1.

(a) The concept of marketing mix involves a deliberate & careful choice of Organization , Product, Price, Promotion & Place, Strategies & Policies.

4 P’s Of Marketing Mix

Marketing Mix

Product • Product Variety • Quality • Design • Features • Brand Name • Packaging • Sizes • Services • Warranties • Return

Places • Channel • Coverage • Locations • Inventory • Transport Promotion • Sales promotion • Advertising • Sales force • Direct Marketing

Price • List Price • Discounts • Allowance • Payment Period • Credit Term

MARKETING It can be broadly defined as the study of the performance of sales, distribution, advertising & sales promotion, planning of product sales & conducting research for demand.

In short, those functions in a business that directly involve contact with the consumer & assessment of their needs are called marketing. KOTLER  According to Kotler marketing is a social & managerial process by which individuals &groups obtain what they need & want through creating, offering & exchanging products of value with others.

FEATURES OF MARKETING * Marketing is a concept, a way of thinking. It starts where production leaves off.

* The marketing concept assumes that the objective of all business enterprise is to make a return to those who have invested in it.

* Marketing is a total function & is concerned with activities such as product planning, product development, product change, pricing & packaging selling & sales promotion & advertising & marketing research.

* Marketing places its primary emphasis on the profitable satisfaction of consumer’s need by providing products as a means to the end of satisfying needs.

* In the marketing concept the consumer is at the top of the organization chart.

IMPORTANCE OF MARKETING * Marketing is the heart of any business organization .Thus, it affects each person’s life .

* Marketing aims at satisfying the needs of customers, accordingly it create utilities of time, place & possession.

* Marketing as a career provides an employment opportunity to various people.

* It helps in developing economic resources of any country.

* Marketing brings regional balances.

* Marketing determines the pattern of consumptions.

* Marketing aims to provide quality products & services , so as to satisfy the customer and ultimately raise their standard of living.

OBJECTIVES OF MARKETING * To satisfy the needs and wants of customers.

*Helping one self to decide whether his career shall be marketing. pricing. * To increase profit for the growth of the business. * To increase the quality of life of the people. services and ideas to create exchanges with target groups that satisfy customer and organizational objectives. * To create good image of the organization. * To raise the standard of living of the people. * To establish the organization &the methods which will be required. .* To determine marketing-mix that aim to satisfy the needs of the customer. OBJECTIVES * To satisfy customer. * To generate and create goodwill for the enterprise. MARKETING MANAGEMENT Marketing management is the process of planning and executing the conception. promotion and distribution of goods.

in their . but the right products for your customers. etc. Hence the job is not to find the right customers for the products. will ordinarily not buy enough of the organisation’s product. if left alone. * Staffing  This requires selection of human resources to accomplish the objectives of marketing management. * Operating  This function includes operating a sales force and directing an advertising programme. Instead of “ make and sell ” philosophy. * Organizing It is the process of arranging activities and people in such a way so that maximum output with highest degree of efficiency can be achieved. * To determine the marketing-mix that will satisfy the needs of customer. Therefore. now-a-days marketing is “customer centered ’’ and not “product centered’’. therefore. is compared with the standards set if there is any deviation then proper measures should taken to avoid such deviation. The marketing concept emphasizes the determination of the requirements of present and potential customers and supplying products to satisfy their requirements.* To generate more and more customer base for the business. * The Selling Concept  The concept holds that consumer. business shifted to “ sense and respond ’’ philosophy. are * Planning  After setting the goal the next step is to determine the manner in which these goals are to be achieved. * Controlling  Here. FUNCTIONS * Determining Objectives  The goals like attaining a certain profit or sales target clearly defined in the marketing management segment. the actual performance result. * Establishment Of Marketing Policies  It is very essential for guiding executives decision making on marketing problems that frequently arise. The organization must. CONCEPT * The Marketing Concept  The concept emerged in the mid-1950s. undertake an aggressive selling and promotion effort. Staffing is the most important function of marketing management as proper selection of personnel is the key to eliminate or reduction in management problems.

Marketing as a ‘Process’ The process of marketing involves an exchange transaction between the buyer in the seller. then it has been a dumping transaction. low costs and mass distribution. If the buyer is not satisfied. it can be concluded that marketing as a process involves – (a) Understanding the customers interests. then the transaction has been at best. Managers in these organizations focus on making superior products and improving them over time. (c) It should result in a long term satisfying relationship between both relationship month is crucial to successful business. * The Product Concept  According to this concept consumer will favour those products that offer the most quality. They take the advantage of the countries huge inexpensive labour pool. * The Production Concept  It is one of the oldest concept in business. advertised and sold properly. Therefore. (b) Both the buyer and Seller must gain. a selling transaction. wants and interests of target market and to deliver the desired satisfactions more effectively and efficiently then competitors in a way that enhances the consumer’s and society’s well being. etc. It is also used when a company wants to expand the market. However. According to this concept the consumer will prefer products that are widely available and inexpensive. distributed. To be termed as a marketing transaction the exchange must result in mutual satisfaction to both the buyer and the seller. (b) Serving them in such a way that it helps the selling organization to fulfill its objective – profit maximization. performance or innovative features. .EX : COCA COLA . The essence of this is : (a) Marketing is an exchange process – both buyer and seller must have something to give to each other. * The Societal Marketing Concept  It holds that the organization’s task is to determine the needs. PEPSI etc. EX: The best example is CHINA who were the largest PC manufacturer. Managers of production oriented business concentrate on achieving high production efficiency. In this exchange transaction the development of a long term relationship between buyers and sellers occurs if the buyer’s gain in the satisfaction on the purchase and subsequent consumption of the product whereas the seller’s gain in the profit that he/she makes on such a transaction. And if the seller does not make a profit. a new or improved product will not necessarily be successful unless the product is priced.

political. (v) Mass media of communication A Consumer Advocates Marketing Action * Implementation * Control B (ii) Govt. rules & policies The marketing Environment.Stages of Marketing process A Organizational System The marketing process is influenced by a No. * Competition * Market Selection. social. D Marketing opportunity * Marketing objectives * Marketing capabilities * Economic. political & legal factors. economic & technological forces. of factors such as : (iv) The social. Strategy Planning (i) Competition * Marketing Mix Product * Differential Advantage (iii) (vi) .

this Marketing Manager partners the following functions. It helps in analyzing the buyer’s habit. effectiveness of . Marketing Department is set up under the supervision of the Marketing Manager. The major purpose of this Deptt is to generate revenue for the business by selling want satisfying goods and services to the Customers. Marketing Research : Marketing research is the systematic search and analysis of facts related to marketing problem. In order to achieve this purpose. 1.FUNCTIONS OF MARKETING MANAGER In most of the business enterprises. popularity of a product.

Packaging has become one of the essential services of modern marketing. This is done at a price. etc. viz. 5. But assembling means collection of goods already purchased from different sources at a common point. Grading & Branding : Standardization means setting up of specifications of a product. it is used by the . Buying & Assembling : Buying and Assembling are important functions of marketing. 2. a brand name is given to a product for identification. viz. Now. Rawmaterials are purchased and assembled in order to produce goods and services as per the need of customers. placing the order and receiving the goods. what to produce or buy ? How to have its packing ? How to fix its price and how to sell it? etc. At last. Buying involves determination of requirements. Product Planning & Development : It is always necessary to plan and develop products which meet the specifications of the customers. Selling : This is an important function of marketing under which ownership of goods in transferred from the seller to the buyer. It is also used in another sense. Buying is different from assembling. 6. Then gradation is done on the basis of these specifications and standards. There are two different forms of selling.advertisements. Packing : A good package represents a combination of the designer’s creative skills and the product as well as marketing and sales knowledge of the manufacturer’s management team. 4. Standardization. 3. finding the sources of supply. Product planning and development involves a number of decisions. It provides upto-date information in regular intervals of time regarding marketing and thus helps in decision making. negotiated selling and action selling.

Financing : Financing of customer purchasing has an integral part of modern marketing. 8. 7. Packaging also gives protection to the product. Advertising : It helps to spread the message about the product and thus. Thus. 13. Price of a product is influenced by the cost of production. 12. Price : Determination of price is an important function of a Marketing Manager. It involves direct and personal contact of the seller or his representative with the purchaser. Transportation : It provides the physical means which facilitate the movement of persons. promote its sale. goods and services from one place to another.manufacturer to establish his branded product or distinct from those of rivals. 11. Storage : Storage of goods in ware houses has become an indispensable services these days. Insurance helps to covers these risks. Insurance A large number of risks are involved in exchange of goods and services. price fixed by the rival firms and Govt. policy. Goods are stored in ware houses to protect them from any kind of damage till they are actually sold in the market. Salesmanship : Salesmanship or personal selling is widely used in retail marketing. packaging acts as a multi-purpose arrangement. 10. The provisional goods to the customers on credit basis is an important device to increase the sales volume. profit margin. MARKETING ENVIRONMENT . 9.

Micro Factors : Suppliers. Economic factors. pricing promotion and distinction policies of the firm. packaging. competitors and general public.Marketing Environment is the totality of forces and entities that surround and potentially effect the marketing of a particular product. legal factors. The forces constituting marketing environment may be classified into – Micro • External forces • Internal forces External Forces: These forces are uncontrollable in nature and influence the marketing environment. Political factors. Internal Forces : The internal environment of a firm consists of controllable forces like product design. natural forces. Policies * Suppliers * Buyers * Consumer Resistance (E) (F) (G) (C) (D) (A) (B) Macro . technological factors. Macro Factors : Demographic factors. Marketing environment forces : The various marketing environment forces are as follows : * Socio-Economic Forces * Competition * Technology * Govt. customers. socio-cultural factor.

vacuum cleaner. A change in literacy profile always mean a more demanding consumer. As the youth form a large proportion of the population in India. it is natural for firms to develop their products and promotions for this group. This also implies better reading habits and hence. (a) Demographic Changes The important demographic changes are as follows : • Age composition • Occupation & Literacy profile.Socio-economic Forces : It refers to demographic changes geographical location. to help them firms have been developing many time-saving appliances like cooking range. cold drinks. changes. advertised in magazines Sex Structure of the population & Role of women : Indian population statistics reveal that women constitute almost 50% of Indian’s population. they now have less time available for their household work. Example : Ready-made garments. as well as ready to eat foods. Thus. Thus. washing machine. The occupational profile of the population also affect the product demand Example : A shirt for the professional executive. role of women in marketing is very significant. Occupation & Literacy problem: The marketer needs to notice the changes in the literacy profile. motor bikes etc. Since more and more women have chosen working and professional career. higher circulation of news papers and magazine may be ensured. economic factors etc. sells best when like Business India & Indian Today. . • Sex structure of the population & role of women Age composition : The Marketer needs to understand the age composition in a country.

