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Marketing Essentials
M
Researching Markets
K U and
Forecasting P Demand
R U
A
Manohar D. Rao
W
md_rao@hotmail.com | 98456.92657
S
MD Rao: Marketing Essentials | Notes to supplement class discussion: Do not circulate | 04.1
Course Road Map
Module Topic Lecture # Chapters
R Quiz
Group
A
Exercise
1 Nature, scope and importance of marketing 1,2 1
M
2 Environment 3,4,5 3,5
3 Strategy / Planning 6,7,8 2 
U
4 Market research 9,10 4
5 Buyer Behaviour 11,12,13,14 6,7 
K
6 Segmentation, Targeting, Positioning 15,16,17 8,11  
7 Competition 18,19,20 9 
P
8 Product and branding 21,22,23,24 10,12,13,20 
9 Place 25,26,27,28 15,16  
U
10 Price 29,30,31,32 14 
11 Promotion 33,34,35,36 17,18,19  
R 4 8
A
Evauation
Quiz (Best 3 of 4) 30
Class Participation (Discussion / Attendance) 10
W
Group Exercises 10
S
Final Exam 50
Total 100
Core text: Kotler, Keller, Koshy & Jha. "Marketing Management". 13e, Pearson, New Delhi
Topics
• Researching markets
R
 Why research markets?
A
 The market research process
M
 Types of research
 Sampling
K U
P
 Collecting and presenting data
 Characteristics of good research
• Forecasting demand
R U
 Some key terms
A
 Estimating current demand
S W
 Estimating future demand
Researching Markets
Why research? Information and decision making
• A decision is the act of
R
• The quality of decisions depends
A
choosing one course of action on, among other things, the
from several alternatives information they are based upon
●
Mangers continuously take all
M
Research provides managers
U
kinds of business decisions: with information to help them
take better decisions
K
●
Marketing: Segmentation, targeting,
positioning; product range, features;
• Information should be:
P
price...
• Accurate
Finance: Cost and sources of funds,
U
●
interest rates, investments... • Current

• Sufficient
R
●
Human resources: Recruitment and
training, compensation, motivation, • Relevant
A
job descriptions, individual profiles... • Accessible
W
“Marketing research is the function which links the consumer, customer and public to
the marketer through information – information used to identify and define marketing
S
opportunities and problems; generate, refine and evaluate marketing actions; monitor
marketing performance and improve understanding of marketing as a process”
- American Marketing Association
Researching Markets
Why research? Applications of marketing research
Companies use marketing research in many ways:
R
• Programmatic: develops marketing options - through
segmentation, opportunity analysis, consumer attitude, A
product usage
M
K U
• Selective: tests different decision
alternatives – new products, copy
P testing, test marketing...
• Evaluative: assesses marketing

performance - including
R U Factors influencing use of research
A
• Research quality
advertising effectiveness,
customer satisfaction, • Proximity to expectations
W
product • Clarity of presentation
quality...
S
• Acceptability within the firm
Based on: David A. Aaker, V.
Kumar and George S. Day. • Challenge to the status quo
“Marketing Research.” Wiley
India. New Delhi, 2007
Researching Markets
The process
R
Define the problem
A
M
Develop research plan
K U
Collect information
P Make
Analyze information
R U decision
A
W
Present findings
S
Researching Markets
Types of research
Research
R
A
M
Exploratory Conclusive
U
Cross-sectional Experiment
Sec. Surveys Case study Descriptive Causal
K
Data
Data collection Longitudinal Laboratory/ Field
P
Individuals Focus Case Survey/ Classical Statistical
(with ideas) groups study Statistical designs designs
U
Data collection
R
Projective Depth
Techniques Interviews
Association
A
• Descriptive studies examine associations between variables;
causal studies look for cause and effect between variables
W
Completion
S
Construction • Although associations can be used to only infer but not
Expression establish cause, they are often used to predict outcomes
Research in Business Decisions
Sampling
R
A
M Mail Questionnaire
• Sampling unit: Who is to be surveyed?

• Sample size: How many people should be K U Telephone
Interview
surveyed?
P
U
Personal
• Sampling procedure: How should the
Interview
respondents be chosen?
R
A Online
Interview
S W
Sampling methods
R
Probability sampling
A
Simple
Random • Statistical inferences about
Stratified a population may be drawn
M
Random
Systematic • The extent of variation

Probability
Sampling
Random in the estimate due to the
U
Cluster sampling procedure may
Random be determined
K
Multi-stage
Random
P
Sampling
Methods
Convenience
U
Sampling
Nonprobability
R Modal
Instance Nonprobability sampling
A
Sampling
Expert
• Statistical inferences about
a population may not be
W
Purposive Quota
Sampling drawn
• Error cannot be estimated
S
Hetero-
geneity
Snowball • Confidence limits cannot
be constructed
Researching Markets
Data collection
Data collection methods
R
Secondary data Internal records A
Primary data
Government
M
Industry bodies
Business press
Questionnaire
Structure
K
Disguise
U Communication
Observation
Natural
P Telephone Contrived
U
Right to
Information Act Structured/ Email/ Mail Mechanical
Disguised
Business
R
Unstructured/
Interview -
Home
Indirect
A
research Recorded
organisations Undisguised
Interview -
W
Unstructured/ Elsewhere
Trade Disguised
S
directories / Internet
Commercial Structured/
databases Undisguised
Researching Markets
Sources of error in marketing research
• Error in marketing research may stem from several sources
R
Error
A
M
Sampling
Error
K
Error
U
Nonsampling
P
Design Administering Response Nonresponse
Error Error Error Error
• Population
specification
• Sampling frame
•
• U
Selection
R
Interaction
• Unintentional
inaccuracies
• Deliberate
• Refusal to
participate
• Inability to be
A
• Recording
• Surrogate falsification contacted
• Interference
information • Termination
W
• Measurement • Incomplete
• Experimental response
• Analysis
S
Characteristics of good research
R
 Scientific method A
M
 Research creativity
 Multiple methods K U
 Interdependence
P
R U
 Value and cost of information
 Healthy skepticism
A
 Ethical marketing
S W
Presenting actionable information: Marketing dashboards
R
A
M
K U
P
R U
Source: http://www.dundas.com
A
S W
Forecasting Demand
• Overestimating R
A
Market / Category
demand can Forecasts
lead to ruin
through huge
M
Actions by Key Decision Makers
J. Scott Armstrong and Roderick J. Brodie: Forecasting for Marketing

U
unsold Competitors
inventories,
(Quantitative Methods in Marketing, Thomson Business Press)

K
Costs Suppliers, Distributors
crippling
Government
overheads;
P
Company action (Marketing Mix)
overstaffing…
• Underestimating
demand leads
to opportunity
R U Market Share
A
Sales
loss, shrinking
market share
and increased
vulnerability
S W Profits/ Other
Financial Outcomes
Forecasting Demand
Key terms
R
• Market Demand: The total volume
bought by a defined customer
A
group in a defined space in a
defined time period, in a defined
M
market environment under a
Market Demand in Time Period t 
Market Potential QP defined marketing program
U
Demand Function • Expansible Market: High Market
Sensitivity (QP >> QM)
K
Sensitivity
Market
Market
Forecast QF Market Potential • Market Penetration Index: Current
Recession QR Market Demand / Market Potential
P • Share Penetration Index: Current
U
Market Minimum QM Market Share / Potential Market Share
• Market Forecast: The Market Demand
R
Planned corresponding to the (one) level of
Expenditure Marketing Expenditure that actually
A
occurs
• Company Sales Quotas: The volume
W
Industry Marketing Expenditure  of sales assigned to the Sales team
as a target
S
• Sales Budget: A slightly lower figure
upon which operations (production,
Based on Philip Kotler and Kevin Keller. Marketing Management.
Dorling Kindersley (India) Pvt. Ltd. 2007 services…) levels are planned
Forecasting Demand
Estimating current demand
Estimate the potential market size of a market for an area:
R
• Total Market Potential: Number of Potential buyers x Average
A
M
quantity purchased x Average price
U
• Alternatively, the Chain-Ratio method may be used -
Total Market Potential: Population x Per Capita Disposable Income
K
x % Disposable Income spent on Item Category x % of this spent
on Sub-category x …
P
• Industrial Market Potential Estimation. Market-Buildup method:
R U
• List all industries that are likely to use product
• Estimate average usage by industry: say / Rs. L of Industry Sales
• Compute total = Σ (Industry sales x Average / Unit of Industry Sales)
A
• Consumer Market Potential Estimation. Multiple-Factor Index method:
S W
• List key factors that influence sale
• Assign weights for importance of each factor
• Compute score for market: Σ (Factor Score x Weight) / Σ Weight
Forecasting Demand
Estimating current demand … 2
Estimating the potential market attractiveness of an area:
R
A
• Brand Development Index: % Brand Sales / % Category Sales x 100. The lower
the BDI, the greater may the opportunity to grow the brand be. On the other
M
hand, one may wish to concentrate in markets with a strong current position
U
• % Brand sales is the amount the brand sells in the market in question, as a
percentage of the total sales of the brand all over the country
K
• % Category sales is, for a product category, the size of the market in question
as a percentage of the total size of the market all over the country
P
U
City % India Brand % India Category BDI
Sales Sales
Bangalore 25
R 20 125
Calcutta
A 15 15 100
Chennai
Mumbai
S W 15
36
20
40
75
90
Forecasting Demand
Estimating future demand
R
A
M
Macro- Company Forecasts may be:
Industry
economic Sales
Forecast • Done internally
U
Forecast Forecast
• Purchased
•Inflation •Industry •Company

K • Commissioned
P
demand = Sales =
•Unemployment
All these forecasts
f (Industry
U
•Interest rates f (Macro- are based on such
forecast,
economic
•Consumer market research as:
R
factors,
confidence share…)
industry • Buying intentions
•Government factors)
A
spending • Test marketing
•
• Quantitative analysis
W
•
•
S
Forecasting Demand
Estimating future demand: Buying intentions
• Survey of Purchase Intention:

R
Purchase probability questionnaire
A
• Sales Force Projections: Σ Salesperson’s
M
U
projections for each customer and prospect
x Adjustment factor [= function(Optimism,
Recent performance, Ulterior motives…)]
K
P
• Expert Opinion:
• Industry watchers
• Trade channels
• Suppliers
R U
A
• Customers’ industry watchers
W
• Marketing consultants
S
•
•
•
Forecasting Demand
Estimating future demand: Some approaches to quantitative analysis
R
Time Series:
Simple
Time-Series:
Smoothing
Regression
A
Gompertz
Curve
Econometrics
M
trends
• Simple
trending of
• Moving
average
K
• Expressing U
the variable
• Growth curve
most
• The use of
economic
P
time data – to be generally theory,
least • Weighted used
forecast as a mathemat-
squares average
function of ical methods
U
• This form has
• Dependent • Exponential several other and
an upper
for auto- independent statistical
R
variable is asymptote:
time correlated variables techniques
e.g. market
data which can to analyse
A
• Particularly saturation
be more economic
used for easily phenomena
short-term forecast
W
forecasts
S
Forecasting Demand
Components of a time series
• A time series is a sequence of

