and influencing buyer specifications. A machine breaks down and requires replacement or new parts. Product Specification. the most common events leading to problem recognition are the following : o The company decides to develop a new product and needs new equipment and materials to produce this product. and calling on prospects.Problem recognition. or receive a call from a sales representative who offers a better product or a lower price. the supplier increases its chances of being chosen in the supplier-selection stage. too can use PVA as a tool for positioning themselves to win an account. the buying organization must develop the item‘s technical specifications. These may include reliability.
the buyer will require a detailed written proposal from each qualified supplier. do a computer search. the buyer will end up with a short list of qualified suppliers. and attend trade shows. Supplier Selection. Where the item is complex or expensive. Those who qualify may be visited by the buyer‘s agents. Once the product has been specified. the buying center will specify desired supplier attributes and indicate their relative importance. Proposal Solicitation. They may be able to show evidence Page 87 . Their written proposals should be marketing documents. not just technical documents. price. who will examine the suppliers‘ manufacturing facilities and meet their personnel. service reliability and supplier flexibility. develop a strong advertising and promotion program. the three most important attributes are technical service. such as a copying machine. phone other companies for recommendations. After evaluating the proposals. The choice and importance of different attributes varies with the type of buying situation. For political-problem products that stir rivalries in the organization the most important attributes are price. It will then rate suppliers on these attributes and identify the most attractive suppliers. supplier flexibility and product reliability. Delivery reliability. After evaluating each company. Marketers can counter the request for a lower price in a number of ways. The supplier‘s task is to get listed in major directories. the buyer will eliminate some suppliers and invite the remaining suppliers to make formal presentations. and build a good reputation in the marketplace. and supplier reputation are highly important for routineorder products. An important part of any presentation involves not only giving information but also asking questions. The buyer will now invite qualified suppliers to submit proposals. watch trade advertisements. Business marketers must thus be skilled in researching. Suppliers who lack the required production capacity or suffer from a poor reputation will be rejected. supplier reputation. For procedural-problem products. The buyer can examine trade directories. the buyer tries to identify the most appropriate suppliers. product reliability. The buying center may attempt to negotiate with its preferred suppliers for better prices and terms before making the final selection.Supplier Search. writing and presenting proposals. positioning their company‘s capabilities and resources so that they stand out from the competition. Their oral presentations should inspire confidence. Before selecting a supplier.
Writing a new purchase order. blanket contracts are sometimes called stockless purchase plans. In the case of maintenance. the buyer negotiates the final order. Increasingly however companies are reducing the number of suppliers. Three methods are commonly used. quality or service. Nor does the buyer want to write fewer and larger purchase orders because that means carrying more inventory. The buyer may contact the end users and ask for their evaluations. Performance review. Order routine specification. Furthermore. and so on. the expected time of delivery. The buyer‘s computer automatically sends an order to the seller when stock is needed. repair and operating items. They also often require the chosen suppliers to achieve continuous quality and performance improvement while at the same time lowering the supply price each year by a given percentage. A blanket contract establishes a long-term relationship in which the supplier promises to resupply the buyer as needed at agreed-upon prices over a specified period of time. Or the buyer might aggregate the cost of poor supplier performance to come up with adjusted costs of Page 88 . warranties. These companies rely on their suppliers to work closely with them during product development and value their suggestions. these companies want each chosen supplier to be responsible for a larger component system. After the suppliers have been selected. This system locks the supplier in tighter with the buyer and makes it difficult for out-suppliers to break in unless the buyer becomes dissatisfied with the insupplier‘s prices. When all is said and done. Or the buyer may rate the supplier on several criteria using a weighted score method. Blanket contracting leads to more single-source buying and ordering of more items from that single source. listing the technical specifications. buyers are increasingly moving toward blanket contracts rather than periodic purchase orders. especially where those services are superior to those offered by competitors. They can also cite the value of the services the buyer now receives. return policies. Because the stock is held by the seller. each time stock is needed is expensive and time consuming. the buyer reviews the performance of the chosen supplier(s).that the ―life-cycle cost‖ of using its product is lower than that of competitors‘ products. the quantity needed.
Institutional and Government markets The institutional market consists of schools. In fact. including price. modify or drop his relationship with the supplier. primarily in the case of complex projects involving major R&D costs and risks. who often complain about excessive paperwork. Many of these organizations are characterized by low budgets and captive clienteles. The supplier should monitor the same variables that are monitored by the product‘s buyers and end users. The performance review may lead the buyer to continue. Because their spending decisions are subject to public review. government organizations are a major buyer of goods and services. Governments will also buy on a negotiated contract basis. many vendors set up a separate division to sell to institutional buyers because of these buyers‘ special buying needs and characteristics. regulations. In some cases. government organizations require considerable paperwork from suppliers. nursing homes. decision-making delays and frequent shifts in procurement personnel. Page 89 . In most countries. the government unit will make allowance for the supplier‘s superior quality or reputation for completing contracts on time. bureaucracy. hospitals. The hospital purchasing agent has to search for institutional-food vendors whose quality meets or exceeds a certain minimum standard and whose prices are low. prisons and other institutions that must provide goods and services to people in their care. and normally they award the contract to the lowest bidder. Government organizations typically required suppliers to submit bids.purchase. and in cases where there is little competition.
pure monopoly oligopoly monopolistic competition pure competition industry In a(n) _____ a small number of large firms produce products that range from highly differentiated to standardized. pure monopoly oligopoly monopolistic competition pure competition industry Page 90 .Module End Quizes In a(n) _____ only one firm provides a certain product or service in the area.