(b) Geographical changes : It relates to changes in urban-rural distribution of population. • Economies of scale. (B) Competition : A firm generally faces three types of competition. Example : Strong family bondage and love for the family as a core value have been a major driving force in the Indian market. i) Brand Competition which comes from marketers or directly similar products. • Institutional factors like Govt. • Trends in the prices of goods & services. (a) Economic Factors The economic environment affect the demand structure of any industry or firm. (c) Changes in the value System : Values are the beliefs which are held by the society and rarely change over a period of time. tax rebates & tariffs. which is now considered good test marketing centre. Example : Visa l& Master card compete globally in the credit card field. regulation. The Marketer. has used this to promote his products. . Vicks vapo rub story: It is an interesting example of wearing core Indian values into marketing communications. in turn. to Bangalore. Example : The decade of the 1980’s saw a shift of industry and work-force including professionals. ii) Competition between substitute products which satisfy the same need. Economic environment such as – • Gross National Product (GNP) • Per Capita Income (PCI) • Balance of payments (BOP) position.

or virtually destroying existing industries. spending. A marketer not only needs to understand these policies but also the political philosophy and ideologies of major political groups and individuals. Marketing efforted are affects by the level of Govt. (D) Govt. iii) More General type of competition.V. . legislations and regulations affect the business environment.Example : Indian Railway & Road Transport Service compete at the national level. (E) Suppliers : A business cannot sell a product without being able to make or buy it. i) By starting entirely new industries as computers. New home appliances and microwavable foods give people additional time in which to engage in other activities. is an important buyers and seller of goods and services. T. all over the world are an important aspect of the economy. this is relatively low. Govt. Technological breakthrough can affects market in three ways. India. and our economic well being. our consumption pattern. has a history of controlled economy with the Govt. (C) Technology: It has a tremendous impact on our lifestyles. The Supplier that supplies goods or services to the producers to make what it sells are the most important for marketing success. ii) By radically altering. When it first come out. The extent of intervention varies. The reasons are : i) ii) Govt. Policies Govt. Moreover. every company is a rival for the customer’s limited buying power. While in the US. the Govt. intervention in industry is a reality. iii) By stimulating markets and industries not related to the new technology. lasers & robots have done. crippled the radio and movie industries. for example. in developing countries intervention is quite high. the money supply and tax legislation.

However. Sources of verbal information : i) Radio & TV Reports ii) Consultants iii) Customer iv) Financial Institutions v) Firm’s employee’s like peer. Publications iv) Trade & Industry journals. The marketing activities must be directed and focused at the buyer. it is necessary on the part of marketer to recognize and understand the importance consumer resistance. . Another technique for environment scanning is to design an appropriate marketing information system (MIS) and also to periodically conduct marketing research. This. are showing inflationary trends. therefore. ii) Business Magazines iii) Govt. could pose a serious threat to a firm’s survival. the firm may have little option but to pass on this hike to the consumer in the form of increased prices. (G) Consumer Resistance : If the prices of raw-materials. Approaches to environmental scanning • SPIRE approach. if the firm is in a competitive market[industry. If the firm happens to be in a monopolistic market or digopolistic market. But. The buyers also worthful in suggesting for improvements in products as well as marketing strategies. it might not face consumer resistance. labour and utilities like electricity etc. the consumer may even shift his choice to the competing product. Information are collected both verbally as well as written. subordinates and suspension. Satisfaction of buyer is highly essential.(F) Buyers : Marketing aims to satisfy the buyers or customers. Sources of written information i) Financial Newspapers. analyzing it and forecasting the impact. ENVIRONMENT SCANNING TOOLS & TECHNIQUES : It is the process of gathering information regarding a company’s external environment.

SPIRE Approaches : This approach integrates environmental forces into strategic decisions through SPIRE. SPIRE Approach has following steps : Step-I : Preparation of a matrix which sets out a detailed list of environmental variables and the strategic marketing components hence showing possible interaction among them. Tech. =Important “Impact linkage” .O.• ‘Scenario Building’ Approach Step-II : Identification of the impact linkages between environment variables and other strategic marketing components. valuesCost pre and competitionIntensity of paymentSupply of InformationBank R.

any additions to P/M required purchased from outside. ii) It increase sensitivity of all delicious makers. required. evaluating the vendors and so forth. iii) It’s forecast can be used in actual decision making. PolicyEXIM for at category of customerLiberal credit Increasing Dealer network institutionsLicensing arrangements with financial major customersEmphasis on Increasing territory coverage Intensifying advertising Step-III : Merits : The impact linkage will reveal clusters when arrange in the i) It helps in generating executive ideas. that have contributed to the . conditions of the economy and the competition etc. human resources required. dealer network or if it has to be Step-II : decision.strategic marketingEnvironment factors PolicyGovt. New product launch matrix. “SCENARIO BUILDING” APPROACH Step-I : In this step the marketer analyses his decisions in terms of financial investment. the industry. current condition of Identifying key decision factors like market share of the firm.

not only other automobile manufacturers. According to Prof. based on the degree of product substitutability. These are : (a) Brand Competition: Here a company consider other companies as their competitors which offers similar product and services to the same customer of similar prices. Example : Ford would see manufacturers. innovation. itself as competing against all other automobile (c) Form Competition : Here a company consider its competitors as all companies manufacturing products that supply the same service. And also competition leads to reduction in costs. market development etc. It would not see itself as competing with Mercedes or BMW (b) Industry Competition : Here a company consider all other companies as its competitors who makes the same product or class of products. Honda. . etc. Hyundai. extrapolated. Philip Kotler. Example : Ford would see itself competing against. but also against manufacturers of motorcycles. Step-IV : This step requires an analysis of the key variables enlisted in above steps reportedly by collecting relevant data from both Step-V : Step-VI : primary and secondary sources. there are four different levels of competition. Waganor & other manufacturers of medium priced automobiles. that have influence on consumer decision – making.Step-III : This step requires enlisting the societal factor like demographic changes literacy status etc. bicycles and tucks. Example : Food might consider its major competitors as Toyota. maker has to The data so collected in the previous steps should now be This is the last step of scenario building where the decision elaborate an different scenarios. C OMPETITION ANALYSIS: It is necessary for the good being of the industry and encourage new product development.

major consumer But with the emergence of competing telecom Vodafone. exorbitant. services and messages so that they achieve targeted profits and growth. MARKET PLANNING Market planning is the basis for strategy development. This is true for both foreign and domestic markets. VSNL had no Low barriers : Low entry and exit barriers in a market are one of the key factors which leads to competition. (a) Motivation to Reduce Costs : Competition is the most important factor which motivates firms to re-examine their cost structure and eliminate inefficiency in the marketing system. which has intensified the competition. Reliance. policies. Thus. Hong Kong or Singapore markets. Canadian. were Air-Tel. it is essential to have a discussion of the factors contributing to degree of competition. foreign vacations and new homes. Mumbai for example. Intensify of competition differs from one market to another. Govt. At the national level. the prices service providers – option but to reduce its price. Technology etc. etc. Therefore. customer. Alwyn and Videocon. FACTORS CONTRIBUTING TO COMPETITON The various factors that contributes to competitors are reduce costs. consumer durables were being produced. In the pre-liberalization period for example. LG and so on. the marketing plan is the central instrument for directing and co-ordinating the marketing the marketing effort. the Indian market is for less competitive than the US. a company consider its competitors as all companies that compete for the same consumer purchasing power. present of strong brands. are BPL. witnesses cut-throat competition than any other town in the country. Kelvinator. products. Example : As long as BSNL had monopoly over the telecom. Marketing department does not set the . Whirlpool. Example : Ford would see itself competing with Companies that sell durables.(d) Generic Competition Here. The aim of marketing planning is to shape the company’s business.

These plans are then implemented at the appropriate levels of the organization. (b) Marketing programme required to satisfy market wants. youth or grown up market or the women market etc. (c) Marketing strategies and the extent and quality of services rendered by other firms in the industry. Results are monitored and corrective actions is taken when necessary. sales channels and services. Example : Conservation of energy resulting in low electricity bill is very important marketing of Consumer appliances operated on electrical mains. It lays out the target market and the values proposition that will be offered. The marketing plan operates at two levels. This target market may be the national or regional market. identification of a target market. ii) The second step of the analysis is the decision regarding the product form. Plans are developed by teams with inputs and sign offs from every important function. iii) The next step. promotion merchandising. Strategic marketing Plan Strategic marketing plans : Tactical Marketing Plan. The marketing planning process starts with the identification and analysis of marketing opportunities and ends with formulation of plans. The decision may be to market the product as a commodity or as a branded product. Exploring Marketing opportunity Identification of market opportunity is critical before the management of a firm takes a decision to launch or diversity in any product area. pricing. PRODUCT MARKET SELECTION The key issues that need to be addressed in product market selection are as follows : i) First.marketing plan by itself. for . (d) Identification of keys success factors in an industry and linking them to a firm’s strengths & weakness. of the analysis is the decision regarding principal use of the product. This involves an analysis of the following : (a) Size of the Market. including product features. based on analysis if the best market opportunities. iv) The final step in the selection of the core customer. The tactical marketing plan specifies the marketing tactics.

i) Profit Impact & Marketing Strategies Approach (PIMS) It is one of the most important approaches to strategic planning and competitive strategy development. Example : A Corporate company marketing and marketing cigarettes may also manufacturing or selling of local tobacco. Example : An Airline company flying people from one destination to another in region may also decide to diversify into courier business and fly papers and cargo on it routes. papers or even filter. The Marketer needs to turn his attention to making specific product – market choices. APPROACHES TO MARKETING PLANNING There are two important approaches to market planning. Horizontal diversification: It involves extending product or selecting products for market segments other than the one currently being served by the firm. Vertical Diversification : It refers to identification of the level at which the firm sells. These relate to the following choices – i) Horizontal Diversifications & ii) Vertical Diversification. This process is shown in the following figure : start Situation Audit (Where are we ? How did we reach here ? Who all are our competitors ? Their strategies ?) Analysis of firms strength and weaknesses What are the key facilitators or hindrances in our situation. Objective setting. all communication from a firms marketing washing machines should be addressed to her.Example : It is the house wives to whom the washing machine is the most important product and hence. Marketing share ? ROI ? Sales Turnover ? .

ii. equal distances represent the same percentage increase. By relative market share we mean market share relative to that of the SBU’s largest competitor.1 means that the company’s sales volume is only 10% of the leader’s. This analysis will also elp the firm to identify key success factors in the industry.S. Situation Audit (Where are we ? How did we reach here ? Who all are our competitors ? Their strategies ?) The relative market share along the horizontal axis is expressed in logarithmic scale land thus. (a) Port-folio Approach : BCG is a leading Management consulting firm in U.Strategic decision making Develop and evaluate strategy option Implementation This approach suggests identification of strength and weaknesses on the basis of a firm ROI analysis. The market growth rate along the vertical axis ranges from 0 percent to 20%. A relative market share of 0. A market growth rate above 10% is considered high. called BCG Model. The horizontal axis of the matrix measures relative market share at an SBU and vertical axis represents the annual growth rate of the market in which the SBU operates. a relative share of 10 means that . The firm developed an approach using growth-share Matrix.

using 1.0 as the cut point. Relative market share is divided into high and low shares.the Company’s SBU is the leader and has 10 times the sales of the rent strongest competitor in that market. arket Growth Rate 20% 18% 11% 14% 12% 10% 8% 6% Cash Cow (6) (7) Dogs (8) (5) Stars (4) (1) Question Marks ? ?(3) ? (2) 4% 2% | | | | | | | | | | | | | | | | | | | .

