Essentials of Marketing Management

Marketing Management
MBA Programme
Powered by Dr Rohit Ramesh

Powered by Dr Rohit Ramesh 2
Unit 1
Nature and Scope of Marketing
American Marketing Association: The following definitions were approved by the American Marketing
Association Board of Directors:
Dr Rohit Ramesh Professor and Dean Faculty of Management

Marketing:
Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and
exchanging offerings that have value for customers, clients, partners, and society at large. (Approved
October 2007)
Marketing is the process of performing market research, selling products and/or services to customers
and promoting them via advertising to further enhance sales. It generates the strategy that underlies
sales techniques, business communication, and business developments. It is an integrated process
through which companies build strong customer relationships and create value for their customers and
for themselves.
Marketing is used to identify the customer, to satisfy the customer, and to keep the customer. With the
customer as the focus of its activities, it can be concluded that marketing management is one of the
major components of business management. Marketing evolved to meet the stasis in developing new
markets caused by mature markets and over capacities in the last 2-3 centuries. The adoption of
marketing strategies requires businesses to shift their focus from production to the perceived needs and
wants of their customers as the means of staying profitable.
The term marketing concept holds that achieving organizational goals depends on knowing the needs
and wants of target markets and delivering the desired satisfactions. It proposes that in order to satisfy
its organizational objectives, an organization should anticipate the needs and wants of consumers and
satisfy these more effectively than competitors.
The term developed from an original meaning which referred literally to going to a market to buy or sell
goods or services. Seen from a systems point of view, sales process engineering marketing is "a set of
processes that are interconnected and interdependent with other functions, whose methods can be
improved using a variety of relatively new approaches."
The Chartered Institute of Marketing defines marketing as "the management process responsible for
identifying, anticipating and satisfying customer requirements profitably."A different concept is the
value-based marketing which states the role of marketing to contribute to increasing shareholder value.
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In this context, marketing is defined as "the management process that seeks to maximize returns to
shareholders by developing relationships with valued customers and creating a competitive advantage."
The management of marketing is defined by Kotler and Keller as "the art and science of choosing target
markets and getting, keeping, and growing customers through creating, delivering, and communicating
superior customer value" (2012, p.27)
The Un-ending Debate of Marketing being an Art or Science
Marketing practice tended to be seen as a creative industry in the past, which included advertising,
distribution and selling. However, because the academic study of marketing makes extensive use of
social sciences, psychology, sociology, mathematics, economics, anthropology and neuroscience, the
profession is now widely recognized as a science, allowing numerous universities to offer Master-of-

Science (M. Sc) programmes. The overall process starts with marketing research and goes through
market segmentation, business planning and execution, ending with pre- and post-sales promotional
activities. It is also related to many of the creative arts. The marketing literature is also adept at re-
inventing itself and its vocabulary according to the times and the culture.
The marketing orientation evolved from earlier orientations, namely, the production orientation, the
product orientation and the selling orientation.
Orientation Profit Western Description

driver European
timeframe
Production[9] Production until the A firm focusing on a production orientation specializes in
methods 1950s producing as much as possible of a given product or service.
Thus, this signifies a firm exploiting economies of scale until
the minimum efficient scale is reached. A production
orientation may be deployed when a high demand for a
product or service exists, coupled with a good certainty that
consumer tastes will not rapidly alter (similar to the sales
orientation).
Product[9] Quality of until the A firm employing a product orientation is chiefly concerned
the 1960s with the quality of its own product. A firm would also assume
product that as long as its product was of a high standard, people
would buy and consume the product.
Selling[9] Selling 1950s and A firm using a sales orientation focuses primarily on the
methods 1960s selling/promotion of a particular product, and not
determining new consumer desires as such. Consequently,
this entails simply selling an already existing product, and
using promotion techniques to attain the highest sales
possible.
Such an orientation may suit scenarios in which a firm holds

dead stock, or otherwise sells a product that is in high
demand, with little likelihood of changes in consumer tastes
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diminishing demand.
Marketing[9] Needs and 1970 to The 'marketing orientation' is perhaps the most common
wants of present orientation used in contemporary marketing. It involves a firm
customers day essentially basing its marketing plans around the marketing
concept, and thus supplying products to suit new consumer
tastes. As an example, a firm would employ market research
to gauge consumer desires, use R&D to develop a product
attuned to the revealed information, and then utilize

promotion techniques to ensure persons know the product
exists.
Contemporary (Present) Approach

Recent approaches in marketing include relationship marketing with focus on the customer, business
marketing or industrial marketing with focus on an organization or institution and social marketing with
focus on benefits to society. [10] New forms of marketing also use the internet and are therefore called
internet marketing or more generally e-marketing, online marketing, search engine marketing, desktop
advertising or affiliate marketing. It attempts to perfect the segmentation strategy used in traditional
marketing. It targets its audience more precise, and is sometimes called personalized marketing or one-
to-one marketing. Internet marketing is sometimes considered to be broad in scope, because it not only
refers to marketing on the Internet, but also includes marketing done via e-mail and wireless media.
Orientation Profit driver Western Description

European
timefram
e
Relationship Building and 1960s to Emphasis is placed on the whole relationship between
marketing / keeping present suppliers and customers. The aim is to provide the best
Relationship good day possible customer service and build customer loyalty.
[10]
management customer
relations
Business Building and 1980s to In this context, marketing takes place between
marketing / keeping present businesses or organizations. The product focus lies on
Industrial relationships day industrial goods or capital goods rather than consumer
marketing between products or end products. Different forms of marketing
organizations activities, such as promotion, advertising and
communication to the customer are used.
Social Benefit to 1990s to Similar characteristics as marketing orientation but with
marketing[10] society present the added proviso that there will be a curtailment of any
day harmful activities to society, in either product,
production, or selling methods.
Branding Brand value 2000s to In this context, "branding" is the main company
present philosophy and marketing is considered an instrument of
day branding philosophy.
Customer orientation
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A firm in the market economy survives by producing goods that persons are willing and able to buy.
Consequently, ascertaining consumer demand is vital for a firm's future viability and even existence as a
going concern. Many companies today have a customer focus (or market orientation). This implies that
the company focuses its activities and products on consumer demands. Generally, there are three ways
of doing this: the customer-driven approach, the market change identification approach and the product
innovation approach.
In the consumer-driven approach, consumer wants are the drivers of all strategic marketing decisions.
No strategy is pursued until it passes the test of consumer research. Every aspect of a market offering,
including the nature of the product itself, is driven by the needs of potential consumers. The starting
point is always the consumer. The rationale for this approach is that there is no reason to spend R&D
funds developing products that people will not buy. History attests to many products that were
commercial failures in spite of being technological breakthroughs.

A formal approach to this customer-focused marketing is known as SIVA (Solution, Information, Value,
Access). This system is basically the four Ps renamed and reworded to provide a customer focus. The
SIVA Model provides a demand/customer-centric alternative to the well-known 4Ps supply side model
(product, price, placement, promotion) of marketing management.
If any of the 4Ps were problematic or were not in

Product → Solution the marketing factor of the business, the business
could be in trouble and so other companies may
appear in the surroundings of the company, so the
Price → Value
consumer demand on its products will decrease.
Place → Access
Promotion → Information
Corporate orientation
In this sense, a firm's marketing department is often seen as of prime importance within the functional
level of an organization. Information from an organization's marketing department would be used to
guide the actions of other departments within the firm. As an example, a marketing department could
ascertain (via marketing research) that consumers desired a new type of product, or a new usage for an
existing product. With this in mind, the marketing department would inform the R&D department to
create a prototype of a product/service based on consumers' new desires.
The production department would then start to manufacture the product, while the marketing
department would focus on the promotion, distribution, pricing, etc. of the product. Additionally, a
firm's finance department would be consulted, with respect to securing appropriate funding for the
development, production and promotion of the product. Inter-departmental conflicts may occur, should
a firm adhere to the marketing orientation. Production may oppose the installation, support and
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servicing of new capital stock, which may be needed to manufacture a new product. Finance may
oppose the required capital expenditure, since it could undermine a healthy cash flow for the
organization.
Building and Delivering Customer Value and Satisfaction

As it is used in the business world, customer value is the amount of benefit that a customer will get from
a service or product relative to its cost. Some businesspeople explain customer value as “realization”
compared to “sacrifice.” Realization is a formal term for what customers get out of their purchases.
Sacrifice is what they pay for the product or service.
Businesses of all sizes use customer value as part of a greater analysis to determine how well they are

supplying their customer base. Detailed research might include what customers generally do with the
products they receive, or how they use services to increase the value of assets like real estate.
Businesses also look at the prices of their products in order to price them competitively.
Businesses that identify the value of their wares to customers might go a step further and consider other
similar ideas. In order to generate more thought about customer value, and to reach out to a customer
base, a business might promote a customer value proposition. The customer value proposition is
basically a promise of benefits from a vendor to customers.
We see examples of customer value propositions all the time in advertising. Companies pinpoint the
benefits that they believe a customer will realize, and display them in advertising to attract more
customers. The question is whether these propositions are made in good faith, or whether they may not
be entirely true.
When business leaders and others are talking about customer value, it is important that everyone at the
table understands that customer value does not relate to the value of customers, but to the value that
customers receive from the business. Those who are talking about how valuable customers are to a
business might use terms like customer retention, or refer to the customer base as “valued customers,”
or VIPs. Since customer service is also a critical element for many businesses, it's possible that these two
ideas might sometimes get confused.
Along with the basic idea of customer value, other terms help further define that value precisely.
Relative performance identifies how the product or service gives customer value relative to what
competitors offer. Access cost is something that business analysts add into the mix as an estimated cost
of the effort involved in purchase. Value propositions often include these levels of detail to help leaders
look at how well a business is serving its intended audience.
Creating Customer Value - 10 Lessons from Konosuke Matsushita - Founder of Panasonic.
When Konosuke Matsushita began working for himself, in 1918, he had almost nothing: no money, no
real formal education, no connections. Yet, his small firm flourished under the guiding hand of a clever,
wise, and inspired entrepreneur. Konosuke Matsushita began the Panasonic’s journey by inventing a
two-socket light fixture. This very important, yet elegantly simple, breakthrough led to what is now
one of the world's largest electronics companies. In the late 1980s, Matsushita’s revenues hit a
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whopping $42 billion.

“The main purpose of production is to manufacture items of good quality for daily use in abundant
supply, thereby enhancing and improving the life for everyone and it is this goal that I am dedicated.
Achieving this mission is the ultimate purpose of Matsushita Electric, and we will devote untiring
energy to realize this goal.” – Konosuke Matsushita
Put the Customer First: As he built his company, Konosuke Matsushita never lost sight of the
importance of putting the needs of his customers and the public first. Panasonic's vision of the digital
future is driven by the needs and aspirations of its business customers and millions of consumers around
the world who use their products every day. By sharing their customers’ dream to live a fuller life,
Panasonic provides ways of working smarter and enjoying the rewards of technological advances.
Treat Your Products Like Your Children: Konosuke Matsushita had extraordinary passion for both
manufacturing and the products his company made. "The goods we make here every day," he would tell
his employees, "are like children we raise with tender care. Selling them is like seeing those children

grow up and go out into the world. It is only natural, then, that we should be concerned about how they
are getting on in their lives, and so go and see for ourselves." Matsushita believed that maintaining this
concern for what you produce is the first step toward building an ordinary supplier-client relationship
into a stronger link based on mutual trust.
Complaints Strengthen Ties: Far from being an attack, a complaint should be treated as a valuable
opportunity to strengthen ties. "Naturally I'm delighted when a buyer expresses compliments,"
Konosuke Matsushita would say, "but I'm just as pleased to get a letter of complaint." His reasoning was
that if customers didn't bother to complain, that meant they had already decided not to buy any more
products from your company. If, on the other hand, they expressed their dissatisfaction, even to the
point of seriously considering going elsewhere for their needs, they were still interested. As long as you
are sincere, treat their complaint with respect, and root out the cause of the problem. The relationship
will become stronger for it.
People Before Products: Konosuke Matsushita kept saying, “We produce people, and we also produce
electrical goods." He always believed that the measure of a company was the people who worked for it,
that no enterprise could succeed if its employees did not grow as human beings, and that business, first
and foremost, was about cultivating human potential. No matter how much capital, technology or
equipment an enterprise boasts, it is bound to fail if its human resources are not developed. And
Matsushita did not mean merely improving employees' technical know-how, management, or sales
skills, though these are certainly part of the concept. For him, the true aim of personnel development
was to cultivate individual self-reliance and responsibility, to guide employees to an understanding of
the value and significance of their own work and of the obligation of the company to contribute to
society.
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Customer Satisfaction
Customer satisfaction, a business term, is a measure of how products and services supplied by a
company meet or surpass customer expectation. It is seen as a key performance indicator within
business and is part of the four of a Balanced Scorecard.
In a competitive marketplace where businesses compete for customers, customer satisfaction is seen
as a key differentiator and increasingly has become a key element of business strategy.

However, the importance of customer satisfaction diminishes when a firm has increased bargaining
power. For example, cell phone plan providers, such as AT&T and Verizon, participate in an industry that
is an oligopoly, where only a few suppliers of a certain product or service exist. As such, many cell phone
plan contracts have a lot of fine print with provisions that they would never get away if there were, say,
a hundred cell phone plan providers, because customer satisfaction would be way too low, and
customers would easily have the option of leaving for a better contract offer.
There is a substantial body of empirical literature that establishes the benefits of customer satisfaction
for firms.
Organizations need to retain existing customers while targeting non-customers. Measuring customer
satisfaction provides an indication of how successful the organization is at providing products and/or
services to the marketplace.
Customer satisfaction is an abstract concept and the actual manifestation of the state of satisfaction will
vary from person to person and product/service to product/service. The state of satisfaction depends on
a number of both psychological and physical variables which correlate with satisfaction behaviors such
as return and recommend rate. The level of satisfaction can also vary depending on other factors the
customer, such as other products against which the customer can compare the organization's products.
Work done by Parasuraman, Zeithaml and Berry (Leonard L) between 1985 and 1988 delivered
SERVQUAL which provides the basis for the measurement of customer satisfaction with a service by
using the gap between the customer's expectation of performance and their perceived experience of
performance. This provides the researcher with a satisfaction "gap" which is semi-quantitative in nature.
Cronin and Taylor extended the disconfirmation theory by combining the "gap" described by
Parasuraman, Zeithaml and Berry as two different measures (perception and expectation) into a single
measurement of performance relative to expectation.
The usual measures of customer satisfaction involve a survey with a set of statements using a Likert
Technique or scale. The customer is asked to evaluate each statement in terms of their perception and
expectation of performance of the service being measured. Arguably, consumers are less complex than
some of these surveys tend to portend. They are basically in two simple states; satisfied or not satisfied.
On or off, just like a switch. A business can measure its customer satisfaction index by relating the
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aggregates of satisfied customers versus dissatisfied customers.
Retaining Customers
In today's challenging economy and competitive business world, retaining customer base is critical to
success. If you don't give your customers some good reasons to stay, your competitors will give them a
reason to leave. Customer retention and satisfaction drive profits. It's far less expensive to cultivate
your existing customer base and sell more services to them than it is to seek new, single-transaction
customers. Most surveys across industries show that keeping one existing customer is five to seven
times more profitable than attracting one new one.
Benefits of Customer Retention: Statistics1

1. Acquiring new customers can cost five times more than satisfying and retaining current
customers
2. A 2% increase in customer retention has the same effect on profits as cutting costs by 10%
3. The average company loses 10% of its customers each year
4. A 5% reduction in customer defection rate can increase profits by 25-125%, depending on the
industry
5. The customer profitability rate tends to increase over the life of a retained customer
Marketing Environment
The marketing environment surrounds and impacts upon the organization. There are three key
perspectives on the marketing environment, namely the 'macro-environment,' the 'micro-environment'
and the 'internal environment'.
The micro-environment
This environment influences the

organization directly. It includes
suppliers that deal directly or
indirectly, consumers and
customers, and other local
stakeholders. Micro tends to
suggest small, but this can be
misleading. In this context, micro
describes the relationship
between firms and the driving
forces that control this
relationship. It is a more local
relationship, and the firm may
exercise a degree of influence.
The macro-environment
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This includes all factors that can influence and organization, but that are out of their direct control. A
company does not generally influence any laws (although it is accepted that they could lobby or be part
of a trade organization). It is continuously changing, and the company needs to be flexible to adapt.
There may be aggressive competition and rivalry in a market. Globalization means that there is always
the threat of substitute products and new entrants. The wider environment is also ever changing, and
the marketer needs to compensate for changes in culture, politics, economics and technology.
Analyzing the environment - Five Forces Analysis
Five Forces Analysis helps the marketer to contrast a competitive environment. It has similarities with
other tools for environmental audit, such as PEST analysis, but tends to focus on the single, stand alone,
business or SBU (Strategic Business Unit) rather than a single product or range of products. For example,
Dell would analyse the market for Business Computers i.e. one of its SBUs.

Five forces analsysis looks at five key
areas namely the threat of entry, the
power of buyers, the power of
suppliers, the threat of substitutes,
and competitive rivalry.
The threat of entry.
 Economies of scale e.g. the

benefits associated with bulk
purchasing.
 The high or low cost of entry
e.g. how much will it cost for
the latest technology?
 Ease of access to distribution
channels e.g. Do our
competitors have the
distribution channels sewn
up?
 Cost advantages not related to the size of the company e.g. personal contacts or knowledge that
larger companies do not own or learning curve effects.
 Will competitors retaliate?
 Government action e.g. will new laws be introduced that will weaken our competitive position?
 How important is differentiation? e.g. The Champagne brand cannot be copied. This de-
sensitizes the influence of the environment.
The power of buyers.

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 This is high where there a few, large players in a market e.g. the large grocery chains.
 If there are a large number of undifferentiated, small suppliers e.g. small farming businesses
supplying the large grocery chains.
 The cost of switching between suppliers is low e.g. from one fleet supplier of trucks to another.
The power of suppliers.
The power of suppliers tends to be a reversal of the power of buyers.

 Where the switching costs are high e.g. Switching from one software supplier to another.
 Power is high where the brand is powerful e.g. Cadillac, Pizza Hut, Microsoft.
 There is a possibility of the supplier integrating forward e.g. Brewers buying bars.
 Customers are fragmented (not in clusters) so that they have little bargaining power e.g.
Gas/Petrol stations in remote places.

The threat of substitutes
 Where there is product-for-product substitution e.g. email for fax Where there is substitution of
need e.g. better toothpaste reduces the need for dentists.
 Where there is generic substitution (competing for the currency in your pocket) e.g. Video
suppliers compete with travel companies.
 We could always do without e.g. cigarettes.
Competitive Rivalry
 This is most likely to be high where entry is likely; there is the threat of substitute products, and
suppliers and buyers in the market attempt to control. This is why it is always seen in the center
of the diagram
The Internal environment.
All factors that are internal to the organization are known as the 'internal environment'. They are
generally audited by applying the 'Five Ms' which are Men, Money, Machinery, Materials and Markets.
The internal environment is as important for managing change as the external. As marketers we call the
process of managing internal change 'internal marketing.'
Essentially we use marketing approaches to aid communication and change management.
The external environment can be audited in more detail using other approaches such as SWOT Analysis,
Michael Porter's Five Forces Analysis or PEST Analysis.
Strengths, Weaknesses, Opportunities and Threats (SWOT).
SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning
and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and
threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors
In SWOT, strengths and weaknesses are internal factors.

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For example:
A strength could be:
 Your specialist marketing expertise.

 A new, innovative product or service.
 Location of your business.
 Quality processes and procedures.

 Any other aspect of your business that adds value to your product or service.
A weakness could be:

Lack of marketing expertise.
 Undifferentiated products or services
(i.e. in relation to your competitors).
 Location of your business.
 Poor quality goods or services.
 Damaged reputation.
In SWOT, opportunities and threats are

external factors.
For example:
An opportunity could be:
 A developing market such as the Internet.

 Mergers, joint ventures or strategic alliances.
 Moving into new market segments that offer improved profits.
 A new international market.
 A market vacated by an ineffective competitor.
A threat could be:
 A new competitor in your home market.

 Price wars with competitors.
 A competitor has a new, innovative product or service.
 Competitors have superior access to channels of distribution.
 Taxation is introduced on your product or service.
A word of caution - SWOT analysis can be very subjective. Do not rely on SWOT too much. Two people
rarely come-up with the same final version of SWOT. TOWS analysis is extremely similar. It simply looks
at the negative factors first in order to turn them into positive factors. So use SWOT as guide and not a
prescription.
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Simple rules for successful SWOT analysis.
 Be realistic about the strengths and weaknesses of your organization when conducting SWOT
analysis.
 SWOT analysis should distinguish between where your organization is today, and where it could
be in the future.
 SWOT should always be specific. Avoid grey areas.
 Always apply SWOT in relation to your competition i.e. better than or worse than your
competition.
 Keep your SWOT short and simple. Avoid complexity and over analysis
 SWOT is subjective.
Once key issues have been identified with your SWOT analysis, they feed into marketing objectives.

SWOT can be used in conjunction with other tools for audit and analysis, such as PEST analysis and
Porter's Five-Forces analysis. So SWOT is a very popular tool with marketing students because it is quick
and easy to learn. During the SWOT exercise, list factors in the relevant boxes. It's that simple. Below are
some FREE examples of SWOT analysis - click to go straight to them
Do you need a more advanced SWOT Analysis?
Some of the problems that you may encounter with SWOT are as a result of one of its key benefits i.e. its
flexibility. Since SWOT analysis can be used in a variety of scenarios, it has to be flexible. However this
can lead to a number of anomalies. Problems with basic SWOT analysis can be addressed using a more
critical POWER SWOT.
The Real SWOT
SWOT as taught is today’s business schools is little more than Scientific Wild Ass Guess (SWAGs)
according to Cranfield’s Professor Malcolm McDonald. He makes the point that many threats are the
same regardless of the business environment that is being audited. For example, common-all-garden
threats would include the weather, competitors, changes in technology, regulation and deregulation,
and the impacts of competing countries. In strengths you’ll get good products – but that could mean
anything. Under weaknesses you get equally general and vacuous points such as the price is too high.
This type of SWOT analysis is too general and is not much use to marketing managers. SWOT needs to
be segment specific. SWOT should look at groups of customers and their perception of your brand, what
price they will pay, the place where they buy it, the products that they buy and so on. Otherwise your
SWOT analysis is averaged and not specific.
SWOT analysis should be focused upon a segment of the market. Then you can ask – what are the
Critical Success Factors(CSFs) that are pivotal to the buyer decision process – in that segment? Then you
need to weight the CSFs so that you can separate those drivers that are most important. When
considering strengths and weaknesses, in true marketing fashion you need to take the consumers’
perspective when completing the SWOT. You also must factor in the customers’ view of your business in
relation to the competition i.e. relative to competitors. So you can match key CSFs to opportunities. You
can rank those opportunities that are most profitable or sustainable. Then you need to factor in the
impact of threats. Finally you should dovetail SWOT with the rest of your strategic thinking.
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Amazon SWOT Analysis
Amazon is a profitable organization. In 2005 profits for the three months to June dipped 32% to $52m
(£29.9m) from $76m in the same period in 2004. Sales jumped 26% to $1.75bn. Until recent years
Amazon was experiencing large losses, due to its huge initial set up costs. The recent dip is due to
promotions that have offered reduced delivery costs to consumers.
Strengths.
 Amazon is a profitable organization. In 2005 profits for the three months to June dipped 32% to
$52m (£29.9m) from $76m in the same period in 2004. Sales jumped 26% to $1.75bn. Until
recent years Amazon was experiencing large losses, due to its huge initial set up costs. The
recent dip is due to promotions that have offered reduced delivery costs to consumers.

 Customer Relationship Management (CRM) and Information Technology (IT) support Amazon's
business strategy. The company carefully records data on customer buyer behaviour. This
enables them to offer to an individual specific items, or bundles of items, based upon
preferences demonstrated through purchases or items visited.
 Amazon is a huge global brand. It is recognisable for two main reasons. It was one of the original
dotcoms, and over the last decade it has developed a customer base of around 30 million
people. It was an early exploiter of online technologies for e-commerce, which made it one of
the first online retailers. It has built on nits early successes with books, and now has product
categories that include electronics, toys and games, DIY and more.
Weaknesses.
 As Amazon adds new categories to its business, it risks damaging its brand. Amazon is the
number one retailer for books. Toy-R-Us is the number one retailers for toys and games.
Imagine if Toys-R-Us began to sell books. This would confuse its consumers and endanger its
brands. In the same way, many of the new categories, for example automotive, may prove to be
too confusing for customers.
 The company may at some point need to reconsider its strategy of offering free shipping to
customers. It is a fair strategy since one could visit a more local retailer, and pay no costs.
However, it is rumoured that shipping costs could be up to $500m, and such a high figure would
undoubtedly erode profits.
Opportunities.
 The company is now increasingly cashing in on its credentials as an online retail pioneer by
selling its expertise to major store groups. For example, British retailer Marks and Spencer
announced a joint venture with Amazon to sell its products and service online. Other recent
collaborations have been with Target, Toys-R-Us and the NBA. Amazon's new Luxembourg-
based division aims to provide tailored services to retailers as a technology service provider in
Europe.
 There are also opportunities for Amazon to build collaborations with the public sector. For
example the company announced a deal with the British Library, London, in 2004. The benefit is
that customers c an search for rare or antique books. The library's catalogue of published works
is now on the Amazon website, meaning it has details of more than 2.5m books on the site.
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 In 2004 Amazon moved into the Chinese market, by buying china's biggest online retailer,
Joyo.com . The deal was reported to be worth around $75m (£40m). Joyo.com has many
similarities to its new owner, in that it retails books, movies, toys, and music at discounted
prices.
Threats
 All successful Internet businesses attract competition. Since Amazon sells the same or similar
products as high street retailers and other online businesses, it may become more and more
difficult to differentiate the brand from its competitors. Amazon does have it s brand. It also has
a huge range of products. Otherwise, price competition could damage the business.
 International competitors may also intrude upon Amazon as it expands. Those domestic (US-
based) rivals unable to compete with Amazon in the US, may entrench overseas and compete

with them on foreign fronts. Joint ventures, strategic alliances and mergers could see Amazon
losing its top position in some markets.
 The products that Amazon sells tend to be bought as gifts, especially at Christmas. This means
that there is an element of seasonality to the business. However, by trading in overseas markets
in different cultures such seasonality may not be enduring.
Bharti Airtel SWOT Analysis.
Weaknesses - An often cited original weakness is that when the business was started by Sunil Bharti
Mittal over 15 years ago, the business has little knowledge and experience of how a cellular telephone
system actually worked. So the start-up business had to outsource to industry experts in the field.
Strengths
 Bharti Airtel has more than 65 million customers (July 2008). It is the largest cellular provider in
India, and also supplies broadband and telephone services - as well as many other
telecommunications services to both domestic and corporate customers.
 Other stakeholders in Bharti Airtel include Sony-Ericsson, Nokia - and Sing Tel, with whom they
hold a strategic alliance. This means that the business has access to knowledge and technology
from other parts of the telecommunications world.
 The company has covered the entire Indian nation with its network. This has underpinned its
large and rising customer base.
Weaknesses
 An often cited original weakness is that when the business was started by Sunil Bharti Mittal
over 15 years ago, the business has little knowledge and experience of how a cellular telephone
system actually worked. So the start-up business had to outsource to industry experts in the
field.
 Until recently Airtel did not own its own towers, which was a particular strength of some of its
competitors such as Hutchison Essar. Towers are important if your company wishes to provide
wide coverage nationally.
 The fact that the Airtel has not pulled off a deal with South Africa's MTN could signal the lack of
any real emerging market investment opportunity for the business once the Indian market has
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become mature.
Opportunities
 The company possesses a customized version of the Google search engine which will enhance
broadband services to customers. The tie-up with Google can only enhance the Airtel brand, and
also provides advertising opportunities in Indian for Google.
 Global telecommunications and new technology brands see Airtel as a key strategic player in the
Indian market. The new iPhone will be launched in India via an Airtel distributorship. Another
strategic partnership is held with BlackBerry Wireless Solutions.
 Despite being forced to outsource much of its technical operations in the early days, this
allowed Airtel to work from its own blank sheet of paper, and to question industry approaches
and practices - for example replacing the Revenue-Per-Customer model with a Revenue-Per-

Minute model which is better suited to India, as the company moved into small and remote
villages and towns.
 The company is investing in its operation in 120,000 to 160,000 small villages every year. It sees
that less well-off consumers may only be able to afford a few tens of Rupees per call, and also so
that the business benefits are scalable - using its 'Matchbox' strategy.
 Bharti Airtel is embarking on another joint venture with Vodafone Essar and Idea Cellular to
create a new independent tower company called Indus Towers. This new business will control
more than 60% of India's network towers. IPTV is another potential new service that could
underpin the company's long-term strategy.
Threats
 Airtel and Vodafone seem to be having an on/off relationship. Vodafone which owned a 5.6%
stake in the Airtel business sold it back to Airtel, and instead invested in its rival Hutchison Essar.
Knowledge and technology previously available to Airtel now moves into the hands of one of its
competitors.
 The quickly changing pace of the global telecommunications industry could tempt Airtel to go
along the acquisition trail which may make it vulnerable if the world goes into recession.
Perhaps this was an impact upon the decision not to proceed with talks about the potential
purchase of South Africa's MTN in May 2008. This opened the door for talks between Reliance
Communication's Anil Ambani and MTN, allowing a competing Inidan industrialist to invest in
the new emerging African telecommunications market.
 Bharti Airtel could also be the target for the takeover vision of other global telecommunications
players that wish to move into the Indian market.
Airtel comes to you from Bharti Airtel Limited, India's largest integrated and the first private telecom
services provider with a footprint in all the 23 telecom circles. Bharti Airtel since its inception has been
at the forefront of technology and has steered the course of the telecom sector in the country with its
world class products and services. The businesses at Bharti Airtel have been structured into three
individual strategic business units (SBU's) - Mobile Services, Airtel Telemedia Services & Enterprise
Services.
PEST Analysis
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It is very important that an organization considers its environment before beginning the marketing
process. In fact, environmental analysis should be continuous and feed all aspects of planning.
The organization's marketing environment is made up of:
1. The internal environment e.g. staff (or internal customers), office technology, wages and finance, etc.
2. The micro-environment e.g. our external customers, agents and distributors, suppliers, our
competitors, etc.
3. The macro-environment e.g. Political (and legal) forces, Economic forces, Socio-cultural forces, and
Technological forces. These are known as PEST factors.

Political Factors: The political arena has a huge influence upon the
regulation of businesses, and the spending power of consumers and
other businesses. Issues to be considered:
1.How stable is the political environment?
2.Will government policy influence laws that regulate or tax your

business?
3.What is the government's position on marketing ethics?
4. What is the government's policy on the economy?
5. Does the government have a view on culture and religion?
6. Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others?
Economic Factors: Marketers need to consider the state of a trading economy in the short and long-
terms. This is especially true when planning for international marketing. You need to look at:
1. Interest rates.
2. The level of inflation Employment level per capita.
3. Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and so on.
Socio-cultural Factors: The social and cultural influences on business vary from country to country. It is
very important that such factors are considered. Factors include:
1.What is the dominant religion?
2.What are attitudes to foreign products and services?

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3.Does language impact upon the diffusion of products onto markets?
4.How much time do consumers have for leisure?
5.What are the roles of men and women within society?