Firms often face _____ such as legal or moral obligations to customers. market challenger market follower market nicher market king market leader Page 91 . entry barriers mobility barriers exit barriers ethical barriers conscience barriers The firm with the largest market share in the relevant product market is called the _____.
and organizations select. the attacker matches its opponent's product. price. advertising. make buying decisions based on each of the following items except which one?] Social Cultural Personal None of the above 8. Social classes are indicated by a cluster of variables rather than a single variable. and dispose of goods. Which of the following is a variable that describes social class? Wealth Education Page 92 . buy. particularly boomers-turned-seniors. and distribution. or experiences to satisfy their needs and desires. flank frontal encirclement bypass guerrilla warfare 6. services. ideas.In a pure _____ attack. The field of ________________________ studies how individuals. customer behaviour sales behaviour consumer behaviour retail behaviour 7 Seniors. use. groups.
Which of the following types of reference groups is described as the group with whom the person interacts fairly continuously and informally? Aspiration group Primary group Secondary group Dissociative group 10 .Occupation All of the above 9. The social class that is described as the social elite who live on inherited wealth are said to be in what level of social class? Upper Upper Lower Upper Upper Middle Upper Lower Page 93 .
Module III Developing Marketing Strategies Page 94 .
Cash Flow allows a company to maintain its viability. and the best way to attain a stable revenue stream is to have one or more Cash Cows. After a period of development it is introduced or launched into the market. Cash Cows are strong products that have achieved a large market share in mature markets. A product's life cycle (PLC) can be divided into several stages characterized by the revenue generated by the product. Organizations increasingly reassess product life cycle costs and revenues. Many products in mature industries are revitalized by product differentiation and market segmentation. All this in an effort to acquire additional market share and become a leader in its respective industry. The Product Life Cycle (PLC) is based upon the biological life cycle. NovemberDecember 1965. In theory it's the same for a product. it shoots out leaves and puts down roots as it becomes an adult (maturity). because the time available to sell a product and recover the investment Page 95 .The Product Life Cycle This model can help to analyze maturity stages of products and industries. after a long period as an adult the plant begins to shrink and die out (decline). eventually the market stabilises and the product becomes mature. Any company is constantly seeking ways to grow future cash flows by maximizing revenue from the sale of products and services. A constant and sustainable cash flow (revenue) stream from product sales is key to any long-term investment. it gains more and more customers as it grows. the modern Product Life Cycle is becoming shorter and shorter. Also. it goes into decline and is eventually withdrawn. a seed is planted (introduction). pp 81-94). then after a period of time the product is overtaken by development and the introduction of superior competitors. For example. it begins to sprout (growth). The term was used for the first time by Theodore Levitt in 1965 in an Harvard Business Review article: "Exploit the Product Life Cycle" (Vol 43. invest in new product development and improve its workforce. If a curve is skectched showing product revenue over time. it may take one of many different shapes.
changes in the marketing mix usually are required in order to adjust to the evolving challenges and opportunities. the operating life of some durable goods. They do this through the consideration of product warranties. the companies that produce these products must take their market life and service life into account when they are planning. companies are attempting to optimize revenue and profits over the entire life cycle. Page 96 .shrinks. such as automobiles and appliances. Product development is the incubation stage of the product life cycle. As a result. spare parts. The Product Life Cycle method identifies the distinct stages affecting sales of a product. Although the product life cycle shrinks. Increasingly. The life cycle concept may apply to a brand or to a category of product. has increased substantially. and the ability to upgrade existing products. It is clear that the Product Life Cycle concept has significant impact upon business strategy and corporate performance. There are no sales and the firm prepares to introduce the product. the operating life of many products is lengthening. For example. Its duration may be as short as a few months for a fad item or a century or more for product categories such as the gasoline-powered automobile. As the product progresses through its life cycle. From the product's inception until its retirement.
The introductory promotion also is intended to convince potential resellers to carry the product. relatively undifferentiated Price . When the product is introduced. Many trial or impulse purchases will occur at this stage. the primary goal is to establish a market and build primary demand for the product class. During the introductory stage the firm is likely to incur additional costs associated with the initial distribution of the product. Some customers make repeat purchases. 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.Promotion is aimed at building brand awareness. Can be recognized by increasing sales and the emergence of competitors. Some firms may announce their product before it is introduced. Growth stage. Sales increase as more customers become aware of the product and its benefits and additional market 97 . Advertising costs typically are high during this stage in order to rapidly increase customer awareness of the product and to target the early adopters. These higher costs coupled with a low sales volume usually make the introduction stage a period of negative profits. In some cases a penetration pricing strategy is used and introductory prices are set low to gain market share rapidly. sales will be low until customers become aware of the product and its benefits.Generally high. B.one or few products. but such announcements also alert competitors and remove the element of surprise. Page The growth stage is a period of rapid revenue growth.The stages in the Product Life Cycle A. Samples or trial incentives may be directed toward early adopters. The product is introduced in the market through a focused and intense marketing effort designed to establish a clear identity and promote maximum awareness. At the vendor's side. Promotion . the Growth stage is also characterized by sustained marketing activities. Distribution .Distribution is selective and scattered as the firm commences implementation of the distribution plan. Introduction stage. The following are some of the marketing mix implications of the introduction stage: Product . During the introduction stage.