A question marks requires a lot of cash because the company has to spent money on plant.1x 0. The eight circles represent the current sizes and positions of eight business unit in a hypothetical company/firm. ii) Stars : . equipment and personnel to keep up with the fast growing market and because it wants to overtake the market leader.5x 2x 4x 10x Relative Market share.3x 0. Thus. each indicating a different type of business viz. The location of each business unit indicates its market growth rate and the relative market share. The growth share matrix is divided into four cells.2x 0. i) Question Marks : It operates in high growth market but have low relative market share. cash cows and dogs. operates three question mark business and this may be too many. the two largest business are 5 & 6.5x 1x 1. stars. question marks. The size of the circle depends on the rupee volume of each business. The company in Fig.4x 0.

(b) The General Electric (US) Model G. has only one cash cow and is therefore. or low market attractiveness and low SBU strength. But these business have slow growth rate in the market and thus needs no finance for expansion. iii) Product that falls in the yellow segment. and to tight off competitor’s attacks. highly vulnerable. The company must spent substantial funds to keep up with the high market growth. ii) Product that stall in the red segment. iii) Cash Cows : It has largest relative market share and produce lot of cash for the company. If a new business proposition falls in this segment the firm will be better advised not to enter in it. ii. holds two dogs.E. The Company uses its cash cows to pay bills and support other businesses. A star doesn’t necessarily produce a positive cash flow for the company..These are the market leaders in a high-growth market. or high market . require the company to invest in it and evolve the company to invest in it and evolve strategies that will lead to it grow. Model suggests a three coloured screen and mentions that products may fall in any part of this coloured screen. Yellow & Red. From the point of view of a decision to enter a market. In the Fig. The company in fig. or moderate to high market attractiveness and moderate to high SBU strengths. the company has two starts. this situation represents a ‘go’ decision. The company in Fig. moderate market attractiveness and moderate SBU strength. The three colours are Green. (iv) Dogs : These are the business that have weak market shares in low growth markets. or moderate to low market attractiveness and company strengths. i) Products falling in green segment. will require that marketer to harvest them or divert them from his portfolio.

ii) Developing Marketing Strategies : Sales growth plan. distribution alternatives. or in other words the “wait & go” strategy. advertising and sales promotion programmes and customer service policy. PROCESS OF MARKETING PLANNING i) Analysing Market opportunities Identify the firm’s potential long run opportunities given its market experience and core competencies.attractiveness but low SBU strength is demand that the management uses the principle of selectivity. sales force operations. pricing policies. iii) Planning Marketing Programmes : . positioning of the product in the target market.

(ii) It is also important to decide the frequency at which the planning exercise needs to be undertaken. In other words. the researcher has to go through several steps.That is to transform marketing strategy into marketing programmes. Thus. The Marketing Research Process : The marketing research process starts right from defining the problem down to the preparation of the report for presentation and decision making. of the budget to the various products. the planner should address to following four issues. analysis and reporting of data and findings relevant to a specific marketing situation seeing the company. MARKET RESEARCH & INFORMATION SYSTEM American Marketing Association defined. marketing research is the development interpretation and communication of decision oriented information to be used in all phases of the marketing process. collection. recording and analyzing of data about problems relating to the marketing at goods & services. In the planning process of marketing. (iii) It is also important to decide who will review and approve the proposed plan along with the decisions regarding the frequency of review etc. marketing mix and marketing allocation Organising the marketing resources and then implementing and controlling the marketing plan. “Marketing Research as the systematic gathering. iv) Managing the Marketing Efforts : Here decisions are taken regarding marketing expenditures. In other words. (iv) The fourth matter which must not be ignored is to decide on the best mechanism to ensure that the plan is executed and desired results are achieved. marketing research is the systematic design. Channels promotion media and sales areas. each step is having own decisive role in the total . (i) It is very important to decide that who will be responsible for developing the marketing plan.

The problem definition should be specific but not too rigid. attainable and measurable. Thus. So the prime goal of this kind of search is to know the unknown. by clearly focusing on the real problem. iii) Causative Research : . Step-II : Statement of Research Objective It is essential to state the objective of research. effort and data. The various steps involved in marketing research process are as follows : Step-I : Defining the Marketing Problem : Defining a correct and appropriate definition regarding a marketing problem is the most important part of the marketing research process. ii) Descriptive Research & iii) Causative Research i) Exploratory Research : Such research is conducted when the researcher does not know how and why a certain phenomenon occurs. These objectives should be specific. The purpose of these objectives is to act as a guide to the researcher and help him in maintaining a focus all through the research. If the definition of the problem is faulty. it is very important to develop the research design and research procedure. These are 3 types of research designs – i) Exploratory Research. Step-III : Research Design and Research Procedure : Once the research problem is defined and objectives are fixed. the research results will be misleading and confusing. ii) Descriptive Research : Generally. this type of research is conducted only when the researcher understands the phenomena or behavioural features.research process. It is also essential to analyse the problem in depth which helps collection and relevant information. the research job can be simplified and completed with the minimum cost. while applying marketing research for solving any marketing problem.

The choice of research design very much depends on the depth and extent of data required. Again primary data one of two types viz. Both arithmetic and statistical analysis are conducted by computing ratios. In this kind of research. But secondary data suffers from the problem of lack of availability. Secondary data refer to information collected from published and unpublished sources in which respect data has been collected and accumulated earlier by someone else. census data and sample data. Primary data refer to data collected directly from the market place from customers. both in terms of time and money. Step-VI : report & Presentation . traders and from suppliers. the urgency of the work and the time available for accomplishment of research. the cost and benefits of the research. The researcher tabulates the data and develops frequency distribution. relevance. And often involvement of personal bias of the researcher. Census data refer to the data collected from the entire population whereas sample data refer to the data collected from certain selected units of population. The problem is primary data is its cost.it is carried out to establish a cause and effect relationship. averages percentages. hypothesis are framed and tested. Step-IV : Gathering the Information Collection of both primary and secondary. Step-V : Analysing the Information : The data collected are needed appropriate analysis. it is essential that data should be collected very carefully and adopting most effective tools. inaccuracy and inefficiency Therefore. data is crucial for conducting market research. Secondary data offers the advantage of economies of time and cost. measures of dispersion and correlation coefficient etc.

Rediff. The marketing researchers collect information from thee soft sources and analyze and interpret to reach relevant findings. A number of companies after database packages on CD-ROM for personal Computer like Encyclopedia Brittanica. The report should be in the form of executive summary giving a bird’s eye view of the research and major recommendations. the decision maker takes judicious decision on the basis of the findings reported and presented by the marketing research team THE INTERNET & WORLD WIDE WEB BASED INFORMATION COLLECTION & PROCESSING “The internet is a worldwide telecommunications network that allows computers and the people who use them to access data. DATA WAREHOUSES AND DATA-MINING .com. that are relevant to the major marketing decisions facing management. pictures. The most popular websites providing information on industry and economic scenario are Yahoo.com. Step-VII : Decision Making In the last step. sound and files throughout the world without regard to their physical location or the type of computer in which they reside”. DATABASES. A primary means of communicating with other professionals and special interest groups and getting information on the internet is through news groups. Indya. Alttavista. Manorama year Book and National Geographi database etc. etc.The last but one step is that of writing out a report and making a presentation decision maker. the findings. Sometimes the decision makers want the researcher to present the findings. Hotbot. The researcher should present in the form of slides.

These techniques are called data mining. Researchers search into database with specific to uncover useful relationships and developments. Example : The manager of a retail super market chain. . Database refers to the assembled data relevant to a particular topic. Data analysis helps in analysis helps in analysis of trends over a period of time and companions of current and historical data. competitors or industry trends. etc. this information can be compiled quickly. Database facilitates data capturing which is a process for converting information into a form that can be handled by a computer. These techniques have the capability to looks “pros & cons” of data that would be overlooked or unrecognizable to researchers. It helps the marketer to target his campaigns more accurately. in these days. Data mining extracts information from an unfamiliar database. It helps the marketers connect better with his customers. say Big Bazar. Data mining techniques. Data Mining : More advanced statistical and artificial intelligence techniques are now being applied to data warehouses. thereby helping them in taking operational and strategic decisions. Data Warehouses : A data warehouse is an enormous collection of data from internal and external sources. for example. By having the computer sort through the electronic records of all completed transactions. might want to know which items are purchased most frequently in each of its stores in India. compiled by a firm for its own use or for use by its clients. Therefore. customers. help marketers understand the structural changes in the market.Database is nothing but a store of information that can be handled by a computer. databases helps the marketer for better understanding of the market place behaviour and enables the marketers to address their customers needs more specifically. The strategy of data warehousing involves providing data to the users in a meaningful manner.

major decisions in global marketing cannot be taken. All these necessitates. the candidate countries should be rated on the basis of three criteria. Generally global marketing research is conducted to decide :i) Whether to go abroad. A good part of the data required for such studies can be collected from published and other readily available sources like websites etc. It must decide which countries to consider. companies cannot simply stay domestic and expect to maintain their markets. COMPETITIVE INTELLIGENCE . promotion decision. asses land interpret the needs of the overseas customers and carryout integrated marketing to satisfy those needs. detailed marketing research. The company must determine whether to market in a few countries or many countries. All the relevant information on the overseas target markets must be systematically collected. analyzed and stored. vi) The marketing organization. Conducting marketing research in countries around the world has become very Without gathering reliable marketing information important to many multi-national firms. iii) Which markets to enter? iv) How to enter the market ? v) The marketing program product decision. outdated. In deciding to go abroad a company needs to define its global objectives and policies. i) Market Attractiveness ii) Risk iii) Competitive Advantage A company trying to engage itself in global marketing. Detailed market studies are a must before embarking upon global marketing.GLOBAL MARKET RESEARCH In these days of liberalization. must correctly identity. In general. ii) Competitive strength of the global market. They are making their operations internationalized. pricing decision and distribution channels selection etc. the company involves in global market research.