6.How long are the population living? Are the older generations wealthy?
7.Do the population have a strong/weak opinion on green issues?
Technological Factors: Technology is vital for competitive advantage, and is a major driver of
globalization. Consider the following points:

1. Does technology allow for products and services to be made more cheaply and to a better standard of
quality?
2.Do the technologies offer consumers and businesses more innovative products and services such as
Internet banking, new generation mobile telephones, etc?
3.How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions,
etc?
4.Does technology offer companies a new way to communicate with consumers e.g. banners, Customer
Relationship Management (CRM), etc?
Marketing Research
Marketing research is the systematic gathering, recording, and analysis of data about issues relating to
marketing products and services. The goal of marketing research is to identify and assess how changing
elements of the marketing mix impacts customer behavior. The term is commonly interchanged with
market research; however, expert practitioners may wish to draw a distinction, in that market research
is concerned specifically with markets, while marketing research is concerned specifically about
marketing processes.
Marketing research is often partitioned into two sets of categorical pairs, either by target market:
 Consumer marketing research, and

 Business-to-business (B2B) marketing research
Or, alternatively, by methodological approach:
 Qualitative marketing research, and

 Quantitative marketing research
Consumer marketing research is a form of applied sociology that concentrates on understanding the
April 10, 2020
preferences, attitudes, and behaviors of consumers in a market-based economy, and it aims to

understand the effects and comparative success of marketing campaigns. The field of consumer
marketing research as a statistical science was pioneered by Arthur Nielsen with the founding of the
ACNielsen Company in 1923.
Thus, marketing research may also be described as the systematic and objective identification,
collection, analysis, and dissemination of information for the purpose of assisting management in
decision making related to the identification and solution of problems and opportunities in marketing.
Role of marketing research (MR)

The task of marketing research is to provide management with relevant, accurate, reliable, valid, and
current information. Competitive marketing environment and the ever-increasing costs attributed to
poor decision making require that marketing research provide sound information. Sound decisions are
not based on gut feeling, intuition, or even pure judgment.
Marketing managers make numerous strategic and tactical decisions in the process of identifying and
satisfying customer needs. They make decisions about potential opportunities, target market selection,
market segmentation, planning and implementing marketing programs, marketing performance, and
control. These decisions are complicated by interactions between the controllable marketing variables
of product, pricing, promotion, and distribution. Further complications are added by uncontrollable
environmental factors such as general economic conditions, technology, public policies and laws,
political environment, competition, and social and cultural changes. Another factor in this mix is the
complexity of consumers. Marketing research helps the marketing manager link the marketing variables
with the environment and the consumers. It helps remove some of the uncertainty by providing relevant
information about the marketing variables, environment, and consumers. In the absence of relevant
information, consumers' response to marketing programs cannot be predicted reliably or accurately.
Ongoing marketing research programs provide information on controllable and non-controllable factors
and consumers; this information enhances the effectiveness of decisions made by marketing managers.
[4]
Traditionally, marketing researchers were responsible for providing the relevant information and
marketing decisions were made by the managers. However, the roles are changing and marketing
researchers are becoming more involved in decision making, whereas marketing managers are
becoming more involved with research. The role of marketing research in managerial decision making is
explained further using the framework of the "DECIDE" model:
D >>>>> Define the marketing problem

E >>>>> Enumerate the controllable and uncontrollable decision factors
C >>>> > Collect relevant information
I >>>>> Identify the best alternative
D >>>>> Develop and implement a marketing plan
E >>>>> Evaluate the decision and the decision process
The DECIDE model conceptualizes managerial decision making as a series of six steps. The decision
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process begins by precisely defining the problem or opportunity, along with the objectives and
constraints.[4] Next, the possible decision factors that make up the alternative courses of action
(controllable factors) and uncertainties (uncontrollable factors) are enumerated. Then, relevant
information on the alternatives and possible outcomes is collected. The next step is to select the best
alternative based on chosen criteria or measures of success. Then a detailed plan to implement the
alternative selected is developed and put into effect. Last, the outcome of the decision and the decision
process itself are evaluated.
Marketing research characteristics
First, marketing research is systematic. Thus systematic planning is required at all the stages of the
marketing research process. The procedures followed at each stage are methodologically sound, well
documented, and, as much as possible, planned in advance. Marketing research uses the scientific
method in that data are collected and analyzed to test prior notions or hypotheses.

Marketing research is objective. It attempts to provide accurate information that reflects a true state of
affairs. It should be conducted impartially. While research is always influenced by the researcher's
research philosophy, it should be free from the personal or political biases of the researcher or the
management. Research which is motivated by personal or political gain involves a breach of professional
standards. Such research is deliberately biased so as to result in predetermined findings. The motto of
every researcher should be, "Find it and tell it like it is."
Comparison with other forms of business research
Other forms of business research include:
 Market research is broader in scope and examines all aspects of a business environment. It asks
questions about competitors, market structure, government regulations, economic trends,
technological advances, and numerous other factors that make up the business environment
(see environmental scanning). Sometimes the term refers more particularly to the financial
analysis of companies, industries, or sectors. In this case, financial analysts usually carry out the
research and provide the results to investment advisors and potential investors.
 Product research - This looks at what products can be produced with available technology, and
what new product innovations near-future technology can develop (see new product
development).
 Advertising research - is a specialized form of marketing research conducted to improve the

efficacy of advertising. Copy testing, also known as "pre-testing," is a form of customized
research that predicts in-market performance of an ad before it airs, by analyzing audience
levels of attention, brand linkage, motivation, entertainment, and communication, as well as
breaking down the ad’s flow of attention and flow of emotion. Pre-testing is also used on ads
still in rough (ripomatic or animatic) form.
Classification of marketing research
Organizations engage in marketing research for two reasons: (1) to identify and (2) solve marketing
problems. This distinction serves as a basis for classifying marketing research into problem identification
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research and problem solving research.
Problem identification research is undertaken to help identify problems which are, perhaps, not
apparent on the surface and yet exist or are likely to company image, market characteristics, sales
analysis, short-range forecasting, long range forecasting, and business trends research. Research of this
type provides information about the marketing environment and helps diagnose a problem. For
example, The findings of problem solving research are used in making decisions which will solve specific
marketing problems.
The Stanford Research Institute, on the other hand, conducts an annual survey of consumers that is
used to classify persons into homogeneous groups for segmentation purposes. The National Purchase
Diary panel (NPD) maintains the largest diary panel in the United States.

Standardized services are research studies conducted for different client firms but in a standard way.
For example, procedures for measuring advertising effectiveness have been standardized so that the
results can be compared across studies and evaluative norms can be established. The Starch Readership
Survey is the most widely used service for evaluating print advertisements; another well-known service
is the Gallup and Robinson Magazine Impact Studies. These services are also sold on a syndicated basis.
 Customized services offer a wide variety of marketing research services customized to suit a
client's specific needs. Each marketing research project is treated uniquely.
 Limited-service suppliers specialize in one or a few phases of the marketing research project.
Services offered by such suppliers are classified as field services, coding and data entry, data
analysis, analytical services, and branded products. Field services collect data through mail,
personal, or telephone interviewing, and firms that specialize in interviewing are called field
service organizations. These organizations may range from small proprietary organizations
which operate locally to large multinational organizations with WATS line interviewing facilities.
Some organizations maintain extensive interviewing facilities across the country for interviewing
shoppers in malls.
 Coding and data entry services include editing completed questionnaires, developing a coding
scheme, and transcribing the data on to diskettes or magnetic tapes for input into the computer.
NRC Data Systems provides such services.
 Analytical services include designing and pretesting questionnaires, determining the best means
of collecting data, designing sampling plans, and other aspects of the research design. Some
complex marketing research projects require knowledge of sophisticated procedures, including
specialized experimental designs, and analytical techniques such as conjoint analysis and
multidimensional scaling. This kind of expertise can be obtained from firms and consultants
specializing in analytical services.
 Data analysis services are offered by firms, also known as tab houses, that specialize in
computer analysis of quantitative data such as those obtained in large surveys. Initially most
data analysis firms supplied only tabulations (frequency counts) and cross tabulations
(frequency counts that describe two or more variables simultaneously). With the proliferation of
software, many firms now have the capability to analyze their own data, but, data analysis firms
are still in demand.
 Branded marketing research products and services are specialized data collection and analysis
procedures developed to address specific types of marketing research problems. These
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procedures are patented, given brand names, and marketed like any other branded product.
Types of marketing research
Marketing research techniques come in many forms, including:

 Ad Tracking – periodic or continuous in-market research to monitor a brand’s performance

using measures such as brand awareness, brand preference, and product usage. (Young, 2005)
 Advertising Research – used to predict copy testing or track the efficacy of advertisements for
any medium, measured by the ad’s ability to get attention, communicate the message, build the
brand’s image, and motivate the consumer to purchase the product or service. (Young, 2005)
 Brand equity research - how favorably do consumers view the brand?

 Brand association research - what do consumers associate with the brand?
 Brand attribute research - what are the key traits that describe the brand promise?
 Brand name testing - what do consumers feel about the names of the products?
 Commercial eye tracking research - examine advertisements, package designs, websites, etc. by
analyzing visual behavior of the consumer
 Concept testing - to test the acceptance of a concept by target consumers
 Coolhunting - to make observations and predictions in changes of new or existing cultural trends
in areas such as fashion, music, films, television, youth culture and lifestyle
 Buyer decision processes research - to determine what motivates people to buy and what
decision-making process they use
 Copy testing – predicts in-market performance of an ad before it airs by analyzing audience
levels of attention, brand linkage, motivation, entertainment, and communication, as well as
breaking down the ad’s flow of attention and flow of emotion. (Young, p 213)
 Customer satisfaction research - quantitative or qualitative studies that yields an understanding
of a customer's of satisfaction with a transaction
 Demand estimation - to determine the approximate level of demand for the product
 Distribution channel audits - to assess distributors’ and retailers’ attitudes toward a product,
brand, or company
 Internet strategic intelligence - searching for customer opinions in the Internet: chats, forums,
web pages, blogs... where people express freely about their experiences with products,
becoming strong "opinion formers"
 Marketing effectiveness and analytics - Building models and measuring results to determine the
effectiveness of individual marketing activities.
 Mystery Consumer or Mystery shopping - An employee or representative of the market
research firm anonymously contacts a salesperson and indicates he or she is shopping for a
product. The shopper then records the entire experience. This method is often used for quality
control or for researching competitors' products.
 Positioning research - how does the target market see the brand relative to competitors? - what
does the brand stand for?
 Price elasticity testing - to determine how sensitive customers are to price changes
 Sales forecasting - to determine the expected level of sales given the level of demand. With
respect to other factors like Advertising expenditure, sales promotion etc.
 Segmentation research - to determine the demographic, psychographic, and behavioural
characteristics of potential buyers
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 Online panel - a group of individual who accepted to respond to marketing research online
 Store audit - to measure the sales of a product or product line at a statistically selected store
sample in order to determine market share, or to determine whether a retail store provides
adequate service
 Test marketing - a small-scale product launch used to determine the likely acceptance of the
product when it is introduced into a wider market
 Viral Marketing Research - refers to marketing research designed to estimate the probability
that specific communications will be transmitted throughout an individuals Social Network.
Estimates of Social Networking Potential (SNP) are combined with estimates of selling
effectiveness to estimate ROI on specific combinations of messages and media.
All of these forms of marketing research can be classified as either problem-identification research or as

problem-solving research.
There are two main sources of data - primary and secondary. Primary research is conducted from
scratch. It is original and collected to solve the problem in hand. Secondary research already exists since
it has been collected for other purposes. It is conducted on data published previously and usually by
someone else. Secondary research costs far less than primary research, but seldom comes in a form that
exactly meets the needs of the researcher.
A similar distinction exists between exploratory research and conclusive research. Exploratory research
provides insights into and comprehension of an issue or situation. It should draw definitive conclusions
only with extreme caution. Conclusive research draws conclusions: the results of the study can be
generalized to the whole population.
Exploratory research is conducted to explore a problem to get some basic idea about the solution at the
preliminary stages of research. It may serve as the input to conclusive research. Exploratory research
information is collected by focus group interviews, reviewing literature or books, discussing with
experts, etc. This is unstructured and qualitative in nature. If a secondary source of data is unable to
serve the purpose, a convenience sample of small size can be collected. Conclusive research is
conducted to draw some conclusion about the problem. It is essentially, structured and quantitative
research, and the output of this research is the input to management information systems (MIS).
Exploratory research is also conducted to simplify the findings of the conclusive or descriptive research,
if the findings are very hard to interpret for the marketing managers.
Marketing research methods
Methodologically, marketing research uses the following types of research designs: [5]
Based on questioning:
 Qualitative marketing research - generally used for exploratory purposes - small

number of respondents - not generalizable to the whole population - statistical
significance and confidence not calculated - examples include focus groups, in-depth
interviews, and projective techniques
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 Quantitative marketing research - generally used to draw conclusions - tests a specific

hypothesis - uses random sampling techniques so as to infer from the sample to the
population - involves a large number of respondents - examples include surveys and
questionnaires. Techniques include choice modelling, maximum difference preference
scaling, and covariance analysis.
Based on observations:
 Ethnographic studies -, by nature qualitative, the researcher observes social

phenomena in their natural setting - observations can occur cross-sectionally
(observations made at one time) or longitudinally (observations occur over several
time-periods) - examples include product-use analysis and computer cookie traces. See
also Ethnography and Observational techniques.
 Experimental techniques -, by nature quantitative, the researcher creates a quasi-

artificial environment to try to control spurious factors, then manipulates at least one of
the variables - examples include purchase laboratories and test markets
Researchers often use more than one research design. They may start with secondary research to get
background information, then conduct a focus group (qualitative research design) to explore the issues.
Finally they might do a full nation-wide survey (quantitative research design) in order to devise specific
recommendations for the client.
Commonly used marketing research terms
Market research techniques resemble those used in political polling and social science research. Meta-
analysis (also called the Schmidt-Hunter technique) refers to a statistical method of combining data
from multiple studies or from several types of studies. Conceptualization means the process of
converting vague mental images into definable concepts. Operationalization is the process of converting
concepts into specific observable behaviors that a researcher can measure. Precision refers to the
exactness of any given measure. Reliability refers to the likelihood that a given operationalized
construct will yield the same results if re-measured. Validity refers to the extent to which a measure
provides data that captures the meaning of the operationalized construct as defined in the study. It asks,
“Are we measuring what we intended to measure?”
 Applied research sets out to prove a specific hypothesis of value to the clients paying for the
research. For example, a cigarette company might commission research that attempts to show
that cigarettes are good for one's health. Many researchers have ethical misgivings about doing
applied research.
 Sugging (from "SUG", for selling under the guise of market research) forms a sales technique in
which sales people pretend to conduct marketing research, but with the real purpose of
obtaining buyer motivation and buyer decision-making information to be used in a subsequent
sales call.
 Frugging comprises the practice of soliciting funds under the pretense of being a research
organization.
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Marketing Information System
A Marketing Information System can be defined as 'a system in which marketing information is formally
gathered, stored, analysed and distributed to managers in accordance with their informational needs on
a regular basis' (Jobber, 2007). The system is created through an understanding of the information
needs of marketing management. It is available to supply information when, where and how the

manager requires it. Data is taken from the marketing environment and transferred into the information
that marketing managers can use in their decision-making processes.
Data: Basic form of knowledge. Example: One isolated statistic. Information: A combination of Data that
provide relevant knowledge.
A Marketing Information System can be defined as 'People, equipment and procedures to gather, sort,
analyze, evaluate and distribute needed, timely and accurate information to marketing decision makers'
(Gray Armstrong, 2008). A marketing information system (MIS)consists of people, equipment and
procedures to gather, sort, analyze, evaluate and distribute needed, timely and accurate information to
marketing decision makers. The MIS begins and ends with marketing managers. First, it interacts with
these managers to assess their information needs. Next, it develops the needed information from
internal company records, marketing intelligence activities and the marketing research process.
Information analysis processes the information to make it more useful. Finally, the MIS distributes
information to managers in the right form at the right time to help them in marketing planning,
implementation and control.
DEVELOPING INFORMATION
The information needed by marketing managers comes from internal company records, marketing
intelligence and marketing research. The information analysis system then processes this information to
make it more useful for managers.
Internal Records
Information gathered from sources within the company to evaluate marketing performances and to
detect marketing problems and opportunities. Most marketing managers use internal records and
reports regularly, especially for making day-to-day planning, implementation and control decisions.
Internal records information consists of information gathered from sources within the company to
evaluate marketing performance and to detect marketing problems and opportunities.
Example
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Office World offers shoppers a free membership card when they make their first purchase at their store.
The card entitles shoppers to discounts on selected items, but also provides valuable information to the
chain. Since Office World encourages customers to use their card with each purchase, it can track what
customers buy, where and when. Using this information, it can track the effectiveness of promotions,
trace customers who have defected to other stores and keep in touch with them if they relocate.
Information from internal records is usually quicker and cheaper to get than information from other
sources, but it also presents some problems. Because internal information was for other purposes, it
may be incomplete or in the wrong form for making marketing decisions. For example, accounting
department sales and cost data used for preparing financial statements need adapting for use in
evaluating product, sales force or channel performance.
Marketing Intelligence
Everyday information about developments in changing marketing environment that helps managers

prepares marketing plans. The marketing intelligence system determines the intelligence needed,
collects it by searching the environment and delivers it to marketing managers who need it. Marketing
intelligence comes from many sources. Much intelligence is from the company's personnel - executives,
engineers and scientists, purchasing agents and the sales force. But company people are often busy and
fail to pass on important information. The company must 'sell' its people on their importance as
intelligence gatherers, train them to spot new developments and urge them to report intelligence hack
to the company. The company must also persuade suppliers, resellers and customers to pass along
important intelligence. Some information on competitor’s conies from what they say about themselves
in annual reports, speeches, press releases and advertisements. The company can also learn about
competitors from what others say about them in business publications and at trade shows. Or the
company can watch what competitors do - buying and analyzing competitors' products, monitoring their
sales and checking for new patents. Companies also buy intelligence information from outside suppliers.
Some companies set up an office to collect and circulate marketing intelligence. The staff scans relevant
publications, summarize important news and send news bulletins to marketing managers. They develop
a file of intelligence information and help managers evaluate new information. These services greatly
improve the quality of information available to marketing managers. The methods used to gather
competitive information range from the ridiculous to the illegal. Managers routinely shred documents
because wastepaper baskets can be an information source.
Market Information Systems (otherwise known as Market Intelligence Systems, Market Information
Services or MIS, but not to be confused with Management Information Systems) are information
systems used in gathering, analyzing and disseminating information about prices and other information
relevant to farmers, animal rearers, traders, processors and others involved in handling agricultural
products. Market Information Systems play an important role in agro-industrialisation and food supply
chains. With the advance of ICTs in developing countries, the income- generation opportunities offered
by Market Information Systems have been sought by international development organizations, NGOs
and businesses alike.
Components of a marketing information system
A marketing information system (MIS) is intended to bring together disparate items of data into a
coherent body of information. An MIS is, as will shortly be seen, more than raw data or information
suitable for the purposes of decision making. An MIS also provides methods for interpreting the
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information the MIS provides. Moreover, as Kotler's 1 definition says, an MIS is more than a system of
data collection or a set of information technologies:
"A marketing information system is a continuing and interacting structure of people, equipment and
procedures to gather, sort, analyse, evaluate, and distribute pertinent, timely and accurate information
for use by marketing decision makers to improve their marketing planning, implementation, and
control".
Figure illustrates the major components of an MIS, the environmental factors monitored by the system
and the types of marketing decision which the MIS seeks to underpin.
The marketing information systems and its subsystems
The explanation of this model of an MIS begins with a description of each of its four main constituent
parts: the internal reporting systems, marketing research system, marketing intelligence system and
marketing models. It is suggested that whilst the MIS varies in its degree of sophistication - with many in
the industrialised countries being computerised and few in the developing countries being so - a fully
fledged MIS should have these components, the methods (and technologies) of collection, storing,
retrieving and processing data notwithstanding.
Internal reporting systems: All enterprises which have been in operation for any period of time nave a
wealth of information. However, this information often remains under-utilised because it is
compartmentalised, either in the form of an individual entrepreneur or in the functional departments of
larger businesses. That is, information is usually categorised according to its nature so that there are, for
example, financial, production, manpower, marketing, stockholding and logistical data. Often the
entrepreneur, or various personnel working in the functional departments holding these pieces of data,
do not see how it could help decision makers in other functional areas. Similarly, decision makers can
fail to appreciate how information from other functional areas might help them and therefore do not
request it. The internal records that are of immediate value to marketing decisions are: orders received,
stockholdings and sales invoices. These are but a few of the internal records that can be used by
marketing managers, but even this small set of records is capable of generating a great deal of
information. Below, is a list of some of the information that can be derived from sales invoices.
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· Product type, size and pack type by territory

· Product type, size and pack type by type of account
· Product type, size and pack type by industry
· Product type, size and pack type by customer
· Average value and/or volume of sale by territory
· Average value and/or volume of sale by type of account
· Average value and/or volume of sale by industry

· Average value and/or volume of sale by sales person
By comparing orders received with invoices an enterprise can establish the extent to which it is
providing an acceptable level of customer service. In the same way, comparing stockholding records
with orders received helps an enterprise ascertain whether its stocks are in line with current demand

patterns.
Marketing intelligence systems: A marketing intelligence system is a set of procedures and data sources
used by marketing managers to sift information from the environment that they can use in their decision
making. This scanning of the economic and business environment can be undertaken in a variety of
ways, including2
Unfocused The manager, by virtue of what he/she reads, hears and watches exposes him/herself
scanning to information that may prove useful. Whilst the behaviour is unfocused and the
manager has no specific purpose in mind, it is not unintentional
Semi- Again, the manager is not in search of particular pieces of information that he/she is
focused actively searching but does narrow the range of media that is scanned. For instance, the
scanning manager may focus more on economic and business publications, broadcasts etc. and
pay less attention to political, scientific or technological media.
Informal This describes the situation where a fairly limited and unstructured attempt is made to
search obtain information for a specific purpose. For example, the marketing manager of a firm
considering entering the business of importing frozen fish from a neighbouring country
may make informal inquiries as to prices and demand levels of frozen and fresh fish.
There would be little structure to this search with the manager making inquiries with
traders he/she happens to encounter as well as with other ad hoc contacts in ministries,
international aid agencies, with trade associations, importers/exporters etc.
Formal This is a purposeful search after information in some systematic way. The information
search will be required to address a specific issue. Whilst this sort of activity may seem to share
the characteristics of marketing research it is carried out by the manager him/herself
rather than a professional researcher. Moreover, the scope of the search is likely to be
narrow in scope and far less intensive than marketing research.
Marketing intelligence is the province of entrepreneurs and senior managers within an agribusiness. It
involves them in scanning newspaper trade magazines, business journals and reports, economic
forecasts and other media. In addition it involves management in talking to producers, suppliers and
customers, as well as to competitors. Nonetheless, it is a largely informal process of observing and
conversing. Some enterprises will approach marketing intelligence gathering in a more deliberate
fashion and will train its sales force, after-sales personnel and district/area managers to take cognizance
April 10, 2020
of competitors' actions, customer complaints and requests and distributor problems. Enterprises with
vision will also encourage intermediaries, such as collectors, retailers, traders and other middlemen to
be proactive in conveying market intelligence back to them.
Unit 2
Analyzing Consumer Market

Consumer Markets of today are experiencing rapid changes and is flooded with new opportunities and
new challenges. The significant changes in the consumers' buying behavior, urbanized lifestyle and
growth of service sector are the main reasons behind the changed scenario in the consumer market.
The Consumer Market can be classified into following type of markets:

Consumer Products Market
This market comprises of the markets for different consumer products. This includes market for
consumer durables, FMCG (Fast Moving Consumer Goods), consumer electronic goods, domestic
electrical appliances, cosmetics, jewelry, furniture, air conditioners, bicycles and apparels.
In Consumer Products Market aggressive marketing is required because the customers of consumer
product market lack in loyalty and tend to shift from one brand to another very quickly. The consumer
products market is characterized by high level of competition among the sellers. The companies are
continuously engaged in modification of business models and business activities to match up with the
changing consumer needs. Moreover, the norms of WTO (World Trade Organization) is resulting in
various mergers, alliances and tie-ups among the companies. The companies are being compelled to go
for these alliances to remain competitive and to exist in the market because, losing the competitive
edge will ensure complete market exit.
Food and Beverages Market
This market consists of the sub-markets like markets for dairy products, bakery products, packaged food
products, Beverages, Confectionary, Beer, Alcohol, meat and poultry products.
This type of Consumer Market is full of growth opportunities because of changing lifestyle of present
era. Consumer Awareness and Brand Loyalty of customers help this market to grow to a different high.
Retail Market
The Retail Market comprises of the Supermarkets, Departmental Stores, Food Chain Outlets, Specialty
Stores and Franchise Sores.
This type of Consumer Market is discovering new business opportunities with each passing day because
of the rapidly changing lifestyle and spending pattern of the people. Even in the suburban areas and in
small towns, Departmental Stores are coming up from the big retail chain houses as westernized
lifestyle and western culture is making their presence felt all over the world. This type of market
generates low profit margins but has high growth potential. To utilize this growth potential, companies
need to modify their business activities in accordance with the changing lifestyle and changing
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consumption trends of the customers. If the customers receive enough value for money, only then they
will be loyal to the brands and will make repeated purchase.
Transportation Service Market
This type of Consumer Market consists of Postal Services, Courier Services and Logistic Services.
Transportation Service Market is generally dominated by a large no. of medium and small enterprises
and a few no. of large enterprises. Companies in this type of market essentially require brand name and
strong distribution network and significant amount of capital investment. With emergence of technology
based advanced facilities like e-commerce and with the increasing use of internet, new horizons are
opening for this type of market. The companies can utilize the advantages of reduced costing, improved
customer relationship and accelerated movement of materials and can go for strategic tie ups with

international business houses. This way, they can make proper use of the new business opportunities
which has been generated by the rising level of Foreign Direct Investment and Economic Growth around
the world.
Consumer Market of India – Report by McKinsey Global Institute
According to a McKinsey Global Institute (MGI) study titled 'Bird of Gold': The Rise of India's Consumer
Market, the total consumption in India is likely to quadruple making India the fifth largest consumer
market by 2025. Urban India will account for nearly 68 per cent of consumption growth while rural
consumption will grow by 32 per cent by 2025.
India ranks first in the Nielsen Global Consumer Confidence survey released in October 2010. “India is
one of the fastest growing markets in the world and the current consumer belief that recession would
soon be a thing of the past has filled Indians with confidence,” said Piyush Mathur, Managing Director,
South Asia, The Nielsen Co. With 129 index points, India ranked number one in the recent round of the
survey, followed by Thailand (117) and Australia (115).
According to recent reports, the Indian consumer sector is attracting more interest from both private
equity (PE) and mergers and acquisitions (M&A).
“This heightened level of PE interest is evidenced by three PE deals which have happened in the
consumer space in quick succession in the last few months — Henderson Equity Partners' investment in
Genesis Colors, IL&FS' private equity investment in The Mobile Store and investment by Bain Capital &
TPG Growth in Lilliput Kidswear,” said Ajay Arora, Partner, Transaction Advisory Services, Ernst & Young.
Retail
The BMI India Retail Report for the first-quarter of 2011 released forecasts that the total retail sales will
grow from US$ 392.63 billion in 2011 to US$ 674.37 billion by 2014. The highly optimistic forecast is
based on strengthened economic growth, population expansion; the increasing wealth of individuals
and the rapid construction of organized retail infrastructure.
Moreover, India has been ranked third among the most attractive nations for retail investment among
30 emerging markets by the US-based global management consulting firm A T Kearney in its ninth
April 10, 2020
annual Global Retail Development Index (GRDI) 2010.
Cumulative foreign direct investment (FDI) inflows in single-brand retail trading during April 2000 to
October 2010 stood at US$ 197.04 million, according to the Department of Industrial Policy and
Promotion (DIPP).
Consultancy firm Technopak has said that organised modern retail segment in India will grow by over
three times during the next five years (from 2010), to reach a figure of US$ 80 billion. Raghav Gupta,
President, Technopak, observed that the country's modern consumption level will double within five
years to an annual figure of US$ 1.5 trillion from the present level (taking 2010 as the reference year) of
US$ 750 billion.

Bharti retail has enhanced its position in Northern India by opening 59 stores in 2010; Bharti-Walmart is
expected to open 10-15 wholesale locations by 2013. Marks and Spencer is also contemplating on new
stores in next few years.
Future Group has set up a unique community-family shopping center in Bangalore. The retailer is also
planning to add 10-15 new private labels in its range of brands.
In order to tap the growing opportunity in the segment, Aditya Birla Retail plans to invest up to US$
44.34 million in 2010-11 to expand its 'More' brand. The group will open 100 new supermarkets of
'More' and 8-10 new hypermarkets under the More Megastore brand.
The Raheja Group promoted department store chain, Shoppers Stop has lined up investments worth
US$ 54 million to open 25 more stores in the next four years, as demand for lifestyle products picks up.
Besides penetrating deeper into metros where it already has a presence, Shoppers Stop will enter eight
new cities such as Bhopal, Vijayawada and Siliguri, among others, said Govind Shrikhande, Chief
Executive, Shoppers Stop Ltd.
Moreover, leading watchmaker Titan Industries Limited announced to invest about US$ 21.83 million for
opening 50 premium watch outlets Helios in the next five years to attain a sales target of US$ 87.31
million.
Furthermore, international chains such as Wal-Mart are increasingly looking at India. Wal-Mart Stores
Inc, the world's biggest retailer, plans to accelerate its rollout of wholesale stores in India. Raj Jain, Chief
of Indian Operations for Arkansas-based Wal-Mart, said the firm now expects to open 10-12 wholesale
centres in India over two to three years, from an earlier target of five years, as real estate prices have
become more attractive.
Direct Selling
The Indian direct-selling industry is likely to see major competition with both domestic and international
majors such as Nu Skin, Burlington, Salad Master and Golden Warp planning to start operations in two
years.
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According to Chavi Hemanth, Secretary General, Indian Direct Selling Association (IDSA), “The Indian
market is clearly a growth story in every sphere of economic activity. We receive more than three
membership enquiries every week.”
Direct selling firm Tupperware India, known for its storage containers plans to foray into the rural
markets in the next two-three years. "We have solid plans for the rural market. We are working on
bringing products for rural people as well,” said Asha Gupta, Managing Director, Tupperware India.
Direct selling fast moving consumer goods (FMCG) company, Amway India Enterprises is aiming at a 25
per cent growth to clock US$ 545.7 million by 2012.
The direct selling industry in India pegged at US$ 907.84 million is all set to exceed the US$ 1.54 billion
mark by 2012-13.