R
measurements taken at different
points in time, with the time of
A
M
observation recorded
• Time series data may show

the following kinds of variation:
K U J F M A M J J A S ON DJ 1 2 3 4 1 2 3 4 1 234
P
• Trends: underlying upward
or downward movement
• Cycles: patterns that repeat with
a periodicity exceeding a year
R U 1 2 3 4 5 6 7 8 9 1 11 1
0 2
A
• Seasonal effect: cycles with a
periodicity of one year or less
W
• Irregular variation: natural,
S
unpredictable, random variation
• Combinations of these patterns
Time →
Marketing Information Systems
• Key to taking more effective operational and strategic decisions R
A
Data Sources Data Repository
MAnalysis /
Processing Decisions /
K U Tools Action
Top
Mgmt.
Internal
P Query
External Non-
commercial
R U Apps.
Ops.
Mgmt.
External
Commercial
A DSS
Other
Stake-
W
holders
S
Some tools and techniques
Analysis of Data
R
Dependence Analysis
A
Interdependence
M
(Prediction) Focus? (Relationships)
U
Single Number of Multiple Variables Between? Objects
DV's?
K
Factor Cluster
Numeric Analysis Both Analysis
Multiple
P
AID DV's?
Regression
ANOVA/ LOGIT Ordination
Discriminant
U
ANCOVA
Analysis Canonical
Discriminant
PROBIT Canonical Correlation
Analysis
R
Correlation Dummy IV's
MANCOVA
A
• Multiple regression: Prediction; understanding relationships. Customer satisfaction
• Cluster analysis:Separating objects into mutually exclusive homogeneous groups. Segmentation
W
• Conjoint analysis: Ranked preference decomposed and a utility determined. New products
S
• Multidimensional scaling: Respondent judgments of, say, similarity of pairs of stimuli; used to
map competing brands. Positioning
• Factor analysis: Determining a few underlying dimensions for several inter-related variables
The use of quantitative analysis tools in marketing
Uses of quantitative Total Consumer Industrial
R
“A coordinated
A
methods in marketing (433) Products Services Products Services
J. Scott Armstrong and Roderick J. Brodie: Forecasting for Marketing
(433 European cos.) (134) (113) (89) (97) collection of data,

systems, tools and
M
APPLICATION AREAS
(Quantitative Methods in Marketing, Thomson Business Press)
Sales forecasting 72% 81% 83% 55% 60% techniques with
U
Market segmentation 72% 78% 74% 66% 67% supporting software
Consumer behaviour 55% 76% 35% 60% 43% and hardware by
Pricing decisions
Sales promotion
54%
36%
63%
49%
58%
31%
K
49%
24%
39%
34%
which an
organisation
P
Advertising decisions 33% 47% 20% 30% 30%
gathers and
Sales force allocation 21% 25% 19% 19% 23%
interprets relevant
DATA ANALYSIS TECHNIQUES USED
Data tables
Graphical representation
83%
84%
R
90%
84%
U 82%
87%
76%
81%
81%
81%
information from
business and
environment and
A
Summary statistics 79% 76% 81% 81% 77%
Tests of significance 26% 35% 17% 32% 20%
turns it into the
Simple regression 36% 46% 31% 36% 28% basis for marketing
W
Multivariate methods 29% 39% 22% 29% 21% action” - John Little
MD Rao: Marketing Essentials

S
Dalrymple (1987) – survey of 134 US companies: 99% used
formal forecasting to create formal marketing plans
| Notes to supplement class discussion: Do not circulate | 04.24

MIS and retailing
R
“Retail has become more of [a] technology business. To differentiate ourselves from
A
time to time, huge investments in IT are critical and our needs are growing each
day” – Paul Singer, Chairman, Target Corporation,
M
Source: Economic Times 13 May 05
• Market basket analysis
U
• When people buy
• Demand / sales forecasts cakes they also
• Product assortment
K buy party items
half the time
• Shelf space allocation
P • Promote party
items – or cakes
U
• Customer – one at a time,
acquisition/retention
R
but not together
• Inventory management • Place the items
A
• eProcurement close to each
other – or far
W
• EDI / EFT apart
S
• Market Basket Analysis
MineSet from Silicon Graphics
•
•
Analysis and DSS in action: Demand forecasting / customer analysis
R
A
M
K U • Demand
forecasting
P
• Customer-
buying patterns
R U • Customer
profiling
• Sales analysis
A
S W Source: www.sas.com
Analysis and DSS in action: Churn management
R
A
• Before DSS churn
M
was ~ 3%.
U
• After, just over 2%
http://www.sas.com/offices/asiapacific/india/successstories/bharti.htm
• Without, likely to
K have increased
above 3%
P • Avg. cost of
U
acquiring
customer: Rs.
R
3000
A
• Customer base at
the time of case
study: 737,000
S W • Value > Rs 2.2

crores
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Marketing Management A
Competition M
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P D. Rao
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Manohar
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MD Rao: Marketing Management | Notes to supplement class discussion: Do not circulate | 06.1
Course Road Map
R Quiz
Group
A
Exercise
M
U
K
P
9 Place 25,26,27,28 15,16  
U
10 Price 29,30,31,32 14 
11 Promotion 33,34,35,36 17,18,19  
R 4 8
A
Evauation
W
Group Exercises 10
S
Final Exam 50
Total 100
Competition
• Competitive forces R
A
M
• Identifying, analysing, monitoring competition
• Competitive advantage and core competence
K U
P
• Competitive strategies
U
• Competition- vs. customer- orientation
R
A
S W
Competitive Forces
Determine intrinsic long-term
R
Threat
of New market or market segment
A
profit attractiveness of a
M
Entrants
Exit Barriers
K U Low High
Low
Low, Stable Low, Risky
Entry Barriers
Bargaining power Competitive Bargaining power
P
of Suppliers Rivalry of Buyers Returns Returns
R U High, Stable High, Risky
High
Returns Returns
A
Threat of
Substitute
Products
S W
Michael Porter’s Five Forces Analysis
Identifying Competition
• An Industry view
• A Market view
• Current
• Latent
Identifying Competition: An Industry View
• Number of Sellers; Degree of
R
Differentiation
• Pure Monopoly A
• Oligopoly
M
U
• Monopolistic Competition
K
• Pure Competition
Industry: A group of companies that
• Entry, Mobility and Exit Barriers offer products or a class of products
• Cost Structure
P that are close substitutes for one
U
another
• Set-up
R
• R&D
• Operations
A
• Marketing & Distribution
• Service
W
• Degree of Vertical Integration
S
• Degree of Globalisation Based on Philip Kotler and Kevin Keller. Marketing Management.
Dorling Kindersley (India) Pvt. Ltd. 2007
Identifying Competition: A Market View
Competitors satisfy the same customer need
R
•HP
A
M
•Olympus •Cameraworks.
com
U
•Snapfish
Based on Philip Kotler and Kevin Keller. Marketing Management. Dorling

•Fuji
Kindersley (India) Pvt. Ltd. 2007; Attributed to J.F. Rayport & B.J. Jaworski
Purchase
K
Purchase camera Purchase
accessories film
•Moto Take pictures
P
Photo Store pictures on
CD Eastman Kodak Digitally
U
•Seattle manipulate
Share pictures pictures •Adobe
Filmworks
Download and
R
Print and receive choose pictures to
•Geocities pictures
•Shutterfly
print
•District •Ofoto
A
•HP
Direct Competition
W
Indirect Competition
S
• Examine consumers’ steps in obtaining and using product
• Direct competition: Related to consumer activity
• Indirect competition: Potential future direct competitors
Analysing Competition
Strengths, weaknesses and reaction patterns
• Whom to attack, and on what fronts; whom to leave alone
R
• Customer survey
A
M
Technology Cost Quality Availability Service
Competitor A E G E P P
Competitor B
Competitor C
G
P
G
K UG
G
G
F
E
P
• Customer Value Analysis: Customer Benefits – Customer Costs
R U
• Classes of competitors: Strong/Weak, “Good”/“Bad”, Near/Distant
• Reaction patterns ↔ Competitive Equilibrium (Bruce Henderson)
A
• Low differentiation → Unstable equilibrium
• A single major critical factor → Unstable equilibrium
S W
• Few critical competitive variables →
• A 2:1 ratio between any two competitors seems to be an equilibrium point
Few competitors
Based on Philip Kotler and Kevin Keller. Marketing Management. Dorling Kindersley (India) Pvt. Ltd. 2007
Monitoring Competition
R
Establish a Collect Analyse
A Respond
M
System Data Data
•Identify •Field sales