and converting non-users into customers. the goal is to gain consumer preference and increase sales. When competitors enter the market. the primary goal is to maintain market share and extend the product life cycle. Also.Maintained at a high level if demand is high. sales velocity is dramatically reduced. advertising expenditures will be reduced. The marketing team may expand the distribution at this point.New product features and packaging options.Modifications are made and features are added in order to differentiate the product from competing products that may have been introduced. and sales volume reaches a steady level. Because brand awareness is strong. 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. This phase can be recognized when competitors beginning to leave the market. improvement of product quality. Competition may result in decreased market share and/or prices. C. The maturity stage is the most profitable. Promotion .segments are targeted.Increased advertising to build brand preference. increasing the difficulty of differentiating the product. During the growth stage. often during the later part of the growth stage. sales will increase further as more retailers become interested in carrying it. Once the product has been proven a success and customers begin asking for it. The marketing mix may be modified as follows: Product . Marketing mix decisions may include: Product . Page 98 . Maturity stage. Trade discounts are minimal if resellers show a strong interest in the product. The competing products may be very similar at this point.Distribution becomes more intensive. Sales promotions may be offered to encourage retailers to give the product more shelf space over competing products. The firm places effort into encouraging competitors' customers to switch. they do so at a slower pace. increasing usage per customer. or reduced to capture additional customers. At this point in time. While sales continue to increase into this stage. typically loyal customers purchase the product. Price . During the maturity stage. Distribution .
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.
Decline stage. The lingering effects of competition, unfavorable economic conditions, new trends, etc, often explain the decline in sales.
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. Discontinue the product when no more profit can be made or there is a successor product. 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.
Several variations of the Industry Life Cycle model have been developed to handle the development of the product, market, and/ or industry. Although the models are similar, they differ as to the number and names of the stages. Here is a list of some major models: In the Introduction stage, the product is introduced to the market through a focused and intense marketing effort designed to establish a clear identity and promote maximum awareness. Many trial or impulse purchases will occur at this stage. Next, consumer interest will bring about the Growth stage, distinguished by increasing sales and the emergence of competitors. The Growth stage is also characterized by sustaining marketing activities on the vendor's side, with customers engaged in repeat purchase behavior patterns. Arrival of the product's Maturity stage is evident when competitors begin to leave the market, sales velocity is dramatically reduced, and sales volume reaches a steady state. At this point in time, mostly loyal customers purchase the product. Continuous decline in sales signals entry into the Decline stage. The lingering effects of competition, unfavorable economic conditions, new fashion trends, etc, often explain the decline in sales.
Limitations of the Product Life Cycle Concept The term "life cycle" implies a well-defined life cycle as observed in living organisms, but products do not have such a predictable life and the specific life cycle curves followed by different products vary substantially. Consequently, the life cycle concept is not well-suited for the forecasting of product sales. Furthermore, critics have argued that the product life cycle may become selffulfilling. For example, if sales peak and then decline, managers may conclude that the product is in the decline phase and therefore cut the advertising budget, thus precipitating a further decline. Nonetheless, the product life cycle concept helps marketing managers to plan alternate marketing strategies to address the challenges that their products are likely to face. It also is useful for monitoring sales results over time and comparing them to those of products having a similar life cycle.
In reality very few products follow such a prescriptive cycle. The length of each stage varies enormously. The decisions of marketers can change the stage, for example from maturity to decline by price-cutting. Not all products go through each stage. Some go from introduction to decline. It is not easy to tell which stage the product is in. Remember that PLC is like all other tools. Use it to inform your gut feeling.
Three Levels of a Product.
For many a product is simply the tangible, phsysical entity that they may be buying or selling. You buy a new car and that's the product - simple! Or maybe not. When you buy a car, is the product more complex than you first thought? In order to actively explore the nature of a product further, lets consider it as three different products - the COREproduct, the ACTUAL product, and finally the AUGMENTED product. These are known as the 'Three Levels of a Product.' So what is the difference between the three products, or more precisely 'levels?' This will be explained by the example of PEPSI
The CORE product is NOT the tangible, physical product. You can't touch it. That's because the core product is the BENEFIT of the product that makes it valuable to you. So with the car example, the benefit is convenience i.e. the ease at
Again with the car example. it is the vehicle that you test drive. Page 102 . Regular (1Liter). when you want to. physical product.which you can go where you like. for which you may or may not pay a premium. It usually consists of lots of added value. part of the augmented product would be the warranty.5 Liter) Feature: Black color with contain Aspartame (Nutra Sweet). Accessible. Another core benefit is speed since you can travel around relatively quickly. Jumbo (2. Fast) Aftercare. Disposable (500ml). Disposable (1. the customer service support offered by the car's manufacture. Augmented Product of PEPSI Good Customer Support (ie.5 Liter). Actual Product of PEPSI Brand Name: Pepsi Quality Level: exceptional Design and Packaging: Regular (275ml). Sucarlose (Splenda). Can (300ml). So when you buy a car. You can get some use out of it. and any after-sales service. buy and then collect. Acesulfame Potassium (Sunnett) The AUGMENTED product is the non-physical part of the product. Core Benefit of PEPSI A drink for refreshment without Alcohol The ACTUAL product is the tangible. easy to find contact details.
Page 103 .
Managing your product positioning requires that you know your customer and that you understand your competition. Pricing. market surveys. Positioning is what the customer believes about your product's value. Industrial Marketing. advertising agencies had primarily been basing their media campaigns on internally conceived benefits of the client's product. June 1969. Their 1981 book about Positioning: "The Battle for Your Mind" became a bestseller. it is a comparison to the other available alternatives offered by the competition. pp. 6. generally. or company in the perception of the target market. channels of distribution. Marketers manage product positioning by focusing their marketing activities on a positioning strategy. positioning is the technique in which marketers try to create an image or identity for a product. brand. Vol. Positioning is a marketing method for creating the perception of a product.What is positioning. Positioning can change due the counter measures taken at the competition.54. wrote. Typical positioning tools include graphical perception mapping. It is expressed relative to the position of competitors.51-55. or company identity. brand. "positioning is not what you do to a product. According to Trout and Ries. features. Positioning is what you do to the mind of the prospect. That is. Positioning is what the customer believes and not what the provider wants them to believe. and advertising all are geared to maximize the chosen positioning strategy. Until then. What matters is how potential buyers see the product. two young marketing guys. The term was actually first mentioned in a paper by Jack Trout: Positioning is a game people play in today's me-too market place. and benefits. and certain statistical techniques. rather than awareness created by advertising or promotion. No. Since that time in marketing. spoke and disseminated to the advertising and PR world about a new concept in communications which they called positioning. you position (place) the product in the mind of the potential buyer". Page 104 . Jack Trout and Al Ries. These beliefs tend to based on customer experiences and evidence. promotion. Starting from 1969. this is the job of market research not just what the enterpreneur thinks is true.