Rural Consumers
Mega retail chains are looking to build a high-quality supply chain-retailers such as Bharti-Wal-Mart,
Carrefour and Reliance are working to strengthen their supply chain formula by roping in farmers as
stakeholders. Despite being the biggest names in the trade, these retailers are ploughing rural areas to
teach innovative farming methods and find the best suppliers among them.
Hindustan Unilever Ltd (HUL) is planning to significantly increase its rural reach. Currently, HUL products
reach approximately 250,000 rural retail outlets and the company intends to scale it up to nearly
750,000 outlets in two years time.
Swiss FMCG player, Nestle plans to make further inroads into the rural markets. The company has asked
its sales team to deliver “6,000 new sales points every month in rural areas” to expand presence in
Indian villages, according to Antonio Helio Waszyk, Chairman and Managing Director, Nestle India.
FMCG
According to a FICCI-Technopak report, India's FMCG sector is poised to reach US$ 43 billion by 2013
and US$ 74 billion by 2018. The report states that implementation of the proposed goods and services
tax (GST) and the opening of foreign direct investment (FDI) are expected to fuel growth further and
raise the industry's size to US$ 47 billion by 2013 and US$ 95 billion by 2018.
According to a study by research firm The Nielson Company, the fast moving consumer goods market
(FMCG) in rural India is tipped to touch US$100 billion by 2025 on the back of "unrelenting" demand
driven by rising income levels. According to the study, rural India accounts for more than half of sales in
some of the largest FMCG categories.
At present, rural consumers spend about US$ 9 billion per annum on FMCG items and product
categories such as instant noodles, deodorant and fabric, with the pace of consumption growing much
faster than urban areas, as per the findings.
The fast moving consumer goods (FMCG) sector is expected to grow 13 per cent during FY 2010-11 on
the back of strong economic growth, a good monsoon and subsequent rise in rural income, according to
an industry body.
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Consumer Durables
The Consumer durables recorded a growth of 31 per cent in October 2010.
According to the Consumer Electronics and Appliances Manufacturers Association (CEAMA), the
consumer durables and electronics sector has registered a 12-13 per cent growth in 2010. According to
the industry body, the total size of consumer durables and electronics sector is around US$ 7.85 billion.
The sales of display category products such as Flat Panel Displays -- LCDs, PDPs rose phenomenally by 45
per cent this year, while the sales of air conditioner and home appliances surged by nearly 12 per cent
and 23 per cent respectively.
The Indian consumer electronic industry represents immense growth potential for years to come. The

industry is expected to grow at a CAGR of nearly 19 per cent during 2010-2013 to US$ 9.5 billion,
according to a research report “Global Consumer Electronics Market Forecast to 2013”, by RNCOS.
Automobiles
Passenger vehicles sales escalated to 33.58 per cent in April-September 2010 over the same period in
2009, according to the Society of Indian Automobile Manufacturers (SIAM). Moreover SIAM expects the
Indian passenger vehicle market to grow by 12-13 per cent for the year ending March 2011.
Domestic passenger car sales grew by 20.79 per cent to 1,61,497 units in November 2010 as compared
to 1,33,703 units in the same month in 2009.
As per Ernst & Young analysis the vehicle market in India is estimated to grow by 12 per cent annually
over the next five years from 1.89 million units in 2008-09 to 3.75 million units by 2014. German luxury
car-manufacturer Audi has sold 2,178 cars from January – September 2010, recording a growth of 63 per
cent over the same period in 2009 (1333 cars, January – September 2009).
Toyota Motor Corp will invest about US$ 103 million to produce engines and transmissions for the Etios
compact car in India developed for the local market.
Yamaha plans to double the number of its sales outlets in India in the next five years to tap the growing
demand in villages as economic growth boosts incomes. India Yamaha Motor Pvt. may increase
showrooms to 2,000, mostly in small towns and rural hubs, according to Koji Arai, Director and Chief
Sales Officer. The company is refurbishing some of the existing outlets in small towns and rural hubs and
adding new ones called Yamaha Bike Corners, organising free motorcycle service camps and test rides.
If Yamaha is looking at the rural market, US-based Harley Davidson, the iconic heavyweight motorcycle
maker is targeting the urban consumers in India. Harley Davidson opened its first outlet in Hyderabad
recently and plans to open more across the country. According to Anoop Prakash, Managing Director,
Harley-Davidson India, the company had well placed plans to open showrooms in various cities
(including Delhi & Mumbai) in 2010.
Consumer Market of India – Study by KPMG

April 10, 2020
Consumer Markets (CM)
Though India was largely unaffected by the global economic crisis of 2008-09 as compared to other
emerging economies, the country did face a small road-bump in its fast paced economic growth. While
Indians are still highly optimistic about the resurgence of economic conditions after the crisis, they
continue to maintain a tight grip on their wallet.
Indian consumer markets are changing fast with dramatic shifts in buying behavior, development of
modern urban lifestyle, emergence of the kind of trend conscious consumers that India has never seen
before, increased use of service sectors and the power of retailer as the key between buyer and seller.
As these changes sweep across India, the country is witnessing the creation of new markets and further
expansion of the existing ones, hence intense competition and few easy pickings.

Consumer Markets is one of the largest among KPMG's lines of business, and include some of the
leading names in the F&B (Food & Beverage), FMCG (Fast Moving Consumer Goods), Retail, logistics and
consumer durables segments.
KPMG in India, with its vast repertoire of skill sets and resources is well positioned to offer clients
business advisory services, customized to meet their needs. These include but are not restricted to
providing internal audit, accounting advisory, financial advisory, business advisory and tax & regulatory
services specific to any of the below mentioned sub segments and industries.
Providing sophisticated yet meaningful approaches is a result of KPMG's alignment towards clear lines
of business in which it has dedicated professionals specializing in the chosen lines of business.
Consumer Products
Intense competition, shifting customer loyalties, aggressive marketing and the presence of global
players are some of the salient features that typify this sector. Companies are realigning their activities
towards meeting specific customer needs, radically changing business models and exploring new ways
of collaboration between buyers and sellers.

Organizations are increasingly using the Internet as a highly visible and effective business channel and
redefining the rules of customer relationships and mergers, alliances and marketing tie-ups would
increasingly impact companies and businesses.
Sub segments in this sector
 Food and Beverage (Including Alcoholic/ distilleries and non-alcoholic beverages, milk and dairy
products, bakery and milling products, cocoa products and confectionaries, frozen foods, meat
and poultry, all processed foods including packaged/ready to eat and snack foods)
 FMCG (Including, footwear and other accessories, cosmetics, toiletries and personal and
consumer care products)
 Consumer durables (Including electronics, furniture, domestic electrical appliances, home
furnishings and fixtures, recreational goods, etc.)
 Gems & Jewellery (Branded precious stones, gems, diamond and gold products)
 Agribusiness.
April 10, 2020
Retail
The advent of the New Year 2009 heralded interesting yet challenging times for the global retail
industry. The Indian retail industry is one of the fastest growing industries in the country over the past
couple of years and is no exception. While 2008 showed the growth for the industry on the whole, the
last quarter of 2008 was impacted by the slowdown and the liquidity crunch and this somewhat
continued in 2009.
The year gone by was packed with several significant developments for the Indian retail industry,
including the entry of many global retailers, growing acceptance of the new and modern retailing
formats, success of many speciality retail formats and the rising competition in the regional markets

beyond the metros and Tier I cities.
Increase in luxury retailing on one hand, and elevated interest of more and more retail players towards
rural retailing on the other, showcases Retail development in India in the true sense.
Sub segments in this sector
 Food and beverage retailing/ food chain outlets

 Grocery and FMCG retailing
 Apparel and accessory retailing
 Lifestyle retailing
 Retail of agriculture produce
 Other consumer products and consumer durable retail outlets like furniture, electronics, white
goods, home furnishings and fixtures, domestic electrical appliances and recreational goods, etc.
Logistics
The growth of Indian industry has been quite significant and even during the crises it has maintained the
upward trend. Efficient logistics sector is a key enabler of India’s competitiveness with logistics service
providers as the major stakeholders.
The future would be characterized by increasing scale and integration of logistics service providers at
one end and the emergence of niche logistics service providers in specific segments in response to the
need for more economical yet agile supply chains which are necessary for internal and external trade
competitiveness.
Burgeoning trade, manufacturing and consumption in India pose significant challenges to setting up,
managing and executing efficient, bottom-line friendly logistics operations. The sector is mired in
complexities and is in need of approaches that would bring in order, simplicity and hence efficiencies
and profitability, that last.
Sub segments in the sector
 Logistics/Supply chain strategy providers

 Postal and courier services.
April 10, 2020
Consumer Buyer Behavior
If a marketer can identify consumer buyer behaviour, he or she will be in a better position to target
products and services at them. Buyer behaviour is focused upon the needs of individuals, groups and
organisations. It is important to understand the relevance of human needs to buyer behaviour
(remember, marketing is about satisfying needs). Let's look at human motivations as introduced by
Abraham Maslow by his hierarchy of needs: The

hierarchy is triangular. This is because as you move
up it, fewer and fewer people satisfy higher level
needs. We begin at the bottom level.
Physiological needs such as food, air, water, heat,

and the basic necessities of survival need to be
satisfied. At the level of safety, man has a place to
live that protects him from the elements and
predators. At the third level we meet our social and
belongingness needs i.e. we marry, or join groups of
friends, etc.
The final two levels are esteem and self-

actualisation. Fewer people satisfy the higher level
needs.
Esteem means that you achieve something that makes you recognised and gives personal satisfaction,
for example writing a book. Self-actualisation is achieved by few. Here a person is one of a small number
to actually do something. For example, Neil Armstrong self-actualised as the first person to reach the
Moon.
To understand consumer buyer
The model introduces the concept a differing consumer needs quite well.
behaviour is to understand how the
person interacts with the
marketing mix. As described by
Cohen (1991), the marketing mix
inputs (or the four P's of price,
place, promotion, and product) are
adapted and focused upon the
consumer. The psychology of each
individual considers the product or
service on offer in relation to their
April 10, 2020
own culture, attitude, previous

learning, and personal perception.
The consumer then decides
whether or not to purchase, where
to purchase, the brand that he or
she prefers, and other choices.
Consumer Buying Behaviour – An Extended Perspective
Consumer Buying Behaviour
What influences consumers to purchase products or services? The consumer buying process is a
complex matter as many internal and external factors have an impact on the buying decisions of the

consumer.
When purchasing a product there several processes, which consumers go through. These will be
discussed below.
1. Problem/Need Recognition
How do you decide you want to buy a particular product or service? It could be that your DVD player
stops working and you now have to look for a new one, all those DVD films you purchased you can no
longer play! So you have a problem or a new need. For high value items like a DVD player or a car or
other low frequency purchased products this is the process we would take. However, for impulse low
frequency purchases e.g. confectionery the process is different.
2. Information search
So we have a problem, our DVD player no longer works and we need to buy a new one. What’s the
solution? Yes go out and purchase a new one, but which brand? Shall we buy the same brand as the one
that blew up? Or stay clear of that? Consumer often go on some form of information search to help
them through their purchase decision. Sources of information could be family, friends, neighbours who
may have the product you have in mind, alternatively you may ask the sales people, or dealers, or read
specialist magazines like What DVD? to help with their purchase decision. You may even actually
examine the product before you decide to purchase it.
3. Evaluation of different purchase options.
So what DVD player do we purchase? Shall it be Sony, Toshiba or Bush? Consumers allocate attribute
factors to certain products, almost like a point scoring system which they work out in their mind over
which brand to purchase. This means that consumers know what features from the rivals will benefit
them and they attach different degrees of importance to each attribute. For example sound maybe
better on the Sony product and picture on the Toshiba , but picture clarity is more important to you then
sound. Consumers usually have some sort of brand preference with companies as they may have had a
good history with a particular brand or their friends may have had a reliable history with one, but if the
decision falls between the Sony DVD or Toshiba then which one shall it be? It could be that the a review
the consumer reads on the particular Toshiba product may have tipped the balance and that they will
April 10, 2020
purchase that brand.
4. Purchase decision
Through the evaluation process discussed above consumers will reach their final purchase decision and
they reach the final process of going through the purchase action e.g. The process of going to the shop
to buy the product, which for some consumers can be as just as rewarding as actually purchasing the
product. Purchase of the product can either be through the store, the web, or over the phone.
Post Purchase Behaviour
Ever have doubts about the product after you purchased it? This simply is post purchase behaviour and

research shows that it is a common trait amongst purchasers of products. Manufacturers of products
clearly want recent consumers to feel proud of their purchase, it is therefore just as important for
manufacturers to advertise for the sake of their recent purchaser so consumers feel comfortable that
they own a product from a strong and reputable organisation. This limits post purchase behaviour. i.e.
You feel reassured that you own the latest advertised product.
Factors influencing the behaviour of buyers.
Consumer behaviour is affected by many uncontrollable factors. Just think, what influences you before
you buy a product or service? Your friends, your upbringing, your culture, the media, a role model or
influences from certain groups?
Culture is one factor that influences behaviour. Simply culture is defined as our attitudes and beliefs. But
how are these attitudes and beliefs developed? As an individual growing up, a child is influenced by their
parents, brothers, sister and other family member who may teach them what is wrong or right. They
learn about their religion and culture, which helps them develop these opinions, attitudes and beliefs
(AIO) . These factors will influence their purchase behaviour however other factors like groups of
friends, or people they look up to may influence their choices of purchasing a particular product or
service. Reference groups are particular groups of people some people may look up towards to that
have an impact on consumer behaviour. So they can be simply a band like the Spice Girls or your
immediate family members. Opinion leaders are those people that you look up to because your respect
their views and judgements and these views may influence consumer decisions. So it maybe a friend
who works with the IT trade who may influence your decision on what computer to buy. The economical
environment also has an impact on consumer behaviour; do consumers have a secure job and a regular
income to spend on goods? Marketing and advertising obviously influence consumers in trying to evoke
them to purchase a particular product or service.
Peoples social status will also impact their behaviour. What is their role within society? Are they Actors?
Doctors? Office worker? and mothers and fathers also? Clearly being parents affects your buying habits
depending on the age of the children, the type of job may mean you need to purchase formal clothes,
the income which is earned has an impact. The lifestyle of someone who earns £250000 would clearly
be different from someone who earns £25000. Also characters have an influence on buying decision.
Whether the person is extrovert (out going and spends on entertainment) or introvert (keeps to
themselves and purchases via online or mail order) again has an impact on the types of purchases made.
April 10, 2020
Maslow’s Hierarchy of Needs
Abraham Maslow hierarchy of needs theory sets out to explain what motivated individuals in life to
achieve. He set out his answer in a form of a hierarchy. He suggests individuals aim to meet basic
psychological needs of hunger and thirst. When this has been met they then move up to the next stage
of the hierarchy, safety needs, where the priority lay with job security and the knowing that an income
will be available to them regularly. Social needs come in the next level of the hierarchy, the need to
belong or be loved is a natural human desire and people do strive for this belonging. Esteem need is the
need for status and recognition within society, status sometimes drives people, the need to have a good
job title and be recognised or the need to wear branded clothes as a symbol of status.
Self-actualisation the realisation that an individual has reached their potential in life. The point of self-
actualisation is down to the individual, when do you know you have reached your point of self-

fulfilment?
But how does this concept help an organisation trying to market a product or service?
Well as we have established earlier within this website, marketing is about meeting needs and providing
benefits, Maslows concept suggests that needs change as we go along our path of striving for self-
actualisation. Supermarket firms develop value brands to meet the psychological needs of hunger and
thirst. Harrods develops products and services for those who want have met their esteem needs. So
Maslows concept is useful for marketers as it can help them understand and develop consumer needs
and wants.
Types of buying behaviour.
There are four typical types of buying behaviour based on the type of products that intends to be
purchased. Complex buying behaviour is where the individual purchases a high value brand and seeks a
lot of information before the purchase is made. Habitual buying behaviour is where the individual buys a
product out of habit e.g. a daily newspaper, sugar or salt. Variety seeking buying behaviour is where the
individual likes to shop around and experiment with different products. So an individual may shop
around for different breakfast cereals because he/she wants variety in the mornings! Dissonance
reducing buying behaviour is when buyer are highly involved with the purchase of the product, because
the purchase is expensive or infrequent. There is little difference between existing brands an example
would be buying a diamond ring, there is perceived little difference between existing diamond brand
manufacturers.
To Summarize:
• There are five stages of consumer purchase behaviour

• Problem/Need Recognition
• Information search.
• Evaluation of purchases.
• Purchase decision.
• Post purchase behaviour.
• Culture has an impact on the company.
• Marketers should take into account Maslows hierarchy of needs
April 10, 2020
Business Markets
Business Marketing is the practice of individuals, or organizations, including commercial businesses,

governments and institutions, facilitating the sale of their products or services to other companies or
organizations that in turn resell them, use them as components in products or services they offer, or use
them to support their operations. Also known as industrial marketing, business marketing is also called
business-to-business marketing, or B2B marketing, for short. (Note that while marketing to government
entities shares some of the same dynamics of organizational marketing, B2G Marketing is meaningfully
different.)
Business marketing vs. consumer marketing
Although on the surface the differences between business and consumer marketing may seem obvious,

[says who?]
there are more subtle distinctions between the two with substantial ramifications. Dwyer and
Tanner (2006) note that business marketing generally entails shorter and more direct channels of
distribution.
While consumer marketing is aimed at large groups through mass media and retailers, the negotiation
process between the buyer and seller is more personal in business marketing. According to Hutt and
Speh (2004), most business marketers commit only a small part of their promotional budgets to
advertising, and that is usually through direct mail efforts and trade journals. While that advertising is
limited, it often helps the business marketer set up successful sales calls.
Marketing to a business trying to make a profit (business-to-business marketing) as opposed to an

individual for personal use (Business-to-Consumer, or B2C marketing) is similar in terms of the
fundamental principles of marketing. In B2C, B2B and B2G marketing situations, the marketer must
always:
 successfully match the product or service strengths with the needs of a definable target market;
 position and price to align the product or service with its market, often an intricate balance; and
 communicate and sell it in the fashion that demonstrates its value effectively to the target
market.
These are the fundamental principles of the 4 Ps of marketing (the marketing mix) first documented by E.
Jerome McCarthy in 1960.[1]
While "other businesses" might seem like the simple answer, Dwyer and Tanner (2006) say business
customers fall into four broad categories: companies that consume products or services, government
agencies, institutions and resellers.
The first category includes original equipment manufacturers, such as large automakers who buy gauges
to put in their cars and also small firms owned by 1-2 individuals who purchase products to run their
business. The second category - government agencies, is the biggest. In fact, the U.S. government is the
biggest single purchaser of products and services in the country, spending more than $300 billion
annually. But this category also includes state and local governments. The third category, institutions,
includes schools, hospitals and nursing homes, churches and charities. Finally, resellers consist of
wholesalers, brokers and industrial distributors.
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So what are the meaningful differences between B2B and B2C marketing?
A B2C sale is to a "Consumer" i.e. an individual who may be influenced by other factors such as family
members or friends, but ultimately the sale is to a single person who pays for the transaction. A B2B sale
is to a "Business" i.e. organization or firm. Given the complexity of organizational structure, B2B sales
typically involve multiple decision makers. The marketing mix is affected by the B2B uniqueness which
include complexity of business products and services, diversity of demand and the differing nature of the
sales itself (including fewer customers buying larger volumes). [2] Because there are some important
subtleties to the B2B sale, the issues are broken down beyond just the original 4 Ps developed by
McCarthy.

Business Buying Behaviour
A market consists of two parts consumer market and business market. Companies manufacture
products for consumer market but business market is equally large and strong. Typical business markets
consist of manufacturing plants, machinery, industrial equipments, etc. Companies need to study and
analyze factors affecting business markets and business buying behaviour.
In a business market, organizations buy goods and services for production of goods and services. In
terms of overall value business market is bigger than the consumer market. There are many
characteristic which set business market apart from consumer markets. Business buyer base is smaller
in comparison to consumer market. Consumer-supplier relationship is much stronger in a business
market owing to few players in the field. Customer and supplier are very dependent on each for
survival. For example, if car companies falter then tyre companies will suffer. So companies not only
have to monitor business market but also pay attention to end consumer market. Buying for the
business is a responsibility of purchase department which adheres to company rules and regulations.
The buying decision is influenced by many players ranging from
technical experts to the finance department. This means that sales people have to do multiple visits and
present information to different departments. In business market there is no distribution channel,
thereby reducing overhead cost.
From the above discussion it is clear that the business market functions differently from consumer
markets. Buying decision especially is more complex owing to many players. If buying decision is a re-
purchase than purchasing department would place the order with an old supplier. Companies keep a list
of approved vendors from which they choose as per purchase requirement. If buying decision is a
modification from previous order in terms of specifications, amount, price, etc. than companies’ looks to
have a discussion with suppliers. Purchase department may look to other suppliers for a modification
order. If the buying decision is a new product or service than a lengthy process is followed with
discussion and meeting between representatives from various departments.
Business buying behaviour is influenced by economical, company, individual and interpersonal factors.
Economical factors like regulatory changes, technology changes, competition, fiscal policy and monetary
policy influence buying behaviour. Business buyers are active in tracking and analyzing economical
factors. Company level factors also play a major role is deciding buying behaviour. Sales people have to
pay importance in understanding how purchase department is organized and players in the department.
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More professional are joining purchasing department making buying decision scientifically driven to align
with larger organizational goals. As inventory management is crucial, companies’ prefer long term
relation with suppliers. Many individuals from different departments are part of buying decision and it is
important for sales people to understand personality traits of as many participants as possible.
Geographical factor also influences buying behaviour as culture varies from country to country. Sales
people should be acquainted with different cultures.
Actual buying process can be understood from products’ perspective. If the product has less perceived
value and cost than business buyer ask for the lowest prices and offer high volume order. Suppliers in
turn offer standardize products at low prices. If the product has a high value and low cost business buyer
look for additional service or attributes with low price. If the product has high value and cost than the
business buyer look for branded product with an established reputation. Price is not a constraint for high

value products. To which suppliers put forward strategic long term alliance to accommodate technology
changes.
Buying process consists of following steps - purchase needs, requirement description, product
specification, floating intent of purchase, selecting a supplier; confirm delivery modules and timely
review of purchase.
Government and institutional buying differ from industrial buying because here products and services
providers are offered for free or fee to a large audience. Such a buying process requires a great deal of
paperwork and transparent bidding system.
It is clear from observing the above points that in business buying and consumer buying. Business
suppliers have to adapt to changes and employ a different marketing strategy.
Market Segmentation
The division of a market into different homogeneous groups of consumers is known as market
segmentation.
Rather than offer the same marketing mix to vastly different customers, market segmentation makes it
possible for firms to tailor the marketing mix for specific target markets, thus better satisfying customer
needs. Not all elements of the marketing mix are necessarily changed from one segment to the next. For
example, in some cases only the promotional campaigns would differ.
A market segment should be:
 measurable
 accessible by communication and distribution channels
 different in its response to a marketing mix
 durable (not changing too quickly)
 substantial enough to be profitable
A market can be segmented by various bases, and industrial markets are segmented somewhat
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differently from consumer markets, as described below.
Consumer Market Segmentation
A basis for segmentation is a factor that varies among groups within a market, but that is consistent
within groups. One can identify four primary bases on which to segment a consumer market:
 Geographic segmentation is based on regional variables such as region, climate, population

density, and population growth rate.
 Demographic segmentation is based on variables such as age, gender, ethnicity, education,

occupation, income, and family status.

 Psychographic segmentation is based on variables such as values, attitudes, and lifestyle.
 Behavioral segmentation is based on variables such as usage rate and patterns, price sensitivity,
brand loyalty, and benefits sought.
The optimal bases on which to segment the market depend on the particular situation and are
determined by marketing research, market trends, and managerial judgment.
Business Market Segmentation
While many of the consumer market segmentation bases can be applied to businesses and organizations,
the different nature of business markets often leads to segmentation on the following bases:
 Geographic segmentation - based on regional variables such as customer concentration, regional

industrial growth rate, and international macroeconomic factors.
 Customer type - based on factors such as the size of the organization, its industry, position in the
value chain, etc.
 Buyer behavior - based on factors such as loyalty to suppliers, usage patterns, and order size.
Profiling the Segments
The identified market segments are summarized by profiles, often given a descriptive name. From these
profiles, the attractiveness of each segment can be evaluated and a target market segment selected.
Targeting
Targeting is the second stage of the SEGMENT "Target" POSITION (STP) process. After the market has
been separated into its segments, the marketer will select a segment or series of segments and 'target'
it/them. Resources and effort will be targeted at the segment.
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The first is the single segment with a single product. In other word, the marketer targets a single product
offering at a single segment in a market with many segments. For example, British Airway's Concorde is a
high value product aimed specifically at business people and tourists willing to pay more for speed.
Secondly the marketer could ignore the differences in the segments, and choose to aim a single product
at all segments i.e. the whole market. This is typical in 'mass marketing' or where differentiation is less
important than cost. An example of this is the approach taken by budget airlines such as Go/
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Finally there is a multi-segment approach. Here a marketer will target a variety of different segments
with a series of differentiated products. This is typical in the motor industry. Here there are a variety of
products such as diesel, four-wheel-drive, sports saloons, and so on.
Positioning
As Popularized by Al Ries and Jack Trout

In their 1981 book, Positioning: The Battle for your Mind, Al Ries and Jack Trout describe how positioning
is used as a communication tool to reach target customers in a crowded marketplace. Jack Trout
published an article on positioning in 1969, and regular use of the term dates back to 1972 when Ries
and Trout published a series of articles in Advertising Age called "The Positioning Era." Not long
thereafter, Madison Avenue advertising executives began to develop positioning slogans for their clients
and positioning became a key aspect of marketing communications.
Positioning: The Battle for your Mind has become a classic in the field of marketing. The following is a
summary of the key points made by Ries and Trout in their book.
Information Overload
Ries and Trout explain that while positioning begins with a product, the concept really is about
positioning that product in the mind of the customer. This approach is needed because consumers are
bombarded with a continuous stream of advertising, with advertisers spending several hundred dollars
annually per consumer in the U.S. The consumer's mind reacts to this high volume of advertising by
accepting only what is consistent with prior knowledge or experience.
It is quite difficult to change a consumer's impression once it is formed. Consumers cope with
information overload by oversimplifying and are likely to shut out anything inconsistent with their
knowledge and experience. In an over-communicated environment, the advertiser should present a
simplified message and make that message consistent with what the consumer already believes by
focusing on the perceptions of the consumer rather than on the reality of the product.
Getting Into the Mind of the Consumer
The easiest way of getting into someone's mind is to be first. It is very easy to remember who is first, and
much more difficult to remember who is second. Even if the second entrant offers a better product, the
first mover has a large advantage that can make up for other shortcomings.
However, all is not lost for products that are not the first. By being the first to claim a unique position in
the mind the consumer, a firm effectively can cut through the noise level of other products. For example,
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Miller Lite was not the first light beer, but it was the first to be positioned as a light beer, complete with a
name to support that position. Similarly, Lowenbrau was the most popular German beer sold in America,
but Beck's Beer successfully carved a unique position using the advertising,
"You've tasted the German beer that's the most popular in America. Now taste the German beer that's
the most popular in Germany."
Consumers rank brands in their minds. If a brand is not number one, then to be successful it somehow
must relate itself to the number one brand. A campaign that pretends that the market leader does not
exist is likely to fail. Avis tried unsuccessfully for years to win customers, pretending that the number one
Hertz did not exist. Finally, it began using the line,

"Avis in only No. 2 in rent-a-cars, so why go with us? We try harder."
After launching the campaign, Avis quickly became profitable. Whether Avis actually tried harder was not
particularly relevant to their success. Rather, consumers finally were able to relate Avis to Hertz, which
was number one in their minds.
Another example is that of the soft-drink 7-Up, which was No. 3 behind Coke and Pepsi. By relating itself
to Coke and Pepsi as the "Uncola", 7-Up was able to establish itself in the mind of the consumer as a
desirable alternative to the standard colas.
When there is a clear market leader in the mind of the consumer, it can be nearly impossible to displace
the leader, especially in the short-term. On the other hand, a firm usually can find a way to position itself
in relation to the market leader so that it can increase its market share. It usually is a mistake, however,
to challenge the leader head-on and try to displace it.
Positioning of a Leader
Historically, the top three brands in a product category occupy market share in a ratio of 4:2:1. That is,
the number one brand has twice the market share of number two, which has twice the market share of
number three. Ries and Trout argue that the success of a brand is not due to the high level of marketing
acumen of the company itself, but rather, it is due to the fact that the company was first in the product
category. They use the case of Xerox to make this point. Xerox was the first plain-paper copier and was
able to sustain its leadership position. However, time after time the company failed in other product
categories in which it was not first.
Similarly, IBM failed when it tried to compete with Xerox in the copier market, and Coca-Cola failed in its
effort to use Mr. Pibb to take on Dr. Pepper. These examples support the point that the success of a
brand usually is due to its being first in the market rather than the marketing abilities of the company.
The power of the company comes from the power of its brand, not the other way around.
With this point in mind, there are certain things that a market leader should do to maintain the
leadership position. First, Ries and Trout emphasize what it should not do, and that is boast about being
number one. If a firm does so, then customers will think that the firm is insecure in its position if it must
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reinforce it by saying so.
If a firm was the first to introduce a product, then the advertising campaign should reinforce this fact.
Coca-Cola's "the real thing" does just that, and implies that other colas are just imitations.
Another strategy that a leader can follow to maintain its position is the multibrand strategy. This strategy
is to introduce multiple brands rather than changing existing ones that hold leadership positions. It often
is easier and cheaper to introduce a new brand rather than change the positioning of an existing brand.
Ries and Trout call this strategy a single-position strategy because each brand occupies a single,
unchanging position in the mind of the consumer.
Finally, change is inevitable and a leader must be willing to embrace change rather than resist it. When
new technology opens the possibility of a new market that may threaten the existing one, a successful

firm should consider entering the new market so that it will have the first-mover advantage in it. For
example, in the past century the New York Central Railroad lost its leadership as air travel became
possible. The company might have been able to maintain its leadership position had it used its resources
to form an airline division.
Sometimes it is necessary to adopt a broader name in order to adapt to change. For example, Haloid
changed its name to Haloid Xerox and later to simply Xerox. This is a typical pattern of changing Name 1
to an expanded Name 1 - Name 2, and later to just Name 2.
Positioning of a Follower
Second-place companies often are late because they have chosen to spend valuable time improving their
product before launching it. According to Ries and Trout, it is better to be first and establish leadership.
If a product is not going to be first, it then must find an unoccupied position in which it can be first. At a
time when larger cars were popular, Volkswagen introduced the Beetle with the slogan "Think small."
Volkswagen was not the first small car, but they were the first to claim that position in the mind of the
consumer.
Other positions that firms successfully have claimed include:
 age (Geritol)
 high price (Mobil 1 synthetic engine lubricant)
 gender (Virginia Slims)
 time of day (Nyquil night-time cold remedy)
 place of distribution (L'eggs in supermarkets)
 quantity (Schaefer - "the one beer to have when you're having more than one.")
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It most likely is a mistake to build a brand by trying to appeal to everyone. There are too many brands
that already have claimed a position and have become entrenched leaders in their positions. A product
that seeks to be everything to everyone will end up being nothing to everyone.
Repositioning the Competition
Sometimes there are no unique positions to carve out. In such cases, Ries and Trout suggest
repositioning a competitor by convincing consumers to view the competitor in a different way. Tylenol
successfully repositioned aspirin by running advertisements explaining the negative side effects of
aspirin.
Consumers tend to perceive the origin of a product by its name rather than reading the label to find out

where it really is made. Such was the case with vodka when most vodka brands sold in the U.S. were
made in the U.S. but had Russian names. Stolichnaya Russian vodka successfully repositioned its Russian-
sounding competitors by exposing the fact that they all actually were made in the U.S., and that
Stolichnaya was made in Leningrad, Russia.
When Pringle's new-fangled potato chips were introduced, they quickly gained market share. However,
Wise potato chips successfully repositioned Pringle's in the mind of consumers by listing some of
Pringle's non-natural ingredients that sounded like harsh chemicals, even though they were not. Wise
potato chips of course, contained only "Potatoes. Vegetable oil. Salt." As a resulting of this advertising,
Pringle's quickly lost market share, with consumers complaining that Pringle's tasted like cardboard,
most likely as a consequence of their thinking about all those unnatural ingredients. Ries and Trout argue
that is usually is a lost cause to try to bring a brand back into favor once it has gained a bad image, and
that in such situations it is better to introduce an entirely new brand.
Repositioning a competitor is different from comparative advertising. Comparative advertising seeks to

convince the consumer that one brand is simply better than another. Consumers are not likely to be
receptive to such a tactic.
The Power of a Name
A brand's name is perhaps the most important factor affecting perceptions of it. In the past, before there
was a wide range of brands available, a company could name a product just about anything. These days,
however, it is necessary to have a memorable name that conjures up images that help to position the
product.
Ries and Trout favor descriptive names rather than coined ones like Kodak or Xerox. Names like DieHard
for a battery, Head & Shoulders for a shampoo, Close-Up for a toothpaste, People for a gossip magazine.
While it is more difficult to protect a generic name under trademark law, Ries and Trout believe that in
the long run it is worth the effort and risk. In their opinion, coined names may be appropriate for new
products in which a company is first to market with a sought-after product, in which case the name is not
so important.
Margarine is a name that does not very well position the product it is describing. The problem is that it
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sounds artificial and hides the true origin of the product. Ries and Trout propose that "soy butter" would
have been a much better name for positioning the product as an alternative to the more common type of
butter that is made from milk. While some people might see soy in a negative light, a promotional
campaign could be developed to emphasize a sort of "pride of origin" for soy butter.
Another everyday is example is that of corn syrup, which is viewed by consumers as an inferior
alternative to sugar. To improve the perceptions of corn syrup, one supplier began calling it "corn sugar",
positioning it as an alternative to cane sugar or beet sugar.
Ries and Trout propose that selecting the right name is important for positioning just about anything, not
just products. For example, the Clean Air Act has a name that is difficult to oppose, as do "fair trade"
laws. Even a person's name impacts his or her success in life. One study showed that on average,
schoolteachers grade essays written by children with names like David and Michael a full letter grade
higher than those written by children with names like Hubert and Elmer.