This help in There are four main steps in designing competitive . intelligence system. time. designing competitive strategies. The data that are used to study competitors are collected from a variety of internal and external sources like the news media. iv) It helps to determine the durability an utility aspect of goods. i) Setting up the system ii) Collecting the data. iii) Evaluating and analyzing the data to ensure their validity and reliability.e. The very purpose of competitive intelligence system is to continuously collect. Marketing efforts of a firm have an impact on the buying decisions of buyer. Hence. money and effort in consumption related items. attitudes towards different kinds of the product and brands. CONSUMER BEHAVIOUR It is a study of how individuals make decisions to spend their available resources i. product features and other marketing mix elements. interpret and disseminate information about competitors to the management. ii) It helps in developing new products. marketers attempt to obtain an indepth knowledge of customer’s buying behaviour. Consumer behaviour includes the act of individuals directly involved in obtaining and using economic goods and services. the internet and company’s own sales people.It is the process of gathering and analyzing available public information about the activities and plans of competitors. Importance of studying consumer behaviour : i) It helps to determine the pricing policy of the product. v) It helps to gain knowledge about customer’s specific needs. preferences. iv) Disseminating information to relevant decision makers and responding to inquiries made by managers. printing media. iii) It helps firms to strengthen the long term customer relationship.

humanitarianism and youthfulness. activity. Our culture reflects what we eat. Sub-culture include nationalities. Achievement and success. buying . progress and material comfort. external comfort. recial groups and geographic regions. religions. what we wear. The growing child acquires a set of values. ii) Social iii) Personal iv) Psychological The cultural factors that influence consumer buying behaviour includes the following : i) Culture ii) Sub-culture iii) Social class i) Culture : It is the fundamental determinant of a person’s want and behaviour. Factors influencing consumer buying behaviour : The various factors that influence consumer buying behaviour are :- i) Cultural. The groups have similar habits. our buying habits. A child growing up in the united states is exposed to the following values. b) Sub-culture : Cash culture consists of smaller sub-culture that provide more specific identification and socialization for their members. behaviour pattern. individualism. It is usually ‘passed on from one generation to the other. colour packing. perceptions. freedom. preferences and behaviours through his or her family and other key institutions. form of the product. efficiency and practicability. consumption pattern an the way we use and dispose products.vi) It helps in determining the quality. the code of conduct. style. An individual’s buying pattern is largely influenced by the culture.

social class determine the type. such as religious. each stage creates different demand for . with upper class consumer preferring magazines and books and lower class consumers preferring television. ii) Social Factors : Consumer behaviour is influenced by social factors such as reference groups. which tends to be more formal and requires less continuous interaction. professional and trade-union groups. Some membership groups are primary groups. home furnishings. religion. such as family. family and social roles and statuses. (c) Social Class: It shows distinct product and brand references in many areas including clothing. Example : A firm that markets most of its product in Andhra Pradesh commercials in Telugu to reach the vast majority of people in the state. and lower class consumer prefer soap operas and sports programs. common experiences or even geographic location.behaviour on the basis of their age. neighbours and co-workers with whom the person interacts fairly continuously and informally. Advertising strategy of a firm are also affected by the sub-cultural differences. upper middle class. (a) Reference Groups: A persons reference group consist of all that group that have a direct has to air its or indirect influence on the person’s attitudes or behaviour. Social class can be subdivided into four categories such as upper class. Groups having a direct influence on a person are called membership groups. upperclass consumers prefer news and drama. To an extent. A family is a small reference group but it is prominent in influencing consumer behaviour. middle class and the lower class differ in media preferences. friends. leisure activities and automobiles. People also belong to secondary groups. Even within a media category such as TV. Family go through various stages of life cycle. quality and quantity of products that a person buys or uses. (b) Family : The family is the most important consumer-buying organization in society.

Example : In India. wear expensive suits. other couples with dependent children. people use different products and their demand for goods and services keep changing. A Supreme Court Justice has more status than a sales manager. lifestyle and personality and self concept. and drink Chivas Regal Scotch. (c) Roles & Statuses : A role consists of the activities a person is expected to perform. older couples with no dependent children. iii) personal factors : These includes the buyer’s age and stage in the life cycle. Members of a family exert a strong influence on the buying decision. occupation. Over the lifecycle stages. most food in the growing and mature years and special diets in the later years. They eat baby foods in the early years. People at different ages will have different tastes in food. Joint decision are taken by both the husband and the wife for purchasing expensive products and services. People choose products that communicate their role and status in society. Even families pass through different stages of . Company Presidents often drive Mercedes. economic circumstances. The husband the wife and the children play different roles while purchasing different products and services and thee roles very from country to country. Each role carries a status.different products and the buying behaviour of the member is greatly influenced by the stage of the family life cycle. Marketers must be aware of the status – Symbol potential of products and brands. and a sales manager has more status than Office Clerk. (a) Age k& Stage in the life cycle : People buy different goods and services over a life time. Therefore. Example : The consumer demands of a bachelor are different from those of a newly married couple or a family with children/no children. Marketers try to adjust their marketing mix to influence the decisions of the decision maker in the family. marketers are keenly interested in the roles played by the members and the relative influence each member exerts on the buying decisions. the major buying decisions for the children are taken by the parents. clothes and furniture and recreation.

they arise from psychological states of tension such as the need for recognition. thirst or discomfort. i) Motivation : A person has many needs at any given time. they arise from physiological states of tension such as hunger. for example. esteem or belonging. Needs are motivational elements behind the purchasing decision of customers. (d) buyers are Psychological Factors : A person’s buying choices are influenced by four major psychological factors. such as :. the hierarchy of needs. Example : A computer manufacturer might find that most computer achievement-oriented. Life style portrays the “Whole person” interacting with his or her environment. (b) Occupation & Economic Circumstances : Occupation also influences consumption pattern. work shoes an lunch boxes. A company even tailor its products for certain occupational groups. Therefore. Marketers search for relationships between their products and life style groups.(i) Motivation. etc. was proposed by . savings. A blue color worker will buy will buy work clothes. (c) Life Style : A lifestyle is a person’s pattern of living in the world as expressed in activities. (ii) Perception. his ability to buy costly products and services on installments and bear the interest rates. will have a significant influence on his buying behaviour.the life cycle. One of the most widely known as motivational theory. marketers should determine the needs of their target markets and introduce different product and marketing efforts targeted at different stages. A motive is a need that is sufficiently pressing to drive the person to act. lawyers and physicians. design different products for brand managers. (iii) Learning & (iv) Beliefs & Attitudes. interests and opinions. The financial condition of an individual such as his disposable income. engineers. Some needs are biogenic. Other needs are psychogenic. Computer software companies.

but eating a particular particular food joint in a want. Protection) Physiological Needs (Food. long Safely needs (Security. Shelter) Custmer tend to satisfy their needs on the basis of the requirement of the needs. Example : Food can be classified as a need. According to Maslow needs can be classified as : (a) Physiological Needs. Self actualization needs Esteem needs (Self esteem. Example: Physiological need is the most basic need and hence.Abraham Maslow and explains why people are driven by particular needs at particular times. status. dish or at a . (b) Safety Needs (c) Love and belongingness (Social needs) (d) Eastern needs (e) Self actualization needs. Recognition) Social Need (Sense of belonging. Water. individual would Satisfaction of one need leads to emergence of higher level unfulfilled needs. an satisfy it first. Needs are general in nature but wants arise out of the desire to fulfill the needs in a specific way.

cues responses and reinforcement. taste hearing etc. does he find it worth spending the time on shopping. where and how a person responds. you may assume that because IBM makes good computers. Understanding the customer’s perception helps the marketers position their product better than that of the competitors. iii) Learning: It involves changes in an individual behaviour arising from experience. organizes and interprets stimuli into meaningful thoughts and pictures. Suppose you buy an IBM computer. • Customer’s buying decision are also influenced by the risk factor involved. Hence. A drive is a strong internal stimulus impelling action. Example : A subscriber/reader who reads a particular newspaper perceive it to give the true picture of the happenings around him. marketers must made an effort to understand the precautions of the customers and adjust their marketing mind accordingly. or journal might Perceptions of a person are affected by many factors like reality. stimuli. ii) Perception : It is defined as the process by which an individual selects. • Customers perceive their environment through the sense of touch. IBM also makes good printers. Learning theorists believe that learning is produced through the interplay of drives. sense. wants. does the customer perceived the product to be safe. Cues are minor stimuli that determine when. • Marketer can address these problems through appropriate communication strategies. Customers base their perception on their needs. .g. rule etc. E. If your experience is recording and IBM will be positively reinforced. you generalize your response to similar stimuli. Later on when you want to buy a printer. past experiences and something that they consider to be true.Marketers must work to create these wants in the customers and position their product in such a way as to invoke desire in the customer to fulfill these wants. In other words. smell.

People’s beliefs about a product or brand influence their buying decisions. Classification of Buying motives Buying Motives their about their Product Motive Patronage Motives Emotional Product Motives Rational Product Motives Emotional Patronage Motives Rational Patronage Motives . The influences that explain why they buy from particular firms or shops are called patronage motives. When tasting the brand versions. ii) Patronage Motive. consumers preferred Diet Coke by 65% and Diet Pepsi by only 23% (with the remainder seeing no difference). Marketer are interested in the beliefs people carry in products. iv) Beliefs & Attitudes : Through doing and learning. These in turn influence buying behaviour. BUYING MOTIVES Buying motives are basically two types : i) Product Motives. The motives which prompt people to buy a given product are called Product Motives. people acquires beliefs and attitudes. A belief is a descriptive thought that a person holds about something.Learning theory teaches marketers that they build up demand for a product by associating it with strong drives and providing positive reimbursement. This example highlights the role brand beliefs play in product choice. A study of the influence of brand belief’s found that consumers are equally split in their preference for Diet Coke Versus Diet Pepsi where testing both on a blind basis.

Buying Roles : It is easy to identify the buyer for many products. because buying roles change. the giant British Chemical Company.Emotional Product Motives : The emotional Motives may persuade a consumer to buy a certain product without evaluating the merits and demerits of such action. In the U. what to buy how to buy or where to buy. Rational Patronage Motives : It persuade a buyer to buy from specific shops because it offers a side selection of the latest model or good offer sales service. . Emotional Patronage Motives : It Persuade a buyer to buy from specific shops without much logical reason behind that action. the various alternatives available to the buyer etc. it decided to advertise its Dulux brand to women. ii) Influencer : The person whose view or advice influences the buying decision. iii) Decider : The person who decides on any component of a buying decision. BUYING DECISIONS Decision making is a process of selecting an appropriate option from two or more alternatives. When ICI. Rational product motives : It involves a logical analysis of the intended purchase the purpose expected to be served by the product. men normally choose their sharing equipment and women choose their cosmetics. A customer gets the freedom of choosing a particular brand or product when there is more than one brand or product to choose from. Different Roles Assumed by People: i) Initiator : The person who first suggests the idea of buying the product or service. He may like the place or may consider the shop as his “favourable” shopping place. discovered that women made 60% of the decisions on the brand of household paint.S. whether to buy. but even here marketers must be careful in making their forgetting decisions.

There are four types of consumer buying behaviour. If the consumer finds quality differences in the brands. After the purchase. bought infrequently. the buyer will shop around to learn what is available. The high involvement is based on the fact that the purchase is expensive. Tying up with various stores for promoting the product and motivating the sales personnel can also be an effective tool in this regard. First. Here. the Consumer might experience dissonance that items from noticing certain disquieting features or hearing favourable things about other brands and will be alert to information that supports his or her decision. Consumers engage in complex buying behaviour when they are highly involved in a purchase and aware of significant differences among brands. infrequent. based on the degree of buyer involvement and the degree of differences among brands. the buyer develops beliefs about the product. a personal computer. and risky. he or she develops attitudes about the product. Buying behaviour : Consumer decision making varies with the type of buying decision. This is usually the case when the product is expensive. a new car are all very different. a tennis racket. i) Complex Buying Behaviour It involves a three-step process. Marketing communication should supply beliefs and evaluations that helps the consumer feel good about his or her brand choice. ii) Dissonance – Reducing Buyer Behaviours : Sometimes the consumer is highly involved in a purchase but sees little differences in brands. The decision to buy tooth paste. he or she might go for the high price. Secondly. v) User : The person who consumes or uses the product or service. Thirdly he or she makes a thoughtful choice.iv) Buyer : The person who makes the actual purchase. iii) Habitual Buying Behaviour: . Complex and complexive purchases are likely to involve more buyer deliberation and more participants. the marketer develop strategies that assists the customer to learn more about the product and the distinct features of their brand. In this case. risky and highly self expressive. like an automobile.