K
•Validity,
U •Disseminate
rapidly within
P
types of force: formal Reliability
data and informal organisation
•Analyse to relevant
•Identify
sources of
information
for each
•Channel/
Trade
R
•Suppliers
U trends
•Identify
imminent
individuals
•React to
competitor
A
changes in moves in line
•Market
•Assign marketing with industry
Research
specific
W
mix position
Firms
responsibility
•Scan for new
S
for system • The Internet
substitutes
Competitive Advantage
Costs and differentiation
R
A
140
M
120
U
Profit D
100 Average Perceived Value
80
K Perceived Customer Value
P
Profit A Profit LCD
Cost
Profit LC
U
60 Average Cost
R
40
20
A
0
Average
S
Industry
W Low Cost
Competitor
Differentiated
Competitor
Differentiated, Low
Cost Competitor
Competitive Strategies
Hypothetical competitive market structure
• Dominant: Controls
R
A
behaviour of others; Expand Total Market
many strategic options • New Users
• New Uses
M
• Strong: Can take • More Usage
independent decisions Defend Market Share
U
• Position Defence
regardless of competitors 40%
Market • Flank Defence
Leader • Preemptive Defence
K
• Favourable: Has an • Counteroffensive Defence
• Mobile Defence
exploitable strength • Contraction Defence
and more than average
P
Expand Market Share
opportunities to improve
Offensive Strategies
U
• Tenable: Currently viable 30% Market • Frontal Attack • Bypass attack
• Flank Attack • Guerilla Warfare
but dependent on the Challengers • Encirclement Attack
R
dominant player
Specific strategies
• Weak: Unsatisfactory Market
A
20%
Followers Market Follower Strategies
position, but can • Counterfeiter • Imitator
• Cloner • Adapter
improve. Improve or exit Market
W
10% Market Nicher Strategies
• Nonviable: Nichers • Specialisation
S
Unsatisfactory
performance; no
opportunity to improve Based on Philip Kotler and Kevin Keller. Marketing Management. Dorling Kindersley (Ind
Competitive Strategies
Lessons from military dogma
R
A
M
“ War belongs to the province of
U
business competition, which is also a
conflict of humanK interests and
P
activities”
U
R- Karl von Clausewitz
A
S W
Market Leader Strategies
Defend market share
“The defensive form of war is in itself stronger than the offense”
R
- Karl von Klauswitz
A
A survey of 25 leading brands
found that between 1923 and 1983
M 2.Flank
U
20 were still in first place, 4 in 3.Preemptive
1.Position 5.Cont-
K
ATTACKER 4.Counter-
second and 1 in fifth raction
offensive DEFENDER
Interbrand's list of top brands
P
(by value) in the new millennium,
however, have several young 6.Mobile
U
brands in the top 10/50
1. Build superior brands, making it almost
• The best defensive
strategy is the courage R impregnable: IBM
A
2. Build “outposts” to protect flank: Smirnoff
to attack yourself 3. Attack before competition does: Titan, Gillette
W
4. Move to neutralise competitive attacks: Kodak
• Strong competitive moves
S
5. Strategically withdraw from some areas: GE
should always be blocked 6. Broaden market into new areas: ICICI
Based on Al Ries & Jack Trout: Marketing Warfare; Philip Kotler and Kevin Keller. Marketing Management. Dorling Kindersley (India) Pvt. Ltd. 2007
Defend market share…2
R
Times of India: 22nd October 2003
A
M
Monitoring,
Responding to,
Defensive
Competitive
Strategy
K U
Purchase Factor:
Location
Competition
P
R U
Production-
Product-Market
Strategy
Strategic
Product
Vendors
A Cost Levels
W
Line
Extension
S
MD Rao: Marketing Management
Organisational
Buying Process
Expand market share
R
• The cost of buying market share
Profitability (%) 
Op. Margin % 
Linear according to
may exceed the revenues it
A
Strategic Planning V-Shaped for Agri-
Institute’s PIMS equipment firms generates; thus the concept of
Program) optimal market share
Served Market Total Market
Profitability 
U
Market Share (%)  Avg. Sales 
K
• These apparently contradictory
charts are reconciled by considering Optimal share
the difference between total market
P
Market Share 
and served market
• Excessive domination could lead to invoking
U
• GE’s policy is to be either 1 or 2 in its
market, or to exit the business antitrust (ICA) laws
R
• Buzzell and Wiersema found that • Beyond a point, the cost of converting those
companies that win share tend to negatively disposed to a company, or those
A
outperform competitors in: who have unique needs, may be excessive;
• New product introduction the costs of legal services, PR and lobbying
also rise with market share
W
• Relative product quality
• Marketing (sales force, advertising, • Inappropriate marketing-mix strategies lead
S
sales promotion) expenditures to lowering of profits: pure price-cut driven
• Price cutting does NOT significantly share increasing strategies are an example
gain market share Based on Philip Kotler and Kevin Keller. Marketing Management. Dorling Kindersley (India) Pvt. Ltd. 2007
Market Challenger Strategies
Offensive strategies: Frontal attack
“The art of war with a numerically inferior army consists in always

R
having larger forces than the enemy at the point which is to be
attacked or defended” - Napoleon A
• Attack:
M
U
A
• Leader L
tt
e
K
• Peers a
• The main consideration a
• Small firms c
is the strength of the d
k
P
•A Frontal Attack needs leader’s position e
e
a 3-1 advantage in r
r
U
“firepower”: Ford vs. • Find a weakness in the
Maruti in the “C” segment leader’s strength and
R
•High price is not usually attack at that point
a “weakness” – the A
L
A
leader is usually the • Launch the attack on as tt
e
lowest-cost producer narrow a front as a
a
c
W
•Weakness in strength: possible d
k
Kodak shelf life vs. e
S
e
widespread availability; r
Longer lines at Hertz r
Offensive strategies: Flanking attack
“Where absolute superiority is not attainable, you must produce a
R
relative one at the decisive point by making skilful use of what you
have” - Karl von Clausewitz
A
• A good flanking move must be made in an
M
uncontested area
• Tactical surprise ought to be an important element
of the plan K U L
e
• The pursuit is just as important as the attack itself
P a
U
d
•Identify a new segment and occupy it first: DEC vs. e
IBM in minicomputers
R A
tt
r
A
•Flanking has been done with high-price: Cadillac a
by Mercedes; low-price: no-frills airlines like c
W
SouthWest and Deccan Air; small size: VW; large k
size: Prince/Head racquets; distribution:Timex; e
S
product form: Close-up… r
•Defend the hard-won position or perish: Altair
Offensive strategies: Encirclement attack
• Attempt to attack a wide R

slice of enemy territory
A
• The challenger will need
M
U
A
superior resources and is best tt L
K
a e
when a swift attack is likely to a
c
break the leader’s will k d
P e
r
e
r
R U
Sun Microsystems has taken on Microsoft in the Java space
by licensing it for all kinds of consumer devices: pagers,
A
cell phones, fax machines, smart cards, access control
devices …
S W Based on Philip Kotler and Kevin Keller. Marketing Management. Dorling Kindersley (India) Pvt. Ltd. 2007
Offensive strategies: Bypass attack
• Most indirect challenger R

strategy A
A
M
tt
• Bypassing markets a
c
U
with well-entrenched k
competitors altogether and L
K
e
r e
addressing easier markets
a
P
to broaden one’s base
d
U
e
• Pepsi acquired Tropicana in 1998 to own a
r
R
dominant position in the orange juice market,
and Quaker Oats (Gatorade) to establish a
A
similar position in the sports drink market
W
• Technological leap-frogging is another
example of a bypass strategy: Nintendo-
Sega-Sony-Microsoft
S
Pepsi vs. Coke
R
“If we were only playing in carbonated
A
soft drinks, competitively we would be
disadvantaged in many ways. Being
M
outside carbonated drinks makes sure
we’re growing in the areas where there is
growth”
K U
…Steven Reinemund, former CEO PepsiCo
South Beach Beverage Co (fruit juice)

negotiated with Coke for two years before
P the soda giant decided against the

acquisition; it took Pepsi just two weeks to
U
make an offer
R
• Sports drinks: Pepsi (Gatorade) 81%
Coke (Powerade) 17%
A
• Bottled water: Pepsi had a two-year start
How they have viewed themselves
S W • Pepsi: Beverage-and snack company

• Coke: “soda” company
Based on ET 19Dec04 p: D. Foust’s article in Business Week
Guerilla warfare
• Small, intermittent attacks, intended to harass the R

opposition and eventually capture a permanent position
A
• Attack with: M
• Selective price cuts
• Intense promotional offensives K U
• Short term alliances
P
• Occasional legal action
R U
• Creating negative publicity for an opponent
A
• Particularly suited for small companies attacking larger
adversaries
S W
Specific attack strategies
R
A
• Value prices
• Lower price goods

M
• Prestige goods
K U
P
• Product proliferation
• Product innovation
• Improved services
R U
A
• Distribution innovation
Market Follower Strategies
• Counterfeiter: Illegal practices R

• Music, Software…
A
M
U
• Cloner: Slight variations
• Computers, Foodstuffs…
K
P
• Imitator: Some features copied, but significant differentiation
R U
• Acceptable to leader, provided not too aggressive
• Adapter: Improvements on basic product copied
A
• May sell in different markets than the leader
S W
• Often becomes a market challenger
Market Nicher Strategies
• Niching works primarily because companies get to know their
R
customers very well and serve them better than anybody else can
A
• Nichers can charge more, often very profitable
M
• Nichers must:
• Identify niches
K U
P
• Expand niches
• Protect niches
R U
• Niches weaken; Nichers must “stick to their niching” but not to their
niches: multi-niching is preferable to single niching
A
• Niche markets are usually unattractive to larger competitors
S W
• Niche markets need not be low-end: Rolls-Royce dominates the
small ultra-luxury auto market
Market Nicher Strategies
Specialisation: The key to success
• End-user
R
• Value chain stage
A
• Customer size
M
• Specific customer
• Geographic K U
• Product
P
• Job-shop
R U
A
• Quality-price
• Service
• Channel
Other Considerations
R
A
M
K U
P
R U
A
S W
Competition- vs. Customer- Orientation
“Knowing what the customer
R
“Amazon.com’s mantra has been
A
wants isn’t too helpful if a dozen that we were going to obsess over
other companies are already our customers and not our
serving the same customer’s competitors. We watch our
wants…To be successful today,
a company must be competitor
M
competitors, learn from them…
But we were never going to
oriented” - Jack Trout
Situation
K U
obsess over them…” - Jeff Bezos
Situation
P
• Competitor X is focusing • 32% of the market is willing to pay for
exclusively in the South state-of-the-art TV’s
• Competitor Y is launching two
new flavours for kids
• Competitor Z is offering
R U • Another 27% will buy if finance is
arranged
• After-sales service is key to buyers of
A
promotional freebies in the West hitech consumer durables
Response: We will Response: We will
W
• Withdraw from the South
S
• Offer kids four new flavours
• Match Z’s promotion incentives
• Get HDTV technology by Q3
• Offer 0% loans and buy-back
• Increase service centres by 25%
R
A
… ProductU andM
K
Branding
P
R U
A
S W
R
M
K U
Product and Branding
P
R U
Manohar D. Rao
A
S W
Course Road Map
R Quiz
Group
A
Exercise
M
U
K
P
9 Place 25,26,27,28 15,16  
U
10 Price 29,30,31,32 14 
11 Promotion 33,34,35,36 17,18,19  
R 4 8
A
Evauation
W
Group Exercises 10
S
Final Exam 50
Total 100
Product
• Product
R
• The Product Life Cycle (PLC)
A
• New product development
M
• Product strategy
• Services K U
• Characteristics
P
• 3 Additional P's
R U
A
• Branding
• Brand equity
W
• Brand strategy
S
Product Life Cycle
Typical cycle
R
Characteristics Introduction Growth
A
Maturity Decline
M
• Sales
• Costs
U
• Profits
• Customers

K
• Competitors
Sales
Mktg. Objectives
Strategies
P
•
•
•
•
Product
Pricing
Distribution
Advertising
R U
A
• Sales promotion
Time 
S W
Product Life Cycle
Characteristics, objectives and strategies
Introduction Growth Maturity
R
Decline
Characteristics
A
Based on Philip Kotler and Kevin Keller. Marketing Management. Dorling Kindersley
Sales Low Rising rapidly Peak Declining
Cost/Customer High Average Low
M Low
U
Profits Negative Rising High Declining
K
Customers Innovators Early adopters Majority Laggards
Competitors Few Increasing Many Declining
P
Marketing Create Maximise market Maximise profit;
Milk for profits
Objectives Awareness / Trial share Defend share
Strategies
Product Basic
R U
Extensions / Service
warranty
Build brand,
category families
Phase weak
products out
A
Price Skim / Penetrate Penetration Match Cut
Distribution Selective Intensive More intensive Selective
(India) Pvt. Ltd. 2007