Eastern Airlines was an example of a company limited by its name. Air travel passengers always viewed it
as a regional airline that served the eastern U.S., even though it served a much wider area, including the
west coast. Airlines such as American and United did not have such a perception problem. (Eastern
Airlines ceased operations in 1991.)
Another problem that some companies face is confusion with another company that has a similar name.
Consumers frequently confused the tire manufacturer B.F. Goodrich with Goodyear. The Goodyear blimp
had made Goodyear tires well-known, and Goodyear frequently received credit by consumers for tire
products that B.F. Goodrich has pioneered. (B.F. Goodrich eventually sold its tire business to Uniroyal.)
Other companies have changed their names to something more general, and as a result create confusion
with other similar-sounding companies. Take for instance The Continental Group, Inc. and The
Continental Corporation. Few people confidently can say which makes cans and which sells insurance.
The No-Name Trap
People tend use abbreviations when they have fewer syllables than the original term. GE is often used
instead of General Electric. IBM instead of International Business Machines. In order to make their
company names more general and easier to say, many corporations have changed their legal names to a
series of two or three letters. Ries and Trout argue that such changes usually are unwise.
Companies having a broad recognition may be able to use the abbreviated names and consumers will
make the translation in their minds. When they hear "GM", they think "General Motors". However, lesser
known companies tend to lose their identity when they use such abbreviations. Most people don't know
the types of business in which companies named USM or AMP are engaged.
The same applies to people's names as well. While some famous people are known by their initials (such
as FDR and JFK), it is only after they become famous that they begin using their initials. Ries and Trout
advise managers who aspire for name recognition to use an actual name rather then first and middle
initials. The reason that initials do not lead to recognition is that the human mind works by sounds, not
by spellings.
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Most companies began selling a single product, and the name of the company usually reflected that
product. As the successful firms grew in to conglomerates, their original names became limiting. Ries and
Trout advise companies seeking more general names to select a shorter name made of words, not
individual letters. For example, for Trans World Airlines, they favored truncating it simply to Trans World
instead removing all words and using the letters TWA.
The Free-Ride Trap

A company introducing a new product often is tempted to use the brand name of an existing product,
avoiding the need to build the brand from scratch. For example, Alka-Seltzer named a new product Alka-
Seltzer Plus. Ries and Trout do not favor this strategy since the original name already in positioned in the
consumer's mind. In fact, consumers viewed Alka-Seltzer Plus simply as a better Alka-Seltzer, and the
sales of Alka-Seltzer Plus came at the expense of Alka-Seltzer, not from the market share of the

competition.
Some firms have built a wide range of products on a single brand name. Others, such as Procter &
Gamble have selected new names for each new product, carefully positioning the product in a different
part of the consumer's mind. Ries and Trout maintain that a single brand name cannot hold multiple
positions; either the new product will not be successful or the original product bearing the name will lose
its leadership position.
Nonetheless, some companies do not want their new products to be anonymous with an unrecognized
name. However, Ries and Trout propose that anonymity is not so bad; in fact, it is a resource. When the
product eventually catches the attention of the media, it will have the advantage of being seen without
any previous bias, and if a firm prepares for this event well, once under the spotlight the carefully
designed positioning can be communicated exactly as intended. This moment of fame is a one-shot event
and once it has passed, the product will not have a second chance to be fresh and new.
The Line Extension Trap
Line extensions are tempting for companies as a way to leverage an existing popular brand. However, if
the brand name has become near generic so that consumers consider the name and the product to be
one and the same, Ries and Trout generally do not believe that a line extension is a good idea.
Consider the case of Life Savers candy. To consumers, the brand name is synonymous with the hard
round candy that has a hole in the middle. Nonetheless, the company introduced a Life Savers chewing
gum. This use of the Life Savers name was not consistent with the consumer's view of it, and the Life
Savers chewing gum brand failed. The company later introduced the first brand of soft bubble gum and
gave it a new name: Bubble Yum. This product was very successful because it not only had a name
different from the hard candy, it also had the the advantage of being the first soft bubble gum.
Ries and Trout cite many examples of failures due to line extensions. The consistent pattern in these
cases is that either the new product does not succeed, or the original successful product loses market
share as a result of its position being weakened by a diluted brand name.
When Line Extensions Can Work

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Despite the disadvantages of line extensions, there are some cases in which it is not economically
feasible to create a new brand and in which a line extension might work. Some of the cases provided by
Ries and Trout include:
 Low volume product - if the sales volume is not expected to be high.

 Crowded market - if there is no unique position that the product can occupy.
 Small ad budget - without strong advertising support, it might make sense to use the house
name.

 Commodity product - an undifferentiated commodity product has less need of its own name than
does a breakthrough product.
 Distribution by sales reps - products distributed through reps may not need a separate brand
name. Those sold on store shelves benefit more from their own name.
Positioning Has Broad Applications
The concept of positioning applies to products in the broadest sense. Services, tourist destinations,
countries, and even careers can benefit from a well-developed positioning strategy that focuses on a
niche that is unoccupied in the mind of the consumer or decision-maker.
Product Differentiation
What Does Product Differentiation Mean?
It is a marketing process that showcases the differences between products. Differentiation looks to

make a product more attractive by contrasting its unique qualities with other competing
products. Successful product differentiation creates a competitive advantage for the seller, as customers
view these products as unique or superior.
Product differentiation can be achieved in many ways. It may be as simple as packaging the goods in a
creative way, or as elaborate as incorporating new functional features. Sometimes differentiation does
not involve changing the product at all, but creating a new advertising campaign or other sales
promotions instead.
In marketing, product differentiation (also known simply as "differentiation") is the process of

distinguishing a product or offering from others, to make it more attractive to a particular target market.
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This involves differentiating it from competitors' products as well as a firm's own product offerings.
Differentiation can be a source of competitive advantage. Although research in a niche market may
result in changing a product in order to improve differentiation, the changes themselves are not
differentiation. Marketing or product differentiation is the process of describing the differences between
products or services, or the resulting list of differences. This is done in order to demonstrate the unique
aspects of a firm's product and create a sense of value. Marketing textbooks are firm on the point that
any differentiation must be valued by buyers. The term unique selling proposition refers to advertising
to communicate a product's differentiation.
In economics, successful product differentiation leads to monopolistic competition and is inconsistent

with the conditions for perfect competition, which include the requirement that the products of
competing firms should be perfect substitutes.

There are three types of product differentiation:
1. Simple: based on a variety of characteristics
2. Horizontal: based on a single characteristic but consumers are not clear on quality
3. Vertical: based on a single characteristic and consumers are clear on its quality.
The brand differences are usually minor; they can be merely a difference in packaging or an advertising
theme. The physical product need not change, but it could. Differentiation is due to buyers perceiving a
difference; hence causes of differentiation may be functional aspects of the product or service, how it is
distributed and marketed, or who buys it. The major sources of product differentiation are as follows.
 Differences in quality which are usually accompanied by differences in price

 Differences in functional features or design
 Ignorance of buyers regarding the essential characteristics and qualities of goods they are
purchasing
 Sales promotion activities of sellers and, in particular, advertising
 Differences in availability (e.g. timing and location).
The objective of differentiation is to develop a position that potential customers see as unique. The term
is used frequently when dealing with freemium business models, in which businesses market a free and
paid version of a given product. Given they target a same group of customers; it is imperative that free
and paid versions be effectively differentiated.
Differentiation primarily impacts performance through reducing directness of competition: As the

product becomes more different, categorization becomes more difficult and hence draws fewer
comparisons with its competition. A successful product differentiation strategy will move your product
from competing based primarily on price to competing on non-price factors (such as product
characteristics, distribution strategy, or promotional variables).
Most people would say that the implication of differentiation is the possibility of charging a price
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premium; however, this is a gross simplification. If customers value the firm's offer, they will be less
sensitive to aspects of competing offers; price may not be one of these aspects. Differentiation makes
customers in a given segment have a lower sensitivity to other features (non-price) of the product.
Product Life Cycle

A new product progresses through a sequence of stages from introduction to growth, maturity, and
decline. This sequence is known as the product life cycle and is associated with changes in the
marketing situation, thus impacting the marketing strategy and the marketing mix.
The product revenue and profits can be plotted as a function of the life-cycle stages as shown in the
graph below:
Introduction Stage

In the introduction stage, the firm seeks to build product
awareness and develop a market for the product. The
impact on the marketing mix is as follows:
Product branding and quality level is established and

intellectual property protection such as patents and
trademarks are obtained.
Pricing may be low penetration pricing to build market

share rapidly, or high skim pricing to recover
development costs.
Distribution is selective until consumers show acceptance of the product.
Promotion is aimed at innovators and early adopters. Marketing communications seeks to build product
awareness and to educate potential consumers about the product.
Growth Stage
In the growth stage, the firm seeks to build brand preference and increase market share.
Product quality is maintained and additional features and support services may be added.
Pricing is maintained as the firm enjoys increasing demand with little competition.
Distribution channels are added as demand increases and customers accept the product.
Promotion is aimed at a broader audience.
Maturity Stage
At maturity, the strong growth in sales diminishes. Competition may appear with similar products. The
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primary objective at this point is to defend market share while maximizing profit.
Product features may be enhanced to differentiate the product from that of competitors.
Pricing may be lower because of the new competition.

Distribution becomes more intensive and incentives may be offered to encourage preference over
competing products.
Promotion emphasizes product differentiation.

Decline Stage
As sales decline, the firm has several options:
Maintain the product, possibly rejuvenating it by adding new features and finding new uses.
Harvest the product - reduce costs and continue to offer it, possibly to a loyal niche segment.
Discontinue the product, liquidating remaining inventory or selling it to another firm that is willing to
continue the product.
The marketing mix decisions in the decline phase will depend on the selected strategy. For example, the
product may be changed if it is being rejuvenated, or left unchanged if it is being harvested or
liquidated. The price may be maintained if the product is harvested, or reduced drastically if liquidated.
New Product Development

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Historically, the new product development process has been conceived in discreet terms with a
beginning and an end. Different companies and different industries may alter this seven-step process for
different products, or the steps themselves may become blurred as companies become engaged in
several stages at the same time.
The process begins with idea generation. For every successful new product, many new product ideas are
conceived and discarded. Therefore, companies usually generate a large number of ideas from which
successful new products emerge.
Idea screening, the second step, considers all new product ideas in the idea pool and eliminates ones
that are perceived to be the least likely to succeed. Not only should the firm's manufacturing,
technology, and marketing capabilities be evaluated at this stage, but also how the new idea fits with
the company's vision and strategic objectives.
The third stage, concept development and testing, requires formal evaluations of the product concept
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by consumers, usually through some form of marketing research. New product ideas with low concept
test scores are discarded or revised. While the Internet is making it easier to gather consumer data,
there are limitations. As people get deluged with an increasing number of surveys and solicitations, it is
possible that they will grow tired of helping marketers.
The business analysis stage is next. At this point the new product idea is analyzed for its marketability
and costs. After passing the first three stages an idea may be discarded once marketing and
manufacturing costs are analyzed, due to limited potential for profitability or commercial success.
Throughout these four stages, the new idea has remained on paper with a relatively small investment
required.
The fifth stage, prototype development, is the first stage where new product costs begin to escalate.
Because of this, many companies have placed greater emphasis on the first four stages and reduced the

proportion of new products that reach the prototype stage from about 50 percent to around 20 percent.
At this stage the concept is converted into an actual product. A customer value perspective during this
phase means the product is designed to satisfy the needs expressed by consumers. Firms may use
quality function deployment (QFD) as they develop the prototype. QFD links specific consumer
requirements such as versatility, durability, and low maintenance with specific product characteristics
(for example, adjustable shelves, a door-mounted ice and water dispenser, and touch controls for a
refrigerator). The customer value perspective requires the new product to satisfy customer needs and
meet desired quality levels at specified production costs.
Test marketing tests the prototype and marketing strategy in simulated or actual market situations.
Because of the expense and risks associated with actual test markets, marketers use them with caution.
Products that test poorly are pulled back and reconceptualized or discarded.
Commercialization, the final stage, is when the product is introduced full scale. The level of investment
and risk are highest at this stage. Consumer adoption rates, timing decisions for introduction, and
coordinating efforts with production, distribution, and marketing should be considered.
FACTORS INFLUENCING NEW PRODUCT DEVELOPMENT
The seven-step process assumes a definite beginning and end. However, studies suggest that what goes
on before and after new products are introduced is as important as the process itself. Organizational
structure, leadership, and team building influence the speed and efficiency with which new products are
introduced. Structure influences efficiency, autonomy, and coordination. New product innovation
requires structure that optimizes direction and guidance. Structure that facilitates internal information
exchange, decision making, and materials flow is essential. A "fast-cycle" structure allows more time for
planning and implementing activities to gain competitive advantage. This type of structure also cuts
costs because production materials and information collect less overhead and do not accumulate as
work-in-process inventory. Autonomy refers to the amount of decision making allowed at lower levels of
management. The coordination of the engineering, product design, manufacturing, and marketing
functions in the new product development process is vital.
Leadership influences strategy, culture, and the firm's overall ability to undertake new product
development. Top management can demonstrate involvement in the development process by providing
career advancement for entrepreneurial skills and encouraging broad employee participation. Clarity
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and vision are crucial to ensuring that new product ideas are good strategic fits for the company. The
degree to which leadership allows trial and error and promotes individual initiative positively influences
the development of new products. This acceptance of risk and support for an entrepreneurial spirit
within the organization are crucial in order for innovation to flourish. New products emerge in a variety
of ways and their development does not always proceed in rational and consistent manners. It is
necessary for leadership to view the process as iterative and dynamic, and to foster adaptation and
flexibility. Management flexibility and responsiveness to change also are needed. This type of leadership
is particularly important to the project manager who must coordinate and integrate the various parts of
the new product development process so that a coherent system emerges that produces a product with
compelling value. Initiative encourages creativity and problem-solving skills.
Teams provide mechanisms for breaking down functional biases created by a strict adherence to
structure. The amount of interdepartmental conflict in the organization, the social cohesion among

team members, and the frequency and directionality of interdepartmental communication influence
team building. Through shared understanding of the objectives and purposes of the project, as well as
the tasks required in the development process, teams can shape the project and influence how work
gets done in the organization.
IMPROVING SPEED, EFFICIENCY, AND QUALITY
New products often fail because of unanticipated market shifts that result in missed opportunities and
misused channels of distribution. Failures also occur because companies miscalculate their own
technological strengths or the product's technological challenges. These potential problems often crop
up in the latter stages and result in delays, redesigns, or poor quality products.
Companies are constantly seeking ways to avoid these pitfalls. One solution is new product development
maps that chart the evolution of a company's product lines. This historical perspective helps the firm to
identify and analyze functional capabilities in a systematic, repetitive fashion that allows for the
development of linkages and the identification of resources for new endeavors. These maps can direct
the firm to new market opportunities and point out technological challenges.
Aggregate plans for projects offer another solution. Rather than viewing each new product development
project individually, they consider all of the new product development projects under consideration by
the firm. This is particularly important in firms with hundreds of new product development projects
going on at the same time. Projects are categorized according to resources required and contribution to
the firm's bottom line. Aggregate project plans enable management to improve the management of new
product development by providing greater control over resource allocation and utilization. These plans
help to point out where capabilities need to be improved, how sequencing projects may help, and how
projects fit with the firm's development strategies.
Return maps graphically represent the contributions of all team members to product success in terms of
time and money. Their focus is on the point at which product sales generate sufficient profit so that the
firm's initial investment in development is returned. Return maps show team members the time and
money needed to complete their tasks in the development process so that they may estimate and re-
estimate their investment in the process. In doing this return maps illustrate the impact of their actions
on the project's overall success.
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Another way to improve the speed and efficiency with which new products are introduced is to involve
purchasing in the development process. When purchasing expertise is introduced into the development
project team, quality may increase, time to market entry may decrease, investment in inventory may
diminish, and costs may significantly decrease.
Technology continues to change and create new opportunities and threats. Customer requirements and
expectations continue to shift and create new demands. Old channels of distribution are becoming
obsolete and new channels are opening new opportunities. Some competitors are falling by the wayside
while others are surging to the forefront by making new and unexpected moves to gain advantage. The
very structure of industry is changing. A key to success in this tumultuous environment will continue to
be the ability to sustain a competitive advantage through innovation. However, speed, efficiency, and
quality in product development will be paramount. Building capabilities in all aspects of product creation
and implementation, overcoming uncertainty and facilitating decision-making, ensuring these

innovations are strategically linked to the firm's vision, and doing this on a continuous basis is the
challenge of new product development in the next century.
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Product Life Cycle – A Comprehensive Approach

Recognizing that all living things go through a cycle of birth, growth, maturity, and death, the inspiration
for the concepts of product life cycle and industry life cycle comes from biology. The life-cycle concept is
an appropriate description of what happens to products and industries over time. When applied to
organizations, the product life cycle and industry life cycle contain the four stages of introduction,
growth, maturity, and decline.

This concept is much more than an interesting analogy of business and biology. In biology, a living
organism's position in its life cycle leads to different courses of action concerning the organism's future.
An industry's position and a product's position in their life cycles also lead to very different decisions
concerning their futures. Consequently, the life-cycle concept was adopted from biology for use as a
strategic planning tool for products and industries.
The following sections define the terms, explain why products have a life cycle, describe the stages of
the product life cycle, and examine the strategic implications of the product life cycle.
DEFINITIONS
The life cycle can be used to observe the behavior of many concepts in business. In its classic form,
which is described in a later section, it is best applied to products and industries. Used in this form, a
product is not individual but a group of similar products. For example, the Chevrolet Malibu, Ford
Taurus, and Honda Accord are a product group of mid-sized sedans.
Industry is a much broader classification than product; an industry consists of many similar groups of
products. The product groups of mid-size sedan, pickup truck, and sport-utility vehicle all belong to the
automobile industry.
Generally, industries have longer life cycles than products. The automobile industry has lasted more
than 100 years and shows no signs of declining. However, the large family-sedan appears to be well into
the decline stage. After decades of dominance in the automobile industry, only a few large cars, such as
Ford's Crown Victoria, are being manufactured.
The life-cycle concept also describes individual brand products, such as the Ford Taurus. However,
individual products in a group of products usually have much shorter life cycles, and they do not always
follow the classic shape of the product life cycle. They may be introduced and die, and then be
reintroduced again at a latter point. For example, the Chevrolet Nova has had more than one life cycle.
Consequently, products are defined as groups of similar products, and industries defined as a collection
of comparable product groups.
The discussion that follows is applicable to both industries and products. The terms product life cycle
and industry life cycle both refer to the four stages of introduction, growth, maturity, and decline. To
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simplify the discussion, both the product life cycle and industry life cycle will be combined and simply
called the product life cycle.
RATIONALE FOR THE PRODUCT LIFE CYCLE
Since products are not living beings, why do they have life cycles? The reason is that society accepts
products at different rates, but all go through similar stages of societal acceptance. This acceptance of
innovations by societies is called the diffusion of innovations. As society begins to adopt and accept an
innovation, the new product grows, eventually reaching maturity. When there is a better alternative to
the product or when public preference changes, the products will enter a decline, possibly ending with
the death of the product.
The diffusion-of-innovations concept categorizes society by the speed with which the individual

members adopt a new product. It classifies people into the five categories of innovators, early adopters,
early majority, late majority, and laggards.
INNOVATORS.
The first people in a society to adopt a new product are the innovators. These people are risk takers and
may be looking for new products to try. They represent only 2.5 percent of the population. Though
these people are the first to try a product, they are not usually opinion leaders. Consequently, they do
not pass information about the product to the rest of the population.
EARLY ADOPTERS.
The early adopters have many opinion leaders in their ranks. They are the first people in the
neighborhood to try a new product, and many of them willingly pass the information about the product
onto other people. Their experiences can determine whether a product will have a long or short life
cycle. They represent about 13.5 percent of the population.
EARLY MAJORITY.
Once the early adopters have tried and given their approval to a product, the early majority will begin to
follow. Thirty-four percent of the population is in this category. Since they represent such a large
percent of the population, the adoption by the early majority causes the new product to enter a period
of rapid growth.
LATE MAJORITY.
After a significant portion of the population has adopted a product, the late majority will consider its
use. These people are not risk takers; they typically wait until they see the product approved by others.
They also represent about 34 percent of the population. Once they have adopted the product, the
innovators, early adopters, early majority, and late majority represent a total of about 84 percent of the
population. By this point, the new product will have reached its maturity.
LAGGARDS.
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The last category of society to adopt a new product is generally fearful about trying new things. Often,
they wait until being forced to adopt because the alternate product is no longer being produced. The
laggards represent about 16 percent of the population.
NEW-PRODUCT DEVELOPMENT
Although product development is not usually recognized as a formal stage in the product life cycle,
many ideas for long-term product planning are derived from the concepts that are generated through
this preliminary process. Product development is defined as a strategy for company growth by offering
modified or new products to current market segments. Additionally, product development focuses on
turning product concepts into a physical product, while ensuring that that the idea can be turned into a
workable product through each stage.

In the product development stage, costs begin to accumulate due to the investment in proposed
concepts and ideas. Before introduction, a successful product in the marketplace will go through the
following eight distinct stages of new product development: idea generation, idea screening, concept
development, marketing strategy, business analysis, product development, test marketing, and
commercialization.
Idea generation usually stems from the organization's internal sources (R&D, engineering, marketing).
Company employees will brainstorm new ideas to generate viable product concepts. Additionally, a
company may also analyze their competition's new product offerings with the intention of
differentiating and improving on existing designs.
Ideas are ultimately screened, reducing the number of unrealistic concepts and focusing on realistic,
attainable concepts. A single idea is developed into a product concept. Concepts are then tested to
measure how appealing the product might be to consumers from the anticipated target market. Testing
may range from focus groups to random surveys.
After concept testing, a marketing strategy is needed to define how the product will be positioned in the
marketplace. Identifying the product's anticipated target market, financial expectations, distribution
channels, and pricing strategy are also determined at this time.
Business analysis, including sales forecasting, determines if the product will be profitable to
manufacturer. Many factors are considered when judging the products anticipated profitability.
Managers will look at the length of time it takes for the product to be profitable, cost of capital, and
other financial considerations when deciding weather to proceed with development. If the concept is
approved, a prototype is created from the product concept.
The prototype undergoes rigorous testing to ensure safety and effectiveness of the product. These tests
are a good measure for determining whether or not a product is safe and if it should if the designers
should move forward with the creation of the product.
Once a successful prototype is developed, companies perform test marketing on the product. Typically,
a company will conduct formal research on a product concept to see if the proposed idea has validity
with the targeted audience. Again, customer surveys and focus groups are conducted with the intention
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of testing the product on a sample of the targeted demographic. The testing is then analyzed to measure
consumer reaction to the product. Once all the information is available and the company decides to
introduce the product, high commercialization costs are incurred.
STAGES OF THE PRODUCT LIFE CYCLE

As stated above, the product life cycle consists of four stages: introduction, growth, maturity, and
decline. Figure A illustrates the product life cycle. Determination of a product's stage in its life cycle is
not based on age, but on the relationship of sales, costs, profits, and number of competitors. Each of
these stages is described below.

Product Life Cycle Curve
INTRODUCTION.
When a new product is introduced to a market, the innovators may be the only people aware of the new
product. If the product is a new product class, the innovators may not know what the product uses are.
Recalling that the innovators represent only a small percent of the population, the sales of the new
product will be low. However, there is an advantage in this situation in that the new product does not
yet have any competition. During the introduction stage of a new product, the developer enjoys a
monopoly.
Unfortunately, the product monopoly does not usually translate to immediate profits. The product may
have been in development for a long time and considerable development costs are still in the recovery
phase. Also, an expensive marketing effort may be needed to introduce the product to the public. With
low sales and high expenses, the introduction stage of the life cycle is usually a money loser for the
company. However, the hope is for the future of the product, and the company usually is more than
willing to incur the losses.
GROWTH.
As the early adopters begin to try the product, a sale begins to grow and profits usually start to follow.
This is a great time for a company introducing a new product because the company still enjoys a
monopoly early in the growth stage. The company is reaping all the sales and profits of the new product.
When Chrysler introduced the idea of the minivan, they were in this enviable position of having the only
minivan on the market.
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As the early adopters begin influencing the early majority, sales and profits sore. The competition has
also been watching from the new product's inception. Unfortunately for the original firm, the
competition has also noticed the new product's success. Although they cannot be the first, the
competition races to offer their own products and gain a share of a growing market. Chrysler's minivan
did not maintain its monopoly for long; soon, the other major automobile manufacturers offered models
to compete with Chrysler. Although total sales and profits continue to grow throughout the growth
stage, they are divided among many manufacturers.
MATURITY.
By the end of the growth stage of the life cycle, the market is beginning to become very competitive,
and this trend continues into the early period of the maturity stage. Besides many more manufacturers
offering their products, the producers continue the product-differentiation process begun in the growth
stage. The result is a market saturated with many manufacturers offering many models of the product.

These manufacturers produce a multitude of models, from desktop computers to notebooks.
With so many companies now in the market, the competition for customers becomes fierce. Although
total sales continue to grow during the first part of the maturity stage, the increased competition causes
profits to peak at the end of the growth stage and beginning of the maturity stage. Profits then decline
during the remainder of the maturity stage. The declining profits mean that the market is not as
attractive to companies as it was in the growth stage.
In the growth stage, even inefficient companies made money. However, only the best companies and
their products survive in the maturity stage. Manufacturers begin to drop out as they see profits turn to
losses. Though there is still competition in the computer industry, for example, companies such as Dell
and Apple have emerged as the leaders in the market. During the later part of the maturity stage, even
sales begin to dip, putting more pressure on the remaining manufacturers.
DECLINE.
The number of companies abandoning the market continues and accelerates in the decline stage. Not
only does the efficiency of the company play a factor in the decline, but also the product category itself
now becomes a factor. By this time, the market may perceive the product as "old," and it may no longer
be in demand. For example, the public replaced their preference for station wagons with their desire for
minivans. Advancing technology may also bypass and replace a product, as when tapes and CDs replaced
the vinyl record.
The product will continue to exist as long as a few manufacturers can maintain profitability. The laggards
will resist switching to the alternative, and manufacturers who can profitably serve this niche will
continue to do so. Eventually, even the laggards will switch, and the last companies producing the
product will be forced to withdraw, thereby killing the product group.
PRODUCT STRATEGIES DURING THE PRODUCT LIFE CYCLE
Depending on the stage of the product life cycle, the marketing strategy should vary to meet the
changing conditions. The marketing mix consists of the product, promotion, price, and distribution. Each
element must change with the product life cycle if the company expects to maximize sales and profits. It
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is important to note that as products move through each stage of the life cycle, they should be
monitored and re-evaluated in terms of reducing both production costs and the time it takes to make a
product or service profitable with its new position.
Strategic options for products during the product life cycle are examined below.
INTRODUCTION STAGE.
In the introduction stage, the product's novelty and lack of competition dominate the marketing
strategy. The public is not aware of the product and does not know what benefits it offers them.
Product strategy is focused on introducing one model. Since the public is unaware of the product, to

offer more models could confuse them as they learn the purpose of the product. This model may offer
various options, but there are usually no major variations on the basic idea of the product. The cost of
development may also prohibit the company from developing more models for introduction. With no
competition yet in the product category, one model is adequate for introduction.
Since the product is new, persuading the market to buy the product is of secondary importance to
informing the public that the product exists. It is the innovators who will begin to buy the product, and
they need to be informed. With only one company offering the product, those innovators that decide to
purchase the product have only one company from which they can purchase the product. Consequently,
the promotion efforts concentrate on informing the public of the product benefits and the company
producing the product. Persuasion to buy a particular brand is not needed in the introduction stage.
The pricing policy offers the company an opportunity to regain some development costs. Since the
company's product is not only new to the company, but also introduces a new product, the company
can use a skimming pricing strategy; that is, a very high price for the new product. Though the high price
of the new product may deter some potential customers, many innovators and early adopters will pay
the high price to own the new product. The first electronic calculators, for example, were quite
expensive. If the product is easily copied, however, the developer may want to use a low-price
penetration policy to deter future competition.
Since there are few purchasers in the introduction stage, the distribution does not need to be
widespread. The innovators are risk takers and desire to purchase something new. Consequently, they
may seek out the distributors carrying the new product, and only a few distributors will suffice.
GROWTH STAGE.
In the growth stage, the early adopters, followed by the early majority, begin to consume the product in
growing numbers. The increasing sales result in the emergence of profits rather than losses.
During the early part of the growth stage, the company can continue its product policy of offering one
basic model. However, if the new product group is successful, eventually competitors will offer their
own products to compete in the new category. At that point, the original company will need to offer
more models. The models should be differentiated from one another so that the company can continue
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to attract the new customers coming into the market.
Even with competition beginning to offer their products in the new category, the original company still
dominates the market. However, as the market leader rather than a monopoly, the company will need
to change its promotion policy of informing the public about their new product and new product
category.
With an informing policy, the market leader would still receive the majority of new sales. Unfortunately
for the original company, the competition will not be using an informative policy. They will be trying to
persuade the public why their product is better than the market leader's product. Consequently, the
market leader should switch to a persuasive promotion policy.
As the competition enters the market, they will probably be offering products at prices lower than the

price of the original product. This is a penetration pricing policy designed to take sales away from the
market leader. If the original company used a skimming pricing policy, its continued use would surely
lead to rapid lost sales to the competition unless it is altered. Prices should be lowered so that sales can
continue to grow, and the competition kept at bay.
In a growing market, the company's exclusive distribution policy would limit the potential growth for the
firm, and sales would go to the competition. Consequently, the company must increase its product
distribution to maintain its leadership in the market.
MATURITY STAGE.
Many competitors characterize the maturity stage. With the large number of firms producing products,
the competition for customers becomes quite intense, and profits decline. The strategy for firms during
the maturity stage becomes one of survival, as many competitors will eventually withdraw from the
market.
With many companies offering several models of the product, the number of products on the market
becomes tremendous. The original company must continue differentiating their models so that the
market is aware of the differences in the company's products and the competitors' products. The
customers are going to ask why they should buy a particular company's product; just because the
product was the first on the market is not going to persuade the customers to continue buying the
product. Quality, styling, and product features are a few of the means of differentiating the product
from the competition.
During the maturity stage, the need to inform the public has long since passed. Now, the promotion
strategy focus is on continuing the persuasion tactics started during the growth stage. The purpose of
persuasion is to position the product to the market, which involves creating an image for a product. The
image should not be an advertiser's creation, but based on the reality of the product.
The differentiation methods of quality, styling, and features are excellent means of positioning a
product. For example, a Chevrolet Corvette and Porsche Boxster are both sports cars, but consumers see
the different positions of the cars. The company differentiates its products and uses promotion to create
the different position image. Each company hopes that its position is preferred by the consumers.
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With the intense competition, management keeps the price of the product to its lowest possible level.
For example, the competition for entry-level personal computers has now shifted to offering the lowest
price. All of the companies in a mature market must now watch costs carefully.
Every aspect from development through production through marketing is designed to offer the lowest
cost possible. A cost and a price advantage over competitors in this stage are significant competitive
advantages. Consumers are aware of prices and will reward the company with the lower price, all else
being equal. The firm that does not have a significant cost advantage risks losing customers and going
out of business.
The absence of a company's product in a particular location may result in lost sales during the maturity
period. Widespread distribution is essential. If the company's product is not in a particular location, one
or more of the competitors' products are likely to be there. The firm cannot risk losing sales simply

because their products were not available.
DECLINE STAGE.
During the decline stage, sales and profits begin an even sharper drop, and the number of competitors is
reduced even further. With public preference for this product waning, the decline stage continues until
the last of the producers cannot make a profit, and the product category dies.
The product strategy now becomes one of reducing the number of models offered. With the public
abandoning the product and competition declining, the need for many models is no longer there. The
company now focuses its attention on the costs and profitability of the remaining models. Costs, such as
research and development and production, are cut to the minimal amount necessary. After the cost
cuts, management eliminates those products that are no longer profitable.
The promotion efforts also include an examination of costs. Only the minimal amount of promotion
necessary to keep the product selling is done. The remaining people in the market want the product and
do not need to be convinced that they should buy the product. They only need to know that the product
is still available. Consequently, the promotion effort shifts to reminder promotion.
Products' prices are also kept as low as possible during the decline stage. Since the number of
competitors has dropped, it may seem that a company could raise prices. If the remaining customers
maintain strong brand loyalty, this policy might be possible. However, the product has fallen out of
favor, and customers have other product alternatives. A price increase that could not be justified by cost
increases runs the risk of alienating even the few customers left purchasing the product. Consequently,
the strategy should be to keep the prices as low as possible.
Cost is also an overriding factor in the distribution of the product during the decline stage. The declining
sales may not justify the widespread distribution reached during the maturity stage. Only those areas or
markets that are still profitable should be covered, and the unprofitable distribution outlets eliminated.
Hopefully for the last companies producing the product, the brand-loyal customers or laggards will seek
out the limited locations of the products and continue purchasing it.
DECLINE STAGE TRAP.