Next time. Ex : Hunger. The buying decision process can be divided into five stages. They choose the brand. and evaluates the product during consumption. to allure the customers for impulse buying. Buying Decision Process Before. discount coupons etc. chooses a brand of cookies without much evaluation. consumer often switth brands and not very brand conscious. A need can be aroused internally within the person. customer involvement in such purchase decision is low. i) Problem Recognition ii) Information Search iii) Evaluation of alternatives iv) Post Purchase Behaviour v) Post Purchase use and disposal i) Problem Recognition : The buying process starts when the buyer recognizes a problem or need. Brand switching occurs for the sake of variety rather than dissatisfaction.When customers buy low-cost regularly purchased/routine products. they do not make significant efforts to gather much information about the product. buying the product consumer pass through different stages. the market leader we strategies like offering the product of a low price. They evaluate the product during consumption. the consumer may reach for another brand out of wish for a different taste. free samples. iv) Variety-seeking Buying Behaviour Consumer shows a great amount of brand differentiation when buying a low involvement product. Therefore. Here. Purchase decision in such cases is quick. . Customers usually do not evaluate the post purchase performance of such products. which they are familiar with or have been choosing for a long time. Here. Ex : The consumer has some beliefs about cookies.

sales persons. packing and advertisements. Personal sources influence the buying decision of a prospective buyer. For high value and infrequently purchased items. Post purchase experience can also help the customer reduce the time for information search and information search and evaluation. maximum amount of information is obtained through commercial sources. displays. the actual purchase. ii) Commercial Sources : Advertising. The criteria to evaluate a product may differ depending either on the buying situation or on the level of involvement required. customer can be simple criterion. iv) Purchase Decision : After evaluation the next step is selection or purchase of a particular brand. When the customers evaluating process results in identifying brands. Information can be gathered from several sources like – i) Personal Sources : Family. iii) Information Search :i A consumer who realizes the need for a product will try to gather information regarding the product. iii) Evaluation of Alternatives : After gathering the information the consumer analyzes them to select the right brand or product. a customer an be involved in detailed analysis of information. provide information. This stage also accounts for a large number of sub-decisions about purchasing a product like – • Seller & location of the store. such as price. The purchase decision also depends on the availability of the brand. pricing strategies. examining.. packaging. Sales Personnels can help customers evaluate the product or brand features. which he is ready to buy. Information search helps the customer understand the features of a product and competing brands better. using the product. iv) Experiential Sources : Handling. Marketers try to arouse these needs and help people identity these through products. Though all types of sources. he moves on to the next stage. a customer than evaluate the information. dealers. iii) Public Sources : Mass Media. consumer rating Organisation. friends. An external stimulus such as an advertisement or the attractiveness of a product package may also bigger a need in the person. However for low involvement or low priced products.Or by an external stimulus. After gathering all the relevant information. . neighbours and reference group.

The marketer’s job doesn’t end when the product is bought. In order to avoid these. when the customer hears good things about other brands. the customer is satisfied. or when he does not get all the features he was looking for in the product. b. If the performance exceeds the expectations. Post purchase satisfaction with the product leads the customer to make repeat purchase and recommend it to others in his reference group. aerosol cars etc. marketers should try to reassure the customer about his purchase decision. Marketers should also make an effort to educate customers on how to dispose the products like hazardous material and other items like plastic bags.• Time of purchase. v) Post Purchase Behaviour : After purchasing the product. The buyer may even try to return the product. Post Purchase Satisfaction : If the product meets the expected performance. Marketers must monitor post purchase satisfaction or dissonance. Ex : People in Punjab used the single tub washing machines for making the summer drink “Lassi”. the consumer will experience some level of satisfaction on dissatisfaction. beverage containers. the customer experiences cognitive dissonance. Post Purchase Dissonance : The dissatisfaction or dissonance might arise. • Price of the product • Delivery & warranty • Payment method like credit arrangements • Size of the product colour and attractiveness of the package. a. . When products of competitors brands have the desirable features that the customer was seeking. the customer is delighted and if it doesn’t the customer is dissatisfied. v) Post Purchase Use and Disposal : Marketers should observe how consumers use the purchased product and how they dispose off their products. Marketers should try to improve the performance of the products and add new and unique features to delight the customers. Some customers may discover new uses for the products other than what the product was meant for.

and jute for packing its products. Larger Buyers : A few large buyers to most of the purchasing in such industries as aircraft engines and defense weapons. Ex : Gumpals offers special tissues and dispensers to dispose of its chewing grum. 2) Projective Techniques. . 1) Surveys : Here the researcher carries out opinion polls involving customers. • • Fewer Buyers : The Business marketers normally deals with for fewer buyers than the consumer marketer does. the researcher has to carefully select the instructions and methods of surreys. 2) Productive Techniques : Like word association. Marketers may also come up with innovative products for successful disposal of their product. evaluate and choose among alternative brands and supplies. though time consuming and costly. uses recycled papers.Many socially responsible companies are engaged in recycling their products. sales persons. 3) Focus Group Discussions. gets a higher response rate and provide meaningful responses. telephone surveys or personal contacts. picture association and thematic appreciation tests (TAT) have been used to get to now subconscious level responses. Kodak recycles acetate films. 3) Focus Group Discussions : This is customer qualitative techniques used to assess customer’s perception about the product and situations. These methods are postal surveys. Tools to study Buyers Behaviour : It is very useful for the marketers to study buyer behaviour regularly.. Personal contract method. Various types of tools are used by the marketers for this purpose. While conducting these surveys. Marketer is giving importance to these qualitative techniques as they provide valuable information on his or her product or brand. dealers and experts. ORGANIZATIONAL BUYING BEHAVIOUR Organizational buying may be defined as “the decision making process by which formal organizations establish the need for purchased products and services and identify. These are – 1) Surveys.

iii) Influencer : People who influence the buying decision. iv) Deciders : People who decide on product requirements or on suppliers. ii) Users : Those who will use the product or service. who must follow their organization’s purchasing policies. They often help define specifications and also provide information for evaluating alternatives.customer relationship : Because of the smaller customer base and the importance and power f the larger customers. Buyers may help shape product specifications. Ex : A paper manufacturer that buyer chemicals from a chemical company that buys a considerable amount of its paper. 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 to the additional out-put. • Professional Purchasing : Business goods are purchased by trained purchasing agents. the users initiate the buying proposal and help define the product requirements. constraints. v) Approvers : People who authorize the proposed actions of deciders or buyers. and requirements. especially items that are technically complex or expensive. Technical personnel are particularly important influencers. relationship between customers and suppliers have been changing from down right adversarial to close and integrated. • Derived Demand : The demand for business goods in ultimately derived from the For this reason. They may be users or others in the organization. Participants in the Business Buying Process : i) Initiators : Those who request that something be purchased. In the recent years. • Direct Purchasing : Business buyers often buy directly from manufacturers rather than through intermediaries. • Reciprocity : Business buyer often select suppliers who also buy from them. Fluctuating Demand : The demand for business goods and services tends to be more volatile than the demand for consumer goods and services.• Close supplier . In many cases. but they play their . suppliers are frequently expected to customize their offerings to individual business customer needs. the business marketers must closely demand for consumer goods. • monitor the buying patterns of ultimate consumers. vi) Buyers : people who have formed authority to select the supplier and arrange the purchase terms. Where the same is not done in consumer purchasing.

• General Need Recognition : After problem recognition. A machine breaks own and requires new parts. In this stage. Also. the buyer may get new ideas at a trade show. the firm has to identify the exact quantity of the product required and the quality levels desired.major role in selecting vendors and negotiating. Some common events lead to problem recognition. vii) Gate Keepers : People who have the power to prevent sellers or information from reaching members of the buying center. and the company searches for another supplier. where the firm starts negotiating with the supplier by giving the technical specifications of the product. the buyers might induce high-level managers. This is the stage where those who have specified the details of the product have a say in the purchase process. and telephone operators sales persons from contacting users or deciders. for the smaller general products. • Product specifications : This is a crucial stage in the buying process. Purchased material turns out to be unsatisfactory. Ex : Purchasing agents. see an ad. receptionists. the purchase department needs the assistance of all those who are concerned with the product to lay down the product specifications. the purchase department searches for external information to issue product specifications. But for products of a complex nature. In more complex purchases. or receive a call from a sales representative who offer a better product or a lower price. The people involved in problem recognition. It is beneficial at this stage for the suppliers . Externally. The problem can be recognized by someone who is internal to the organization or by someone who is external to the organization. A purchasing manager senses an opportunity to obtain lower prices or better quality. must find out the alternative available to solve the problem that has been identified. the specification will be standardized. the specifications can be easily given by the people who actually use the product. The company decides to develop a new product and needs new equipment and materials. STEPS IN BUYING PROCESS • may prevent Problem Recognition : The buying process begins when someone in the company recognizer a problem or need that can be met by acquiring a good or service. For products that are purchased regularly.

to maintain a close co-ordination with the buyers of the organization, sine such suppliers will have an early advantage over competitive suppliers.

Supplier Search :

The buyer now tries to identify the most appropriate suppliers.

The buyer can examine trade directories, contact other companies for recommendations, watch trade advertisements, and attend trade shows. However, now-a-days the most likely place to look is on the internet. Once the list of suppliers is finalized, the company carefully analyzes each supplier and selects one who meets the specifications, quality standards and delivery schedules set by the purchasing department. Industrial marketers who have a significant presence in all of the above said media will have a significant advantage over other suppliers.

Proposed Solicitation : The buyer invites qualified suppliers to submit proposals. If

the item is complex or expensive, the buyer will require a detailed written proposal from each qualified supplier. After evaluating the proposals, the buyer will invite a few suppliers to make formal presentations. Business marketers must be skilled in researching, writing and presenting proposals. Written proposals should be marketing documents that describe value and benefits in customer terms, not just technical documents. Oral presentations should inspire confidence, and position their company’s capabilities and resources so that they stand out from the competition.

Supplier Selection : Before selecting a supplier, the buying center will specify desired

supplier attributes and their relative importance. It will them suppliers on these attributes and identify the most attractive suppliers. In practice, business buyers use a variety of methods to assess supplier value. Business marketers need to do a better job of understanding how business buyers arrive at their valuations.

Order Routine Specification : After selecting suppliers, the buyer negotiates the final

order, listing the technical specifications, the quantity needed, the expected time of delivery, return policies, warranties and so on. In the case of maintenance, repair and

operating items buyers are moving towards blanket contracts rather than periodic purchase orders. A blanker contract establishes a long term relationship in which the supplier promises to re-supply the buyer as needed, at agreed upon prices, over a specified period of time. Because the stock is held by the seller, blanker contracts are sometimes called stockless purchase plans. The buyer’s computer automatically sends an order to the seller when stock is needed. Blanket contracting leads to more single source buying and ordering of more items from that single source. This system locks suppliers in tighter with the buyer and makes it difficult for out-suppliers to break in unless the buyer becomes dissatisfied with the in-supplier’s prices, quality or service.