W
Awareness; Awareness, interest; Stress benefits, Reduce; aim to
Advertising
Focused Mass market brand differences retain core loyals
Sales promotion
trial
S
Heavy: induce

Reduce as demand
increases
Increase to
induce switching
Reduce to
minimum

Product Life Cycle
Other patterns
High initial interest;
R
Follows typical curve;
A
stable, continuous use: a second curve is
Low-priced everyday stimulated by
use products with novel aggressive promotion
Sales 
Sales 
features
K U
Time 
P
U
Time 
Growth-Slump-Maturity New uses found for
Cycle-Recycle
original product
R
Sales 
A
S W
Time / Phases 
Scalloped
Product Life Cycle
Style, Fashion and Fad PLC’s
Basic, distinctive
R
Currently popular
A
mode of expression style
Sales 
Sales 
M
K U
Time / Phases 
P Time / Phases 
U
Style Fashion
Short-lived fashion
Style
R
Sales 
Fashion
Fad
A
S W Time / Phases 
Fad
Based on Philip Kotler
and Kevin Keller. Marketing Management.
Product Life Cycle:
Critique
• Too many shapes R

A
"...clearly, the PLC is a
M
dependent variable
which is determined by
• Too much variation in
duration of phases
K U market actions; it is not
an independent variable
to which companies
P
should adapt their
marketing programs.
U
Marketing management
• Difficult to recognise stage itself can alter the shape
R and duration of a brand's
A
life cycle"
• Result of marketing - Nariman K. Dhalla &
natural cycle
S W
strategies rather than Sonia Yuspeh
New Product Development
R
A
Buy
Company
Booz, Allen Hamilton’s
New Product categories:
M
• New-to-the-world
U
Buy
Patent
(High risk/return;
K
Acquire few - 10%)
• New product lines
P
Buy
Licence • Product line additions
U
New
Products
• Product
R
improvements
In-house
A
• Repositioning (new
Develop
segments)
S W Contract
• Cost reduction
The process
R
A
1 Idea 2 Idea
Generation
Y Screening
Y 3 Concept Y 4 Market Y 5 Business Y
Good Fit with
Dev./Test Strategy Analysis A
Acceptable? Viable? Profitable?
Idea? Goals?
N N N N
M N
N
Drop
K
N
U
Y
PModify Y
U
Product/
Send back to
Mkt.
improve?
Program?
R
N N
6 Product
A 7 Market 8 Comm-
W
A Development Testing ercialisation
Product Sales Sales
Sound? Y Enough? Y Enough?
S
N

Y

Concept development
R
A
Calories
Low High
M
Product Brand
Product Concept
Idea Concept Here?
High
Price/Gram
Brand A
•Milk •Who will •Concept 1: •Map

K
P
Additive buy? Instant current
Powder breakfast positions of Brand B
•What is
Low
to for adults competing
U
the
increase brands
primary •Concept 2: Brand C
taste and
R
benefit? Tasty mid-
nutrition
day snack •Determine
value of •When will
A
for kids mix of
drink they
offerings
consume? •Concept 3:
vis-à-vis
W
Bed-time
other
health drink
brands
S
for all
Concept testing
R
Measure
Evaluate
Alternate
A
M
Describe
Product
Importance 
Product
 Relative
Product
Concepts:
Utility 
Dimensions
U
Concept
Conjoint
Analysis
K A B
Flavours
C
•Milk powder •Benefits clear?

P •Give meaningful
U
additive that combinations of
•Need?
adds missing attributes
R
nutrition •Gaps?
Importance 
 Relative
•Rank/rate
A
•In three flavours: •Value? combinations
Utility 
Vanilla, Mango,
•Will buy? •Use statistical
Chocolate
programs to
W
•Who will
•In packs of 6 determine “utility”,
consume, when, A B C
S
sachets for importance of
how frequently...? Brand
Rs. 105 a box attributes
Market testing (consumer goods)
• Sales-Wave Research: Consumers who try the product

R
initially at no cost are re-offered product / competitor
products at prices that are slightly lower than store prices
A
- three-five times. The number of customers who select
the product, and satisfaction levels are noted
M
K
• Simulated Test Marketing: Responses of a sample
(30-40) of qualified consumers, before and after
U Estimate:
• Trial
P
various stimuli are studied. Sales forecasts factor in
findings
• First repeat
U
• Adoption
• Controlled Test Marketing: The impact of different stimuli
R
and promotion incentives are studied in a sample of
• Purchase
stores and geographic locations, and findings factored frequency
A
in forecasting models
S W
• Test Markets: Product launched in one or more of a
few “representative” cities, and sales forecast for the
region / country based on performance in these cities
Product Strategy
Product levels
Physical goods, Services, Events, Information, Ideas…

R
Potential Product Air Travel A
Augmented Product
M
• Fundamental benefit
U
bought: Transportation
K
Expected Product
• Adding features to the
product: Classes of seat,
Basic Product
P
Types of aircraft…
• Attributes customers
U
Core
Benefit normally expect: Baggage,
R
In-flight magazines…
• Exceeding expectations:
A On-line check in, Frequent

flyer…
S W • All possible extensions:

Casino in-flight…
Product Strategy
Product Classifications
R
•Quickly consumed;
A
Non-
Durable
distribute, advertise
•Long-term; service,
reliability important
M •Intangible, variable;
U
Durability reputation, quality
processes key
Durables
K
•Staples / Impulse /
Emergency:
Frequent purchase,
Tangibility
P with little effort
U
Products Services
Conven
•Bought after
-ience Shopp-
comparisons made
R
Goods ing
Goods
•Unique
characteristics that
A
Consumer warrant special
Use Special effort
-ity
W
Unsou- Goods •Not normally
ght thought of; requires
Goods
S
selling
Industrial
•Materials, Capital
Based on Philip Kotler and Kevin Keller. Marketing Management. Items, Supplies
Product Strategy
The product mix
The set of all products that a particular vendor offers for sale
R
A
• Number of product lines:
M
Width Detergents (7); Toilet Soaps (7);
Oral care (3)
K U• Number of items in mix:

(17; Average line length = 6)
P
• Number of variants in item:
4 sizes x 3 Flavours = 12
Consistency
Product
Mix
R U Length
• Proximity of relationship of
product lines to each other:
Production; Distribution…
A A company can improve
S WDepth
performance along the four
product mix dimensions
Product Strategy
Product line analysis: Market profile
• An item’s market profile also needs to be clearly understood

R
• A product map aids
A
• Visualising competitive positions
M
U
• Identifying unaddressed product-market segments
Low
Paper Weight
Medium High K Extra High
P
U
High
P-O-P
Displays
Finish Quality
R
Medium
General
A
Printing Office
Supplies
W
Low
S

Product Strategy
Product line length
• Product lines are too short if
R
• Product lines are too long if
A
• Profits can be increased by • Profits can be increased by
adding items dropping items
• Lengthening product lines
M
• Lengthening product lines
U
• Offers a more complete • Increases inventory/service
market coverage … costs

• Soaks up excess capacity
P
Adding items beyond current range
Line
Stretching •Downmarket stretch: Sony / Gillette
R U •Upmarket stretch: Toyota

•Two-Way stretch: TI Calculators

Lengthening
A
the Product
Line
Adding items within current range
S W
Length: Profits vs.
Market share ?
Line Filling •Add just-noticeable difference:
Maruti Swift LX/VX
•Overdone if confusion or
cannibalisation results: Alto/Zen
Product Strategy
Product line modernisation, featuring, pruning
• Modernisation: Overhauling older items to incorporate
R
contemporary looks / functionality / technology…
A
• Ford replaced under-performing engine in its Ikon with a more efficient
“ROCAM” version, in response to poor market acceptance
M
reinforce image / boost sagging sales…
• Maruti 800; Omni
K U
• Featuring: Promote different items at different points in time to
P
U
• Pruning: Rationalising product line – cutting out deadwood items
that do not contribute to the bottom line / add little differentiation…
R
• HLL refocused attention to 35 “Power Brands” from among 110
A
brands
The impact of eliminating brands on the mix as a whole needs to be considered.
W
Speaking of the decision to cut out small, local tea brands (Ruby Dust and Super Dust) a
former HLL manager estimates that 30-40% of business came from these brands. Also,
S
“…retailers would buy these brands from us, our other products used to piggy-back on
that distribution chain. These were the carrier-brands” - Business World, 30 Aug 2004, p31
Product Strategy
Packaging and labelling
• Packaging: the activities

R
A
• MFDA concerned about
of designing and product use
• Wipro’s new labels state
producing a container
M
product use is as a light oil
before bathing
for a product • Toll-free line for details set up
• Increasingly a marketing
tool:
K U
• Label: a simple tag
attached to a product or
an elaborate graphic that
P
• Attract attention in
crowded shelves is part of the package
• Describe features
U • Identify product or brand
Source: Economic Times 06 July, 2005

• Create consumer
confidence
R • Describe product:
A
manufacturer, place,
• Reinforce image / brand contents, time, usage
S W
• Enhance convenience
• Protect contents • Must comply with
regulatory requirements
• Promote
p5
R
A
M
Services
K U
P
R U
A
S W
Services
Characteristics
Intangibility Inseparability
R
Perishability
A
Variability
M
•Cannot be
seen or felt
•More difficult to
evaluate
•Production
and
consumption
simultaneous
K U
•Same service
may be
performed
differently by
•Differential
pricing
•Reservations
P
different •Address waiting
•Provider a part
•People, Place, people, and
of the service if •Part-time
U
Equipment, at different
delivered by a workers
Price, Testimony times
person: Can
R
are important be highly •Peak-time
•Key to delivery:
person-driven efficiency
•Concrete •Selection
A
benefits to be •Customer
•High vendor- •Training
communicated consumer participation
•Process
W
interaction •Multi-skilling
•Monitoring
S