provide cognitive stimulation) Steps in Product Positioning. that define the product 'space' Collect information from a sample of customers about their perceptions of each product on the relevant attributes Determine the share of mind of each product Determine the current location of each product in the product space Determine the target market's preferred combination of attributes. These are called: an ideal vector. there are six basic strategies for product positioning: Page 105 1. By attribute or benefit. provide benefits to customers) 2. Symbolic (self-image enhancement.This is the most frequently used positioning strategy. Process Identify competing products Identify the attributes. For a light beer. needs. also called dimensions. it might be the mint taste or tartar control.Competitive Edge and Positioning A successful positioning strategy is usually based on a sustainable competitive advantage of a company. or solutions Use categories Usage occasions Placing and comparing it relative to another product Dissociation of the product class Three bases of positioning can be distinguished 1. ego identification. Functional (solve problems. affective fulfillment) 3. including: Product features Benefits. it might be that it tastes great or that it is less filling. Examine the fit between: the positions of competing products. . Experiential (provide sensory stimulation. Positioning can be based on several things. For toothpaste. belongingness and social meaningfulness. the position of your product and the position of the ideal vector Select the optimum position Generally.
2. Recommended for: Services companies.BMW and Mercedes often compare themselves to each other segmenting the market to just the crème de la crème of the automobile market. Stealth Positioning: 1. Three Positioning Strategies by Youngme Moon In an HBR article of May 2005. 6.Margarine competes as an alternative to butter. Margarine is positioned as a lower cost and healthier alternative to butter. By price or quality. This method removes "sacred" product attributes. toys). 4. But IKEA added: children drop-off. Reverse Positioning.The users of Apple computers can design and use graphics more easily than with Windows or UNIX. cafe. and it offers no sales consultancy. Apple positions its computers based on how the computer will be used. Youngme Moon introduced three variations of Positioning that can be used to break free from Product Life Cycle thinking. For example IKEA is not delivering to your home the products which you have bought. while Costco tells us that diamonds are diamonds and that only a chump will pay Tiffany prices. By product or service class. while butter provides better taste and wholesome ingredients. Breakaway. 5. Only college students may participate with their campus email IDs. Facebook is too cool for MySpace and serves a smaller. By use or application. 3. Companies can change how consumers perceive them. more sophisticated cohort. Simultaneously new attributes are added that would typically be found only in a highly augmented product.Facebook is a social networking site used exclusively by college students. Page 106 . Ford and Chevy need not apply.Tiffany and Costco both sell diamonds. Tiffany wants us to believe that their diamonds are of the highest quality. By user. Three positioning strategies that marketers use to cause a mental shift at consumers are Reverse. By competitor. By Positioning or often Repositioning their products in unexpected ways.
2. Breakaway Positioning. This method associates the product with a radically different category. By manipulating the cues of consumers of how they perceive and categorize a product, a firm can change how consumers frame a product. (ex. Swatch > no longer in category Swiss Watches, but in Fashion Accessories). Recommended for Packaged Goods companies. 3. Stealth Positioning. This variant gradually interests consumers for a new offering, by hiding the product's true nature. For example Sony's AIBO robot was positioned as a lovable pet. This shifted consumer's attention away from its major limitations as a household aide. It apparently even turned elderly people into early technology adopters. Recommended for: Technology companies.
After the organisation has selected its target market, the next stage is to decide how it wants to position itself within that chosen segment. Positioning refers to „how organisations want their consumers to see their product‟. What message about the product or service is the company trying to put across? Car manufacturer Daewoo in the UK, has successfully positioned themselves as the family value model. The UK car Skoda brand which has been taken over by Volkswagen has been repositioned as a vehicle which had negative brand associations, to one which regularly wins car of the year awards. The positive comments from the industry and attributes of this vehicle is has changed the perception of consumers about the Skoda brand.
Developing a positioning strategy
Developing a positioning strategy depends much on how competitors position themselves. Do organisations want to develop ‗a me too‘ strategy and position themselves close to their competitors so consumers can make a direct comparison when they purchase? Or does the organisation want to develop a strategy which positions themselves away from their competitors? Offering a benefit which is superior depends much on the marketing mix strategy the organisation adopts. The pricing strategy must reflect the benefit offered and the promotion strategy must communicate this benefit.
Ultimately positioning is about how you want consumers to perceive your products and services and what strategies you would adopt to reach this perceptual goal.
What sets your product, service and company apart from your competitors? What value do you provide and how is it different than the alternatives? Competitive positioning is about defining how you’ll “differentiate” your offering and create value for your market. It‘s about carving out a spot in the competitive landscape and focusing your company to deliver on that strategy. A good strategy includes Market profile: size, competitors, stage of growth Customer segments: groups of prospects with similar wants & needs Competitive analysis: strengths, weaknesses, opportunities and threats in the landscape Positioning strategy: how you‘ll position your offering to focus on opportunities in the market Value proposition: the type of value you‘ll deliver to the market When your market clearly sees how your offering is different than that of your competition, it‘s easier to generate new prospects and guide them to buy. Without differentiation, it takes more time and money to show prospects why they should choose you; as a result, you often end up competing on price – a tough position to sustain over the long term. One of the key elements of your positioning strategy is your value proposition. There are three essential types of value: operational excellence, product leadership and customer intimacy. Here is a hypothetical example of each type of value.