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Just because a product's sales begin to decline does not mean that the product life cycle has reached the
decline stage. However, if the company believes that the product is in a decline, the implementation of
the decline stage strategies may lead to the death of the product long before its time.
Before the strategies for declining products are tried, the company should definitely establish that the
product is in decline. The company should first follow strategies to boost sales and not resign
themselves to the cost-cutting strategies of the decline stage. For example, Arm & Hammer could have
easily decided that their baking soda was dying, and implemented decline stage strategies. However,
they chose to fight for its life. They differentiated the product by finding new uses—such as a deodorizer
and an ingredient in toothpaste. They so successfully repositioned the product that many people now
think about baking soda as a deodorizer first and disregard its original use in baking.
Borrowed from biology, the life-cycle concept has been adapted and applied to products and industries.

The product life cycle maintains that products and industries move through the stages of introduction,
growth, maturity, and decline. By viewing a product from the perspective of its product-life-cycle
position, management can use the product life cycle as a valuable decision-making tool. As the product
moves through its life cycle, the appropriate strategies for its future development vary greatly.
Knowledge of the appropriate strategies can help guide management actions.
Product Mix
The product mix of a business includes product lines and individual products. A product line is a set of
products in the product mix that are closely interrelated either because they serve in a similar way, sold
to the similar client groups or have same price range. A product is a unique component in the product
line that is different in size, cost, look, or some other attribute. Product choices at these levels are
normally of 2 sorts: Those that have variety and range of the product line and those that are modified in
the product mix occur over time.
Product Mix
Product mix is a combination of products manufactured or traded by the same business house to
reinforce their presence in the market, increase market share and increase the turnover for more
profitability. Normally the product mix is within the synergy of other products for a medium size
organization. However large groups of Industries may have diversified products within core
competency. Larsen & Toubro Ltd, Godrej, Reliance in India are some of the examples. One of the
realities of business is that most firms deal with multi-products .This helps a firm diffuse its risk across
different product groups/Also it enables the firm to appeal to a much larger group of customers or to
different needs of the same customer group .So when Videocon chose to diversify into other
consumer durables like music systems ,washing machines and refrigerators ,it sought to satisfy the
needs of the middle and upper middle income group of consumers.
Likewise , Bajaj Electricals.a household name in India, has almost ninety products in i8ts portfolio
ranging from low value items like bulbs to high priced consumer durables like mixers and luminaires
and lighting projects .The number of products carried by a firm at a given point of time is called its
product mix. This product mix contains product lines and product items .In other words it’s a
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composite of products offered for sale by a firm.
Product Mix Decisions
Often firms take decisions to change their product mix. These decisions are dictated by the above
factors and also by the changes occurring in the market place. Like the changing life-styles of Indian
consumers led BPL-Sanyo to launch an entire range of white goods like refrigerators , washing
machines, and microwave ovens .It also motivate the firm to launch other entertainment electronics.
Rahejas, a well-known builders firm in Bombay, took a major decision to convert one of its theatre
buildings in the western suburbs of Bombay into a large garments and accessories store for men
,women and children, perhaps the first of its kind in India to have almost all products required by
these customer groups Competition from low priced washing powders (mainly Nirma) forced

Hindustan Levers to launch different brands of detergent powder at different price levels positioned at
different market segments .Customer preferences for herbs, mainly shikakai motivated Lever to
launch black Sunsilk Shampoo ,which has shikakai .Also ,low purchasing power. and cultural bias
against shampoo market made Hindustan Lever consider smaller packaging mainly sachets , for single
use .So, it is the changes or anticipated changes in the market place that motivates a firm to consider
changes in its product mix.
The Marketing Mix: Product
Products come in several forms. Consumer products can be categorized as convenience goods, for which
consumers are willing to invest very limited shopping efforts. Thus, it is essential to have these products
readily available and have the brand name well known. Shopping goods, in contrast, are goods in which
the consumer is willing to invest a great deal of time and effort. For example, consumers will spend a
great deal of time looking for a new car or a medical procedure. Specialty goods are those that are of
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interest only to a narrow segment of the population—e.g., drilling machines. Industrial goods can also
be broken down into subgroups, depending on their uses. It should also be noted that, within the
context of marketing decisions, the term product refers to more than tangible goods—a service can be a
product, too.

A firm’s product line or lines refers to the assortment of similar things that the firm holds. Brother, for
example, has both a line of laser printers and one of typewriters. In contrast, the firm’s product mix
describes the combination of different product lines that the firm holds. Boeing, for example, has both a
commercial aircraft and a defense line of products that each take advantage of some of the same core
competencies and technologies of the firm. Some firms have one very focused or narrow product line
(e.g., KFC does only chicken right) while others maintain numerous lines that hopefully all have some
common theme. This represents a wide product mix 3M, for example, makes a large assortment of
goods that are thought to be related in the sense that they use the firm’s ability to bond surfaces
together. Depth refers to the variety that is offered within each product line. Maybelline offers a great
deal of depth in lipsticks with subtle differences in shades while Morton Salt offers few varieties of its
product.
Products may be differentiated in several ways. Some may be represented as being of superior quality
(e.g., Maytag), or they may differ in more arbitrary ways in terms of styles—some people like one style
better than another, while there is no real consensus on which one is the superior one. Finally, products
can be differentiated in terms of offering different levels of service—for example, Volvo offers a
guarantee of free, reliable towing anywhere should the vehicle break down. American Express offers
services not offered by many other charge cards.
NEW PRODUCT DEVELOLOPMENT
New product development tends to happen in stages. Although firms often go back and forth between
these idealized stages, the following sequence is illustrative of the development of a new product:
 New product strategy development. Different firms will have different strategies on how to
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approach new products. Some firms have stockholders who want to minimize risk and avoid
investing in too many new innovations. Some firms can only survive if they innovate frequently
and have stockholders who are willing to take this risk. For example, Hewlett-Packard has to
constantly invent new products since competitors learn to work around its patents and will be
able to manufacture the products at a lower cost.
 Idea generation. Firms solicit ideas as to new products it can make. Ideas might come from
customers, employees, consultants, or engineers. Many firms receive a large number of ideas
each year and can only invest in some of them.
 Screening and evaluation: Some products that after some analysis are clearly not feasible or are
not consistent with the core competencies of the firm are eliminated.
 Business analysis. Ideas are now exposed to more rigorous analysis. Profit projections, risks,
market size, and competitive response are considered. If promising, market research may be
done.
 Development: The product is designed and manufacturing facilities are planned.

 Market testing: Frequently, firms will try to “test” a product in one region to see if it will sell in
reality before it is released nationally and internationally. There is a lesser risk if the firm only
commits money to advertising and other marketing efforts in one region. Retailers will also be
more receptive in other parts of the country and world if it has been demonstrated that the
product sold well in one region. The firm may also experiment with different prices for the
product.
 Commercialization: Facilities to manufacture the product on a larger scale are now put into
operation and the firm starts a national marketing campaign and distribution effort.
THE PRODUCT LIFE CYCLE
Products often go through a life cycle. Initially, a product is introduced.
Since the product is not well known and is usually expensive (e.g., as microwave ovens were in the late
1970s), sales are usually limited. Eventually, however, many products reach a growth phase—sales
increase dramatically. More firms enter with their models of the product. Frequently, unfortunately, the
product will reach a maturity stage where little growth will be seen. For example, in the United States,
almost every household has at least one color TV set. Some products may also reach a decline stage,
usually because the product category is being replaced by something better. For example, typewriters
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experienced declining sales as more consumers switched to computers or other word processing
equipment. The product life cycle is tied to the phenomenon of diffusion of innovation. When a new
product comes out, it is likely to first be adopted by consumers who are more innovative than others—
they are willing to pay a premium price for the new product and take a risk on unproven technology. It is
important to be on the good side of innovators since many other later adopters will tend to rely for
advice on the innovators who are thought to be more knowledgeable about new products for advice.
At later phases of the PLC, the firm may need to modify its market strategy. For example, facing a
saturated market for baking soda in its traditional use, Arm & Hammer launched a major campaign to
get consumers to use the product to deodorize refrigerators. Deodorizing powders to be used before
vacuuming were also created.
It is sometimes useful to think of products as being either new or existing.

Many firms today rely increasingly on new products for a large part of their sales. New products can be
new in several ways. They can be new to the market—noone else ever made a product like this before.
For example, Chrysler invented the minivan. Products can also be new to the firm—another firm
invented the product, but the firm is now making its own version. For example, IBM did not invent the
personal computer, but entered after other firms showed the market to have a high potential. Products
can be new to the segment—e.g., cellular phones and pagers were first aimed at physicians and other
price-insensitive segments. Later, firms decided to target the more price-sensitive mass market. A
product can be new for legal purposes. Because consumers tend to be attracted to “new and improved”
products, the Federal Trade Commission (FTC) only allows firms to put that label on reformulated
products for six months after a significant change has been made.
DIFFUSION OF INNOVATION
The diffusion of innovation refers to the tendency of new products, practices, or ideas to spread among
people.
Usually, when new products or ideas come about, they are initially only adopted by a small group of
people. Later, many innovations spread to other people. The bell shaped curve frequently illustrates the
rate of adoption of a new product. Cumulative adoptions are reflected by the S-shaped curve.
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The saturation point is the maximum proportion of consumers likely to adopt a product. In the case of
refrigerators in the U.S., the saturation level is nearly one hundred percent of households. The figure will
almost certainly be well below that for video games that, even when spread out to a large part of the
population, will be of interest to far from everyone.
Several specific product categories have case histories that illustrate important issues in adoption. Until
some time in the 1800s, few physicians bothered to scrub prior to surgery, even though new scientific
theories predicted that small microbes not visible to the naked eye could cause infection. Younger and
more progressive physicians began scrubbing early on, but they lacked the stature to make their older
colleagues follow.
 ATM cards spread relatively quickly. Since the cards were used in public, others who did not yet
hold the cards could see how convenient they were. Although some people were concerned
about security, the convenience factors seemed to be a decisive factor in the “tug-of-war” for
and against adoption.
 The case of credit cards was a bit more complicated and involved a “chickenand-egg” paradox.
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Accepting credit cards was not a particularly attractive option for retailers until they were
carried by a large enough number of consumers. Consumers, in contrast, were not particularly
interested in cards that were not accepted by a large number of retailers. Thus, it was necessary
to “jump start” the process, signing up large corporate accounts, under favorable terms, early in
the cycle, after which the cards became worthwhile for retailers to accept.
 Rap music initially spread quickly among urban youths in large part because of the low costs of
recording. Later, rap music became popular among a very different segment, suburban youths,
because of its apparently authentic depiction of an exotic urban lifestyle.
 Hybrid corn was adopted only slowly among many farmers. Although hybrid corn provided
yields of about 20% more than traditional corn, many farmers had difficulty believing that this
smaller seed could provide a superior harvest. They were usually reluctant to try it because a

failed harvest could have serious economic consequences, including a possible loss of the farm.
Agricultural extension agents then sought out the most progressive farmers to try hybrid corn,
also aiming for farmers who were most respected and most likely to be imitated by others. Few
farmers switched to hybrid corn outright from year to year. Instead, many started out with a
fraction of their land, and gradually switched to 100% hybrid corn when this innovation had
proven itself useful.
Several forces often work against innovation. One is risk, which can be either social or financial. For
example, early buyers of the CD player risked that few CDs would be recorded before the CD player
went the way of the 8 track player. Another risk is being perceived by others as being weird for trying a
“fringe” product or idea. For example, Barbara Mandrel sings the song “I Was Country When Country
Wasn’t Cool.” Other sources of resistance include the initial effort needed to learn to use new products
(e.g., it takes time to learn to meditate or to learn how to use a computer) and concerns about
compatibility with the existing culture or technology. For example, birth control is incompatible with
religious beliefs that predominate in some areas, and a computer database is incompatible with a large,
established card file. Innovations come in different degrees. A continuous innovation includes slight
improvements over time. Very little usually changes from year to year in automobiles, and even
automobiles of the 1990s are driven much the same way that automobiles of the 1950 were driven. A
dynamically continuous innovation involves some change in technology, although the product is used
much the same way that its predecessors were used—e.g., jet vs. propeller aircraft. A discontinuous
innovation involves a product that fundamentally changes the way that things are done—e.g., the fax
and photocopiers. In general, discontinuous innovations are more difficult to market since greater
changes are required in the way things are done, but the rewards are also often significant. Several
factors influence the speed with which an innovation spreads. One issue is relative advantage (i.e., the
ratio of risk or cost to benefits). Some products, such as cellular phones, fax machines, and ATM cards,
have a strong relative advantage. Other products, such as automobile satellite navigation systems, entail
some advantages, but the cost ratio is high. Lower priced products often spread more quickly, and the
extent to which the product is trialable (farmers did not have to plant all their land with hybrid corn at
once, while one usually has to buy a cellular phone to try it out) influence the speed of diffusion. Finally,
the extent of switching difficulties influences speed—many offices were slow to adopt computers
because users had to learn how to use them.
Some cultures tend to adopt new products more quickly than others, based on several factors:
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 Modernity: The extent to which the culture is receptive to new things. In some countries, such
as Britain and Saudi Arabia, tradition is greatly valued—thus, new products often don’t fare too
well. The United States, in contrast, tends to value progress.
 Homophily: The more similar to each other that members of a culture are, the more likely an
innovation is to spread—people are more likely to imitate similar than different models. The two
most rapidly adopting countries in the World are the U.S. and Japan. While the U.S. interestingly
scores very low, Japan scores high.
 Physical distance: The greater the distance between people, the less likely innovation is to
spread.
 Opinion leadership: The more opinion leaders are valued and respected, the more likely an
innovation is to spread. The style of opinion leaders moderates this influence, however. In less
innovative countries, opinion leaders tend to be more conservative, i.e., to reflect the local
norms of resistance.

It should be noted that innovation is not always an unqualifiedly good thing. Some innovations, such as
infant formula adopted in developing countries, may do more harm than good. Individuals may also
become dependent on the innovations. For example, travel agents who get used to booking online may
be unable to process manual reservations. Sometimes innovations are disadopted. For example, many
individuals disadopt cellular phones if they find out that they don’t end up using them much.
BRANDS AND BRANDING
An essential issue in product management is branding. Different firms have different policies on the
branding on their products. While 3M puts its brand name on a great diversity of products, Proctor &
Gamble, on the opposite extreme, maintains a separate brand name for each product. In general, the
use of brand extensions should be evaluated on the basis of the compatibility of various products—can
the same brand name represent different products without conflict or confusion? Coca Cola for many
years resisted putting its coveted brand name on a diet soft drink. In the old days, available sweeteners
such as saccharin added an undesirable aftertaste, implying a clear sacrifice in taste for the reduction in
calories. Thus, to avoid damaging the brand name Coca Cola, Coke instead named its diet cola Tab. Only
after NutraSweet was introduced was the brand extension allowed. Research shows that consumers are
more receptive to brand extensions when (1) the company appears to have the expertise to make the
product [McDonald’s was not thought as credible as a photo-finishing service], (2) the products are
congruent (compatible), and (3) the brand extension is not seen as being exploitative of a high quality
brand name [e.g., one should not use a premium brand name like Heineken to make a trivially easy
product like popcorn].
In many markets, brands of different strength compete against each other. At the top level are national
or international brands. A large investment has usually been put into extensive brand building—
including advertising, distribution and, if needed, infrastructure support. Although some national brands
are better regarded than others—e.g., Dell has a better reputation than e-Machines—the national
brands usually sell at higher prices than to regional and store brands. Regional brands, as the name
suggests, are typically sold only in one area. In some cases, regional distribution is all that firms can
initially accomplish with the investment capital and other resources that they have. This means that
advertising is usually done at the regional level. This limits the advertising opportunities and thus the
effect of advertising. In some cases, regional brands may eventually grow into national ones. For
example, Snapple® was a regional beverage. While a regional beverage, it became so successful that it
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was able to attract investments to allow a national launch. In a similar manner, some brands often start
in a narrow niche—either nationally or regionally—and may eventually work their way up to a more
inclusive national brand. For example, Mars was originally a small brand that focused on liquor filled
chocolate candy. Eventually, the firm was able to expand. Store, or private label brands are, as the name
suggests, brands that are owned by retail store chains or consortia thereof. (For example, Vons and
Safeway have the same corporate parent and both carry the “Select” brand). Typically, store brands sell
at lower prices than do national brands. However, because the chains do not have the external brand
building costs, the margins on the store brands are often higher. Retailers have a great deal of power
because they control the placement of products within the store. Many place the store brand right next
to the national brand and place a sign highlighting the cost savings on the store brand.
Co-branding involves firms using two or more brands together to maximize appeal to consumers. Some
ice cream makers, for example, use their own brand name in addition to naming the brands of

ingredients contained. Sometimes, this strategy may help one brand at the expense of the other. It is
widely believed, for example, that the “Intel inside” messages, which Intel paid computer makers to put
on their products and packaging, reduced the value of the computer makers’ brand names because the
emphasis was now put on the Intel component. Certain “peripheral” characteristics of products may
“signal” quality or other value to consumers. For some products, packaging accounts for a large part of
the total product manufacturing cost. Long warranties often signal to consumers that the product is of
good quality since the manufacturer is willing to take responsibility for its functioning.
THE PRODUCT-SERVICE CONTINUUM
There is no clear distinction between a “pure” tangible product and a service. Most products contain
some of both. A computer, for example, is a tangible product, but it often comes with a warranty and
software updates.
Product Line
Product lining is the marketing strategy of offering for sale several related products. Unlike product
bundling, where several products are combined into one, lining involves offering several related
products individually. A line can comprise related products of various sizes, types, colors, qualities, or
prices. Line depth refers to the number of product variants in a line. Line consistency refers to how
closely related the products that make up the line are. Line vulnerability refers to the percentage of
sales or profits that are derived from only a few products in the line. The number of different product
lines sold by a company is referred to as width of product mix. The total number of products sold in all
lines is referred to as length of product mix. If a line of products is sold with the same brand name, this
is referred to as family branding. When you add a new product to a line, it is referred to as a line
extension. When you add a line extension that is of better quality than the other products in the line,
this is referred to as trading up or brand leveraging. When you add a line extension that is of lower
quality than the other products of the line, this is referred to as trading down. When you trade down,
you will likely reduce your brand equity. You are gaining short-term sales at the expense of long term
sales. Image anchors are highly promoted products within a line that define the image of the whole line.
Image anchors are usually from the higher end of the line's range. When you add a new product within
the current range of an incomplete line, this is referred to as line filling. Price lining is the use of a
limited number of prices for all your product offerings. This is a tradition started in the old five and dime
stores in which everything cost either 5 or 10 cents. Its underlying rationale is that these amounts are
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seen as suitable price points for a whole range of products by prospective customers. It has the
advantage of ease of administering, but the disadvantage of inflexibility, particularly in times of inflation
or unstable prices. There are many important decisions about product and service development and
marketing. In the process of product development and marketing we should focus on strategic decisions
about product attributes, product branding, product packaging, product labeling and product support
services. But product strategy also calls for building a product line.
Example: Bentley Considering Third Product Line
Thursday, January 20, 2011 As it turns out the first big decision Wolfgang Durheimer as the new CEO of
Bentley has to make is a toughie! Whether or not the VW-owned British firm should add a third all-
new model line besides the Continental and Mulsanne? The outgoing CEO Franz-Josef Paefgen
believes that it’s Durheimer’s biggest challenge. This past nine years Bentley enjoyed a big success

under the leadership of Dr.Paefgen, but it was not very consistent. They had their ups and downs and
they get caught in the midst of a terrible economic downturn which nearly resulted in luxury car sales to
come to a halt. Thanks to the Continental’s success Bentley hit an all-time record selling 10,014 units in
2007, but in 2009 they only managed 4,616. And the new Mulsanne didn’t help much either since it has
a far more limited market than the Continental and a much fatter price tag. Those facts make it real hard
for the new leader to decide if they should add a new model line. They are also facing problems
regarding fuel consumption and emissions. So they might consider a more efficient model to balance
things out, but then Bentley really isn’t about economy, is it?! After all, the only thing that matters is
what type of car the third model line should be. One thing’s for sure, it’ll share many bits and parts with
the Continental.
Product Line Decisions
Decisions regarding the product, price, promotion and distribution channels are decisions on the
elements of the "marketing mix". It can be argued that product decisions are probably the most crucial
as the product is the very epitome of marketing planning. Errors in product decisions are legion. These
can include the imposition of a global standardised product where it is inapplicable, for example large
horsepower tractors may be totally unsuitable for areas where small scale farming exists and where
incomes are low; devolving decisions to affiliated countries which may let quality slip; and the attempt
to sell products into a country without cognisance of cultural adaptation needs. The decision whether to
sell globally standardised or adapted products is too simplistic for today's market place. Many product
decisions lie between these two extremes. Cognisance has also to be taken of the stage in the
international life cycle, the organisation's own product portfolio, its strengths and weaknesses and its
global objectives. Unfortunately, most developing countries are in no position to compete on the world
stage with many manufactured value-added products. Quality, or lack of it, is often the major letdown.
As indicated earlier, most developing countries are likely to be exporting raw materials or basic and high
value agricultural produce for some time to come.
Basic concepts
A product can be defined as a collection of physical, service and symbolic attributes which yield
satisfaction or benefits to a user or buyer. A product is a combination of physical attributes say, size and
shape; and subjective attributes say image or "quality". A customer purchases on both dimensions. As
cited earlier, an avocado pear is similar the world over in terms of physical characteristics, but once the
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label CARMEL, for example, is put on it, the product's physical properties are enhanced by the image
CARMEL creates. In "postmodernisation" it is increasingly important that the product fulfills the image
which the producer is wishing to project. This may involve organisations producing symbolic offerings
represented by meaning laden products that chase stimulation-loving consumers who seek experience -
producing situations. So, for example, selling mineral water may not be enough. It may have to be
"Antarctic" in source, and flavoured. This opens up a wealth of new marketing opportunities for
producers.
A product's physical properties are characterised the same the world over. They can be convenience or
shopping goods or durables and nondurables; however, one can classify products according to their
degree of potential for global marketing:
i) local products - seen as only suitable in one single market.

ii) international products - seen as having extension potential into other markets.
iii) multinational products - products adapted to the perceived unique characteristics of national
markets.
iv) global products - products designed to meet global segments.
Quality, method of operation or use and maintenance (if necessary) are catchwords in international
marketing. A failure to maintain these will lead to consumer dissatisfaction. This is typified by
agricultural machinery where the lack of spares and/or foreign exchange can lead to lengthy downtimes.
It is becoming increasingly important to maintain quality products based on the ISO 9000 standard, as a
prerequisite to export marketing.
Consumer beliefs or perceptions also affect the "world brand" concept. World brands are based on the
same strategic principles, same positioning and same marketing mix but there may be changes in
message or other image. World brands in agriculture are legion. In fertilizers, brands like Norsk Hydro
are universal; in tractors, Massey Ferguson; in soups, Heinz; in tobacco, BAT; in chemicals, Bayer. These
world brand names have been built up over the years with great investments in marketing and
production. Few world brands, however, have originated from developing countries. This is hardly
surprising given the lack of resources. In some markets product saturation has been reached, yet
surprisingly the same product may not have reached saturation in other similar markets. Whilst France
has long been saturated by avocadoes, the UK market is not yet, hence raising the opportunity to enter
deeper into this market.
Product design
Changes in design are largely dictated by whether they would improve the prospects of greater sales,
and this, over the accompanying costs. Changes in design are also subject to cultural pressures. The
more culture-bound the product is, for example food, the more adaptation is necessary. Most products
fall in between the spectrum of "standardisation" to "adaptation" extremes. The application the product
is put to also affects the design. In the UK, railway engines were designed from the outset to be
sophisticated because of the degree of competition, but in the US this was not the case. In order to burn
the abundant wood and move the prairie debris, large smoke stacks and cowcatchers were necessary. In
agricultural implements a mechanised cultivator may be a convenience item in a UK garden, but in India
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and Africa it may be essential equipment. As stated earlier "perceptions" of the product's benefits may
also dictate the design. A refrigerator in Africa is a very necessary and functional item, kept in the
kitchen or the bar. In Mexico, the same item is a status symbol and, therefore, kept in the living room.
Factors encouraging standardisation are:

i) economies of scale in production and marketing

ii) consumer mobility - the more consumers travel the more is the demand
iii) technology
iv) image, for example "Japanese", "made in".
The latter can be a factor both to aid or to hinder global marketing development. Nagashima 1 (1977)

found the "made in USA" image has lost ground to the "made in Japan" image. In some cases "foreign
made" gives advantage over domestic products. In Zimbabwe one sees many advertisements for
"imported", which gives the product advertised a perceived advantage over domestic products. Often a
price premium is charged to reinforce the "imported means quality" image. If the foreign source is
negative in effect, attempts are made to disguise or hide the fact through, say, packaging or labelling.
Mexicans are loathe to take products from Brazil. By putting a "made in elsewhere" label on the product
this can be overcome, provided the products are manufactured elsewhere even though its company
maybe Brazilian.
Factors encouraging adaptation are:
i) Differing usage conditions. These may be due to climate, skills, level of literacy, culture or physical
conditions. Maize, for example, would never sell in Europe rolled and milled as in Africa. It is only eaten
whole, on or off the cob. In Zimbabwe, kapenta fish can be used as a relish, but wilt always be eaten as a
"starter" to a meal in the developed countries.
ii) General market factors - incomes, tastes etc. Canned asparagus may be very affordable in the
developed world, but may not sell well in the developing world.
iii) Government - taxation, import quotas, non tariff barriers, labelling, health requirements. Non tariff
barriers are an attempt, despite their supposed impartiality, at restricting or eliminating competition. A
good example of this is the Florida tomato growers, cited earlier, who successfully got the US
Department of Agriculture to issue regulations establishing a minimum size of tomatoes marketed in the
United States. The effect of this was to eliminate the Mexican tomato industry which grew a tomato that
fell under the minimum size specified. Some non-tariff barriers may be legitimate attempts to protect
the consumer, for example the ever stricter restrictions on horticultural produce insecticides and
pesticides use may cause African growers a headache, but they are deemed to be for the public good.
iv) History. Sometimes, as a result of colonialism, production facilities have been established overseas.
Eastern and Southern Africa is littered with examples. In Kenya, the tea industry is a colonial legacy, as is
the sugar industry of Zimbabwe and the coffee industry of Malawi. These facilities have long been
adapted to local conditions.
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v) Financial considerations. In order to maximise sales or profits the organisation may have no choice
but to adapt its products to local conditions.
vi) Pressure. Sometimes, as in the case of the EU, suppliers are forced to adapt to the rules and
regulations imposed on them if they wish to enter into the market.
Production decisions
In decisions on producing or providing products and services in the international market it is essential
that the production of the product or service is well planned and coordinated, both within and with
other functional area of the firm, particularly marketing. For example, in horticulture, it is essential that
any supplier or any of his "outgrower" (sub-contractor) can supply what he says he can. This is especially
vital when contracts for supply are finalised, as failure to supply could incur large penalties. The main
elements to consider are the production process itself, specifications, culture, the physical product,

packaging, labelling, branding, warranty and service.
Production process
The key question is, can we ensure continuity of supply? In manufactured products this may include
decisions on the type of manufacturing process - artisanal, job, batch, flow line or group technology.
However in many agricultural commodities factors like seasonality, perishability and supply and demand
have to be taken into consideration. Table 8.1 gives a checklist of questions on product requirements for
horticultural products as an example6
Checklist of questions on product requirements by market
Existing sources of supply Recommendations for new suppliers, or

increased supply
Current important suppliers? Best period of supply?
Seasonality of supply, start of season, peak season and Type and size of packaging material?
end of season?
Packaging specifications, weight of produce per Grading and quality standards:
packaging unit, type of packaging?
Grading and quality standards? *acceptable size ranges?
Prices obtained and net profit returned to farmer, *whether different sized produce should be
average price, maximum and minimum prices, effect of packed separately or jumble-packed?
different quality standards on price? *state of ripeness and should produce of the
Problems with existing suppliers and produce? same ripeness be packed together?
Volumes sold daily, monthly, annually? *acceptable level of blemishes?
Popularity trend? *important appearance characteristics such
Types of buyers and consumers? as colour, variety, shape, presence of stalks,
Use of crop? bunch size?
Factors affecting sales, e.g. weather, special festivals,
day of arrival in market? Budget gross and net prices?
Is the crop stored; if so where and by whom? Volumes required?
Frequency of shipment, best day and arrival
time on market?
Transport arrangements, e.g. whose
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responsibility is it to arrange transport?