Services
3 additional P’s
People Physical
R
A
Process
Evidence
M
•Selection,
training,
motivation key
•Outward
appearances /
presentation
must be
K U •Standardisation as
far as possible:
• Repeatability
P
•Need to show:
consistent with • Predictability
• Concern service offered:
U
• Reduced
• Competence
• Speed dependence on
• Reliability individuals
R
• Cleanliness
• Initiative
• Scalability
• Responsive- • Comfort
ness
• Sincerity
A • Competence
• Quality / Style
S W • Stability /
Permanence
Services
Categories
R
1. Pure tangible good A
High
1
M
2
U 2. Tangible good +
Tangible Component
K
Accompanying service
P
3 3. Hybrid
R4
U 4. Major service +
Accompanying minor
goods / services
A 5
Low
5. Pure service
Low
S W
Service Component High
Services
Customer evaluation
• As services are
R
• Services vendors
A
harder to need to focus on
evaluate, buyers • Differentiation
tend to base
M
• Service Quality
purchase • Productivity
U
decisions on:
Most Most
• Word-of-mouth Goods Services
• Price, Personnel,
Physical Cues
K
P
Easy to
Evaluate
R U Difficult to
Evaluate
Medical
diagnosis
Vacation
A
Clothing
S W
High in Search
Qualities
High in Experience
Qualities
High in Credence
Qualities
Based on Valerie Zeithaml (1981): How Consumer Evaluation Processes Differ between Goods and Services. The Marketing of Services, AMA
Services
Addressing customer concerns
R
A
Performance
Mean Mean
Fair Excellent Attribute Description Import- Perform-
M
7 ance ance
1
Extremely
7 4
U
2 1 Done right first time 6.6 3.0
Priority for Keep up
Importance
improvement good work
K
2 Delivery on time 6.1 6.5
5
P
3 3 Courtesy 3.4 3.1
Slightly
U
6
4 Waiting time 5.8 5.6
Low priority Overkill
R
Explanation of job
5 2.1 6.4
1 done
A
1 7
6 Costs 4.5 3.5
• Customer complaints
W
• Customer service
S
7 Quality of job 6.5 2.0
R
A
M
Branding
K U
P
R U
A
S W
What is a Brand?
“A name, term, sign, symbol or design, or a combination of them,
R
A
intended to identify the goods or services of one seller or group of sellers
and to differentiate them from those of competitors” - AMA
Product
M
K U
• Functionality important
• Can be easily copied
P
R U Brand
A • Consumer perception
important
S W • More difficult to imitate
Brand Equity
Two views
R
“The differential effect that
Brand equity
A
knowing a brand name has
on customer response to a
M product or service”
K U
Customer-based
P Financials-oriented
●
●
Mental associations
Cognitive and emotional
Relationships
R U ●
●
Net additional cash flows
Discounted earnings
Risk
A
● ●
●
Behaviour ●
Intangible assets
S W
The Rolls Royce brand has greater “stature” than Toyota;
however, the financial value of Toyota is higher
Brand Equity
Customer-Based Brand Equity
“The true measure of the strength of a brand depends on how consumers

R
think, feel and act with respect to that brand.” Kevin L. Keller
A
M
U
Relationships
What about you
Resonance
K and me? Loyalty
P Response
What about you?
U
Judgements Feelings
Meaning
Performance
R Imagery
What are you?
PoP/PoD
A Identity
W
Salience Who are you?
Awareness
S
CBBE / Brand resonance pyramid
Brand Equity
The world's most valuable brands
R
“The total financial
A
value of a brand”
M
“If this company were to
split up I would give you
U
the property, plant and
equipment and I would
K
take the brands and the
Source: Interbrand / Businessweek. Best Global Brands 2006.
trademarks and I would
P
be far better off than
you.”- John Stuart
R U
A ET 16Jul05 p6
S W Infosys
2003: Rs. 7,488 cr.($1.5 Bn)
2005: Rs. 14,152 cr.
Brand Strategy
Brand extensions
Product Category
Co-branding R
A
New Current
Combining two
M
or more well
known names:
New
New Brands Multibrands

Brand Name
K U
Indian Oil /
Citibank Debit
Card
P
Brand extension
Current
The Nivea association allowed Philips to attract

Category Line people who normally wet shave...they not only
U
gained market share from competitors but also
Extension Extension
grew the entire market for electric razors
- David Aaker
R
• Sub-brands: Extending a line faces the risks of cannibalisation and dilution of
A
the image of the parent brand. The job of the sub-brand is to reduce these risks
by distinguishing the downscale sub-brand from the parent brand
W
• The Dell Dimension line is a sub-brand that distinguishes less expensive
products from the rest of the offerings, and signal that they do not have the

S
same qualities as items positioned above them

Brand Strategy
Brand strategy: The advantages and shortcomings of extensions
Advantages. May
R
• Improve acceptance
A
M
In the 70's Xerox attempted – and
• Reduce risk perception failed badly – to take on IBM IT. Its
U
great brand strength – it is a generic! -
• Reduce costs of marketing
was a liability: Xerox was just not IT!
K
• Offer consumers greater Xerox repositioned itself as a
choice document company
P
Richard Branson, Virgin (150
R U
companies in different industries all
branded Virgin): “... if I feel that we Disadvantages. May
A
can do it better than it's been done by
other people, we'll have a go. Some • Dilute brand meaning
people call that 'brand stretching' … • Cannibalise sales
S W
Occasionally we'll come unstuck”
• Hurt parent image if it fails
• Confuse consumers
R
A
M
...PlaceK U
P
R U
A
S W
R
A
Marketing Management M
Place
K U
P
Manohar D. Rao
R U
A
S W
Course Road Map
R Quiz
Group
A
Exercise
M
U
K
P
9 Place 25,26,27,28 15,16  
U
10 Price 29,30,31,32 14 
11 Promotion 33,34,35,36 17,18,19  
R 4 8
A
Evauation
W
Group Exercises 10
S
Final Exam 50
Total 100
Place - Topics
R
A
• Marketing channels
• Designing channels
• Managing channels
M
• Retailing
K U
• Wholesaling
P
• Distribution logistics
R U
A
• Developments in India
S W
Marketing Channels
Functions
Value through Marketing channels: A set of interdependent organisations

R
•Reach
that connect marketers to target buyers. Channels add value
through distribution, communication and services
A
•Cost
reduction /
M
Assortments
•Customer
convenience
K U
P
and servicing
U
•Market
intelligence
•Promotion
R
A
•Warehousing /
Inventory
W
•Transportation
S
•Risk-sharing
MxC M+C
Based on Philip Kotler and Kevin Keller. Marketing Management. Dorling Kindersley (India) Pvt. Ltd. 2007; Ramaswamy & Namakumari: “Marketing Management”
Marketing Channels Retail Outlets – Provisions / General
Reach: Hindustan Unilever
R
A
M
Urban Supermarket Rural General Store
U
Hindustan Lever Network
Channels in With 35 “super brands”
K
• Direct selling channel
Rural Areas
catering to a wide spectrum • 350,000 consultants (Nov 05)
of segments across the • 1500 towns, 250 service
P
centres, 42 offices
country, HUL has built a • Direct selling industry:
Rs 2,300 crores
U
network of 7,500+ distributors
and 1,000,000+ retail outlets Project Shakti
R
• Areas with pop. < 2000
• Spend: Rs. 20-25pm / FMCG
A
• ~25000 women (agents) /
5000 villages
• Initial dropout rate 50%. With
W
training, 10%
• Effective communication
S
medium as well
Warehouse in Rural Area • Competition cannot easily

reach SHG
Image source: www.hll.com; Business World 30Aug04 Project Shakti: Self-Help Groups
Marketing Channels
Reach: Innovating in India
R
• Philips in 2004 enlisted mobile phone distributors to distribute their DVD players.
A
The rationale was a common customer profile. Starting with sales of 50,000 units
in 2003, Philips sold 500,000 units in 2005. It plans to sell 1,000,000 going beyond
M
major metros to Tier II cities as well
U
• Kodak is looking beyond major metros to the 20,000-1 lakh population centres
K
for its made-for-emerging markets camera, the sub Rs. 500 KB-10. It uses FMCG
channels and novelty stores. In two years, the company has added 12,000 new
outlets, reached out to 1,300 new towns in 250 new districts. This has helped
P
Kodak achieve a volume growth of 30% in 2003-04
R U
• Air Deccan first tied up with IOC to sell air tickets at petrol bunks
• McDonalds has sited outlets at railway stations; both McDonalds and Pizza Hut
A
have embraced the concept of home deliveries
W
• Western Union leverages the Indian postal service network to reach rural India,
S
particularly those regions – such as Punjab - with large numbers of households
receiving remittances from abroad
Source (some cases): Brand Equity, 06 July 2005, p1
Marketing Channels
Members
R
• Sole-Selling Agent / Marketer: An agency appointed by a manufacturer to
A
be responsible for all marketing / selling / distribution functions in an area
M
• Wholesaler / Distributor: Are subordinate to SSA/marketers, if present. They
take title and possession of goods and resell products downstream to
K U
semi-wholesalers or to retailers. Cash-and-carry wholesalers sell to small
retailers who pay cash, and take delivery, on the spot
• Carrying & Forwarding Agents (CFA): A special class of wholesaler who
P
stock a manufacturer’s products and are responsible for distributing them to
wholesalers and the retail chain. CFA’s are different from wholesalers in that
R U
they do not buy goods, but merely book order on behalf of the manufacturer
• Semi-Wholesaler: Intermediaries who buy products of several producers
A
in bulk, break bulk and resell goods to retailers in assortments that are in
demand. Semi-wholesalers may also engage in some retailing activity
S W
• Retailer / Dealer: Also sometimes called authorised representatives, these
channel members sell to the end consumer. They carry just enough stock to
meet their own needs
Marketing Channels
Levels
0-Level 1-Level 2-Level 3-Level

R 4-Level
Manufacturer
A
M
U
Sole-Selling Agent /
Marketer
Wholesaler /
K
P
Distributor
Semi-Wholesaler
R U
A
Retailer / Dealer
Consumer
S W Based on Philip Kotler and Kevin Keller. Marketing Management. Dorling Kindersley (India) Pvt. Ltd. 2007;;
Ramaswamy & Namakumari: “Marketing Management”
Marketing Channels
Flows
R 1. Physical Goods
A
Transport / Transport / Channel
Supplier Producer Transport Customer
Warehouse Warehouse Member
Reverse flows can take place when
M
products are: A. Returned
B. Recycled C. Disposed of …
U
2. Title
Supplier Channel
K
Producer Customer
Member
3. Payment
P
Supplier Channel
Bank Producer Bank Bank Customer
Member
Supplier
Transport /
WH. / Bank
R U
Producer
Transport /
WH. / Bank
Channel
Member
Transport /
Bank
4. Information
Customer
A
W
5. Promotion
Advertising Advertising Channel
S
Supplier Producer Customer
Agency Agency Member
Based on Philip Kotler and Kevin Keller.
Marketing Management. Dorling
Kindersley (India) Pvt. Ltd. 2007
Designing Channels
R
Push Strategy Analyse Set Identify
A Evaluate
M
vs. Customer Channel Channel Channel
Pull Strategy Needs Objectives Alternatives Alternatives
Service output •Service