Alpha is completely dedicated to
Carrot Technology’s customers
Starboard’s market is flooded
innovation and quality. They’re constantly working on product improvements and new ideas that they can bring to market. They know what their competitors are doing and are completely focused on staying one step ahead in order to capture a greater share of their market. Alpha’s culture is all about product leadership, and their prospects see it even before they become customers.
don’t want bells and whistles, just a good product at the lowest possible price. Carrot focuses on operational excellence so they can continually offer the lowest price in the market. For example, they just patented a new machine that dramatically lowers their costs. They’re not trying to come up with new or better products; they just want to produce more volume at a lower cost. Carrot’s value proposition is operational excellence; they convey it in their messages and in everything they do. Alpha Co.’s customers care most about quality – they want the best product.
with products at all ends of the price spectrum. Yet Starboard’s customers want more than a product off the shelf; they want customized solutions. So Starboard’s mission is to know as much as possible about their customers’ businesses so they can deliver the correct solutions over time. Starboard knows they can’t just say “We offer great service.” Starboard’s team knows they have to deliver on that value proposition in every interaction they have with prospects and customers.
These companies are totally focused on delivering their value propositions. They don’t just say it — they do it, and that makes it easier to win in their respective markets. Rather than leaving your positioning and value proposition to chance, establish a strategy. Think impartially about the wants and needs of your customers and what your competition offers. You may find an unmet need in the market, or you may realize that you need to find a way to differentiate from your competitors. As a result, you may decide to promote a different attribute of your product, or you may find entirely new opportunities to create new products and services. Either way, you’ll strengthen your business in both the short and long term.
Your prospects see little difference between you and your competitors. Your prospects partially buy into the value you provide. and your company has found success in the market. Page 110 . Your product is somewhat different and better than those of your competitors and you communicate that difference. You have to fight long and hard for every sale. but you don’t win all of the deals that you could. Your prospects respond because you’re meeting their needs.Best Case Neutral Case Worst Case You provide a one-of-a-kind product/service that your market needs and wants. though probably not as consistently as you should. You have a strong value proposition that differentiates you from your competitors. so you’re competing solely on price. you communicate it consistently in everything you do. It’s very difficult to meet your revenue and profit goals.
even if their solutions are much different than yours – they’re still your competition. product leadership and customer intimacy. mature. growth. or declining stage of its life. It’s also important when you’re expanding or looking for a new edge. This “lifecycle stage” affects your entire marketing strategy. so be as impartial as you can. or conduct research if you have the time. Profile your market Document the size of your market. budget and opportunity. It’s easy to think you’re the best. Uncover their true wants and needs – you’ll learn a great deal about what you can deliver to solve their problems and beat your competitors. Rate your own company and your direct competitors on operational efficiency (price). Page 111 . Evaluate your competition List your competitors. major competitors and how they’re positioned. Segment your market Understand the problems that your market faces. Group your prospects into “segments” that have similar problems and can use your product in similar ways. Include any competitors that can solve your customers’ problems. By grouping them into segments.Key concepts & steps Before you begin Your competitive positioning strategy is the foundation of your entire business – it’s the first thing you should do if you’re launching a new company or product. Determine whether your market is in the introductory. you can efficiently market to each group. Talk with prospects and customers.
or customer intimacy (the best solution & service). these strategies are the essential building blocks for your business. Together. Once you have a competitive positioning strategy. product leadership (the best product). Determine whether you can focus on those vulnerable areas – they’re major opportunities. Identify products/services you can offer to meet the true needs of your market in a new and better way. Page 112 . develop a brand strategy to help you communicate your positioning and value proposition every time you touch your market.Stake a position Identify areas where your competition is vulnerable.” Now. Define your value proposition There are three core types of value that a company can deliver: operational efficiency (the lowest price). your decision is your “value proposition. Determine which one you’re best equipped to deliver.
A good marketing strategy should integrate an organization's marketing goals.Targeting and Positioning: ." A strategy is different than a tactic. It is important that these objectives have measurable results. a marketing plan has no foundation. A marketing plan contains a list of specific actions required to successfully implement a specific marketing strategy. well-considered strategy. Marketing strategies serve as the fundamental underpinning of marketing plans designed to reach marketing objectives. policies. it is not recommended. While it is possible to write a tactical marketing plan without a sound. Without a sound marketing strategy.edu/~tskim/Lecture%20Note%206. The objective of a marketing strategy is to provide a foundation from which a tactical plan is developed. higher-margin products and services that enhance the consumer's interaction with the low-cost product or service. An example of marketing strategy is as follows: "Use a low cost product to attract consumers.utdallas. This allows the organization to carry out its mission effectively and efficiently. and action sequences (tactics) into a cohesive whole.Marketing Strategy: Marketing Strategies: A marketing strategy serves as the foundation of a marketing plan. One used the following techniques to device the Marketing Strategy for the product/service: Segmentation Targeting Positioning Page http://www. Once our organization.pdf 113 Lecture dealing with the aspects of Segmentation . via our low cost product. our organization will sell additional. has established a relationship with consumers.