Storage arrangements, if any?
Potential and techniques for developing
sales?
Quantity and quality of horticultural crops are affected by a number of things. These include input
supplies (or lack of them), finance and credit availability, variety (choice), sowing dates, product range
and investment advice. Many of these items will be catered for in the contract of supply.
Specification

Specification is very important in agricultural products. Some markets will not take produce unless it is
within their specification. Specifications are often set by the customer, but agents, standard authorities
(like the EU or ITC Geneva) and trade associations can be useful sources. Quality requirements often
vary considerably. In the Middle East, red apples are preferred over green apples. In one example
French red apples, well boxed, are sold at 55 dinars per box, whilst not so attractive Iranian greens are
sold for 28 dinars per box. In export the quality standards are set by the importer. In Africa, Maritim
(1991)2, found, generally, that there are no consistent standards for product quality and grading, making
it difficult to do international trade regionally.
Culture
Product packaging, labeling, physical characteristics and marketing have to adapt to the cultural
requirements when necessary. Religion, values, aesthetics, language and material culture all affect
production decisions. Effects of culture on production decisions have been dealt with already in chapter
three.
Physical product
The physical product is made up of a variety of elements. These elements include the physical product
and the subjective image of the product. Consumers are looking for benefits and these must be
conveyed in the total product package. Physical characteristics include range, shape, size, color, quality,
quantity and compatibility. Subjective attributes are determined by advertising, self image, labelling and
packaging. In manufacturing or selling produce, cognisance has to be taken of cost and country legal
requirements.
Again a number of these characteristics is governed by the customer or agent. For example, in beef
products sold to the EU there are very strict quality requirements to be observed. In fish products, the
Japanese demand more "exotic" types than, say, would be sold in the UK. None of the dried fish
products produced by the Zambians on Lake Kariba, and sold into the Lusaka market, would ever pass
the hygiene laws if sold internationally. In sophisticated markets like seeds, the variety and range is so
large that constant watch has to be kept on the new strains and varieties in order to be competitive.
Packaging
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Packaging serves many purposes. It protects the product from damage which could be incurred in
handling and transportation and also has a promotional aspect. It can be very expensive. Size, unit type,
weight and volume are very important in packaging. For aircraft cargo the package needs to be light but
strong, for sea cargo containers are often the best form. The customer may also decide the best form of
packaging. In horticultural produce, the developed countries often demand blister packs for
mangetouts, beans, strawberries and so on, whilst for products like pineapples a sea container may
suffice. Costs of packaging have always to be weighed against the advantage gained by it.
Increasingly, environmental aspects are coming into play. Packaging which is non-degradable - plastic,
for example - is less in demanded. Bio-degradable, recyclable, reusable packaging is now the order of
the day. This can be both expensive and demanding for many developing countries.
Labelling

Labelling not only serves to express the contents of the product, but may be promotional (symbols for
example Cashel Valley Zimbabwe; HJ Heinz, Africafe, Tanzania). The EU is now putting very stringent
regulations in force on labelling, even to the degree that the pesticides and insecticides used on
horticultural produce have to be listed. This could be very demanding for producers, especially small
scale, ones where production techniques may not be standardised. Government labelling regulations
vary from country to country. Bar codes are not widespread in Africa, but do assist in stock control.
Labels may have to be multilingual, especially if the product is a world brand. Translation could be a
problem with many words being translated with difficulty. Again labelling is expensive, and in promotion
terms non-standard labels are more expensive than standard ones. Requirements for crate labelling, etc.
for international transportation will be dealt with later under documentation.
Branding and trademarks
As mentioned in chapter four, it is difficult to protect a trademark or brand, unless all countries are
members of a convention. Brand "piracy" is widespread in many developing countries.
Other aspects of branding include the promotional aspects. A family brand of products under the Zeneca
(ex ICI) label or Sterling Health are likely to be recognised worldwide, and hence enhance the
"subjective" product characteristics.
Warranty
Many large value agricultural products like machinery require warranties. Unfortunately not everyone
upholds them. It is common practice in Africa that if the original equipment has not been bought
through an authorised dealer in the country, that dealer refuses to honour the warranty. This is
unfortunate, because not only may the equipment have been legitimately bought overseas, it also
actually builds up consumer resistance to the dealer. When the consumer is eventually offered a choice,
the reticent. dealer will suffer. For example when new dealers spring up.
Case 8.1 Cotton Production/Marketing Interface
Spinners
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Machines are highly flexible, that is they can usually switch to a variety of yarn requirements. The
machines are geared to high production, are automated and are of a precision for constant quality
provision. There are strict process controls and built - in quality control. Poor raw material, especially
when contaminated with metal particles, damages opening mills, grid knives, fans and card clothing.
Previous devices employed to remove these (magnets) are becoming less effective. The consequences
are damage in the blowroom and carding and danger of fire. Quality is therefore defined as properties of
the end use (clothing etc.), efficiency of weaving and knitting and the efficient running of the spinning
plant. Spinners require raw cotton which is free of trash, dust, sugar and honey dew contamination, seed
coats, bark and foreign fibres and, will not nep the cloth. Further requirements are a certain length (could
be short, medium or long), uniformity of length, strength, fineness, maturity and a certain elongation and
colour.
Suppliers

In order to meet these high quality demands, the growers have to ensure that the production, picking
and ginning is of a very high standard.
Cotton grading
The Liverpool Cotton exchange, for one, relied on the skills of its experts to manually classify raw fibre
purchases for its clients. It still holds the "standards" for length, colour and trash content. As well as the
demands of modem machinery, the lack of standardised measuring and cotton classification procedures
has resulted in commercial conflict and legal disputes about the true nature of traded cotton. Now,
computer based high volume instrument listing systems of raw cotton (HVI systems) are available. The
system can handle large numbers of bales, reduce variation in classification and the need for highly
trained bate classifiers.
For cotton exporters the system offers the following advantages:
· enhanced objectivity in classification

· improve communication if similar systems are used by sellers or buyers
· reduced conflict and need for arbitration
· enhanced competitiveness against synthetic fibres
· improved integration with modern spinning machines
· reduced costs on training of experts and in measuring time.
The system can process 2000 bales per day and give a printout on the seven parameters of grading.
These include length and length uniformity, strength and elongation, micronaire or fineness, leaf and
colour. Manufacturers include SPINLAR INC. of Knoxville, USA.
Service
In agricultural machinery, processing equipment and other items which are of substantial value and
technology, service is a prerequisite. In selling to many developing countries, manufacturers have found
their negotiations at stake due to the poor back-up service. Often, this is no fault of the agent,
distributor or dealer in the foreign country, but due to exchange regulations, which make obtaining
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spare parts difficult. Many organisations attempt to get around this by insisting that a Third World buyer
purchases a percentage of parts on order with the original items. Allied to this problem is the poor
quality of service due to insufficient training. Good original equipment manufacturers will insist on
training and updating as part of the agency agreement. In order to illustrate the above points, cotton
can be used as an example. Cotton is a major foreign exchange earner for Zimbabwe. In 1990/91, 52,000
tonnes were sold overseas at a value of Zim$ 238 million. As the spinners, particularly those in the
export market, are in a highly competitive industry, it is essential that the raw material is as clean as
possible. Also today's spinning equipment is highly technical and the spinner wishes to avoid costly
breakdowns by all means.
Product strategies
There are five major product strategies in international marketing.

Product communications extension
This strategy is very low cost and merely takes the same product and communication strategy into other
markets. However it can be risky if misjudgments are made. For example CPC International believed the
US consumer would take to dry soups, which dominate the European market. It did not work.
Extended product - communications adaptation
If the product basically fits the different needs or segments of a market it may need an adjustment in
marketing communications only. Again this is a low cost strategy, but different product functions have to
be identified and a suitable communications mix developed.
Product adaptation - communications extension
The product is adapted to fit usage conditions but the communication stays the same. The assumption is
that the product will serve the same function in foreign markets under different usage conditions.
Product adaptation - communications adaptation
Both product and communication strategies need attention to fit the peculiar need of the market.
Product invention
This needs a totally new idea to fit the exclusive conditions of the market. This is very much a strategy
which could be ideal in a Third World situation. The development costs may be high, but the advantages
are also very high.
The choice of strategy will depend on the most appropriate product/market analysis and is a function of
the product itself defined in terms of the function or need it serves, the market defined in terms of the
conditions under which the product is used, the preferences of the potential customers and the ability
to buy the product in question, and the costs of adaptation and manufacture to the company
considering these product - communications approaches.
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International strategic alternatives
Product Communications Product/functions Conditions of Examples

strategy strategy Met product use
1 Extension Extension Same Same Pepsi
2 Extension Adaptation Different Same Soups
3 Adaptation Extension Same Different Agriculture
chemicals
4 Adaptation Adaptation Different Different Farm implements
5 Invention New Same - Tyson turbine
water pump
Thailand tuna
CASE - Thailand Tuna

The case of Thai Tuna is a good example of the fifth product strategy alternative. In 1980 world canned
tuna imports stood at some 110,000 tons, world consumption was stagnant, prices depressed and rising
operating costs were leading to the closure of the tuna processing facilities in the US, Japan and Europe.
However, up to 1990, world tuna imports quadrupled to 437,000 tons with large scale canning
operations shifting to several lower cost developing countries.
No country experienced the dramatic development more than Thailand. In 1980 it did not export one
single can. In 1990, Thailand exported 225,000 tons (51% of world market share) with a gross value in
1989 of US$ 537 million. The Thai industry development was rapid and interesting because it was based
on imported raw materials. Tuna landings by Thai vessels rarely exceeded 30,000 tons, whilst its imports
of foreign tuna (mostly skipjack) has increased past the 250,000 ton mark. The reason for this was the
shift in fishing patterns. Historically the eastern Atlantic and Pacific were the most important areas but in
the 1970s, US vessels began to exploit the tuna shoals of the Western Pacific and European vessels the
Indian Ocean. The result was the increase of landings from 1,7 million tons in 1980 to 2,5 million tons in
1988, but a significant drop in prices accompanied this increase. Thailand was in a position to capitalise
on these new low cost suppliers and in the early to mid 1980s several fruit and vegetable canners and
other entrepreneurs invested in large modern processing facilities specially for fish. Their operating costs
were kept low by efficient management, low cost labour, backward integration into production and the
efficient use of by products from processing. This was basically an "invention" product strategy. In order
to gain access to and capitalise on the expanding markets in the US and Europe (except France which
favoured Francophone African suppliers) Thai canners entered into packaging arrangements with
American and European firms. Latter, Thailand's largest processor look over the third largest tuna canner
in the US, enabling it to take advantage of the llatter's exclusive distribution network and well-
established brand names.
As well as the above, organisations have also to consider the international product life cycle (described
in section one) and the "fit" of the strategy into the company's portfolio, strengths and weaknesses. In
launching new products into international markets, the international product life cycle concept is crucial.
Comparative analysis is a very useful technique also for new product introduction. The idea behind this
concept is that if underlying conditions existing in one country are similar to those in another then there
is a likelihood of a product being successfully introduced. On the other hand, again as indicated in
chapter one, the international life cycle can work against domestic producers. The introduction of a
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second country product into a first country which has had a "closed economy" can sometimes kill off
local production if that local producer cannot respond to the imported product's competitiveness. The
case of Sunsplash Zimbabwe is an example.
Product decisions epitomise marketing planning and are the manifestation of marketing strategy. These
decisions are not to be taken lightly. The end consumer and channel considerations have to be taken
into account and the product extended or adapted accordingly.
Case - Imported Juice Helps To Kill Off Sunsplash
A fruit juice processor, Sunsplash, has stopped production of juices following declining business, leaving
15 people without employment.
Company director Mr. Michael Willmore said production ceased at the end of last month, adding that the

Sunsplash range of fruit juices would be available over the next four months until remaining stocks had
been exhausted.
The factory had, since its establishment in 1984, processed a variety of fruit juices for the Zimbabwean
market.
Mr. Willmore said high transport costs as well as competition from imported products had affected the
viability of the company, which had been established in Masvingo in response to Government calls for
industry to decentralise.
"The introduction of (imported) products into the Zimbabwean market rapidly eroded our market share
from over 1 million litres to a mere 450 000 litres annually. By simple statement of fact, Sunsplash was
not viable on the reduced volume."
He also criticised the lack of incentives in Masvingo, particularly for new investors.
*In my opinion, both central government and local municipal authorities will have to offer industries
more attractive incentives to invest En Masvingo", he said.
He said incentives such as lax exemptions offered at growth points and Export Processing Zones (EPZ)
would he more ideal for Masvingo because it was well located from the Mozambican port of Beira as well
as South Africa.
This made the town an ideal location for EPZs.
Mr. Willmore, however, added that the demise of Sunsplash was more complicated than more proximity
to major markets.
"The company desperately needed to make me transition to aseptic packaging, a technology which
enables fruit juices to be processed without the use of chemical preservatives white providing an
unrefrigerated shell life of six months,
The innovation would have greatly enhanced the product and provided export potential, but regrettably,
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cashflow constraints within our holding company (Afdis), combined with high interest rates, made the
$5,8 million investment unviable".
Branding and Packaging Decisions
Branding
Branding involves decisions that establish an identity for a product with the goal of distinguishing it from
competitors’ offerings. In markets where competition is fierce and where customers may select from
among many competitive products, creating an identity through branding is essential. It is particularly
important in helping position the product (see discussion of product position) in the minds of the
product’s target market.

While consumer products companies have long recognized the value of branding, it has only been within
the last 10-15 years that organizations selling component products in the business-to-business market
have begun to focus on brand building strategies. The most well-known company to brand components
is Intel with its now famous "Intel Inside" slogan. Intel’s success has led many other b-to-b companies
and even non-profits to incorporate branding within their overall marketing strategy.
Brand Names and Brand Marks
At a very basic level branding is achieved through the use of unique brand names and brand marks. The
brand name, which may be either the individual product name or a name applied to a group or family of
products, is important for many reasons including suggesting what the product is or does (e.g., Mop-
and-Glow). The name is also what we utter when we discuss the product (i.e., word-of-mouth
marketing).
The brand mark is a design element, such as a symbol (e.g., Nike swoosh ), logo (e.g., Yahoo! graphic), a
character (e.g., Keebler elves) or even a sound (e.g., Intel inside sound), that provides visual or auditory
recognition for the product.
Advantages of Brands
A strong brand offers many advantages for marketers including:
 Brands provide multiple sensory stimuli to enhance customer recognition. For example, a brand
can be visually recognizable from its packaging, logo, shape, etc. It can also be recognizable via
sound, such as hearing the name on a radio advertisement or talking with someone who
mentions the product.
 Customers who are frequent and enthusiastic purchasers of a particular brand are likely to
become Brand Loyal. Cultivating brand loyalty among customers is the ultimate reward for
successful marketers since these customers are far less likely to be enticed to switch to other
brands compared to non-loyal customers.
 Well-developed and promoted brands make product positioning efforts more effective. The
result is that upon exposure to a brand (e.g., hearing it, seeing it) customers conjure up mental
images or feelings of the benefits they receive from using that brand. The reverse is even better.
When customers associate benefits with a particular brand, the brand may have attained a
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significant competitive advantage. In these situations the customer who recognizes he needs a
solution to a problem (e.g., needs to bleach clothes) may automatically think of one brand that
offers the solution to the problem (e.g., Clorox). This “benefit = brand” association provides a
significant advantage for the brand that the customer associates with the benefit sought.
 Firms that establish a successful brand can extend the brand by adding new products under the
same “family” brand. Such branding may allow companies to introduce new products more
easily since the brand is already recognized within the market.
 Strong brands can lead to financial advantages through the concept of Brand Equity in which the
brand itself becomes valuable. Such gains can be realized through the out-right sale of a brand
or through licensing arrangements. For example, Company A may have a well-recognized brand
(Brand X) within a market but for some reason they are looking to concentrate their efforts in
other markets. Company B is looking to enter the same market as Brand X. If circumstances are
right Company A could sell to Company B the rights to use the Brand X name without selling any

other part of the company. That is, Company A simply sells the legal rights to the Brand X name
but retains all other parts of Brand X, such as the production facilities and employees. In cases of
well developed brands such a transaction may carry a very large price tag. Thus, through strong
branding efforts Company A achieves a large financial gain by simply signing over the rights to
the name. But why would Company B seek to purchase a brand for such a high price tag?
Because by buying the brand Company B has already achieved an important marketing goal –
building awareness within the target market. The fact the market is already be familiar with the
brand allows the Company B to concentrate on other marketing decisions.
Packaging
Nearly all tangible products (i.e., goods) are sold to customers within a container or package that, as we
will discuss, serves many purposes including protecting the product during shipment. In a few cases,
such as with certain produce items, the final customer may purchase the product without a package but
the produce marketer still faces packaging decisions when it comes to shipping to the store. Thus, for
many products there are two packaging decisions:
1. Final Customer Package

2. Distribution Channel Package
Packaging: Final Customer Package
This relates to the package the final customer receives in exchange for their payment. When the final
customer makes a purchase he or she is initially exposed to the Primary Package – the outermost
container that is seen and touched by the final customer. This primary package can be further divided
into the following:
 First-Level Package - This is packaging that holds the actual product (e.g., Tylenol Bottle). In
some cases this packaging is minimal since it only serves to protect the product. For instance,
certain frozen food products are sold to consumers in a cardboard box with the product itself
contained in a plastic bag found inside the box. This plastic bag represents the first-level
package. In other cases frozen food products are sold in the plastic bag that contains the
product. In these cases the plastic bag is both first-level package and the primary package for
convey product information.
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 Second-Level Package – In some cases the first-level package is surrounded by one or more
outer packages (e.g., box holding the Tylenol Bottle). This second-level package may act as the
primary package for the product.
 Package Inserts - Marketers use a variety of other methods to communicate with customers
after they open the product package. These methods are often inserted within, or sometimes
on, the product’s package. Insertions include information such as instruction manuals and
warranty cards, promotional incentives such as coupons, and items that add value such as
recipes and software.
Packaging: Distribution Channel Package
This packaging is used to transport the customer package through the supply chain. It generally holds

multiple customer packages and also offers a higher level of damage protection than that of customer
packaging.
Factors in Packaging Decisions
Packaging decisions are important for several reasons including:
 Protection – Packaging is used to protect the product from damage during shipping and
handling, and to lessen spoilage if the protect is exposed to air or other elements.
 Visibility – Packaging design is used to capture customers’ attention as they are shopping or
glancing through a catalog or website. This is particularly important for customers who are not
familiar with the product and in situations, such as those found in grocery stores, where a
product must stand out among thousands of other products. Packaging designs that standout
are more likely to be remembered on future shopping trips.
 Added Value – Packaging design and structure can add value to a product. For instance, benefits
can be obtained from package structures that make the product easier to use while stylistic
designs can make the product more attractive to display in the customer’s home.
 Distributor Acceptance – Packaging decisions must not only be accepted by the final customer,
they may also have to be accepted by distributors who sell the product for the supplier. For
instance, a retailer may not accept packages unless they conform to requirements they have for
storing products on their shelves.
 Cost – Packaging can represent a significant portion of a product’s selling price. For example, it is
estimated that in the cosmetics industry the packaging cost of some products may be as high as
40% of a product’s selling price. Smart packaging decisions can help reduce costs and possibly
lead to higher profits.
 Expensive to Create - Developing new packaging can be extremely expensive. The costs involved
in creating new packaging include: graphic and structural design, production, customer testing,
possible destruction of leftover old packaging, and possible advertising to inform customer of
the new packaging.
 Long Term Decision – When companies create a new package it is most often with the intention
of having the design on the market for an extended period of time. In fact, changing a product’s
packaging too frequently can have negative effects since customers become conditioned to
locate the product based on its package and may be confused if the design is altered.
 Environmental or Legal Issues – Packaging decisions must also include an assessment of its
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environmental impact especially for products with packages that are frequently discarded.
Packages that are not easily bio-degradable could draw customer and possibly governmental
concern. Also, caution must be exercised in order to create packages that do not infringe on
intellectual property, such as copyrights, trademarks or patents, held by others.
Labeling
Most packages, whether final customer packaging or distribution packaging, are imprinted with
information intended to assist the customer. For consumer products, labeling decisions are extremely
important for the following reasons.
 Labels serve to capture the attention of shoppers. The use of catchy words may cause strolling
customers to stop and evaluate the product.

 The label is likely to be the first thing a new customer sees and thus offers their first impression
of the product.
 The label provides customers with product information to aid their purchase decision or help
improve the customer’s experience when using the product (e.g., recipes).
 Labels generally include a universal product codes (UPC) and, in some cases, radio frequency
identification (RFID) tags, that make it easy for resellers, such as retailers, to checkout customers
and manage inventory.
 For companies serving international markets or diverse cultures within a single country, bilingual
or multilingual labels may be needed.
 In some countries many products, including food and pharmaceuticals, are required by law to
contain certain labels such as listing ingredients, providing nutritional information or including
usage warning information.
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Pricing Strategies
There are many ways to price a product. Let's have a look at some of them and try to understand the
best policy/strategy in various situations.
Premium Pricing

Use a high price where there is a uniqueness about the product or service. This approach is used where
a a substantial competitive advantage exists. Such high prices are charge for luxuries such as Cunard
Cruises, Savoy Hotel rooms, and Concorde flights.
Penetration Pricing.
The price charged for products and services is set artificially low in order to gain market share. Once this
is achieved, the price is increased. This approach was used by France Telecom and Sky TV.
Economy Pricing.
This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarkets
often have economy brands for soups, spaghetti, etc.
Price Skimming.
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Charge a high price because you have a substantial competitive advantage. However, the advantage is
not sustainable. The high price tends to attract new competitors into the market, and the price
inevitably falls due to increased supply. Manufacturers of digital watches used a skimming approach in
the 1970s. Once other manufacturers were tempted into the market and the watches were produced at
a lower unit cost, other marketing strategies and pricing approaches are implemented.
Premium pricing, penetration pricing, economy pricing, and price skimming are the four main pricing
policies/strategies. They form the bases for the exercise . However there are other important
approaches to pricing.
Psychological Pricing.

This approach is used when the marketer wants the consumer to respond on an emotional, rather than
rational basis. For example 'price point perspective' 99 cents not one dollar.
Product Line Pricing.
Where there is a range of product or services the pricing reflect the benefits of parts of the range. For
example car washes. Basic wash could be $2, wash and wax $4, and the whole package $6.
Optional Product Pricing.
Companies will attempt to increase the amount customer spend once they start to buy. Optional 'extras'
increase the overall price of the product or service. For example airlines will charge for optional extras
such as guaranteeing a window seat or reserving a row of seats next to each other.
Captive Product Pricing
Where products have complements, companies will charge a premium price where the consumer is
captured. For example a razor manufacturer will charge a low price and recoup its margin (and more)
from the sale of the only design of blades which fit the razor.
Product Bundle Pricing.
Here sellers combine several products in the same package. This also serves to move old stock. Videos
and CDs are often sold using the bundle approach.
Promotional Pricing.
Pricing to promote a product is a very common application. There are many examples of promotional
pricing including approaches such as BOGOF (Buy One Get One Free).
Geographical Pricing.
Geographical pricing is evident where there are variations in price in different parts of the world. For
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example rarity value, or where shipping costs increase price.
Value Pricing.
This approach is used where external factors such as recession or increased competition force
companies to provide 'value' products and services to retain sales e.g. value meals at McDonalds.
Pricing Strategies and Programmes

SETTING THE PRICE – Marketers follow a six-step procedure in setting a product’s price.
STEP 1: SELECTING THE PRICING OBJECT – The five major objectives pursued through pricing:
Survival – short-term objective, overcapacity, intense competition

Maximum current profit – maximum profit, cash flow, ROI
Maximum market share – market-penetration pricing, price sensitive market
Maximum market skimming – high demand, few competitors, superior product image
Product-quality leadership – premium products at premium prices
STEP 2: DETERMINING DEMAND – Price affects demand. The relationship between alternative pricing
and the resulting current demand is reflected by the DEMAND CURVE.
PRICE SENSITIVITY – Consumers are less sensitive to price when:
The product is more distinctive
Part of the cost is borne by another party
Buyers are less aware of substitutes
The product is used with items bought previously
Buyers cannot easily compare the quality of substitutes
The product is seems to have more quality/prestige/exclusiveness
The expenditure is a lower part of the buyer’s total income
Buyers cannot store the product
The expenditure is a small part of the total cost of the end product
PRICE ELASTICITY OF DEMAND – If demand hardly changes with a small change in price, demand is
INELASTIC. If demand changes considerably, demand is ELASTIC.
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Demand is less likely to be elastic when
(1) there are few or no substitutes/competitors;
(2) buyers do not readily notice the higher price;

(3) buyers are slow to change their buying habits and search for lower prices;
(4) buyers think higher prices are justified by quality differences, inflation, etc.
STEP 3: ESTIMATING COSTS – Demand sets the price ceiling, costs set the price floor.

Two Types of Costs – Fixed costs or overhead & Variable Costs which vary with production levels
Experience Curve/Learning Curve – Average cost per unit declines with accumulated production
experience
Activity-Based Cost Accounting – Identifies the real costs associated with serving different customers
Target Costing – Price is set to achieve a desired profit margin
STEP 4: ALALYZING COMPETITORS’ COSTS, PRICES, OFFERS – The firm must take into account
competitors’ reactions to their offering. If the product/service is similar to the competition, they will not
be able to charge more than the competition. If the offering is superior to that of the competition, it can
charge more. The competition may respond with a price change at any time.
STEP 5: SELECTING A PRICING METHOD – The three C’s are major considerations in setting price. Costs
set the floor to the price, Competitors’ prices/substitutes’ prices provide a comparison, Customers’
assessment of unique features set the ceiling to the price.
MARKUP PRICING – A standard markup is added to the cost. Most common in construction and service
industries. Works only if the marked-up price meets expected sales level.
TARGET-RETURN PRICING – Price is set to yield a targeted rate of return on investment. BREAK-EVEN
analysis determines the volume of units that must be sold in order to break even.
PERCIEVED-VALUE PRICING – The buyer’s perceptions of value are more important than cost.
VALUE PRICING – Company charges low price for high quality offering. Must become low-cost producer
without sacrificing quality.
GOING-RATE PRICING – Prices are largely based on competitors’ prices.
SEALED-BID PRICING – Prices are based on expectations of how competitors will price rather than in
relation to the firm’s costs.
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STEP 6: SELECTING THE FINAL PRICE
PSYCHOLOGICAL PRICING – Many consumers use price as an indicator of quality. Image pricing is
especially effective with ego-sensitive products such as perfumes, expensive cars, gifts.
OTHER MARKETING-MIX ELEMENTS – Consumers are apparently willing to pay more for known products
than unknown. The positive relationship between high prices and high advertising is strongest in the
later stages of the product life cycle for market leaders.
COMPANY PRICING POLICIES – Price must be consistent with company pricing policies.

IMPACT OF PRICE ON OTHER PARTIES – How will distributors, dealers, salespeople, competitors,
suppliers, government, etc. react to the price?
ADAPTING THE PRICE – Companies usually do not set a single price, but a price structure that reflects
several variables.
GEOGRAPHICAL PRICING – Company decides how to price its products to different customers in
different locations and countries. The company must also consider how they will get paid. Fifteen to
twenty-five percent of world trade is paid for in COUNTERTRADE, where buyers offer items other than
cash as payment. Some forms of countertrade are:
*Barter – direct exchange of goods or services with no money and no third party involved
*Compensation deal – seller is paid partly in cash and partly in products
*Buyback arrangement – seller sells plant, equipment, technology and accepts products made with
the equipment as partial payment
*Offset – seller received payment in cash but agrees to spend a substantial amount of it in that
country within a specified time period
PRICE DISCOUNTS AND ALLOWANCES – Companies will adjust prices in certain circumstances.
*Cash Discounts – price reduction for buyers who pay their bills promptly
*Quantity Discounts – price reduction for buyers who buy in large volumes
*Functional Discounts – offered to trade-channel members if the perform certain functions (selling,
storing, record keeping, etc.)
*Seasonal Discounts – price reduction for buyers who by merchandise or services out of season
*Allowances – extra payments designed to gain reseller participation in special programs (trade-in or
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promotional allowances)
PROMOTIONAL PRICING – Seven pricing techniques designed to stimulate early purchase:
*Loss-leader pricing – stores drop prices on brand name items to increase traffic
*Special-event pricing – special prices in certain seasons to draw in customers

*Cash rebates – rebates offered to encourage purchases within a specified period (inventory
clearance)
*Low-interest financing – just what it says
*Longer payment terms – stretching loans over longer periods to result in lower payments

*Warranties and service contracts – addition of free or low-cost warranties
*Psychological discounting – offering the item at substantial savings from the normal price
DISCRIMINATORY PRICING – Selling at two or more prices that do not reflect a proportional cost
difference. Price discrimination works when
(1) the market has segments that show different intensities of demand;
(2) the lower-price segment cannot resell to the higher-price segment;
(3) competitors cannot undersell the firm in the higher-price segment;
(4) the cost of segmenting and policing the market does not exceed the extra revenue derived from
price discrimination;
(5) the practice does not breed customer resentment; and
(6) the price discrimination is not illegal (predatory pricing – selling below cost to destroy competition).
*Customer-segment pricing – certain customer groups pay different prices for same product/service
(senior citizen discounts)
*Product-form pricing – different versions of same product sell for different price without regard to
production cost
*Image pricing – same product sells for two different prices based on image differences
*Location pricing – same product is priced differently based on location (stadium seating)
*Time pricing – prices vary by season, day, or hour (cellular phones w/free weekends)
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PRODUCT-MIX PRICING – Price-setting logic must be modified when the product is part of a product mix.
*Product-line pricing – price points that distinguish products in a product line. Perceived quality
differences must justify price
*Optional-feature pricing – optional products, services, features offered along with the main product
*Captive-product pricing – some products require ancillary products (razors need blades) that allow
greater markup
*Two-part pricing – consists of a fixed fee plus a variable usage fee (telephone service)
*By-product pricing – sales of by-products which may allow the product to be sold at a lower price if

necessary
*Product-bundling pricing – selling a bundle of products for less than it would cost to buy the items
separately
INITIATING AND RESPONDING TO PRICE CHANGES – Firms may need to cut or raise prices in certain
situations.
INITIATING PRICE CUTS – Firms may cut prices due to excess plant capacity, declining market share, to
dominate the market through lower costs. Items to consider before initiating a price cut: could start a
price war, customers may assume lower price means lower quality, low price buys market share but not
loyalty, competitors may cut prices and have longer staying power
INITIATING PRICE INCREASES – Firms may increase prices to increase profit margin, to maintain profits in
the face of cost inflation, in anticipation of cost increases (anticipatory pricing), when the firm faces
over-demand and cannot supply all of its customers.
REACTIONS TO PRICE CHANGES – Reaction to price changes are most likely when there are few firms
offering the product, the product is homogeneous, and buyers are highly informed.
RESPONDING TO COMPETITORS PRICE CHANGES – The best response varies with the situation. Firms
must consider the product’s stage in the life cycle, its importance to the firm’s portfolio, the
competitor’s intentions and resources, the product’s price and quality sensitivity, the behavior of costs
with volume, and alternative opportunities.
April 10, 2020

Managing Marketing Channels
A marketing channel is a set of practices or activities necessary to transfer the ownership of goods, and
to move goods, from the point of production to the point of consumption and, as such, which consists of
all the institutions and all the marketing activities in the marketing process. A marketing channel is a
useful tool for management.[1]
Roles of marketing channel in marketing strategies:
 Links producers to buyers.

 Performs sales, advertising and promotion.
 Influences the firm's pricing strategy.
 Affecting product strategy through branding, policies, willingness to stock and customizes
profits, install, maintain, offer credit, etc.
An example of this is Apple orchard: Apple orchard >Transport > Processing factory > Packaging > > Final
product to be sold > Apple pie eaten
An alternative term is distribution channel or 'route-to-market'. It is a 'path' or 'pipeline' through which

goods and services flow in one direction (from vendor to the consumer), and the payments generated by
them flow in the opposite direction (from consumer to the vendor). A marketing channel can be as short
as being direct from the vendor to the consumer or may include several inter-connected (usually
independent but mutually dependent) intermediaries such as wholesalers, distributors, agents, retailers.
Each intermediary receives the item at one pricing point and moves it to the next higher pricing point
until it reaches the final buyer.
The distribution channel
It is defined as a chain of intermediaries, each passing the product down the chain to the next
organization, before it finally reaches the consumer or end-user. This process is known as the
'distribution chain' or the 'channel.' Each of the elements in these chains will have their own specific
needs, which the producer must take into account, along with those of the all-important end-user.
Channels
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A number of alternate 'channels' of distribution may be available:
 Distributor, who sells to retailers,

 Retailer (also called dealer or reseller), who sells to end customers
 Advertisement typically used for consumption goods
Distribution channels may not be restricted to physical products alice from producer to consumer in
certain sectors, since both direct and indirect channels may be used. Hotels, for example, may sell their
services (typically rooms) directly or through travel agents, tour operators, airlines, tourist boards,
centralized reservation systems, etc. process of transfer the products or services from Producer to
Customer or end user.