K U •Un- •Optimum
P
output levels conventional economic
•Lot size
as a strategy mix
•Product-type
U
•Waiting time element
influences •Control and
•Spatial objectives: •Internal vs commitment
R
convenience • Perishables external
•Adaptability
• Bulk •Degree of
A
•Product
• Custom-built distribution
variety
• High value • Exclusive
•Service • Selective
W
•Segmentwise • Intensive
back-up
S
•Regulations •Terms and
compliance responsibility
Designing Channels
Economic considerations
R
Sales
A
Selling Costs (Rs.) 
Agent
M
U
Own
Sales Force
K
e
t ag
v an Sales
Break-even
l Ad Force
P
Sales ne VAP’s
Value-Add of Sale  an
Sales (Rs.)  Ch
U
Distributors Direct
Retail Sales
R
Stores Channels
Tele-
marketing In-direct
A
Channels
Internet
Direct Marketing Channels
S W Cost / Transaction 
Designing Channels
eTailing in India
R
• Total Internet business in
A
India ~Rs. 2000 cr; IOAI expects
Rs. 2300 cr by 2006-07
M
• IAMAI estimates 46 Mn online
U
users in 2007; expects 100 Mn by
2007-08
K “Besides garments, the store will

also merchandise goods
P ranging from mobile phones
U
and other electronic goods, to
crockery. We aim to earn
R
Rs. 300 crore from this venture in
the next year”
A
- Kishore Biyani, MD, Pantaloon
Retail. Quoted in ET, 17 April, 2006
on Futurebazaar.com
S W • GAP, one of the largest global

apparel brands, etails just 5-7%
of its sales
Source: ET, 17 Apr ’06, p6
Designing Channels
Factors influencing selection
R
Market •Consumer or Industrial
A
M
•Geographic location / dispersion
•Perishability
Product
K U
•Complexity
•Standardisation
•Unit Value
P
•Adequacy of resources
Selection Producer •Width of Product Mix
U
Factors
•Need for control
R •Effectiveness of channel vis-à-vis competition
A
Competition •Positioning / Competitive advantage
considerations
•Intensive: Saturation coverage; Convenience
S W Distribution
Intensity
•Selective: Close cooperation, training; Service
•Exclusive: Extreme form of Selective
Designing Channels
Channel architecture: Marketing systems
• Horizontal marketing system: Two or more R

unrelated companies cooperate to address
A
M
marketing opportunities that are emerging:
U
• In-store stores / banking
• Finance counters at auto dealers
• Insurance to credit-card holders
K Source: Deccan Herald 16Oct03
P
R U
• Multi-channel marketing system: A firm using two or more
channel systems to reach one or more customer segments.
Benefits include:
A
• Increased coverage
W
• Lower channel costs
S
• Increased customised selling
Designing Channels
Channel architecture: Analysis and planning
Management
Generation
A
Qualifying
Post-Sales
Account
Presales
Closing
Service
Leads
Lead
Sale
Internet 
M Channels that
U
might be used
National    by a vendor of
K
Acc. Mgmt. software
 services for
Direct Sales  
P
new business
Telemarkting  
CUSTOMER
VENDOR
Direct Mail

Retail Stores
R
Distributors
A
Dealers /
VARs
Advertising
S W 
Based on Philip Kotler and Kevin
Keller. Marketing Management.
Dorling Kindersley (India) Pvt. Ltd.
2007; attributed to Rowland
Moriarty / Ursula Moran
Managing Channels
Channels and the PLC
R
Value Added by Channel
A
M
High Low
1. Attract innovators;
U
1. Introductory 4. Declining demand inelastic
K
• PC: Hobby Stores • PC: Mail Order
Low
2. High-volume channel
Market Growth
• Designer Apparel: • Designer Apparel:

members appear;
P
Boutiques Off-price Stores
prices decline
U
2. Rapid Growth 3. Maturity 3. Low-cost channel
• PC: Specialty Retailers • PC: Mass members appear;
R
price declines further
High
Merchandisers
• Designer Apparel:
A
Better Department • Designer Apparel: 4. Lowest possible
Stores Mass Merchandisers cost / price sells
S W
Based on Philip Kotler and Kevin Keller. Marketing Management. Dorling Kindersley (India) Pvt. Ltd. 2007 attributed to: Miland Lele
Managing Channels
Channel conflict: Types of conflict
R
A
Between:
M
U
Vertical
Channel • Different levels of the
K
same channel
Types of
Horizontal
Channel
P
• Members of a channel at
U
Conflict
the same level
R • Members of the different
A
Multichannel
channels of a vendor
S W
Managing Channels
Channel conflict: Causes and resolution
R
Goal
Incompat- other profitability A
• One level may want market share, the
M
ibility
Causes of
Conflict
Nebulous
Roles
K U
• Two or more members solicit business
from the same customer
P
• Outlooks - and therefore operational
U
Perceptions
approaches - may vary: demand
R
forecasts
Managing Conflict:
•
Co-optation A
Accepting superordinate goals
W
•
• Diplomacy
•
• S
Mediation / Arbitration
Legal action
Retailing
Types of retailers
• Small general stores

R
• Convenience stores
A
Sales Volume
M
High Low
• Speciality stores
• Supermarkets
U
Convenience Upmarket
High
• Departmental stores
K Food Stores Specialty
Stores
Value
• Discount stores
P
U Discount Stores
Low
• Franchises Unviable!
(Hypermarkets)
• Retail chains
R
A
Source: Ronald Gist.” Retailing Concepts and Decisions”
• Shopping malls
S W
• Canteen Stores Dept. (CSD)
• Public Distribution System (PDS)
Retailing
Levels of service
R
A
M
Self-
Service •Low overheads,
prices. Basis for
U
discount stores Value Added
High Low
K
•Some assistance
Self- available
Breadth of Line
Broad
Selection (locate-compare Shopper’s Stop Big Bazaar
P
-select)
Service
U
Levels
•Breadth of line,
Narrow
Limited hence more Neighbourhood
R
Service Tanishq
assistance General Store
available
A
Full Service
•Service
encouraged;
W
higher prices
S
Retailing
Marketing decisions
R
Target
A
• Who is expected to patronise shop: Basis for
consistent services/pricing/promotion/location
M
U
• Breadth and depth of assortment must match
Assortment target’s expectations; packaging / pack size /
K
frequency of change / display positions
important; Retailer may drop lower-margin,
large-footprint items
Marketing
Services /
P
• Ambience; Hours / Fitting Rooms / Ordering
U
Atmosphere
Decisions
modes; Shipping / Alterations / Returns;
Parking / Restaurants / Rest-rooms
Pricing /
R • Relative levels; EDLP vs. Hi-Lo; Loss-leaders /
A
Promotion Reference pricing; Sales; Coupons; Offers
W
• Key factor influencing where-to-buy. CBD /
Local shopping centres / Community shopping
S
Location centres / Residential areas / Shop-in-shop
Retailing
Technology as a differentiator
• Wal-Mart
R
A
• Monitors what people search for on its website. Introduced a new
M
online channel for pet goods after finding “pet merchandise”
high on items searched for that it didn’t stock
K U
• Requires its top 100 suppliers to supply goods with RFID (Radio
Frequency ID) tags. RFID helps cut inventory checking costs and
curb shoplifting
• IHOP Restaurants
P
R U
• Uses GIS and demographics to determine how many homes with
families that meet its target profile exist in a potential area.
Reduces time to identify sites to seconds - used to take weeks!
• A
Bank of America
S W
• Bank managers are given an alert when teller lines exceed five
customers, so that they can put on extra tellers
Source: Economic Times, 28 Aug. 2005
Retailing
India goes big
R
A
…Pantaloon Retail…is
expanding the Big
Big Bazaar now Bazaar format first…
M
accounts for a higher “Metro is forcing us
proportion of to…”
Pantaloon’s sales than
U
does the group’s chain
of lifestyle stores
K
P
The first of RPG Retail’s
hypermarket Giant was
set up in Hyderabad.
R U Hypermarkets
The hypermarket is a 50,000
A
– 60,000 sq.ft. facility selling
Players Stores Add.
---------------------------
W
everything from vegetables Big Bazaar 21 25/ 1 yr
and grocery to apparel and RPG Retail 4 16/ 1 yr
Star India/Trent 1 ~16/2 yrs
S
consumer electronic goods. Hypercity,
The price on every item is Shoppers’ Stop - 2/ 1 yr
Reliance Retail - 1000
3-5% lower than MRP
Source: ToI 10Nov03; Businessworld, 27 March 2006, p26
Retailing
Nirmalya Kumar on trends: “…the century of retail”
R
• The 20th century was a century of brands … media was consolidated and the channels
A
of distribution fragmented … one, two or at most three channels … to advertise to
reach 90% of the population. The distribution channels … badly fragmented … little
choice but to follow the frequently coercive mandates of brand owners
M
• Distribution channels have consolidated while media channels have fragmented …
U
Audiences are deserting TV for gaming, mobile phones and the Internet … At the same
time, 10-12 major retailers can account for 40-50% of a manufacturer’s global sales
K
• The size and dominance of retailers, combined with media fragmentation, mean that
P
large retailers have become the mass channel for communicating with customers
U
• The major new retail innovation has been the hard discount concept … Aldi doesn’t
carry any manufacturer brands, only private labels … It has only 700 SKU’s … it does
R
not offer the customer three brands of coffee or three pack sizes … it stocks one size of
its own coffee… hard discounters are often 90% private labels while soft discounters are
A
35-40% private labels … branded manufacturers have to work so much harder
Source: BW 1 Aug 2005, p65
• The biggest factors [explaining the power of retailers] have been the commoditisation
W
of quality and the global supply chain … if branded manufacturers get them made in
S
China, so can the retailers … they don’t need to advertise and market … don’t need a
sales force … don’t do any research and development … a 20-25% cost advantage …
before the overheads advantage … manufacturers are typically bloated with MBA’s
Retailing
Non-store retailing
R
A
Catalogs /
Direct mail
TV
M
U
Shopping
Direct Tele-
K
Marketing marketing
Direct
P Airport Kiosk
U
Non-Store On-line
Retailing Selling
Shopping
R Ice-cream Cart
A
Vending:
Manual /
Automatic
S W Buying
Services
Image source: www.hll.com
Retailing
The most attractive emerging retail market in the world!
R
A
• $350 Billion market
M • Projected growth: 13%
K U • Top 5 have < 2% share