Performance Review : The buyer periodically reviews the performance of the chosen

supplier(s). Three methods are commonly used. The buyer may contact the end users and ask for their evaluations; the buyer may rate the supplier on several criteria using a weighted score method; or the buyer might aggregate the cost of poor supplier performance to come up with adjusted costs or purchase, including price. The performance review may lead the buyer to continue, modify or end the relationship with the supplier. The supplier should monitor the same variables that are monitored by the product’s buyers and end users.

CLASSIFICATION OF ORGANIZATIONAL MARKETS 1. The Institutional Markets : It consists of schools, hospitals, nursing homes prisons and other institutions that must provide goods and services to people in their care. A marketer trying to cater to customers in these markets should carefully plan out their marketing strategies to suit the individual needs of these customers. Generally, non-profit organizations such as schools, colleges universities, hospitals and museums comprise institutional markets. Universities, schools and colleges requires a lot of infrastructure like class room furniture, books, computers and so son. Hospitals require surgical equipment, diagnostic machinery, beds and many other products. Harks, it is always a better strategy to approach these customers individually and offer tailor made solutions to address their needs.

2. Government Markets : Government agencies are the largest buyers of goods and services in a country. The Indian Govt. spends billions of dollars every year on goods and services for the various government departments at the central, state, district, municipal and village levels. To be able to sustain and complete in this market, industrial marketers must have a clear perspective of the procedures followed by the Government in its buying methods. The purchasing process of the government is influenced by different groups of people of various levels who legislate, select and analyze the goods and services before actually purchasing them. Each year, the government of India spends a massive amount for the defence of the country. Normally, it appears difficult to market any product or service to the government departments. No amount of marketing, advertising or promotional effort will have an effect an officials in charge of purchases in government departments since they give the maximum importune to the cost of the product or service and purchase only those with the lowest price. The Govt. of India purchases raw-materials, finished goods, capital intensive goods, tools and spare parts, consumables, office furniture and other equipment and services. It buys product ranging from small pins to airplanes and aircraft carriers. The Govt. also purchase services ranging from garbage clearance to huge construction projects such as construction of dams and major rivers. The need to fulfill contain social obligations make the Govt. purchase a minimum amount of products and services from the unorganized sector and cooperative societies as well. Otherwise, all purchases by Government departments take place formally with the organized sector with tenders being called for and rules and procedures being strictly followed. Normally, the entire process of calling for tenders, giving the work order, and issue of payment takes a very long time. 3. Producer Markets : Producers buy the products from suppliers, not for direct sales to the customers, but for processing them and converting them into finished goods. These finished goods are then sold to customers for their use. Example:

Britannia purchases firm products such as wheat, milk and sugar not for selling them

directly to the customers but for processing them into various products like biscuits, bread, cookies and so on. These finished products are then sold to the end customers for

Buyers wield a greater bargaining power in the reseller markets. Therefore IBM is an OEM for Intel. buyers can influence the producers to change and enhance the product features at no additional cost to make the products competitive in the market. To pay proper attention to particular areas. To know the preference of place of purchase (shop) by consumers. MARKET SEGMENTATION It is the process of dividing a heterogeneous market into homogeneous subunits. 4. the computer manufacturer. which buyer tyres from other companies to fit their motorcycles. To design marketing mix and promotion mix. OEM buy industrial products and incorporate them into their final products. To know the willingness of consumers to pay for the additional benefits.consumption. IBM. industrial dealers and users. the third type of producers are users who buy the products which will facilitate their production process though they are not part. • Hero Honda is an OEM. To plan all marketing activities around the consumers. . Finally. In the reseller market. Objectives of Market Segmentation : • • • • • • • • • To identify potential customers and additional benefits desired by the consumers. Similarly. To help and make the marketing efforts more efficient and more economical. To understand competition and formulate marketing programmes. Here re-sellers normally bargain with the manufacturers for heavy price discounts. The producer markets are further divided into original equipment manufacturers (OEM). To increase productivity and adds to consumer value. Reseller Markets : Resellers are marketers who do not purchase products for converting them into finished products or for personal use. buys microprocessors from Intel. Wholesalers for a part of the resellers market. but for selling them to other customers for a monetary gain.

vi) Helps to assess competitive strengths and weaknesses. Competitive strengths and weakness can be assessed effectively and marketers can avoid competition and use resources more profitably by catering customer demand which is not being met by rivals. following points.Importance of Market Segmentation : In reality market demand is heterogeneous and not homogeneous. ii) It plan all marketing activities around the customers. vii) Creates good Coordination among customers : Segmentation brings benefits not only to the marketer. It would benefit the firm if the efforts were concentrated on segments that are the most productive and profitable ones. i) Facilitates proper choice of target market : Segmentation helps the marketer Importance of market segmentation can be understood from the to distinguish one customer group from another within a given market and thereby enables him to decide which segment should form his target market. When differences in customer needs are analysed. price and promotion can have best coordination. When segmentation attains . iii) Facilitates tapping of the market : Segmentation also enables the marketer to fulfill the needs of the target buyer. iv) Making the Marketing effort more efficient and economic: Segmentation ensures that the marketing effort is concentrated on well defined and carefully chosen segments. Marketing programme is tailored exactly in accordance with the needs of specific market segment and produce. This can yield profits and prospects for growth. It also helps him to generate an accurate prediction of the likely responses from each segment of the target buyers. Segmentation ensures higher customer satisfaction. because customer is the focus of marketing effort and only target markets are served. v) Effective utilization of Marketing resources : Segmentation leads to more effective utilization of marketing resources. but to the customer as well. the analysis may reveal that certain customers needs are not being met and the marketer can exploit such a marketing opportunity and till these needs.

LEVELS OF MARKET SEGMENTATION The levels of market segmentation are – (A) Segment Marketing. customers and companies can conveniently settled down with each other. Segment marketing offers several benefits over mass marketing. and it will also have a clearer picture of its competitors. we have Maruti Zen. A niche is a comparatively smaller segment like the Ferrari which will have a limited customer base because of its specialized product offerings. The marketers doesn’t create the segments. not a segment. Thus. We must be careful not confuse a segment and sector. However. The company can more easily select the best distribution and communication channels. (A) Segment Marketing : A market segment consists of a group of customers who share a similar set of wards. we would distinguish between Car buyers who are primarily seeking low-cost basic transportation and those seeking a luxurious driving experience. (C) Local Marketing : The fundamental difference between a segment and a niche is that a segment is usually is usually a broader . Wagon-R. Some will want a low-cost car and others will want an experience car. The market segment when further divided into sub-segment to identify and cater to the unsatisfied needs of a small group is called a niche.higher level of sophistication and perfection. (C) Niche Marketing & (D) Local Marketing. Niche marketers presumably understand their customer’s needs so well that the customers willingly pay a premium. Alto. in that not everyone wants exactly the same thing. Ex In the mid-size car segment. (B) Individual Marketing. a niche is a small segment at the market that has some specific unsatisfied needs. Generally. The company can create a more fine-tuned product or service offering and price it appropriately for the target segment. The problem is that young. (B) Niche Marketing A niche is a more narrowly defined group seeking a distinctive mix of benefits. the marketer’s task is to identify the segments and decide which one(s) to target. Young. middle-income car buyers will differ about what they want in a car. market place where many competitors operate. Tata Indica and Fiat Palio. middle-income car buyers is a sector. even and segment is partly a fiction.

a) Geographic location of customers. Intact. 2) Product related segmentation 3) Competition related segmentation. education. BASES & METHODS OF SEGMENTING CONSUMER & INDUSTRIAL MARKETERS Market Segmentation can be broadly divided into 3 major groups. sex. to segment the market. and that marketers can achieve much more provision and effectiveness by addressing individual needs. almost all the business-to-business These days most companies are approaching individuals through e-mails to promote their products and services. (D) Individual Customer Marketing : Individual Marketing is the extreme level of segmentation in which marketers focus on individual customers. occupation. Mot marketers who have a global presence tend to offer customized products to suit the local markets. the rural customer is more aware about various products and buys the same branded products which is urban counterpart buys. it may fails utterly at the local level because at un-matured local tastes and preferences. 1. 1) Customer based segmentation. The prominence of local marketing has became so dominant that even if a product proves to be successful at the national or global level. family size. etc. c) Buyer Readiness. Demographic Characteristics : Factors like age. Video etc. income. b) Psychographic variables. . marketing is individual marketing. Those who favours individual marketing claim that segments are a fiction.“Think Global Act Local” has long been a buzzword. are used singly or in combination. etc. Customer based segmentation : Three important factors in this type of segmentation are . that individuals within so-called segments differ greatly. But after the advent of TV. (a) Geography Location of Customers : Rural & Urban Division (Ex – Nike Show Room) Metro & Non-Metro (Max Brands are used in Metro) Previously there was a difference in rural market and urban market. and martial status etc.

Income : On the basis if income the market can be segmented as – • Low Income • Low Middle Income • Middle Income • Upper Middle Income • Higher Income If income increases the expenditure partners changes i. etc. Ex. Marketing Professionals etc. Teachers. Business Men. S/W Professionals. Professors.000 you may travel by plane. CA. Buying automobiles etc.Doctor. part-time. You are travelling by train suppose Rs. are bought through the influence of child food products like biscuits.00. soft drink etc. full-time. Martial Status : Behaviour and consumption pattern of single and married people differs. Occupation : Whether self employed.000 is your income per month. soap. And if your income increases to Rs.1.Age : • • • • • • • Infants Marketing (Newly born – 14 years) Child Marketing (1 – 12 years) Tears Marketing (13 – 19 years) Adolescent Marketing (16 – 19 years) Youth Marketing (20 – 25 years) Middle aged Marketing ( 36 – 50 years) Elder & Seniors Marketing (50 years & above) The buying decision of FMCG Products like tooth paste.e. fruit juice. Education Based on education the Indian market can be segmented as – • Ligerates • Illiterates • High School Educated • University • Graduates. it increases.10. A PC manufacturer can sell more PC to software professionals. . pizzas. Eating out. Post-Graduates Educated people are more aware about the environment and product. etc. burger.

(c) Buyers Readiness : Another variable used for segmenting the market is buyer readiness or preparedness to buy the product. • • • • Unaware Buyers People aware but not interested People who are interested to buy People who will positively buy the product. the unexpected guests.Ex Married people are more frugal in spending money. Stand alone (Living outside city). (b) Benefits Segmentation (c) Consumption (d) Decision Criteria. (b) Psychographic Variable : Even though the two individuals may be of the same age. Family Size : Unmarried Nuclear family Parents and children living separately in the same town). on the basis of life style. ii) 165 litres refrigerators for small family.e. Product Related Segment : (a) Product use situation. people are not so frugal in spending money. A marketer tgries to make the product versatile so that it can be used in different situations. 2. i) 360 Litres refrigerators for large family. (a) Product use situation : The marketer may also use product related bases for market segmentation. for example. and same profession with similar education and income. is shown as being used in different situations like a party. Rasna. Each of the customer may have a different attitude towards risk taking and new products and stores i. A customer may buy a sports watch for sporting activities and a jeweled watch for party . a drink at the end of a long and tiring working day. One of the important bases is product use situations.