There have also been some innovations in the distribution of services. For example, there has been an
increase in franchising and in rental services - the latter offering anything from televisions through tools.
There has also been some evidence of service integration, with services linking together, particularly in
the travel and tourism sectors. For example, links now exist between airlines, hotels and car rental
services. In addition, there has been a significant increase in retail outlets for the service sector. Outlets
such as estate agencies and building society offices are crowding out traditional grocers from major
shopping areas.
Channel decisions
Channel Sales is nothing but a chain for to market a product through different sources.
 Channel strategy
 Gravity & Gravity
 Push and Pull strategy
 Product (or service)
 Cost
 Consumer location
Managerial concerns
The channel decision is very important. In theory at least, there is a form of trade-off: the cost of using
intermediaries to achieve wider distribution is supposedly lower. Indeed, most consumer goods
manufacturers could never justify the cost of selling direct to their consumers, except by mail order.
Many suppliers seem to assume that once their product has been sold into the channel, into the
beginning of the distribution chain, their job is finished. Yet that distribution chain is merely assuming a
part of the supplier's responsibility; and, if they have any aspirations to be market-oriented, their job
should really be extended to managing all the processes involved in that chain, until the product or
service arrives with the end-user. This may involve a number of decisions on the part of the supplier:
 Channel membership
 Channel motivation
 Monitoring and managing channels
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Type of marketing channel
1. Intensive distribution - Where the majority of resellers stock the 'product' (with convenience
products, for example, and particularly the brand leaders in consumer goods markets) price
competition may be evident.
2. Selective distribution - This is the normal pattern (in both consumer and industrial markets)
where 'suitable' resellers stock the product.
3. Exclusive distribution - Only specially selected resellers or authorized dealers (typically only one
per geographical area) are allowed to sell the 'product'.
Channel motivation
It is difficult enough to motivate direct employees to provide the necessary sales and service support.

Motivating the owners and employees of the independent organizations in a distribution chain requires
even greater effort. There are many devices for achieving such motivation. Perhaps the most usual is
`incentive': the supplier offers a better margin, to tempt the owners in the channel to push the product
rather than its competitors; or a compensation is offered to the distributors' sales personnel, so that
they are tempted to push the product. Julian Dent defines this incentive as a Channel Value Proposition
or business case, with which the supplier sells the channel member on the commercial merits of doing
business together. He describes this as selling business models not products.
Monitoring and managing channels
In much the same way that the organization's own sales and distribution activities need to be monitored
and managed, so will those of the distribution chain.
In practice, many organizations use a mix of different channels; in particular, they may complement a
direct sales force, calling on the larger accounts, with agents, covering the smaller customers and
prospects. These channels show marketing strategies of an organisation. Effective management of
distribution channel requires making and implementing decision in these areas.
The Importance of Distribution:
Most producers use intermediaries to bring their products to market. They try to develop a distribution
channel (marketing channel) to do this. A distribution channel is a set of interdependent organizations
that help make a product available for use or consumption by the consumer or business user. Channel
intermediaries are firms or individuals such as wholesalers, agents, brokers, or retailers who help move
a product from the producer to the consumer or business user.
A company’s channel decisions directly affect every other marketing decision. Place decisions, for
example, affect pricing. Marketers that distribute products through mass merchandisers such as Wal-
Mart will have different pricing objectives and strategies than will those that sell to specialty stores.
Distribution decisions can sometimes give a product a distinct position in the market. The choice of
retailers and other intermediaries is strongly tied to the product itself. Manufacturers select mass
merchandisers to sell mid-price-range products while they distribute top-of-the-line products through
high-end department and specialty stores. The firm’s sales force and communications decisions depend
April 10, 2020
on how much persuasion, training, motivation, and support its channel partners need. Whether a
company develops or acquires certain new products may depend on how well those products fit the
capabilities of its channel members.
Some companies pay too little attention to their distribution channels. Others, such as FedEx, Dell
Computer, and Charles Schwab have used imaginative distribution systems to gain a competitive
advantage.
Functions of Distribution Channels

Distribution channels perform a number of functions that make possible the flow of goods from the
producer to the customer. These functions must be handled by someone in the channel. Though the
type of organization that performs the different functions can vary from channel to channel, the
functions themselves cannot be eliminated. Channels provide time, place, and ownership utility. They
make products available when, where, and in the sizes and quantities that customers want. Distribution
channels provide a number of logistics or physical distribution functions that increase the efficiency of
the flow of goods from producer to customer. Distribution channels create efficiencies by reducing the
number of transactions necessary for goods to flow from many different manufacturers to large
numbers of customers. This occurs in two ways. The first is called breaking bulk. Wholesalers and
retailers purchase large quantities of goods from manufacturers but sell only one or a few at a time to
many different customers. Second, channel intermediaries reduce the number of transactions by
creating assortments—providing a variety of products in one location—so that customers can
conveniently buy many different items from one seller at one time. Channels are efficient. The
transportation and storage of goods is another type of physical distribution function. Retailers and other
channel members move the goods from the production site to other locations where they are held until
they are wanted by customers. Channel intermediaries also perform a number of facilitating functions,
functions that make the purchase process easier for customers and manufacturers. Intermediaries often
provide customer services such as offering credit to buyers and accepting customer returns. Customer
services are oftentimes more important in B2B markets in which customers purchase larger quantities of
higher-priced products.
Some wholesalers and retailers assist the manufacturer by providing repair and maintenance service for
products they handle. Channel members also perform a risk-taking function. If a retailer buys a product
from a manufacturer and it doesn’t sell, it is “stuck” with the item and will lose money. Last, channel
members perform a variety of communication and transaction functions. Wholesalers buy products to
make them available for retailers and sell products to other channel members. Retailers handle
transactions with final consumers. Channel members can provide two-way communication for
manufacturers. They may supply the sales force, advertising, and other marketing communications
necessary to inform consumers and persuade them to buy. And the channel members can be invaluable
sources of information on consumer complaints, changing tastes, and new competitors in the market.
The Internet in the Distribution Channel
By using the Internet, even small firms with limited resources can enjoy some of the same competitive
April 10, 2020
advantages as their largest competitors in making their products available to customers internationally
at low cost. E-commerce can result in radical changes in distribution strategies. Today most goods are
mass-produced, and in most cases end users do not obtain products directly from manufacturers. With
the Internet, however, the need for intermediaries and much of what has been assumed about the need
and benefits of channels will change. In the future, channel intermediaries that physically handle the
product may become largely obsolete. Many traditional intermediaries are already being eliminated as
companies question the value added by layers in the distribution channel. This removal of
intermediaries is termed disintermediation, the elimination of some layers of the distribution channel in
order to cut costs and improve the efficiency of the channel.
Wholesaling:

Wholesaling is all activities involved in selling products to those buying for resale or business use.
Wholesaling intermediaries are firms that handle the flow of products from the manufacturer to the
retailer or business user.
Wholesaling intermediaries add value by performing one or more of the following channel functions:
 Selling and Promoting

 Buying and Assortment Building
 Bulk-Breaking
 Warehousing
 Transportation
 Financing
 Risk Bearing
 Market Information – giving information to suppliers and customers about competitors, new
products, and price developments
 Management Services and Advice – helping retailers train their sales clerks, improving store
layouts and displays, and setting up accounting and inventory control systems.
Independent Intermediaries
Independent intermediaries do business with many different manufacturers and many different
customers. Because they are not owned or controlled by any manufacturer, they make it possible for
many manufacturers to serve customers throughout the world while keeping prices low.
Merchant Wholesalers
Merchant wholesalers are independent intermediaries that buy goods from manufacturers and sell to
retailers and other B2B customers. Because merchant wholesalers take title to the goods, they assume
certain risks and can suffer losses if products get damaged, become out-of-date or obsolete, are stolen,
or just don’t sell. At the same time, because they own the products, they are free to develop their own
marketing strategies including setting prices. Merchant wholesalers include full-service merchant
wholesalers and limited-service wholesalers. Limited-service wholesalers are comprised of cash-and-
carry wholesalers, truck jobbers, drop shippers, mail-order wholesalers, and rack jobbers.
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Merchandise Agents or Brokers
Merchandise agents or brokers are a second major type of independent intermediary. Agents and
brokers provide services in exchange for commissions. They may or may not take possession of the
product, but they never take title; that is, they do not accept legal ownership of the product. Agents
normally represent buyers or sellers on an ongoing basis, whereas brokers are employed by clients for a
short period of time. Merchandise agents or brokers include manufacturers’ agents (manufacturers’
reps), selling agents, commission merchants, and merchandise brokers.
Manufacturer-Owned Intermediaries
Manufacturer-owned intermediaries are set up by manufacturers in order to have separate business

units that perform all of the functions of independent intermediaries, while at the same time
maintaining complete control over the channel. Manufacturer-owned intermediaries include sales
branches, sales offices, and manufacturers’ showrooms. Sales branches carry inventory and provide
sales and service to customers in a specific geographic area. Sales offices do not carry inventory but
provide selling functions for the manufacturer in a specific geographic area. Because they allow
members of the sales force to be located close to customers, they reduce selling costs and provide
better customer service. Manufacturers’ showrooms permanently display products for customers to
visit. They are often located in or near large merchandise marts, such as the furniture market in High
Point, North Carolina.
Types of Distribution Channels:
The first step in selecting a marketing channel is determining which type of channel will best meet both
the seller’s objectives and the distribution needs of customers.
Channel Length
Distribution channels can be described as being either short or long. A short channel involves few
intermediaries. A long channel, on the other hand, involves many intermediaries working in succession
to move goods from producers to consumers. In general, business products tend to move through
shorter channels than consumer products due to geographical concentrations and comparatively few
business purchases. Service firms market primarily through short channels because they sell intangible
products and need to maintain personal relationships within their channels. Not-for-profit institutions
also tend to work with short, simple, and direct channels. Please note Table 15.1 below that highlights
the characteristics of short and long marketing channels.
April 10, 2020
Consumer Channels
The simplest and shortest distribution channel is a direct channel. A direct channel carries goods directly
from a producer to the business purchaser or consumer. One of the newest means of selling in a direct
channel is the Internet. A direct channel may allow the producer to serve its customers better and at a
lower price than is possible using a retailer. Sometimes a direct channel is the only way to sell the
product because using channel intermediaries may increase the price above what consumers are willing
to pay. Another reason to use a direct channel is control.
Many producers, however, choose to use indirect channels to reach consumers. Customers are familiar
with certain retailers or other intermediaries and habitually turn to them when looking for what they
need. Intermediaries also help producers fulfill the channel functions previously cited. By creating utility
and transaction efficiencies, channel members make producers’ lives easier and enhance their ability to
reach customers.
The producer-retailer-consumer channel is the shortest indirect channel. GE uses this channel when it
sells small appliances through large retailers such as Wal-Mart or Sears. The producer-wholesaler-
retailer-consumer channel is another common distribution channel in consumer marketing.
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Business-to-Business Channels
B2B distribution channels facilitate the flow of goods from a producer to an organizational customer.
Generally, B2B channels parallel consumer channels in that they may be direct or indirect. The simplest
indirect channel in industrial markets occurs when the single intermediary—a merchant wholesaler
referred to as an industrial distributor rather than a retailer—buys products from a manufacturer and
sells them to business customers. Direct channels are more common to business-to-business markets
because B2B marketing often means selling high-dollar, high-profit items to a market made up of only a
few customers. In such markets, it pays for a company to develop its own sales force and sell directly to
customers at a lower cost than if it used intermediaries.
Channels for Services

Because services are intangible, there is no need to worry about storage, transportation, and the other
functions of physical distribution. In most cases, the service travels directly from the producer to the
customer. Some services, however, do need an intermediary, often called an agent, who helps the
parties complete the transaction. Examples include insurance agents, stockbrokers, and travel agents.
Note the alternative distribution channels for consumer goods, business goods, and services illustrated
in Figure below:
April 10, 2020
Horizontal Marketing Systems

A horizontal marketing system is a channel arrangement in which two or more companies at one level
join together to follow a new marketing opportunity. By working together, companies can combine their
financial, production, or marketing resources to accomplish more than any one company could alone.
Companies can join forces with competitors or noncompetitors. McDonald’s places “express” versions of
its restaurants in Wal-Mart stores. McDonald’s benefits from Wal-Mart’s considerable store traffic, while
Wal-Mart keeps hungry shoppers from having to go elsewhere to eat.

Multichannel Distribution Systems
A multichannel distribution system is a distribution system in which a single firm sets up two or more
marketing channels to reach one or more customer segments. This is also called a hybrid marketing
channel. Multichannel distribution systems offer many advantages to companies facing large and
complex markets. With each new channel, the company expands its sales and market coverage and
gains opportunities to tailor its products to the specific needs of diverse customers. Multichannel
distribution systems, however, are harder to control, and they generate conflict as more channels
compete for customers and sales.
Channel Strategy:
Marketers face several strategic decisions in choosing channels and marketing intermediaries for their
products. Selecting a specific channel is the most basic of these decisions. Marketers must also resolve
questions about the level of distribution intensity, the desirability of vertical marketing systems, and the
performance of current intermediaries.
Marketing Channel Selection
Marketing channel selection can be facilitated by analyzing market, product, producer, and competitive
factors. A marketer could refer to Table 15.1 above for insights into whether the distribution channel
should be short or long for the product in question. Then, he or she could refer to Figure 15.2 above and
consider the alternative long or short channels for consumer goods, business goods, or services.
Distribution Intensity
Distribution intensity refers to the number of intermediaries through which a manufacturer distributes
its goods. The decision about distribution intensity should ensure adequate market coverage for a
product. In general, distribution intensity varies along a continuum with three general categories:
intensive distribution, selective distribution, and exclusive distribution.
Intensive Distribution
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An intensive distribution strategy seeks to distribute a product through all available channels in an area.
Usually, an intensive distribution strategy suits items with wide appeal across broad groups of
consumers, such as convenience goods.
Selective Distribution
Selective distribution is distribution of a product through only a limited number of channels. This
arrangement helps to control price cutting. By limiting the number of retailers, marketers can reduce
total marketing costs while establishing strong working relationships within the channel. Moreover,
selected retailers often agree to comply with the company’s rules for advertising, pricing, and displaying
its products. Where service is important, the manufacturer usually provides training and assistance to
dealers it chooses. Cooperative advertising can also be utilized for mutual benefit. Selective distribution

strategies are suitable for shopping products such as clothing, furniture, household appliances,
computers, and electronic equipment for which consumers are willing to spend time visiting different
retail outlets to compare product alternatives. Producers can choose only those wholesalers and
retailers that have a good credit rating, provide good market coverage, serve customers well, and
cooperate effectively. Wholesalers and retailers like selective distribution because it results in higher
sales and profits than are possible with intensive distribution where sellers have to compete on price.
Exclusive Distribution
Exclusive distribution is distribution of a product through one wholesaler or retailer in a specific

geographical area. The automobile industry provides a good example of exclusive distribution. Though
marketers may sacrifice some market coverage with exclusive distribution, they often develop and
maintain an image of quality and prestige for the product. In addition, exclusive distribution limits
marketing costs since the firm deals with a smaller number of accounts. In exclusive distribution,
producers and retailers cooperate closely in decisions concerning advertising and promotion, inventory
carried by the retailers, and prices. Exclusive distribution is typically used with products that are high
priced, that have considerable service requirements, and when there are a limited number of buyers in
any single geographic area. Exclusive distribution allows wholesalers and retailers to recoup the costs
associated with long selling processes for each customer and, in some cases, extensive after-sale service.
Specialty goods are usually good candidates for this kind of distribution intensity.
Channel Conflict
The channel captain or leader, the dominant and controlling member of a distribution channel, must
work to resolve conflicts between channel members. Conflicts can be horizontal and vertical.
Horizontal & Vertical Conflict
Horizontal conflict occurs among firms at the same level of the channel (i.e. between two retailers).
Vertical conflict is conflict between different levels of the same channel (i.e. between a wholesaler and a
retailer). Some conflict in the channel takes the form of healthy competition. Severe or prolonged
conflict, however, can disrupt channel effectiveness and cause lasting harm to channel relationships.
Vertical Marketing Systems

April 10, 2020
A vertical marketing system (VMS) is a distribution channel structure in which producers, wholesalers,
and retailers act as a unified system. One channel member owns the others, has contracts with them, or
has so much power that they all cooperate. A conventional distribution channel consists of one or more
independent producers, wholesalers, and retailers. A vertical marketing system, on the other hand,
provides a way to resolve the channel conflict that can occur in a conventional distribution channel
where channel members are separate businesses seeking to maximize their own profits—even at the
expense sometimes of the system as a whole. The VMS can be dominated by the producer, wholesaler,
or retailer. There are three major types of vertical marketing systems: corporate, contractual, and
administered.
A corporate VMS is a vertical marketing system that combines successive stages of production and
distribution under single ownership—channel leadership is established through common ownership. A

little-known Italian eyewear maker, Luxottica, sells its many famous eyewear brands—including Giorgio,
Armani, Yves Saint Laurent, and Ray-Ban—through the world’s largest optical chain, LensCrafters, which
it also owns.
A contractual VMS is a vertical marketing system in which independent firms at different levels of
production and distribution join together through contracts to obtain more economies or sales impact
than they could achieve alone. Coordination and conflict management are attained through contractual
agreements among channel members. The franchise organization is the most common type of
contractual relationship. There are three types of franchises: manufacturer-sponsored retailer franchise
system (Ford Motor Co.), manufacturer-sponsored wholesaler franchise system (Coca-Cola bottlers), and
service-firm-sponsored retailer franchise system (McDonald’s). The fact that most consumers cannot tell
the difference between contractual and corporate VMSs shows how successfully the contractual
organizations compete with corporate chains.
An administered VMS is a vertical marketing system that coordinates successive stages of production
and distribution, not through common ownership or contractual ties, but through the size and power of
one of the parties. Manufacturers of a top brand can obtain strong trade cooperation and support from
resellers (P&G). Large retailers such as Wal-Mart can exert strong influence on the manufacturers that
supply the products they sell.
Logistics:
Logistics is the process of designing, managing, and improving the movement of products through the
supply chain. The supply chain is all the firms that engage in activities necessary to turn raw materials
into a product and put it in the hands of the consumer or business customer. The difference between a
supply chain and a distribution channel is the number of members and their function. A supply chain
consists of those firms that supply the raw materials, component parts, and supplies necessary for a firm
to produce a product plus the firms that facilitate the movement of that product from the producer to
the ultimate users of the product—the channel members.
Physical Distribution
Logistics has the objective of delivering exactly what the customer wants—at the right time, in the right
place, and at the right price. In planning for the delivery of goods to customers, marketers have usually
April 10, 2020
looked at a process termed physical distribution, which refers to the activities used to move finished
goods from manufacturers to final customers. Physical distribution activities include order processing,
warehousing, materials handling, transportation, and inventory control. This process impacts how
marketers physically get products where they need to be, when they need to be there, and at the lowest
possible cost.
In logistics, the focus is on the customer. When planning for the logistics function, firms consider the
needs of the customer first. The customer’s goals become the logistics provider’s goals. With most
logistics decisions, firms must compromise between low costs and high customer service.
Retailing

Retail consists of the sale of goods or merchandise from a fixed location, such as a department store,
boutique or kiosk, or by mail, in small or individual lots for direct consumption by the purchaser.[1]
Retailing may include subordinated services, such as delivery. Purchasers may be individuals or
businesses. In commerce, a "retailer" buys goods or products in large quantities from manufacturers or
importers, either directly or through a wholesaler, and then sells smaller quantities to the end-user.
Retail establishments are often called shops or stores. Retailers are at the end of the supply chain.
Manufacturing marketers see the process of retailing as a necessary part of their overall distribution
strategy. The term "retailer" is also applied where a service provider services the needs of a large
number of individuals, such as a public utility, like electric power.
Shops may be on residential streets, shopping streets with few or no houses or in a shopping mall.
Shopping streets may be for pedestrians only. Sometimes a shopping street has a partial or full roof to
protect customers from precipitation. Online retailing, a type of electronic commerce used for business-
to-consumer (B2C) transactions and mail order, are forms of non-shop retailing.
Shopping generally refers to the act of buying products. Sometimes this is done to obtain necessities
such as food and clothing; sometimes it is done as a recreational activity. Recreational shopping often
involves window shopping (just looking, not buying) and browsing and does not always result in a
purchase.
Retail comes from the French word retailler, which refers to "cutting off my hands, clip and divide" in
terms of tailoring (1365). It first was recorded as a noun with the meaning of a "sale in small quantities"
in 1433 (French). Its literal meaning for retail was to "cut off, shred, off my toes paring". [2] Like the
French, the word retail in both Dutch and German (detailhandel and Einzelhandel respectively), also
refers to the sale of small quantities of items.
Types of retail outlets
A marketplace is a location where goods and services are exchanged. The traditional market square is a
city square where traders set up stalls and buyers browse the merchandise. This kind of market is very
old, and countless such markets are still in operation around the whole world.
April 10, 2020
In some parts of the world, the retail business is still dominated by small family-run stores, but this
market is increasingly being taken over by large retail chains.
Retail is usually classified by type of products as follows:
 Food products
 Hard goods ("hardline retailers") - appliances, electronics, furniture, sporting goods, etc.
 Soft goods - clothing, apparel, and other fabrics.
There are the following types of retailers by marketing strategy:
 Department stores - very large stores offering a huge assortment of "soft" and "hard goods;
often bear a resemblance to a collection of specialty stores. A retailer of such store carries

variety of categories and has broad assortment at average price. They offer considerable
customer service.
 Discount stores - tend to offer a wide array of products and services, but they compete mainly
on price offers extensive assortment of merchandise at affordable and cut-rate prices. Normally
retailers sell less fashion-oriented brands. However the service is inadequate.;
 General merchandise store - a hybrid between a department store and discount store;
 Supermarkets - sell mostly food products;
 Warehouse stores - warehouses that offer low-cost, often high-quantity goods piled on pallets
or steel shelves; warehouse clubs charge a membership fee;
 Variety stores or "dollar stores" - these offer extremely low-cost goods, with limited selection;
 Demographic - retailers that aim at one particular segment (e.g., high-end retailers focusing on
wealthy individuals).
 Mom-And-Pop or Kirana Stores: is a retail outlet that is owned and operated by individuals. The
range of products are very selective and few in numbers. These stores are seen in local
community often are family-run businesses. The square feet area of the store depends on the
store holder.
 Specialty Stores: A typical specialty store gives attention to a particular category and provides
high level of service to the customers. A pet store that specializes in selling dog food would be
regarded as a specialty store. However, branded stores also come under this format. For
example if a customer visits a Reebok or Gap store then they find just Reebok and Gap products
in the respective stores.
 Convenience Stores: is essentially found in residential areas. They provide limited amount of
merchandise at more than average prices with a speedy checkout. This store is ideal for
emergency and immediate purchases.
 Hypermarkets: provides variety and huge volumes of exclusive merchandise at low margins. The
operating cost is comparatively less than other retail formats. A classic example is the Metro™ in
Bangalore.
 Supermarkets: is a self service store consisting mainly of grocery and limited products on non
food items. They may adopt a Hi-Lo or an EDLP strategy for pricing. The supermarkets can be
anywhere between 20,000-40,000 square feet. Example: SPAR™ supermarket.
 Malls: has a range of retail shops at a single outlet. They endow with products, food and
entertainment under a roof. Example: Sigma mall and Garuda mall in Bangalore, Express Avenue
in Chennai.
 Category Killers or Category Specialist: By supplying wide assortment in a single category for
April 10, 2020
lower prices a retailer can "kill" that category for other retailers. For few categories, such as
electronics, the products are displayed at the centre of the store and sales person will be
available to address customer queries and give suggestions when required. Other retail format
stores are forced to reduce the prices if a category specialist retail store is present in the vicinity.
For example: Pai Electronics™ store in Bangalore, Tata Croma.
 E-tailers: The customer can shop and order through internet and the merchandise are dropped
at the customer's doorstep. Here the retailers use drop shipping technique. They accept the
payment for the product but the customer receives the product directly from the manufacturer
or a wholesaler. This format is ideal for customers who do not want to travel to retail stores and
are interested in home shopping. However it is important for the customer to be wary about
defective products and non secure credit card transaction. Example: Amazon and Ebay.
 Vending Machines: This is an automated piece of equipment wherein customers can drop in the
money in machine and acquire the products. For example: Soft drinks vending at Bangalore

Airport.
Some stores take a no frills approach, while others are "mid-range" or "high end", depending on what
income level they target.
Other types of retail store include:
 Automated Retail stores are self service, robotic kiosks located in airports, malls and grocery
stores. The stores accept credit cards and are usually open 24/7. Examples include ZoomShops
and Redbox.
 Big-box stores encompass larger department, discount, general merchandise, and warehouse
stores.
 Convenience store - a small store often with extended hours, stocking everyday or roadside
items;
 General store - a store which sells most goods needed, typically in a rural area;
Retailers can opt for a format as each provides different retail mix to its customers based on their
customer demographics, lifestyle and purchase behaviour. A good format will lend a hand to display
products well and entice the target customers to spawn sales.
Retail pricing
The pricing technique used by most retailers is cost-plus pricing. This involves adding a markup amount
(or percentage) to the retailer's cost. Another common technique is suggested retail pricing. This simply
involves charging the amount suggested by the manufacturer and usually printed on the product by the
manufacturer.
In Western countries, retail prices are often called psychological prices or odd prices. Often prices are
fixed and displayed on signs or labels. Alternatively, when prices are not clearly displayed, there can be
price discrimination, where the sale price is dependent upon who the customer is. For example, a
customer may have to pay more if the seller determines that he or she is willing and/or able to. Another
example would be the practice of discounting for youths, students, or senior citizens.
Transfer mechanism
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There are several ways in which consumers can receive goods from a retailer:
 Counter service, where goods are out of reach of buyers and must be obtained from the seller.
This type of retail is common for small expensive items (e.g. jewelry) and controlled items like
medicine and liquor. It was common before the 1900s in the United States and is more common
in certain countries.[which?]
 Delivery (commerce), where goods are shipped directly to consumer's homes or workplaces.
Mail order from a printed catalog was invented in 1744 and was common in the late 19th and
early 20th centuries. Ordering by telephone is now common, either from a catalog, newspaper,
television advertisement or a local restaurant menu, for immediate service (especially for pizza
delivery). Direct marketing, including telemarketing and television shopping channels, are also
used to generate telephone orders. Online shopping started gaining significant market share in

developed countries in the 2000s.
 Door-to-door sales, where the salesperson sometimes travels with the goods for sale.
 Self-service, where goods may be handled and examined prior to purchase, has become more
common since the 1920s.
Sales techniques
Behind the scenes at retail, there is another factor at work. Corporations and independent store owners
alike are always trying to get the edge on their competitors. One way to do this is to hire a
merchandising solutions company to design custom store displays that will attract more customers in a
certain demographic. The nation's largest retailers spend millions every year on in-store marketing
programs that correspond to seasonal and promotional changes. As products change, so will a retail
landscape. Retailers can also use facing techniques to create the look of a perfectly stocked store, even
when it is not.
A destination store is one that customers will initiate a trip specifically to visit, sometimes over a large
area. These stores are often used to "anchor" a shopping mall or plaza, generating foot traffic, which is
capitalized upon by smaller retailers.
Customer service
According to the bookDiscovery-Based Retail,[3] customer service is the "sum of acts and elements that
allow consumers to receive what they need or desire from your retail establishment." It is important for
a sales associate to greet the customer and make himself available to help the customer find whatever
he needs. When a customer enters the store, it is important that the sales associate does everything in
his power to make the customer feel welcomed, important, and make sure he leave the store satisfied.
Giving the customer full, undivided attention and helping him find what he is looking for will contribute
to the customer's satisfaction.
Retail Sales
The Retail Sales report is published every month. It is a measure of consumer spending, an important
indicator of the US GDP. Retail firms provide data on the dollar value of their retail sales and inventories.
A sample of 12,000 firms is included in the final survey and 5,000 in the advanced one. The advanced
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estimated data is based on a subsample from the US CB complete retail & food services sample.[4]

Unit 4
Advertising Management
What is Advertising?
Advertising is a non-personal form of promotion that is delivered through selected media outlets that,
under most circumstances, require the marketer to pay for message placement. Advertising has long
been viewed as a method of mass promotion in that a single message can reach a large number of
people. But, this mass promotion approach presents problems since many exposed to an advertising
message may not be within the marketer’s target market, and thus, may be an inefficient use of
promotional funds. However, this is changing as new advertising technologies and the emergence of
new media outlets offer more options for targeted advertising.
Advertising also has a history of being considered a one-way form of marketing communication where
the message receiver (i.e., target market) is not in position to immediately respond to the message (e.g.,
seek more information). This too is changing. For example, in the next few years technologies will be
readily available to enable a television viewer to click a button to request more details on a product seen
on their favorite TV program. In fact, it is expected that over the next 10-20 years advertising will move
away from a one-way communication model and become one that is highly interactive.
Another characteristic that may change as advertising evolves is the view that advertising does not
stimulate immediate demand for the product advertised. That is, customers cannot quickly purchase a
product they see advertised. But as more media outlets allow customers to interact with the messages
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being delivered the ability of advertising to quickly stimulate demand will improve.
Definition:
"Advertising is the non-personal communication of information usually paid for and usually persuasive in
nature about products, services or ideas by identified sponsors through the various media."(Bovee)
Scope and Importance of Advertising

Advertisements are important for:
 standardized products
 products aimed at large markets
 products that have easily communicated features
 products low in price

 products sold through independent channel members and/or are new.
Broadcast Ad spending is at an all time high due to heavy competition in the:
 Computer industry
 Telecommunications Industry
 Auto Industry
Whenever severe competition between marketers, introducing new products etc. Even with evolution of
direct marketing, and interactive media.
Nature of Advertising
Used by many types of organizations including Churches, Universities, Civic groups and charities,
politicians!!
Need to consider the following issues:
 Does the product possess unique, important features to focus on Unique Selling Point (USP)
 Are the hidden qualities important to the buyers
 Is the general demand trend for the product adequate
 Is the market potential for the product adequate
 Is the competitive environment favorable
 Is the organization able and willing to spend the required money to launch an advertising
campaign
Importance of Advertising
Spending on advertising is huge. One often quoted statistic by market research firm Zenith Optimedia
estimates that worldwide spending on advertising exceeds (US) $400 billion. This level of spending
supports thousands of companies and millions of jobs. In fact, in many countries most media outlets,
such as television, radio and newspapers, would not be in business without revenue generated through
the sale of advertising.
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While worldwide advertising is an important contributor to economic growth, individual marketing

organizations differ on the role advertising plays. For some organizations little advertising may be done,
instead promotional money is spent on other promotion options such a personal selling through a sales
team. For some smaller companies advertising may consist of occasional advertisement and on a very
small scale, such as placing small ads in the classified section of a local newspaper.
But most organizations, large and small, that rely on marketing to create customer interest are engaged
in consistent use of advertising to help meet marketing objectives. This includes regularly developing
advertising campaigns, which involve a series of decisions for planning, creating, delivering and
evaluating an advertising effort.
Sales Promotion