sold at a given price. large markets . "all elderly women buy the same cosmetics brands" and so on. distributed in a certain way. and promoted in a certain way.identification of broad. Everyone within the Marketing world knows and speaks of segmentation yet not many truly understand its underlying mechanics. Because of this intra-group similarity. more options are available for a new business but resources would normally be a little limited.e. If your company is already on a market.e. There are many dimensions to be considered. What causes this? It has been documented that most marketers fail the segmentation exam and start with a narrow mind and a bunch of misconceptions such as "all teenagers are rebels". Market segmentation is widely defined as being a complex process consisting in two main phases: . and uncovering them is certainly an exercise of creativity. they are likely to have similar feeling and ideas about a marketing mix comprised of a given product or service. That is. thus failure is just around the corner.segmentation of these markets in order to select the most appropriate target markets and develop Marketing mixes accordingly. This is not something that is arbitrarily imposed on society: it is derived from the recognition that the total market is often made up of submarkets (called 'segments'). customers) into smaller subgroups.Segmentaion: Market segmentation is the process in marketing of grouping a market (i. Page 114 . they are likely to respond somewhat similarly to a given marketing strategy. Identify and name the broad market You have to have figured out by this moment what broad market your business aims at. people in the segment are similar to each other in their attitudes about certain variables). These segments are homogeneous within (i. this can be a starting point.
The biggest challenge is to find the right balance for your business: use your experience. Formulate narrower markets Try to form sub-markets around what you would call your "typical customer". as different people can have different opinions and you can usually count on at least those items most people agree on. Page 115 . demographics included. Do not avoid asking opinions even from non-Marketing professionals. Identify and make an inventory of potential customers' needs This step pushes the creativity challenge even farther. You should have by now a list of need dimensions for each market segment: try to identify those that carry a determining power. since it can be compared to a brainstorming session. The more possible needs you can come up with. Also create a list of people-related features. the better. What you have to figure out is what needs the consumers from the broad market identified earlier might have. on the condition to be able to satisfy their needs using the same Marketing mix. then aggregate similar people into this segment. for each narrow market you form – a further step will ask you to name them. knowledge and common sense to estimate if the market you have just identified earlier is not too narrow or too broad for you. what could possibly trigger a buying decision? Answering these questions can help you list most needs of potential customers on a given product market. Start building a column with dimensions of the major need you try to cover: this will make it easier for you to decide if a given person should be included in the first segment or you should form a new segment. Identify the determining dimensions Carefully review the list resulted form the previous step. There is no exact formula on how to form narrow markets: use your best judgement and experience. Reviewing the needs and attitudes of those you included within each market segment can help you figure out the determining dimensions. Got yourself stuck in this stage of segmentation? Try to put yourself into the shoes of your potential customers: why would they buy your product.
while most segments have similar needs. Estimate the size of each market segment Each segment identified.intelliquest. This is considered a benefit by your target market Both of these conditions are necessary for a good positioning. Lecture on Segmentation: http://www. A good position is: 1.pdf Positioning Simply. It is important for a marketer to understand market behavior and what triggers it. even if. You might notice that. for lack of data. named and studied during the previous stages should finally be given an estimate size. positioning is how your target market defines you in relation to your competitors.Name possible segment markets You have identified the determining dimensions of your market segments. it is only a rough estimate. A good way of naming these markets is to rely on the most important determining dimension. they're still different needs: understanding the difference and acting upon it is the key to achieve success using competitive offerings. What makes you unique 2. now review them one by one and give them an appropriate name. So what if you are the only red-haired singer who only knows how to play a G minor chord? Does your target market consider this a good thing? Page 116 . allow time to consider what other aspects you know about them.com/resources/technical/MarketSegmentationOverview_M BIQ_June24. Evaluate the behavior of market segments Once you are done naming each market segment.
two questions need to be answered: 1. you have a chance at getting their attention.What is our marketing environment? 2. Some things to consider: Is your company small and flexibility? Do you offer low cost and high quality? Does your product offer unique benefits? Are you the first on the market with this product (First mover advantage)? Positioning Strategies There are seven positioning strategies that can be pursued: Page Benefits: What are the benefits to the customers? 117 Product Attributes: What are the specific product attributes? . Environment In order to begin positioning a product.Positioning is important because you are competing with all the noise out there competing for your potential fans attention. Some things to consider: How is the market now satisfying the need your software satisfies? What are the switching costs for potential users for your market? What are the positions of the competition? The competitive advantage is an internal question.What is our competitive advantage? The marketing environment is the external environment. What do you have that gives you advantage over your competitors. It is important to understand your product from the customers point of view relative to the competition. If you can stand out with a unique benefit.
I open a catering business offering catering services in the client‘s home. such as age or income. pricing and distribution of your products and/or services easier and more cost-effective. I could target my market with a direct mail campaign that went only to particular residents.Usage Occasions: When / how can the product be used? Users: Identify a class of users. Away from a Competitor: Positioned away from competitor. Against a Competitor: Positioned directly against a competitor. Targeting: Target Marketing involves breaking a market into segments and then concentrating your marketing efforts on one or a few key segments. depending on how you want to slice up the pie. for instance. Product Classes: Compared to different classes of products. Target marketing can be the key to a small business‘s success. The beauty of target marketing is that it makes the promotion. instead of advertising with a newspaper insert that goes out to everyone. So if. While market segmentation can be done in many ways. Demographic segmentation – based on measurable statistics. Page 118 . three of the most common types are: Geographic segmentation – based on location such as home addresses. Target marketing provides a focus to all of your marketing activities. Psychographic segmentation – based on lifestyle preferences. such as being urban dwellers or pet lovers.