• Average risk,
moderate market
P
attractiveness, huge
opportunity, fair
U
timeline
R
A
Source: A.T. Kearney “Emerging market priorities for global retailers” (2006 GRDI)
S WSource: Economic Times, 13May05
Wholesaling
Functions
R
• Selling / Promoting: Provide a network of local contacts to augment the
A
manufacturer’s sales force
• Buying / Building assortments: Select and buy goods – from several
M
suppliers if needed – and sell them in the assortments customers need them
K U
• Bulk breaking: Save costs by buying in bulk and selling in smaller lots
• Warehousing: Hold stocks, reducing inventory costs and risk to suppliers and
customers
P
• Transportation: Speed deliveries by virtue of proximity
R U
• Financing: Provide credit to customers; order early on suppliers / pay on time
• Risk bearing: Take title to goods, and so absorb some of the risks of pilferage,
A
damage, spoilage, obsolescence
• Market Information: Provide to both customers and suppliers on products,
S W
competition, pricing, trends
• Management services and support: Provide training and technical support

to retailers – particularly for consumer durables - and industrial customers
Logistics
Objectives and management
R
A
• Value proposition: levels of on-time
M
Value
Proposition delivery; billing accuracy
U
• Levels; Warehouse locations; Supply from
alternate plants
Channel
Design
K
• Trade-off between service levels and costs
• Sales forecasting;
Logistics
P
• Warehouse / inventory (carrying costs/
U
Objectives
stock-outs; time-to deliver; reordering
Operational policies) management
R
Excellence
• Transportation (speed, reliability, safety,
A
frequency, cost , special needs…)mgmt.
• Order-to-payment cycles mgmt.
Implement-
W
ation • Implementing design with information
systems, equipment and policies
S
Developments in India
Quality in the supply chain
R
A
“Many CEOS are today asking
the question: how do I ensure
M
that the product retains its quality
even after it leaves the factory
U
gate…”
K Castrol India customer care

head says it’s important to
P
ensure first in first out (FIFO)of
warehouses for soluble cutting
oils…can go off specifications in
U
eight months
R Radhakrishna Foodlands, a
major stockist and distributor of
A
perishable products has
introduced a gadget in its
vehicles that monitors
W
temperature… “…we can make
out whether the driver ensured
S
the required temperature…”
Source: ToI 17 Dec 2004 p13
Improving efficiency in Indian retailing
R
A
• Large retailers in India have been
M
trying to get manufacturers to put bar
codes on their products according to
U
the globally accepted EAN (now
GS1) system
K
• The Retailers Association of India
P
(RAI) has endorsed this practice
R U Source: BW 21 November 05, p 16

• RAI expects bar-coding to help
• Retailers manage inventory better
• Suppliers implement automated
A
replenishment systems, by providing
instant feedback on sales
W
• Consumers by reducing stockouts
S
ITC’s eChoupal
R ITC Factory
Farmer
A
Mandi
M Buyer
K U eChoupal
Seller
P
Farmer ITC Factory
U
Mandi
R
Buyer
http://www.echoupal.com/
A
• Farmer linked directly to information, buyers
• Farmers sell to ITC / Mandi
• Quality, productivity, realisation improved
W
• ITC: procurement costs lowered, supplies
improved; entry into huge market
S
• The farmer is also a consumer: 35 companies
sell through ITC’s eChoupal; ITC to open giant
rural malls
R
A
M
… Price K U
P
R U
A
S W
R
M
K U
Price
P
R U
Manohar D. Rao
A
S W
Course Road Map
R Quiz
Group
A
Exercise
M
U
K
P
9 Place 25,26,27,28 15,16  
U
10 Price 29,30,31,32 14 
11 Promotion 33,34,35,36 17,18,19  
R 4 8
A
Evauation
W
Group Exercises 10
S
Final Exam 50
Total 100
Topics
• Understanding price R
A
• Pricing strategies
M
• The pricing process
K U
• Adapting the price
P
• Changing the price
R U
A
W
• Responding to price changes
S
Understanding Price
Characteristics
• Price takes on different forms

R
• Rent
A
• Tuition
M
• Fare
• Tariff
K U
P
• Toll
• Interest
• Salary / Wage
• Commission
R U
A
• Among poorer buyers, price is the major determinant of choice
S W
• This is also true for commodities
Understanding Price
Price, volume, cost, profit
R
Generates revenue;
A
Other marketing mix
elements produce cost
Revenue = f(Price, Units sold, …)
MProfits
r1; ufc1
← FC/Unit →
reduces with
volume
r2; ufc2
K U
Total Cost
P
U
Variable Costs = f(Product,
Place, Promotion, …)
R Fixed Costs = f(Product, Place, …)
A
Rs. 
Break-
W
even
sales
S
Sales Volume 
Pricing Strategies
Price-Quality positions
• 1,5,9 Co-exist, catering to different buyer groups

R
• 2,3,6 Attack diagonal strategies, offering better Value-for-money
A
• 4,7,8 Represent strategies that overcharge and which will
probably cause dissonance and poor company image
M
High
Price
Medium
K U Low
P
High
1.Premium 2.High-Value 3.Super-Value
R U
Medium
Quality
4.Overcharging 5.Medium-Value 6.Good-Value
A
W
7.Rip-Off 8.False Economy 9.Economy
Low

S Based on Philip Kotler and Kevin Keller. Marketing Management. Dorling Kindersley (India) Pvt. Ltd. 2007

Pricing Strategies
Price points in the Indian automobile industry
R
Segment Brand
A
Ultimate Maybach
M
U
Increasing Perceived Quality/Value
Luxury Mercedes
Superior
K
Sonata
Niche
P Scorpio
Enhanced
R U City
Increasing Price
Mid-range Santro
A
Value-for-money Indica
W
Basic Maruti 800

S | Notes to supplement class discussion: Do not circulate | 10.7
Pricing Strategies
Price consistent with value
• Charging too little leads to an opportunity loss

R
• Charging too much leads to losing potential opportunities
A
M
Missed
Opportunities
K U
The Marlboro experience
• 1989-93: Indifferent to entry
low-priced private brands
Share
From 26% of
to 22%
P
• 1993-95: Responded by
lowering price 31%
U
Price Charged 
• 2001: Maintained strategy 38%
Glaxo's strategy
Price Value
R • Glaxo was second in the market with the anti-

ulcer drug Zantac and conventional wisdom
A
expected it to price lower than the pioneer,
Tagamet. However, as the product had fewer
Unharvested drug interactions and side effects, it was
W
priced higher and still gained market
Value leadership

S
Value Delivered 

The Pricing Process
3C’s: Customer Demand-Cost Function-Competitors’ Prices
R
Analyse
A
Choose
M
Define Pricing Determine Estimate Competitors’
Pricing Set Price
Objective Demand Costs Pricing
Method
Strategies
K U

•Link to •Price •Type of •Relative •Marking Up •Psycho-
corporate sensitivity cost positions logical
P
•Target return
objectives
•Demand •Volume •Customer •Gain-Risk
•Perceived
U
•Pursue curves value sharing
•Experience value
• Survival analysis
curve •Other
R
•Value-

• Maximise (CVA) marketing
profit •Accounting based
mix
methods
A
• Maximise
•Going-rate elements
share
•Target
• Skim •Auction- •Corporate
costing
W
• Product- type policies
Quality
•Group •Impact on
S
leadership
• Partial cost others
recovery
The Pricing Process
Define the objective
• Pricing is part of an overall marketing strategy; it needs
R
A
to be consistent with positioning and other mix elements
• Pricing objectives include
Objective Characteristics
M
Considerations
Survival
Cover variable costs, some fixed
costs, to stay in business
K UOvercapacity; Intense
competition
P
Maximise Focus on short-term; prices such Demand, costs clearly
curr. profits that current profits / RoI highest known; long-run impacted
Maximise
share
Skim
Prices kept low to penetrate
market
R U
Prices elevated to take advantage New product / technology
Experience curve benefits;
High price-sensitivity
A
of superior competitive position introduction
Source: ET 23 October 06
Premium Prices elevated to reinforce Product leadership players
W
positioning image of high quality
S
Partial cost Prices determined by cost, rather Not-for-profit organisations;
recovery than market, issues Access to other income
The Pricing Process
Determine demand - Price sensitivity
• Price has a direct and significant impact on demand

R
• This relationship is normally inverse: increasing prices
A The Internet
provides great
M
will decrease demand flexibility in pricing.
Together with
U
• However, price increases for prestige goods can clickstream
analysis and data
increase demand. This phenomenon may also be
K
from cookies, it
observed when prices are increased for inexpensive allows vendors to
(Giffen) goods. The rational is entirely different! experiment with
P
prices and offers to
• 1
Consumers tend to be less price sensitive if determine demand
U
curves and price
• Products are distinct and have few substitutes behaviour
R
• They cannot easily compare alternatives However, care
must be taken to
A
• Price is a small part of the total cost avoid being seen
as arbitrary or
• The outlay is a small part of total income deceptive in
S W
• The product is used with assets bought previously
• The product is perceived to be exclusive, or enhances prestige
pricing practices
1
Attributed to Tom Nagle
The Pricing Process
Determine demand - Price sensitivity: elasticity of demand
• Demand curve: Relationship between price and current demand
R
A
• Price elasticity of demand: Relative change in demand due to a change in price;
(%ChangeQuantity / % ChangePrice) Inelastic (Little change), Elastic (Much change)
M • Magnitude
U
16
100 units
• Direction
200 units
K
14
• Indifference
12 Band
10
P • Short-term /
U
Price (Rs.) 
Long- term
Rs.4
8
R
•Giffen goods
6 Estimate from
•Veblen goods
A
4 •Statistical
analysis
W
2 •Experiments
•Questionnaire
S
0
100 200 300 400 500
Demand (Units) 
The Pricing Process
Price sensitivity - Cell phone prices in India
Model Nokia 1100 Nokia 1108 Nokia 2300

R
Approximate Price (Rs.) 3047 3301
A 3698
M
Volume Market Share % 25 12 8
U
Source: ET 01 June 05
• These three models occupied the top three ranks by volume market share
K
• The Nokia 1100 was not, however, the cheapest; Motorola’s C115 was priced
at Rs. 2438 and had the seventh largest share of the market by volume
P
• A similar pattern was seen for basic colour Nokia phones
Model
Approximate Price (Rs.)
R U Nokia 2600
4685
Nokia 3120
5165
A
Volume Market Share % (Colour Phones) 7 3
Source: ET 01 June 05
W
Source: ET 23 October 06

S | Notes to supplement class discussion: Do not circulate | 10.13
The Pricing Process
Estimate costs
• Demand determines the price ceiling; costs determine the floor.
R
A
Variances in cost, together with price elasticity and marketing mix
need to be considered while setting price. So does competition
• Fixed costs do not vary with production or revenue; Variable costs

vary directly; Total cost = fixed cost + variable cost; Average cost =
M
• With experience, productivity tends to
increase and costs tend to decrease
U
Total cost/Units produced, at a given level of production
K 60 Current price
P
• Differentiated pricing is used to customise
50
U
Profit P1
offers; depends on delivery schedules, 40 Profit P2
R
quantities…; ABC is method employed
Cost / Unit Rs. 