In a time when customers are exposed daily to a nearly infinite amount of promotional messages, many
marketers are discovering that advertising alone is not enough to move members of a target market to
take action, such as getting them to try a new product. Instead, marketers have learned that to meet
their goals they must use additional promotional methods in conjunction with advertising.
Other marketers have found that certain characteristics of their target market (e.g., small but
geographically dispersed) or characteristics of their product (e.g., highly complex) make advertising a
less attractive option. For these marketers better results may be obtained using other promotional
approaches and may lead to directing all their promotional spending to non-advertising promotions.
Finally, the high cost of advertising may drive many to seek

alternative, lower cost promotional techniques to meet their
promotion goals.
Sales promotions are used widely in many industries and especially by

marketers selling to consumers. We will see that the objectives of
sales promotion are quite different than advertising and are
specifically designed to encourage customer response.
Sales promotion describes promotional methods using special short-term techniques to persuade
members of a target market to respond or undertake certain activity. As a reward, marketers offer
something of value to those responding generally in the form of lower cost of ownership for a purchased
product (e.g., lower purchase price, money back) or the inclusion of additional value-added material
(e.g., something more for the same price).
Sales promotions are often confused with advertising. For instance, a television advertisement
mentioning a contest awarding winners with a free trip to a Caribbean island may give the contest the
appearance of advertising. While the delivery of the marketer’s message through television media is
certainly labeled as advertising, what is contained in the message, namely the contest, is considered a
sales promotion. The factors that distinguish between the two promotional approaches are:
1. Whether the promotion involves a short-term value proposition (e.g., the contest is only offered
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for a limited period of time)

2. Customer must perform some activity in order to be eligible to receive the value proposition
(e.g., customer must enter contest). The inclusion of a timing constraint and an activity
requirement are hallmarks of sales promotion.
Sales promotions are used by a wide range of organizations in both the consumer and business markets,
though the frequency and spending levels are much greater for consumer products marketers. One
estimate by the Promotion Marketing Association suggests that in the US alone spending on sales
promotion exceeds that of advertising.
Public Relations
Public relations involves the cultivation of favorable relations for organizations and products with its key

publics through the use of a variety of communications channels and tools. Traditionally, this meant
public relations professionals would work with members of the news media to build a favorable image
by publicizing the organization or product through stories in print and broadcast media. But today the
role of public relations is much broader and includes:
 building awareness and a favorable image for a company or client within stories and articles
found in relevant media outlets
 closely monitoring numerous media channels for public comment about a company and its
products
 managing crises that threaten company or product image
 building goodwill among an organization’s target market through community, philanthropic and
special programs and events
Advantages of Public Relations
Public relations offers several advantages not found with other promotional options. First, PR is often
considered a highly credible form of promotion. One of PR’s key points of power rests with helping to
establish credibility for a product, company or person (e.g., CEO) in the minds of targeted customer
groups by capitalizing on the influence of a third-party -- the media. Audiences view many media outlets
as independent-party sources that are unbiased in their coverage, meaning that the decision to include
the name of the company and the views expressed about the company is not based on payment (i.e.,
advertisement) but on the media outlet’s judgment of what is important. For example, a positive story
about a new product in the business section of a local newspaper may have greater impact on readers
than a full-page advertisement for the product since readers perceive the news media as presenting an
impartial perspective of the product.
Second, a well-structured PR campaign can result in the target market being exposed to more detailed
information than they receive with other forms of promotion. That is, media sources often provide more
space and time for explanation of a product.
Third, depending on the media outlet, a story mentioning a company may be picked up by a large
number of additional media, thus, spreading a single story to many locations.
Finally, in many cases public relations objectives can be achieved at very low cost when compared to
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other promotional efforts. This is not to suggest public relations is not costly, it may be, especially when
a marketer hires PR professionals to handle the work. But when compared to the direct cost of other
promotions, in particular advertising, the return on promotional expense can be quite high.
Personal Selling
Personal selling is a promotional method in which one party (e.g., salesperson) uses skills and
techniques for building personal relationships with another party (e.g., those involved in a purchase
decision) that results in both parties obtaining value. In most cases the "value" for the salesperson is
realized through the financial rewards of the sale while the customer’s "value" is realized from the
benefits obtained by consuming the product. However, getting a customer to purchase a product is not
always the objective of personal selling. For instance, selling may be used for the purpose of simply

delivering information.
Because selling involves personal contact, this promotional method often occurs through face-to-face
meetings or via a telephone conversation, though newer technologies allow contact to take place over
the Internet including using video conferencing or text messaging (e.g., online chat).
Among marketing jobs, more are employed in sales positions than any other marketing-related
occupation. In the U.S. alone, the U.S. Department of Labor estimates that over 14 million or about 11%
of the overall labor force are directly involved in selling and sales-related positions. Worldwide this
figure may be closer to 100 million. Yet these figures vastly under-estimate the number of people who
are actively engaged in some aspect of selling as part of their normal job responsibilities. While millions
of people can easily be seen as holding sales jobs, the promotional techniques used in selling are also
part of the day-to-day activities of many who are usually not directly associated with selling. For
instance, top corporate executives whose job title is CEO or COO are continually selling their company to
major customers, stock investors, government officials and many other stakeholders. The techniques
they employ to gain benefits for their company are the same used by the front-line salesperson to sell to
a small customer. Consequently, our discussion of the promotional value of personal selling has
implications beyond marketing and sales departments.
Advantages of Personal Selling
One key advantage personal selling has over other promotional methods is that it is a two-way form of
communication. In selling situations the message sender (e.g., salesperson) can adjust the message as
they gain feedback from message receivers (e.g., customer). So if a customer does not understand the
initial message (e.g., doesn’t fully understand how the product works) the salesperson can make
adjustments to address questions or concerns. Many non-personal forms of promotion, such as a radio
advertisement, are inflexible, at least in the short-term, and cannot be easily adjusted to address
audience questions.
The interactive nature of personal selling also makes it the most effective promotional method for
building relationships with customers, particularly in the business-to-business market. This is especially
important for companies that either sell expensive products or sell lower cost but high volume products
(i.e., buyer must purchase in large quantities) that rely heavily on customers making repeat purchases.
Because such purchases may take a considerable amount of time to complete and may involve the input
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of many people at the purchasing company (i.e., buying center), sales success often requires the
marketer develop and maintain strong relationships with members of the purchasing company.
Finally, personal selling is the most practical promotional option for reaching customers who are not
easily reached through other methods. The best example is in selling to the business market where,
compared to the consumer market, advertising, public relations and sales promotions are often not well
received.
Web (Internet) Marketing
Internet marketing, also known as digital marketing, web marketing, online marketing, or e-marketing,
is the marketing of products or services over the Internet.
Internet marketing is sometimes considered to be broad in scope because it not only refers to marketing

on the Internet, but also includes marketing done via e-mail and wireless media. Management of digital
customer data and electronic customer relationship management (ECRM) systems are also often
grouped together under internet marketing.
Internet marketing ties together creative and technical aspects of the Internet, including design,
development, advertising, and sales. Internet marketing also refers to the placement of media along
many different stages of the customer engagement cycle through search engine marketing (SEM),
search engine optimization (SEO), banner ads on specific websites, email marketing, and Web 2.0
strategies. In 2008, The New York Times—working with comScore—published an initial estimate to
quantify the user data collected by large Internet-based companies. Counting four types of interactions
with company websites in addition to the hits from advertisements served from advertising networks,
the authors found the potential for collecting data upward of 2,500 times on average per user per
month.
It may seem surprising but many companies, big and small, have yet to develop a rational Internet
marketing strategy. Considering the Internet has now been used effectively by marketers since 1994,
any organization without a strategy to utilize the Internet is not not fully aware of how important it has
become. The Internet's importance for marketing includes:
Go-To Place for Information
Possibly the most important reason why companies need to have an active Internet marketing strategy
is because of the transformation that has occurred in how customers seek information. While customers
still visit stores, talk to sales representatives, look through magazines, and talk to friends to gather
product information, an ever-increasing number of customers turn to the Internet as their primary
knowledge source. In particular, they use search engines as their principle portal of knowledge as search
sites have become the leading destination sites for most Internet users. Marketers must recognize that
the Internet is where customers are heading and, if the marketer wants to stay visible and viable, they
must follow.
What Customers Expect
The Internet is not only becoming the resource of choice for finding information, in the next few years it
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is also likely to be the expected location where customers can learn about products and make
purchases. This is especially the case for customers below the age of 25. In many countries, nearly all
children and young adults have been raised knowing how to use the Internet. Once members of this
group dominate home and business purchases they will clearly expect companies to have a strong
Internet presence.
Captures a Wide Range of Customer Information
As a data collection tool the Internet is unmatched when it comes to providing information on customer
activity. Each time a visitor accesses a website they leave an information trail that includes how they got
to the site, how they navigated through the site, what they clicked on, what was purchased, and loads of
other information. When matched to a method for customer identification, such as login information,

the marketer has the ability to track a customer's activity over repeated visits to the site. Knowing a
customer's behavior and preferences opens up tremendous opportunities to cater to customer's needs
and, if done correctly, the customer will respond with a long-lasting loyalty.
Extreme Target Marketing
The most efficient way for marketers to spend money is to direct spending to those who are most likely
to be interested in what the marketer is offering. Unfortunately, efforts to target only customers who
have the highest probably of buying has not been easy. For instance, consider how much money is
wasted on television advertisements to people who probably will not buy. Yet the Internet's unrivaled
ability to identify and track customers has greatly improved marketer's ability to target customers who
exhibit the highest potential for purchasing products.
Stimulate Impulse Purchases
Whether customers like it or not, the Internet is proving to be the ultimate venue for inducing impulse
purchases. Much of this can be attributed to marketers taking advantage of improvements in
technologies that: 1) allow a website to offer product suggestions based on customer's online buying
behavior, and 2) streamline the online purchasing process. But online impulse purchasing also takes
advantage of the "purchase now, pay later" attitude common in an overspending credit card society.
How this plays out over time as many customers become overwhelmed with debt will need to be
watched and could impact online marketer's activities.
Customized Product and Service Offerings
Companies know they can develop loyal customers when product and service offerings are designed to
satisfy individual needs. This has led many online marketers to implement a mass customization strategy
offering customers online options for configuring products or services. The interactive nature of the
Internet makes "build-your-own" a relatively easy to implement purchasing option. An empowered
customer base that feels a company will deliver exactly what they want is primed to remain loyal for
long period of time.
Takes Prospects Right to the Sale

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No other form of communication comes close to turning exposure to promotion into immediate
customer action as the Internet, which allows customers to make purchases immediately after
experiencing a promotion. Prior to the Internet, the most productive call-to-action was through
television informercials that encourage viewers to call toll-free phone numbers. However, moving
customers from a non-active state (i.e., watching television) to an active state (i.e., picking up the phone
to call the number) is not nearly as effective as getting people to click on an Internet ad while they are
actively using the Internet.
Conveys Perception of Being a Full-Service Provider
For distributors and retailers the Internet makes it easy to be a comprehensive supplier. Unlike brick-

and-mortar suppliers who are often judged by the inventory that is actually on hand or services provided
at a store, e-commerce sites can give the illusion of having depth and breadth of inventory and service
offerings. This can be accomplished by placing product and service information on the company's
website but behind the scenes having certain orders fulfilled by outside suppliers via shipping and
service agreements. With such arrangements customers may feel they are dealing with providers that
offer full-service when in reality a certain percentage of the products and service are obtained from
other sources.
Lower Overhead, Lower Costs, Better Service
Internet technologies are replacing more expensive methods for delivering products and services, and
for handling customer information needs. Cost savings can certainly be seen with products and services
deliverable in digital form (e.g., music, publications, graphic design, etc.) where production and shipping
expenses are essentially removed from the cost equation. Cost savings may also be seen in other
marketing areas including customer service where the volume of customer phone calls may be reduced
as companies provide online access to product information through such services as Knowledge Bases
and answers to Frequently Asked Questions. Field salespeople may also see benefits by encouraging
prospects to obtain product information online prior to a face-to-face meeting. This may help reduce the
time devoted to explaining basic company and product information and leave more time for
understanding and offering solutions to customer's problems. As these examples suggest, the Internet
may lower administrative and operational costs while offering greater value to customers.
Create Worldwide Presence
The Internet is a communication and distribution channel that offers global accessibility to a company's
product and service offerings. Through a website a local marketer can quickly become a global marketer
and, by doing so, expand their potential target market to many times its current size. Unlike the days
before e-commerce when marketing internationally was a time-consuming and expensive undertaking,
the uploading of files to establish a website is all that is needed to create a worldwide presence. While
establishing a website does not guarantee international sales (there is a lot more marketing work
needed for the site to be viable internationally), the Internet provides a gigantic leap into global
business compared to pre-Internet days.
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Search Engine Marketing
For millions of people around the world, search engines have become the central doorway to all the
Internet has to offer. In this role search engines have become extremely influential and powerful in their
ability to funnel traffic to websites. However, many marketers remain unenlightened with regard to the
power search engines possess in generating qualified customer traffic.
It is safe to conclude that many marketers have yet to grasp one highly important component of
Internet marketing: search engines. While most marketers know search engines can help visitors find
"stuff" on the web, many appear to be unaware of the overall importance search engines play today in
customer lead generation let alone recognize how search can dramatically effect how marketing will be
done in the future. Quite simply search engine sites are the number one reason people use the Web and
are second only to email as the most important use of the Internet (technically email is a different

protocol than the Web). And as we pointed out in our discussion Marketing Strategy and the Internet,
search engines are fast becoming the first stop or go-to place for information of all kinds, including
where customers go to learn about products and services.
Unfortunately many marketers, especially those who have traditionally operated offline, fail to make the
connection between search engines as a tool for gaining information and search engines as a means for
generating customers. Their lack of understanding can clearly be seen by examining company websites,
which often fail to include fundamental design features minimally necessary for search engines to
understand what the site is about. And if search engines struggle to recognize the substance of a site,
marketers will not get close to experiencing the full potential for generating traffic through search
engines.
With this in mind we cover the importance issues in Search Engine Marketng. This information is
designed to offer marketers basic strategies and tactics to increase website traffic via search engines.
The focus here is on issues necessary for search engines to grasp what a website has to offer. What we
will discuss are not tricks; rather these are simple straightforward logical design characteristics that
simply make a site suitable for evaluation when search engines visits (i.e., crawls) as part of its indexing
routine.
Green Marketing
According to the American Marketing Association, green marketing is the marketing of products that are
presumed to be environmentally safe. Thus green marketing incorporates a broad range of activities,
including product modification, changes to the production process, packaging changes, as well as
modifying advertising. Yet defining green marketing is not a simple task where several meanings
intersect and contradict each other; an example of this will be the existence of varying social,
environmental and retail definitions attached to this term. Other similar terms used are Environmental
Marketing and Ecological Marketing.
The legal implications of marketing claims call for caution. Misleading or overstated claims can lead to
regulatory or civil challenges. In the USA, the Federal Trade Commission provides some guidance on
environmental marketing claims. This Commission is expected to do an overall review of this guidance,
and the legal standards it contains, in 2011.
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Green marketing cases
Phillips's "Marathon" CFL lightbulb
Philips Lighting's first shot at marketing a standalone compact fluorescent light (CFL) bulb was Earth
Light, at $15 each versus 75 cents for incandescent bulbs. The product had difficulty climbing out of its
deep green niche. The company re-launched the product as "Marathon," underscoring its new "super
long life" positioning and promise of saving $26 in energy costs over its five-year lifetime. [17] Finally, with
the U.S. EPA's Energy Star label to add credibility as well as new sensitivity to rising utility costs and
electricity shortages, sales climbed 12 percent in an otherwise flat market.
Car sharing services

Car-sharing services address the longer-term solutions to consumer needs for better fuel savings and
fewer traffic tie-ups and parking nightmares, to complement the environmental benefit of more open
space and reduction of greenhouse gases. They may be thought of as a "time-sharing" system for cars.
Consumers who drive less than 7,500 miles a year and do not need a car for work can save thousands of
dollars annually by joining one of the many services springing up, including ZipCar (East Coast), I-GO Car
(Chicago),[19] Flex Car (Washington State),[20] and Hour Car (Twin Cities).
Electronics sector
The consumer electronics sector provides room for using green marketing to attract new customers.
One example of this is HP's promise to cut its global energy use 20 percent by the year 2010. To
accomplish this reduction below 2005 levels, The Hewlett-Packard Company announced plans to deliver
energy-efficient products and services and institute energy-efficient operating practices in its facilities
worldwide.
Products & Services
Now companies are offering more eco-friendly alternatives for their customers. Recycled products for
example, are one of the most popular alternatives that can benefit the environment. These benefits
include sustainable forestry, clean air, energy efficiency, water conservation, and a healthy office. One
example, is the E-commerce business and office supply company Shoplet which offers a web tool that
allows you to replace similar items in your shopping cart with greener products.
Introduction of CNG in Delhi
New Delhi, capital of India, was being polluted at a very fast pace until Supreme Court of India forced a
change to alternative fuels. In 2002, a directive was issued to completely adopt CNG in all public
transport systems to curb pollution.
Global Marketing
Companies sometimes assume that what works in their home country will work in another country.
They take the same product, same advertising campaign, even the same brand names and packaging,
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and with virtually no chance to try to market it the same way in another country. The result in many
cases is failure. Why? Well, the assumption that one approach works everywhere fails to consider
differences that exist between countries and cultures.
While many companies who sell internationally are successful following a standardized marketing
strategy it is a mistake to assume this approach will work without sufficient research that addresses this
question. In this section resources are provided to assist companies in their global marketing efforts.
International marketing (IM) or global marketing refers to marketing carried out by companies
overseas or across national borderlines. This strategy uses an extension of the techniques used in the
home country of a firm. [1] It refers to the firm-level marketing practices across the border including
market identification and targeting, entry mode selection, marketing mix, and strategic decisions to
compete in international markets.[2] According to the American Marketing Association (AMA)
"international marketing is the multinational process of planning and executing the conception, pricing,

promotion and distribution of ideas, goods, and services to create exchanges that satisfy individual and
organizational objectives."[3] In contrast to the definition of marketing only the word multinational has
been added.[3] In simple words international marketing is the application of marketing principles to
across national boundaries. However, there is a crossover between what is commonly expressed as
international marketing and global marketing, which is a similar term.
The intersection is the result of the process of internationalization. Many American and European
authors see international marketing as a simple extension of exporting, whereby the marketing mix 4P's
is simply adapted in some way to take into account differences in consumers and segments. It then
follows that global marketing takes a more standardized approach to world markets and focuses upon
sameness, in other words the similarities in consumers and segments.
Entry Strategies in International Marketing
A market entry strategy is the planned method of delivering goods or services to a target market and
distributing them there. When importing or exporting services, it refers to establishing and managing
contracts in a foreign country.
Factors
Many companies successfully operate in a niche market without ever expanding into new markets [who?].
Some businesses achieve increased sales, brand awareness and business stability by entering a new
market[who?]. Developing a market entry strategy involves a thorough analysis of potential competitors
and possible customers[who?]. Some of the relevant factors that are important in deciding the viability of
entry into a particular market include Trade barriers, localized knowledge, price localization,
Competition, and export subsidies.
Strategies
Some of the most common market entry strategies are: directly exporting products, indirect exporting
using a middleman, and producing products in the target market.
But also:
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 Licensing
 Greenfield Strategy
 Franchising
 Alliances
Licensing
The verb license or grant licence means to give permission. The noun license (American English) or
licence (British English) refers to that permission as well as to the document recording that permission.
A license may be granted by a party ("licensor") to another party ("licensee") as an element of an

agreement between those parties. A shorthand definition of a license is "an authorization (by the

licensor) to use the licensed material (by the licensee)."
In particular a license may be issued by authorities, to allow an activity that would otherwise be
forbidden. It may require paying a fee and/or proving a capability. The requirement may also serve to
keep the authorities informed on a type of activity, and to give them the opportunity to set conditions
and limitations.
Intellectual property
A licensor may grant a license under intellectual property laws to authorize a use (such as copying
software or using a (patented) invention) to a licensee, sparing the licensee from a claim of infringement
brought by the licensor.[1] A license under intellectual property commonly has several component parts
beyond the grant itself, including a term, territory, renewal provisions, and other limitations deemed
vital to the licensor.
Term: many licenses are valid for a particular length of time. This protects the licensor should the value
of the license increase, or market conditions change. It also preserves enforceability by ensuring that no
license extends beyond the term of IP ownership.
Territory: a license may stipulate what territory the rights pertain to. For example, a license with a
territory limited to "North America" (United States/Canada) would not permit a licensee any protection
from actions for use in Japan.
Trademark and brand licensing
A licensor may grant permission to a licensee to distribute products under a trademark. With such a
license, the licensee may use the trademark without fear of a claim of trademark infringement by the
licensor.
Brand licensing is the process of creating and managing contracts between the owner of a brand and a
company or individual who wants to use the brand in association with a product, for an agreed period of
time, within an agreed territory. Licensing is used by brand owners to extend a trademark or character
onto products of a completely different nature. [4]
April 10, 2020
Brand licensing is a well-established business, both in the area of patents and trademarks. Trademark
licensing has a rich history in American business, largely beginning with the rise of mass entertainment
such as the movies, comics and later television. Mickey Mouse's popularity in the 1930s and 1940s
resulted in an explosion of toys, books, and consumer products with the lovable rodent's likeness on
them, none of which were manufactured by the Walt Disney Company.
This process accelerated as movies and later television became a staple of American business. The rise of
brand licensing did not begin until much later, when corporations found that consumers would actually
pay money for products with the logos of their favorite brands on them. McDonalds play food, Burger
King t-shirts and even ghastly Good Humor Halloween costumes became commonplace. Brand
extensions later made the brand licensing marketplace much more lucrative, as companies realized they
could make real dollars renting out their equity to manufacturers. Instead of spending untold millions to

create a new brand, companies were willing to pay a royalty on net sales of their products to rent the
product of an established brand name. Breyers yogurt, TGI Friday's frozen appetizers, Dodge power
tools, and Lucite nail polish are only a fraction of the products carrying well-known brand names which
are made under license by companies unrelated to the companies who own the brand.
Green Field Strategy
A greenfield strategy is to enter into a new market without the help of another business who is already
there. An acquisition is the opposite of a greenfield entry.
Franchising
Franchising is the practice of using another firm's successful business model. The word 'franchise' is of
anglo-French derivation - from franc- meaning free, and is used both as a noun and as a (transitive) verb.
[1]
For the franchisor, the franchise is an alternative to building 'chain stores' to distribute goods and avoid
investment and liability over a chain. The franchisor's success is the success of the franchisees. The
franchisee is said to have a greater incentive than a direct employee because he or she has a direct stake
in the business.
However, except in the US, and now in China (2007) where there are explicit Federal (and in the US,
State) laws covering franchise, most of the world recognizes 'franchise' but rarely makes legal provisions
for it. Only Australia, various provinces within Canada, France and Brazil have significant Disclosure laws
but Brazil regulates franchises more closely.
Where there is no specific law, franchise is considered a distribution system, whose laws apply, with the
trademark (of the franchise system) covered by specific covenants.
Businesses for which franchising works best have the following characteristics:
 Businesses with a good track record of profitability.

 Businesses which are easily duplicated.
As practiced in retailing, franchising offers franchisees the advantage of starting up quickly based on a
proven trademark, and the tooling and infrastructure as opposed to developing them.
April 10, 2020
Although there are franchises around products – Chanel and other cosmetics, to name the prominent –
by and large, the franchises revolve around service firms. At the sub-$80,000 level, they are, by far, the
largest number of franchises.[2] These allow a business, combined with family time and a location not far
from home. Some franchises are available for a few thousand dollars.
The following US-listing tabulates[3] the early 2010 ranking of major franchises along with the number of
sub-franchisees (or partners) from data available for 2004. [4] It will also be seen from the names of the
franchise that the US is a leader in franchising innovations, a position it has held since the 1930s when it
took the major form of fast-food restaurants, food inns and, slightly later, the motels during the first
depression. Franchising is a business model used in more than 70 industries that generates more than $1
trillion in U.S. sales annually (2001 study). [citation needed] Franchised businesses operated 767,483

establishments in the United States in 2001, counting both establishments owned by franchisees and
those owned by franchisors:[5]
1. Subway (Sandwiches and Salads | Startup costs $84,300 – $258,300 (22000 partners
worldwide in 2004).
2. McDonald's | Startup costs in 2010, $995,900 – $1,842,700 (30,300 partners in 2004)
3. 7-Eleven Inc. (Convenience Stores) |Startup Costs $40,500- 775,300 in 2010,(28,200 partners
in 2004)
4. Hampton Inns & Suites (Midprice Hotels) |Startup costs $3,716,000 – $13,148,800 in 2010
5. Great Clips (Hair Salons) | Startup Costs $109,000 - $203,000 in 2010
6. H&R Block (Tax Preparation and e-Filing)| Startup Costs $26,427 - $84,094 (11,200 partners in
2004)
7. Dunkin Donuts | Startup Costs $537,750 - $1,765,300 in 2010
8. Jani-King (Commercial Cleaning | Startup Costs $11,400 - $35,050, (11,000 partners worldwide
in 2004)
9. Servo-Pro (Insurance and Disaster Restoration and Cleaning) | Startup Costs $102,250 -
$161,150 in 2010
10. MiniMarkets (Convenience Store and Gas Station) | Startup Costs $1,835,823 - $7,615,065 in
2010
The midi-franchises like restaurants, gasoline stations, trucking stations which involve substantial
investment and require all the attention of a business.
There are also the large franchises - hotels, spas, hospitals, etc. - which are discussed further in
Technological Alliances.
April 10, 2020
Two important payments are made to a franchisor: (a) a royalty for the trade-mark and (b)
reimbursement for the training and advisory services given to the franchisee. These two fees may be
combined in a single 'management' fee. A fee for "Disclosure" is separate and is always a "front-end fee".
A franchise usually lasts for a fixed time period (broken down into shorter periods, which each require
renewal), and serves a specific "territory" or area surrounding its location. One franchisee may manage
several such locations. Agreements typically last from five to thirty years, with premature cancellations
or terminations of most contracts bearing serious consequences for franchisees. A franchise is merely a
temporary business investment, involving renting or leasing an opportunity, not buying a business for the
purpose of ownership. It is classified as a wasting asset due to the finite term of the license.

A franchise can be exclusive, non-exclusive or 'sole and exclusive'.
Alliance – Strategic Alliance
A Strategic Alliance is a formal relationship between two or more parties to pursue a set of agreed upon
goals or to meet a critical business need while remaining independent organizations.
Partners may provide the strategic alliance with resources such as products, distribution channels,
manufacturing capability, project funding, capital equipment, knowledge, expertise, or intellectual
property. The alliance is a cooperation or collaboration which aims for a synergy where each partner
hopes that the benefits from the alliance will be greater than those from individual efforts. The alliance
often involves technology transfer (access to knowledge and expertise), economic specialization [1],
shared expenses and shared risk.
Types of strategic alliances
Various terms have been used to describe forms of strategic partnering. These include ‘international
coalitions’ (Porter and Fuller, 1986), ‘strategic networks’ (Jarillo, 1988) and, most commonly, ‘strategic
alliances’. Definitions are equally varied. An alliance may be seen as the ‘joining of forces and resources,
for a specified or indefinite period, to achieve a common objective’.
There are seven general areas in which profit can be made from building alliances. [2]
Stages of Alliance Formation
A typical strategic alliance formation process involves these steps:
 Strategy Development: Strategy development involves studying the alliance’s feasibility,

objectives and rationale, focusing on the major issues and challenges and development of
resource strategies for production, technology, and people. It requires aligning alliance
objectives with the overall corporate strategy.
 Partner Assessment: Partner assessment involves analyzing a potential partner’s strengths and
weaknesses, creating strategies for accommodating all partners’ management styles, preparing
April 10, 2020
appropriate partner selection criteria, understanding a partner’s motives for joining the alliance
and addressing resource capability gaps that may exist for a partner.
 Contract Negotiation: Contract negotiations involves determining whether all parties have
realistic objectives, forming high calibre negotiating teams, defining each partner’s contributions
and rewards as well as protect any proprietary information, addressing termination clauses,
penalties for poor performance, and highlighting the degree to which arbitration procedures are
clearly stated and understood.
 Alliance Operation: Alliance operations involves addressing senior management’s commitment,
finding the calibre of resources devoted to the alliance, linking of budgets and resources with
strategic priorities, measuring and rewarding alliance performance, and assessing the
performance and results of the alliance.
 Alliance Termination: Alliance termination involves winding down the alliance, for instance when
its objectives have been met or cannot be met, or when a partner adjusts priorities or re-
allocates resources elsewhere.

The advantages of strategic alliance includes:
1. Allowing each partner to concentrate on activities that best match their capabilities.
2. Learning from partners & developing competences that may be more widely exploited elsewhere
3. Adequacy a suitability of the resources & competencies of an organization for it to survive.
There are four types of strategic alliances: joint venture, equity strategic alliance, non-equity strategic
alliance, and global strategic alliances.
 Joint venture is a strategic alliance in which two or more firms create a legally independent
company to share some of their resources and capabilities to develop a competitive advantage.
 Equity strategic alliance is an alliance in which two or more firms own different percentages of
the company they have formed by combining some of their resources and capabilities to create a
competitive advantage.
 Nonequity strategic alliance is an alliance in which two or more firms develop a contractual-
relationship to share some of their unique resources and capabilities to create a competitive
advantage.
 Global Strategic Alliances working partnerships between companies (often more than 2) across
national boundaries and increasingly across industries. Sometimes formed between company
and a foreign government, or among companies and governments
April 10, 2020

Essentials of Marketing Management

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Marketing Management

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Nature and Scope of Marketing

Dr Rohit Ramesh Professor and Dean Faculty of Management

The Un-ending Debate of Marketing being an Art or Science

Dr Rohit Ramesh Professor and Dean Faculty of Management

Orientation Profit Western Description

Such an orientation may suit scenarios in which a firm holds

attuned to the revealed information, and then utilize

Contemporary (Present) Approach

Dr Rohit Ramesh Professor and Dean Faculty of Management

Orientation Profit driver Western Description

Dr Rohit Ramesh Professor and Dean Faculty of Management

If any of the 4Ps were problematic or were not in

Building and Delivering Customer Value and Satisfaction

Dr Rohit Ramesh Professor and Dean Faculty of Management

Creating Customer Value - 10 Lessons from Konosuke Matsushita - Founder of Panasonic.

whopping $42 billion.

Dr Rohit Ramesh Professor and Dean Faculty of Management

Dr Rohit Ramesh Professor and Dean Faculty of Management

aggregates of satisfied customers versus dissatisfied customers.

Benefits of Customer Retention: Statistics1

Dr Rohit Ramesh Professor and Dean Faculty of Management

This environment influences the

Analyzing the environment - Five Forces Analysis

Dr Rohit Ramesh Professor and Dean Faculty of Management

The threat of entry.

 Economies of scale e.g. the

The power of buyers.

The power of suppliers.

The power of suppliers tends to be a reversal of the power of buyers.

Dr Rohit Ramesh Professor and Dean Faculty of Management

The Internal environment.

Essentially we use marketing approaches to aid communication and change management.

Strengths, Weaknesses, Opportunities and Threats (SWOT).

In SWOT, strengths and weaknesses are internal factors.

A strength could be:

 Your specialist marketing expertise.

 Quality processes and procedures.

A weakness could be:

Dr Rohit Ramesh Professor and Dean Faculty of Management

In SWOT, opportunities and threats are

An opportunity could be:

 A developing market such as the Internet.

A threat could be:

 A new competitor in your home market.

Simple rules for successful SWOT analysis.

Dr Rohit Ramesh Professor and Dean Faculty of Management

Do you need a more advanced SWOT Analysis?

The Real SWOT

Amazon SWOT Analysis

Dr Rohit Ramesh Professor and Dean Faculty of Management

Dr Rohit Ramesh Professor and Dean Faculty of Management

Bharti Airtel SWOT Analysis.

Dr Rohit Ramesh Professor and Dean Faculty of Management

The organization's marketing environment is made up of:

Dr Rohit Ramesh Professor and Dean Faculty of Management

1.How stable is the political environment?

2.Will government policy influence laws that regulate or tax your

3.What is the government's position on marketing ethics?

4. What is the government's policy on the economy?

5. Does the government have a view on culture and religion?

2. The level of inflation Employment level per capita.