even considering the morale of the product team.'s projection systems division was faced with Sony's surprise introduction of a better graphics projector. Barco N. However. Such a strategy considers a portfolio of products and takes into account the anticipated moves of competitors in the market. then moves on when the competition Page 119 . Barco's engineers had been working long hours on their new projector that would not be as good as Sony's. selling it to the innovator market segment and charging a premium price for it. Barco wisely stopped working on the inferior product and put a major effort in developing a projector that outperformed Sony's. so it traditionally pursued a skimming strategy in the graphics projector market. video projectors were not Barco's market. The Case of Barco In late 1989. introducing high quality products first and targeting a niche market that was willing to pay a higher price. Instead. Barco could not compete on price. However. However. The Barco case illustrates several marketing strategy concepts: Price / Selling Effort Strategies: A firm that follows a skimming strategy seeks to be the first to introduce a product with very good performance. moderately competitive markets. It makes as much profit as possible. Barco had been perceived as a leader. it would not have been a good idea to introduce a product that was inferior to that of Sony. Being a smaller company. the company had not introduced a new graphics projector in over two years. Barco's overall market share for all types of projectors was only 4%.The marketing concept of building an organization around the profitable satisfaction of customer needs has helped firms to achieve success in high-growth. where it had a 55% market share of the small market. to be successful in markets in which economic growth has leveled and in which there exist many competitors who follow the marketing concept. Even though Barco's market was mainly in graphics projectors. Some people thought they should not stop work on that product since the engineers' morale would suffer after being told how important it was to work hard to get the product out. it was spending a large portion of its R&D budget on video projector products.V. a well-developed marketing strategy is required.
8 is not necessarily twice as much as 4 in an ordinal ranking system. and what the ideal values of those attributes would be. Competitors have certain strengths and abilities. projections. The competition's probable response to a firm's actions should be considered carefully. The results allow one to predict which attributes are the Page 120 . they can report perceptions of similarities between brands. and opportunity analysis to define any unexploited opportunities for growth. Semantic scaling: a very simple rating of how consumers perceive the physical attributes of a product. The price is likely to fall over time as competition is encountered. Furthermore. To succeed. Such a skimming strategy contrasts with a penetrating strategy. Multidimensional scaling (MDS) addresses the problems associated with semantic scaling by polling the consumer for pair-wise comparisons between products or between one product and the ideal. However. the firm should resist the temptation to proceed with its mediocre product. and conjoint analysis. Marketing research studies include consumer studies. Marketing Research for Strategic Decision Making The two most common uses of marketing research are for diagnostic analysis to understand the market and the firm's current performance. multidimensional scaling. A few of these are outlined below. Semantic scaling is not very accurate since the consumers are polled according to an ordinal ranking so mathematical averaging is not possible. and increasing the price over time as market share is gained. which seeks to gain market share by sacrificing short-term profits. distribution studies. MDS analyses do not indicate the relative importance between attributes. The assumption is that while people cannot report reliably which attributes drive their choices. A firm never should introduce a product that is obsolete when it hits the market. For example. a firm must leverage its own unique abilities. Conjoint analysis infers the relative importance of attributes by presenting consumers with a set of features of two hypothetical products and asking them which product they prefer. This question is repeated over several sets of attribute values.arrives. A firm should prepare defensive strategies before potential threats arrive. If the competition surprises a firm with the introduction of a vastly superior product. semantic scaling. intelligence studies. each person uses the scale differently.
the expected market share of a given design can be estimated. From these answers. For newer products however. Managers are asked four questions: What would sales be with: 1. New Product Diffusion Curve Page 121 . From this information.more important. there is a very positive correlation. no sales force half the current effort 50% greater effort a saturation level of effort. 4. Multi-Product Resource Allocation The most common resource allocation methods are: Percentage of sales Executive judgement All-you-can-afford Match competitors Last year based Another method is called decision calculus. 3. For mature products. Decision algorithms that result in extreme solutions. The BCG growth-share matrix is one such model. such as allocating most of the sales force to one product while neglecting another product often do not yield practical solutions. 2. Portfolio models may be used to allocate resources among major product lines or business units. one can determine the parameters of the S-curve response function and use linear programming techniques to determine resource allocations. sales increase very little as a function of advertising expenditures. the combination of attribute values that is the most preferred.
The marketing strategy should take this adoption curve into account and address factors that influence the rate of adoption by the different types of consumers. Order of market entry is very important. the chance to set a standard. The pioneering advantage is obtained from both the supply and demand side. No. some types of consumers such as innovators and early adopters buy the product before other consumers. Page 122 There are four classic price/selling effort strategies: . 14. Vol. and the way the industry develops and its potential size are not deterministic. The incumbent develops inertia in its R&D and may not be a flexible as newcomers. There also are disadvantages to being the pioneer.) This rule was determined empirically. and the choice of perceptual position. For example. and introduce a new product in the market that may cannibalize the first but deter other firms from entering. the brand that entered third is forecasted to have 1/√3 times the market share of the first entrant (Marketing Science. Part 2 of 2. Being first allows a competitor to leapfrog the early technology. In fact.As a new product diffuses into the market. and channel preemption. there is the advantage of familiarity. the forecasted market share relative to the pioneering brand is the pioneering brand's share divided by the square root of the order of entry. creating a standard. 3. and how to manage the product over its life cycle. Developing an industry has costs that the pioneer must bear alone. Dynamic Product Management Strategies Two fundamental issues of product management are whether to pioneer or follow. The product adoption follows a trajectory that is shaped like a bell curve and is known as the product diffusion curve. 1995. From the supply side. On the demand side. there are raw material advantages. better experience effects to provide a cost advantage. advertise that it was the first. it can maintain it by improving the product. Once a firm gains a pioneering advantage.