To market these segments. soft drinks). where a customer may buy for functional purposes. Some want intangible benefits while other looks for tangible ones. the marketer identifies benefits that a customer looks for when buying a product. b) Light users. There are segments that are quality. as a gift. an accessory. ask for titan”. Looking attractive and pretty is important to a woman when she buys dresses or cosmetics. technology and service sensitive. positioning decisions. For example there are customer clusters who are high on price sensitivity. coffee. a) Heavy users. Accordingly the following segments are visible. “Titan. (c) Consumption : It has also been the basis for segmenting beverages (tea. or a jewellery item. c) Service offered by the firm & d) Technology. liquor and cigarette markets. The differentiation between them is based on the benchmark quantity defined by the marketer for each segment. Customers look for different benefits. Customer differ in term of sensitivity on all these parameters. c) Moderate users. d) Decision Criteria : Another basis of segmentation is the decision criteria a customer uses to evaluate and buy a brand or the product. b) Perceived quality of the product/service. fair and lovely used thin intangible psychological benefit to segment its market. (b) Benefits Segmentation : Here. This analysis can help firms take appropriate . Thus. This has been a very effective method of segmenting the market for watches. Hence. the customer need is different. durability. in one of its early commercials reminded the woman that “the next time he thinks of a gift for you. a product or a brand may be selected by the customer depending on use situations. Research shown the following four parameters in consumer decision making today = a) Price. In each case.wear. firms need to research the most dominant decision criteria in each segment and then evaluate its capability to deliver.

Geographical Location. carefully and see if any if them is a factor determining customer quality. Pears. will the customer refuse the competing brand. Cinthol. Lux. non-availability of competing brand. ii) Soft Core Loyals : Those who are loyal to two or three brands in a product group are called soft core loyal. The marketer should examine these factors.COMPETITION RELATED SEGMENTATION Customer loyalty. is an important index to determine the competitive position of the firm. Buyer Behaviour/motivation or purchase criteria Size of the Customer : . Lux. So this is used as a basis of segmenting have the following segments : i) Hard-Core Loyals : These are the customers who continue to buy the same brand over & over again. Lux in her nine shopping cycles will marketer needs to watch such customers and motive them to shift to the hard-core loyalty segment. Pears. Ex A house wife buys Lux. Hence it is the job of marketer to make out why the customer is switching either because of low price or habit. cigarette smokers and tea drinkers are some customer groups where such hard-core loyalties are commonly visible. The firm needs to examine why it is losing its customers to competitor brands. if and when offered. In either case. The rest here is. the brand is changing. These are the customers for whom brand switching is as easy as changing a shirt. End use. iii) Switchers : switchers are those customers who never stick to a brand. Cinthol. and insist a buying his own preferred brand? Newspapers. They may switch for variety or for a special deal. SEGMENTING INDUSTRIAL MARKETS Some of the commonly used based for segmenting the industrial 1) 2) 3) 4) 1. Cinthol. Size of the customer.

For example – using price as an input we can segment buyers as insensitive. ii) Differentiation : Firms located in Mumbai constitute one segment for a telecom segment or plan. Example Coke. 4. we may have . sensitive and highly sensitive to price changes.a) Large Buyers. P&PSI (Soft Drink) These soft drinks retain the same flavor. TARGET MARKET STRATEGY There are 3 strategies – i) Standardization ii) Differentiation iii) Focus i) Standardization Here the firm offers the same product to different market segments. This type of segmentation can also help the marketer to correct any imbalances that may exist in his selling efforts. construction. product packaging and sales call frequencies for. End Use : Another way of segmenting the industrial market is by differentiating end user’s of the firm’s product. Example 3. Geographical Location The geographical location of a customer is another basis for segmenting the industrial products market. firm. 2. The size of a customer can help a firm determine its sales potential and competitive position in that customer group. while firm located in Delhi constitute another market .criteria. some of the end user segments include automobiles. We can also categorize customer – whether he wants standardized or customized products.Based on the size and purchases. office furniture. Generally firms have different payment terms. It uses the same pricing. we can further segment the market on the basis of purchase . c) Small Buyers. For a steel manufacturer. each of these customer group. b) Medium sized Buyers. The advantage is the economies of scale which a firm gets in mass product and marketing. communication and distribution strategies. Each of these segments have their characteristics and require a different marketing approach. advertising. and packaging across segments in different geographical areas. Buyer Behaviour/Motivation or Purchase Criteria : Within any specific end use segment.

Hence. This strategy helps the firm enjoy the economies of scale as well as higher market penetration and consequentially a higher market scheme. In this way Maruti is able to focus its entire strategy on both the economy and premium segments. 7 up advertised itself as “the uncola”. and it would be hard for a competitors to claim them. Both the cars has some basic features and offers specific benefits to its buyers. Example An airline differentiates its products into 3 classesFirst class. or even a person. ii) Grab an unoccupied position : United Jersy Bank. noting advertised that giant banks were usually flower ion arranging loans. market only refers to a set of existing and potential buyers of a product / service. Avis acknowledged its second position in the rental for business and claimed. the firm differentiates its products to suit different segment needs and expectations. you position the product in the mind of the prospect. iii) De-position or Re-position : BMW attempts to deposition Mercedes Benz with the comparison “The ultimate sitting machine versus the ultimate driving machine. iii) Focus : This is a combination of standardization and differentiation. Example – Maruti 800. Here. Business class & economy class Each of these classes is targeted at a specific segment whose needs are different from the other. a service. However. A piece of Merchandise. Example – Hertz – World’s largest auto-rental agency. Therefore. a buyer who is looking for more features like power steering and music systems can get the same at an additional price. These above brands own these positions. positioned itself as “the fast-moving bank. a company. We try harder. the marketer has to choose the appropriate strategy in order to achieve higher market penetration in each of his market segments. Coca-cola – World’s largest soft-drink company. . Porsche – World’s best sports car. But positioning is not what you do to a product. the core strategy remain the same but differentiation is made to take into account specific customer group requirement.This is just the opposite of the standardization strategy. “We are number two. A competitor has 3 strategic alternatives : i) Strengthen own current position : The first is to strengthen its own current position in the market. Well known products generally hold a distinctive position in consumer’s mind. Positioning is what you do to the mind of the prospect. POSITIONING Positioning start with a product. That is. an institution.” MARKET DEMAND FORECASTING KEY TERMS IN FORECASTING Market Demand i) In reality.

iv) Market Demand : It refers to the total value that would be brought by a deprived customer group in a defined geographical area in a defined time period in a defined marketing environment under a defined marketing programme.ii) Market Potential : Market Potential is a is a quantitative estimate of the total possible demand by customers for a product in a given market. assuming that the ideal marketing effort is made. market potential refers to the upper limit of market demand. the opinion from the various competent authorities such as the consumers. vi) Market Forecast : It refers to what the customer will demand in total in actual practice during the period of the forecast. In these methods. sales force etc. It indicates how much of a product is likely to be sold during a specified future period in a specified market. Based on these opinions. . This is very useful in estimating the market demand for consumer durables or even a view product. i) Quantitative ii) Quantitative. vii) viii) Sales Forecast : It refers to the estimates of future sales of the Company’s products. iii) Company Potential: It refers to a pat of the market potential that an individual firm or company can achieve at the maximum in a given market. Quantitative tools are opinion polling methods. In other words. This method could also be used to measure the demand for a product at a different level of the market effort. are recorded. v) Company Demand : It refers to that port of market potential that is achievable under existing conditions. It gives an indication of the ultimate potential for the product and industry as a whole. at specified prices. The opinion polling methods of demand forecasting are of three kinds : i) Buying Intention Survey Method : This involves surveying the buyers to assess their intention to buy the product. Company Forecast : It refers to the total demand for the product of a particular firm that is expected during the period of the forecast. given the product and a defined marketing environment. managers. company demand refers to a company’s share of the total market demand. under ideal conditions and on the assumption that the ideal marketing effort is made. Forecasting Tools : There are two kinds of tolls that one can use to estimate market demand. In other words. the demand for a product in the future is forecasted.

ii) Sales Force Opinion Method : In this method. They are also asked to mention their assumption about the future market environment. Since each expert works from his or her office. iii) Expert opinion method : This involves constituting a panel of experts and asking them to estimate the market demand for a given product. Quantitative Techniques : A wide variety of analytical and statistical methods are available for demand forecasting by a firm. The response so obtained constitutes purchase probability for a given product and hence an index of purchase probability can be made. The firm can choose the most appropriate one depending on its forecasting objectives. the chances of him or her getting influenced by others doesn’t arise. he or she isolates extreme opinions and estimates and revert back to the concerned expert. These estimates are then pooled and a national level forecast of sales is obtained. Once the marketers gets the estimates. There are two types of demand forecasting. giving them the assumptions which others have made. these polls are commonly used by many firms for estimating market demand and the company’s market share. The reason is that they would like to show a positive variance of sales against targets to their top management.Ex – Change in price and its effect on consumer demand can be studied method. the company asks individual sales personnel to estimate sales of the given product in his or her territory. This method can study different scenarios and is particularly useful in estimating demand for a new product or technology. sales people are believed to underestimate sales in their territories. large buyers. marketing consultants and trade associations. However. A variant of the Delphi Technique is the expert opinion poll in which a firm may interview experts in its industry. Nevertheless. through this The purchase intention of the buyer can be measured on a seven-point scale from a “definitely buy” to a “definitely not buy”. It is for this reason that not many companies rely on sales force opinion. These experts could be dealers. These polls too have the same limitations as that of the consumer survey. Very few companies use this tool as. Individual experts do not know who else is on the panel. i) ii) Short Term Long Term . the marketers does not reveal the estimate of the other experts. most often.

we take a twoperiod average of the moving average and place them in between the corresponding time periods..e. Obviously in this case. For Example. there are two middle periods. Each moving average’ is based on values covering a fixed time interval. rd The Important long Term forecasting tools are : i) Moving Average Method : y1 = y2= y1+y2+ y3 N y2+y3+ yN N y3 = y3+y4 N +…. Time series analysis. ‘N’ is even. i. i. the successive values of moving averages are placed against the middle value of the concerned group of items. Example 8. Moving averages consists of a series of arithmetic means calculated from overlapping groups of successive values of time series. moving average averages with the original data. When the period of moving average is odd. The method gives a time series of moving averages. This technique is called centering and the corresponding values are called moving averages centered. Exponential smoothing method.1 . the second moving average value is placed against the time period ‘6’ and so on. called ‘period of moving average’ and is shown against the enter of the period. 5 th value. yN for different time periods.. the first moving average value is placed against the middle period. each point of the time series is the arithmetical or weighted average of a number of preceding consecutive points of the time series.e.The Important short-term forecasting tools are : i) ii) i) ii) Moving Average Method. y2.+ yN .. if ‘N’ is odd. Thus..For the following time series which gives the demand for the period of an industry. Econometrics Methods. When the period of moving average is even. find the trend by using 3-years moving average. for a time series. The composition of items adjusted successively by replacing the first value of the previous by averaged group by the next value below that group. This method helps eliminate the effects of seasonality and other irregular trends in demand while forecasting the future figures. the moving average of period ‘N’ is given by 1st value of moving average 2nd value of moving average 3 value of moving average and so on.. y3 …. y 1. if N = 9.e. i.