more uses. greater manufacturing complexity. To increase profits from existing brands. clutter and confusion in advertising for both customers and distributors. If a product is in a mixed category. it can occupy more of the distributors' shelf space.Selling Effort Price Low High Low Necessity Goods Classic Skim Strategy Vulnerable to new entrants High Classic Penetration Strategy Luxury Goods In general. and it preempts competition. Increasing the breadth of the product line as several advantages. it is better to do so oneself rather than let the competition do so. more management resources required. after introduction it will tend to move to the lowlow or high-high one. While a wider range of products will cause a firm to cannibalize some of its own sales. A firm can better serve multiple segments. products are clustered in the low-low or high-high categories. The drawbacks of broad product lines are reduced volume for each brand (cannibalization). increased inventory. increase the demand through more users. a firm can improve its production efficiency. more advertising (or less per brand). and more usage. it offers customers a more complete selection. A firm also can defend its existing base through line extensions (expand on a current Page 123 .
the seller's legal obligation to pay damages is called product liability. Module end Quizes 1 The sales and profits of an individual product may not follow the life cycle pattern. True A) B) 3 False A new product is one that is new in any way for the company concerned. and brand extensions. True A) B) 2 False During the sales decline stage of the product life cycle.brand). flanker brands (new brands in an existing product area). True A) Page B) False 124 . True A) B) 4 False If an individual is injured by a defective or unsafely designed product. no firm can earn a profit.
During the introduction stage. B) C) problems communicating or demonstrating the new product's benefits. the new product may not be compatible with the buyer's values. E) 7 none of the above. A) B) "me too" products quickly take market share away from the innovator. Page E) all of the above. 125 D) risk in buying something for the first time. True A) B) 6 False During the introduction stage of the product life cycle: promotion is likely to be needed to increase primary demand. what would hinder acceptance of a new product? consumers may not see the new product as offering a superior alternative to whatever A) they are currently using. .5 Category managers have exactly the same role as brand managers. D) industry profits are at their highest. C) most products achieve intensive distribution.
126 Rallo Company has seen most of its competitors drop out of its product market due to declining sales and profits. D) pool of potential users is exhausted. Page market introduction. D) industry profits fall. E) 10 persuasive promotion. However Rallo still has much demand for its products from a small group of loyal customers. E) 9 all of the above.8 During the market growth stage of the product life cycle: the industry experiences the smallest profits. What is the most important reason why industry sales level off in the market maturity stage of the product life cycle? aggressive competitors entering the markets. In which stage of the product life cycle is this product market? . C) industry sales grow slowly. A) B) price cutting. C) less efficient firms leaving the market. A) B) the market begins to fragment into sub-markets or segments. then rise.
E) sales decline. Page 127 .A) market growth. D) market maturity. B) C) market development.
(2004) ‘Implementing Integrated Marketing: The SEEBOARD Energy case’. is a useful approach Jenkinson. Prentice-Hall India Integrated Marketing: a new vision. L.. Vol. 5 no. Palgrave Macmillan. International Journal of Voluntary Sector and Nonprofit Marketing. Sain. morale and energy. Journal of Interactive Marketing. Dealing with Competition By Evan Williams | Maintaining Focus as an Entrepreneur 2. 10:1-14 Green. p359-372 Page 128 . Sain.Positioning: The Battle for Your Mind Marketing Management. 4. and Mathews. 93-209. April. A. UK Jenkinson. a concept developed by Aaron Antonovsky that is concerned with the conditions for human coherence. WARC. B. (2005) Advertising Works And How.. A. A. Palgrave-Macmillan.Y Video resources Academicearth.org 1. ed. 204-219 Salutogenesis. (2007) Integrated Marketing and its implications for personalised customer marketing strategies. pp. J Direct. motivation. Basingstoke. 3. and Bishop K. B. Phillip Kotler. Vol 8 No. B. Henley on Thames. Basingstoke UK/New York N. Optimising Communication for Charity Brand Management. Data and Digital Marketing Practice. pp. Can Entrepreneurship be Taught? By Evan Williams | Maintaining Focus as an Entrepreneur References Jenkinson. (2005). in Marketing Mind Prints edited by Philip Kitchen.Refer Books Book: Jack Trout and Al Ries .
The Economist .). Marketing: principles and practice (4th ed. Caroline Ross (2001). Al Halborg. Al Halborg. "Definition of marketing". Adcock.A..sdsu. "1". Guiltinan et al.com/Lessons/lesson_services_marketing. p. (2005) International Marketing. Page 129 . Gary Armstrong. McGraw Hill/Irwin. Principles of marketing (5th ed.). London Kotler. Stanley J. A Framework for Marketing Management (4th ed. 1996 Dev.). 7. Adcock. "Introduction".. Pearson Prentice Hall. Dennis. "In the Mix: A Customer-Focused Approach Can Bring the Current Marketing Mix into the 21st Century". 16. Kevin Lane Keller (2009). Joshi. "Definition of Marketing". Selden (1997). p. (1998) The Individualized Corporation. p. John Saunders (2008). 25. Philip. Sales Process Engineering: A Personal Workshop.. "Marketing defined". Veronica Wong. New Delhi and New York \ "Chapter 6: ORGANIZATIONAL MARKETS AND BUYER BEHAVIOR".marketingteacher.WI.. p.).). Philip. Veronica Wong. Heinemann. Oxford University Press. Philip. Rakesh Mohan. "Introduction". 15. John K. 23. John Saunders (2008). Caroline Ross (2001). http://www.com.Ghoshal S. International Marketing: Modern and Classic Papers (1st ed. Don E. Paliwoda.edu "Services Marketing".. Marketing Management 14 (1). American Marketing Association. C.htm. Kotler. Rohan. Chekitan S. 17. "Marketing Management: Strategies and Programs". Bartlett. Schultz (January/February 2005). Marketingteacher. "Marketing defined". Chartered Institute of Marketing. p. Milwaukee. Ryans. "Back to first principles". Dennis. Marketing: principles and practice (4th ed.). Gary Armstrong. Principles of marketing (5th ed. Kotler. Paul H. p.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.