More recent values. Year 1999 2000 2001 2002 2003 2004 2005 2006 1999 42 2000 46 2001 48 2002 39 2003 54 2004 65 2005 66 2006 60 3. 2. And.67 63. being more relevant for the forecast the degree of importance of that value. It is similar to moving averages and used fairly extensively. It may be noted that weights (w) are to be assigned such that ‘w’ lies between zero and unity (0<w<1). The weights assigned to each value reflect the degree of importance of that value. value for a future period cannot be predicated under this method. and ‘S1’ be the smoothened value at time ‘t’.yearly moving averages Production (in 100 tons) 42 46 48 39 54 65 66 60 3-yearly moving total 136 133 141 158 185 191 3-yearly moving Average 45. being assigned to each value reflect the degree of importance of that value. S1 = y1. weights are determined by selecting a smoothing constant that minimizes the sum of squared deviations between the forecasted and observed values.33 44. the smoothened value ‘S1’ is found with the help of the equations : St = wyt + (1-w) St-1 Where.67 61. St is the current smoothened value . And for any succeeding time period ‘t’. this method is called the smoothing of a series in the sense that it reduces the fluctuations in the time series. be the observed value of the series at time ‘t’. Exponential Smoothing Method : Another technique. More recent values.00 52. The process of exponential smoothing is an follows : Let ‘y’. Forecasts based on exponential smoothing are a weighted average of observed and predicted values for the previous period. More recent values. since so mathematical function is used for finding the trend. And. called the exponential smoothing is a very popular approach for short term forecasting. The smoothing scheme begins by setting smoothened value equal to the observed value for the period (t=1).33 47. However.Year Production : (in 100 tons) Soln.67 - This method is helped in trend calculations only. being more relevant for the forecast are assigned greater weights than previous period values.

20 (420) +_ 0.78 434.20 (460) + (1-0.20 (430) + (1-0.20.20)(400) = 406.20 (420) + (1-0. Thus.20)(435.70) = 432. forecast the demand for the next week.e.20)(424.20 (440) + (1-0.80 415. 11th week.20. The method can .00 408.04 S5 = 0.20)(406) = 408.w is the weight and 0 < w < 1 yt is the current observed value St-1 is the previous smoothened value.62 S9 = 0.20 (420) + (1-0. S2 = 0.80 S4 = 0.62) = 435.20)(434.04 424.03 S6 = 0.80) = 415. Week : 1 2 3 4 5 6 7 Demand : 400 430 420 440 460 440 470 (in units) Soln.03 427.20)(435.04 Exponential smoothing method is particularly useful when forecasts of a large number of items are made. the forecasted demand for the 11th week is computed as follows : S11 = 0.70 432.20)( 408.20 St 400.56 430.56) – 430.2 The demand for product of a firm over the last 10 weeks are given below.20 (440) + (1-0. i.20)(415. It is not necessary to keep a long history of past data.03) = 435/23 S8 = 0.78) = 434.00 406.56 Using w = 0. Example 8.20 (440) + (1-0.04) = 424. If w = 0.80 (432.23 435.00 S3 = 0.04 It has been assumed that S1 = y1.70 S10 = 0.62 435. Forecasts Based on Exponential Smoothing 8 430 9 440 10 420 Week (t) 1 2 3 4 5 6 7 8 9 10 11 Demand (Yt) 430 430 420 440 460 440 470 430 440 420 - W=0.20 (430) + (1-0.

4. 3. a statistical technique is followed to analyse past demand data. by month. All basic factors underlying demand variations are analyzed. The important assumption behind the time series analysis is that the factors influencing demand will not change very much over a period of time and that the future will reflect the past. Time Series analysis Another statistical method that is extensively used in long-term demand forecasting is the Time series Analysis. 3. In other words. exponential smoothing is one of the most accurate statistical techniques available for forecasting. In this method. The econometric . for example. Cyclical patterns that repeat every two year or every three years and so on. Such data.. also now as Trend cycle Analysis. this method is basically a projection method/. as additional observations become available it is easy to update the forecasts. and (d) random fluctuations. a time series is a set of chronologically ordered points of raw data. 4. are isolated and measured using the statistical technique. Growth rates of these trends. Econometrics Methods Economics provide certain econometric models which constitute another analytical method of demand forecasting Econometrics basically attempts to express economic theories in mathematical terms so that they can be verified by statistical methods and used to measure the impact of one economic variable upon another for predicting future events. (a) Longterm growth trends. Thus. 5. (b) cyclical changes. Thus. The four main types o demand variations. In this sense. A firm which has been in existence for some time. When arranged chronologically yield ‘time series’. will have accumulated data on sales of the various products pertaining to different time periods. Systematic variation or seasonal variation which arises due to seasonality in the series of data. (c) seasonal variations. Trend in the data.have a stable response to changes and responses can be adjusted as required. Forecasting the future demand. 2. for several continuous years. Projections of future demand are made by studying the interaction of the basic and significant influences of demand. Time series analysis helps in identifying and explaining : 1. The trend lines for each type of variation are studied and demand forecasts are made. demand for a product.

planning and control. that described and simulate the total demand situation. The independent variables may be exogenous and/or endogenous. and the discontinuance of marginal or unprofitable lines”. The determinants of demand are independent variables whereas demand is dependent variable. linear or non-linear. (d) PLC helps the marketer to plan a strategy to meet the competition. 6. screening. 5. 2. (b) The knowledge that a product will pass through such a cycle of life is helpful in evolving proper product policies and promotion and pricing strategies. The forecast is derived through this set of equations. The interrelationship between demand and its determinants can be estimated by statistical analysis of past data. PRODUCT PLANNING Product planning may be defined as “the act of marking out and supervising the search. the modification of existing lines. But these models are quite complex and extensive to develop. The econometric models are used more in forecasting the demand for durable goods both industrial and consumer durable goods. development and commercialization of new products. Former are external non-economic determinants of demand. The econometric model is constituted by a set of interdependent equations.forecasting models vividly represent the real world situations and the multiple variables involved in the demand situation. 1. (c) PLC is a reliable aid in modifying the marketing strategies. There is constant interactions between demand and reach of the determinants of the demand. 4. 3. The econometric model is based on the following principles. Demand for a product depends on several factors. (e) PLC cautions management about the declining stage of the product. . Importance of PLC (a) PLC concept is a useful tool for market forecasting. 7. There is also constant interaction among the independent variables themselves.

The involves the following steps. argued that the PLC concept is essentially descriptive and if the management use it as perceptive tool. it would be making a grievous mistake. This involves. (b) Analysis of the quality. performance and perceived benefits of competitor products. 4. 1. firms renewed to use it. Projecting brand or product sales on the basis of above analysis. The approach to locating a product or brand in the PLC of a firm involves environmental scanning and trend analysis. Some of the blunders committed due to dependences on PLC are firms put to much of emphasis on new product development instead of continuing the revitalization process of existing brands (a study shows that more than 95% of new products fail). pricing and promotional strategies of a firm. sometimes firms get misguided by PLC concept that stagnation in sales or negative growth rates in sales create illusion of decline stage leading to phase out of products or brands. In an article. Estimation of the probable years remaining for the brand of product. Analysis of development of short term tactics of competitors. it should be effectively manipulated by the firm to locate its product or brand in it. if any (d) Analysis of the relative advantage the brand product enjoys over competitors in the market place. Fixation of the brand or product’s position in the life cycle. 3. Analysis of historical sales and growth trends in the brand and industry. Analysis of historical information regarding life cycles of similar and related products. PLC is not free from criticisms. 5. Analysis of recent trends in the market place. “Forget the product life cycle”.However. Levitt believes that PLC is a planning tool and not just a descriptive tool. 7. (c) Analysis of shifts in distribution channels. Thus. Dhalla and Yuspeh. (a) Analysis of recent trend regarding the number and strengths of competitors. 2. Still it is believed that PLC is an important strategic tool in marketing. STEPS IN NEW PRODUCT DEVELOPMENT PROCESS Eight stages are involved in the new product development process : . LOCATING PRODUCTS IN PLC Since PLC is a useful concept to deal with product. 6.

The companies develop new products to achieve strong sales and healthy profits. then the new product strategy may be to introduce an additional to an existing product line or revise an existing product. Product development. employees and top management. And the surviving ideas then move into full-scale screening process. So that they can submit their idea Manager or Idea Committee. • Concept development and testing : A concept is an elaborated version of a product idea expressed in meaningful consumer terms. Concept development and testing. scientists. Customer needs and wants are also the • Screening : An organization or company should motivate its employees through reward. For example. Business analysis. Market testing & Commercialization The purpose of each stage is to determine whether the idea should be stage is to determine whether he idea should be dropped or moved to the next stage. a new product might be designed to protect market share of the company. Also the screened idea helps in evaluating the potential of new product ideas.• • • • • • • • Idea generation Screening. customers buy concepts and not just the tangible product. every company should have an explicit strategy with respect to developing new products. ii) Marginal ideas. • Idea generation : The New Product Development (NPD) process starts with the search for ideas. Marketing-strategy development. According to Levitt. Let us now consider the various stages a firm has to pass through for launching a new product in the market. New product ideas can come from interacting with various groups and from using creativity generating techniques. . The company then divide the ideas into 3 groups such as – i) Promising ideas. iii) Rejects. Ideas for new products can come from customer. Each promising ideas is researched by a committee member. sources to search for ideas. For example. This strategy is called New-Product Strategy. This is the idea from which following product concepts may be developed. A new product strategy is a statement identifying the role a new product is expected to playing achieving corporate and marketing goals. competitors. Thus. If it is so. a leading soft drink company wanted to strength its product line by adding a new range of fruit juice.

the product concept. Then the next task is decide how will the new product differ from existing soft drinks. The company may consider two product attributes-taste and packaging. • Marketing-strategy development : After having a successful concept resting.  The third part describes the long-run sales and profit goals and marketing – mix strategy over time. The company can also position the brand against competing ones on several features like use situation. Market testing : This stage thoroughly evaluates the acceptance of potential market through the use of market research.  The second part outlines the planned price. with all the related decision and resource commitments. the stage is now set for testing them. calories. the new product manager develops a preliminary marketing-strategy plan for producing the new product into the market. Concept-2 : Fresh bottled mango juice for the young and the grown ups as a fun thirst quenching and refreshing beverage to be had at any time. now becomes a brand concept. Assume that the second concept looks to be attractive and promising. After the product and brand concepts have been developed. structure and behaviour. cost and profit projections to determine whether they satisfy company objectives. and the sales market share. the planned product positioning. .Concept-1 : Fresh fruit juice for children and adolescents as a health supplement at breakfast. Commercialization : It is the actual introduction of the product into the market place. price. The plan generally consists of three arts :  The first part describes the target market’s size. packaging ad distribution cost estimates. Concept-3 : Fresh bottled mango juice for adults as a health supplement. and convenience. • • • Product development : It involves developing the product itself and further development of marketing. In this stage the company needs to prepare sales. The moment it does so. • Business analysis : It’s an in-depth study of the estimated economic feasibility of new product ideas. and marketing budget for the first year. and profit goals sought in the first few years. distribution strategy.

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