Experience
30 curve
• Target costing: Cost at which a product
A
meets the profit level set, for the
(estimated) level of price that it can
20
W
command; different cost elements 10
(design, materials, manufacturing…)
S
0
are examined to determine if target
cost can be achieved Accumulated production
The Pricing Process
Analyse competitors’ pricing strategies
R
A
• Pricing must take competition
into consideration; Competitors
M
usually respond swiftly to
changes in pricing
Cost element A B C
• Competitors’ response
depends on their strategy
K UPrice
Acquisition
12
2
18
1
15
P
and position; the leader may
charge high prices for extra Usage 3 2 5
U
perceived value but is often Maintenance 2 2 3
the lowest cost producer -
R
Finance 3 1 2
attacking with price is
A
normally unwise! Total cost of brand 22 24 28
• Customer Value Analysis (CVA)
S W
Value = Benefits - Costs
The Pricing Process
Choose a pricing method
• Mark-up pricing
R
A
Price = Variable Cost + (Fixed Cost / Units Sales) + Margin + Channel Margins
• Target-return pricing
M
Price = Unit Cost + (RoI x Capital Invested / Unit Sales)
Attribute We Comp. Value (Rs)
U
• Perceived-value pricing Delivery 2wks 4wks 50,000
MTBF 5Mhrs 4Mhrs 1,00,000
Price = Competitor’s price + Σ Perceived value for
K
Training 1 day 2 days - 25,000
differential attributes Incremental value: 1,25,000
-----------------------------------------------------------
• Value pricing Price ? 10,00,000
P
Price is set low for high-quality. Requires cost leadership
U
• Going-rate pricing
Price is based on competitors’; equal, less or more
• Auction-type pricing
R
www.volumebuy.com
A
• English: Start low, increase till nobody tops last bid
• Dutch: Start high, decrease till first acceptance
W
• Sealed bid: Only one bid may be submitted
S
• Group pricing
Price is based vendors willing to offer discounts
for a “pool” of orders: Volumebuy.com Dorling Kindersley (India) Pvt. Ltd. 2007
The Pricing Process
Set the price: Psychological considerations
R
• Price associated with quality: high price is desirable for prestige items
A
• Prices ending in “9” eg Rs. 199 or “.95” eg Rs.199.95 imply a discount
M
• Buyers compare with a “Reference price” - displaying goods with other expensive
U
goods can influence this reference price; comparisons with competitors or stating
manufacturer’s recommended price are others
K
• “Signpost” items - those whose prices buyers are familiar with - are also used to
compare outlets by extrapolating to other items. These are deliberately priced low
- sometimes even at a loss
P
R U
• “Sunk cost” effect: Buyers will act in a certain way that is different from their usual
behaviour if they have already paid for the whole or part. Usage also high when
price/payment fresh in the mind. Payments can be scheduled to manipulate this:
frequent payments tend to induce use
A
• Size of payments: Rs. 1,00,000 up front or Rs. 2000 pm for 60 months; Increase in
W
months rather than installment usually preferred
S
• Price components: GM was contemplating offering buyers of its electric car, the
Chevy Volt the option to rent the vehicle’s battery as a way of pricing the vehicle
at a comparable level to a traditional, petrol-driven family car
The Pricing Process
Set the price: Other considerations
R
• Gain-and-risk considerations
A
• “Money-back”: If value not realised; If lower prices
found anywhere else within a specified period
M
• Other marketing mix elements
• Price needs to be consistent with the other
K U
P
elements of the marketing mix: Products
successfully positioned as quality items
of relative quality / cost
R U
need to be priced accordingly regardless
Economic Times Business Associates’ Feature: 16July05
A
• Other parties: consider impact on
• Channel
• Competitors
S W
• Regulators / regulations
Adapting the Price
• Geographical pricing
R
International barter agreements are
A
becoming a key part of Venezuelan
• Barter president Hugo Chavez’ foreign policy.
• Entry into new countries: agro buy-back… Oil from Venezuela is being exchanged
M
for Cuban medical expertise, Bolivian
• Discounts gas and, perhaps in the future, Haitian
U
rice or Barbadian sugar – Dec 2007
• Cash
K
• Volume
• Pricing / profit calculations must consider
• Functional
all these revenue “leaks” – not just list or
P
• Seasonal invoice prices
• Allowances
U
• Retailer pricing may be EDLP (Every Day
• End-customer Low Price) or High-Low
R
• Online order
EDLP tends to attract “big basket”,
• Promotions infrequent shoppers
• Loss-leader
A High-Low tends to be preferred by those
who make many visits to a store but buy
W
• Special-event
• More-for-same a little at a time
•
•
Financing
S
Additional warranty

Adapting the Price …2
R
A
• Discriminatory pricing
• Customer-segment
In August 05, DoT asked cell phone service
M
• Product-form
providers to stop charging different rates
• Channel
U
for calls originating and terminating on
• Time their own network and for those originating
K
• Core / “Fill-in” on theirs but terminating on others’
• Product-mix pricing
P
•
•
Product-line
Optional feature
R U
A
• Captive-product
• Two-part
W
• By-product
• Product-bundling
S
(all-or-none)


Changing the Price
• Reducing prices
R
A
Usually done to increase share; can have undesired consequences
Effect Consequences
M
Buyers may associate poor quality with low
Lowers image
price
U
Attracts fickle buyers Those who buy cheapest will switch, but who
may not remain loyal
Prods sleeping giants
K
May induce leader to cut deeper and longer
• Increasing prices
P
An increase in the end price has a leveraged effect on profit margins;
Current Price
R U
Also, a small increase may not attract retaliatory action
New Price Remarks

Unit Price (Rs.) 100 1% increase
Based on Philip Kotler and Kevin

A
Keller. Marketing Management.

101
Sales (Units) 1000 1000 Assumed constant
W
Sales (Rs.) 100,000 101,000 Unit price x Units sold
S
Total Costs (Rs.) (95,000) (95,000) Does not change
Profit (Rs.) 5,000 6,000 20% increase
Changing the Price
• Excess capacity
R
• Market conditions
A
• Cover rising costs
M
• Justify price rise
• Market share
• Competitor-driven
•
• • Do nothing
• May lose some
K U
Price 
P
share
• Cut costs
U
• Smaller share; Maintain • Offer more
margin; Decline in long- • Smaller share;Decline in short-term
profitability; Increase in long-term
R
term profitability
profitability
A
•Attack competition; Give
more value
•Maintain share; Decline in
W
short-term and increase
• Match cut in long-term profitability
S
• Introduce new models for new segments • Maintain share;
• Some cannibalisation; Increase total sales Decline in short-term profitability

Quality  Dorling Kindersley (India) Pvt. Ltd. 2007
Responding to Price Changes
Price wars between the leading FMCG manufacturers in India
R
“Recently an international competitor attacked our
laundry business led by a price reduction of as much A
as 50%…
M
K U
We have been able to fully protect our market
P
leadership and share, albeit sacrificing short-term
profit.
R U
We made this necessary trade-off as market share is
A
the best means of sustaining future profit.”
S W – M.S. Banga, Chairman, HLL. June 24, 2005
R
A
M
… PromotionK U
P
R U
A
S W
R
Marketing Essentials A
M
K U
Promotion
P
R U
Manohar D. Rao
A
S W
Course Road Map
R Quiz
Group
A
Exercise
M
U
K
P
9 Place 25,26,27,28 15,16  
U
10 Price 29,30,31,32 14 
11 Promotion 33,34,35,36 17,18,19  
R 4 8
A
Evauation
W
Group Exercises 10
S
Final Exam 50
Total 100
Promotion - Topics
• Why Promote?
R
• Communication A
●
What is communication?
M
●
●
The marketing communications mix
Communications platforms
K U
P
●
The communication process
Integrated marketing communications
U
●
• Managing Promotional Tools

R
A
●
Advertising
●
Print advertising
S W
• Reaching out to Rural India
Why Promote At All?
R
A
M
U
McGraw-Hill’s famous
“Man in chair”
K advertisement
P Compelling reasons
U
for companies to
advertise
R
A
S W
Communication
Hierarchy of effects
• Hierarchy of effects models of consumer response to marketing
R
A
communications assume that consumers move through a series of
mental states as a result of exposure to marketing communications
M Response-Hierarchy Models
U
Model Cognitive Affective Behavioural
K
AIDA Attention  Interest  Desire  Action
Hierarchy-of-Effects Awareness  Knowledge  Liking  Preference Conviction  Purchase
P
Innovation- Awareness  Interest  Evaluation  Trial  Adoption
Adoption
U
Communications Exposure  Reception  Attitude  Intention  Behaviour
Cognitive response 
R
• William McGuire's model • John Wannamaker said “I know
• Exposure half of my advertising expenditure
• Attention
• Comprehension A is wasted; the trouble is, I don't know
which half”
• Yielding
• Intentions
• Behaviour S W • The likelihood of success in
communication, assuming a 50%
success rate at each step, is just 1.6%
Communication
What is it?
• Content:
Meaningful, “Sticky”
R
A
• Platform: Appropriate
to target / message • Ease of
• Comprehensible understanding
Encode Message
M
Decode
U
Media
K
• Who to target
• What to say • Competing/ Receiver
Sender • What response sought interfering messages
P
Noise
• Awareness
U
• Interest
• Conviction
R
• Action
Feedback Response
A • Buying phase
• Post-purchase
• Information
• Demonstration
Message may not
be received well:
W •Selective attention
• Negotiation
S
• Order •Selective distortion
•Selective retention
Communication
The marketing communications mix
R
• Form of paid, non-personal
sin
g
Pro Sale A
presentation and promotion
of ideas, products or services
M
by an identified sponsor
r ti m s
dve ot
ion
U
A • Temporary inducements for
the trial or usage of a product
K
or service
Marketing • Programs to promote the
P
Comms. Mix image of a company or of its
P
offerings
t i ng
U ubic
ct
e
• Face-to-face interaction with

e
k
i ty
r
r
Ma
i
prospective customers to
D
R
/ PR
impart information, answer
questions and secure orders
A
Personal Selling • Direct communications with
prospective customers
W
through email, phone, fax,
the Internet or paper mail

S |
Based on Philip Kotler and KevinKeller.Marketing Management, 12 ed. New Delhi.Pearson Education, 2007.
Notes to supplement class discussion: Do not circulate | 11.7

Communication
Communications platforms
Advertising Sales Publicity / PR Personal
R Direct
A
Promotion Selling Marketing
M
U
•Print media •Free samples •Press coverage •Official •Email
Meetings campaigns
•Coupons •Seminars
K
•Radio
(beware
•Discounts •Event •Informal
•Video (TV, spamming)
sponsorship Interaction
Cable,
P
•Rebates •Mailers
Movies) •Presentations
•Social cause
•Contests •Telemarketing
U
•Brochures sponsorship •Custom demos
•Demonstration •TV shopping
•Logos •Lobbying •Testimonials
R
•Trade shows and •Internet
•Packaging •Annual Reports
references shopping
•Loyalty bonus
A
(Outer / •Publications
Inserts) •Support for
customer’s
•Posters
W
own sales
•Hoardings initiatives
•POP displays
S
MD Rao: Marketing Essentials |
Based on Philip Kotler and Kevin Keller. Marketing Management, 12 ed. New Delhi.Pearson Education, 2007.

Communications Platforms
Sales promotion, public relations, direct marketing
Sales Promotion Public Relations

RDirect Marketing
Promoting quicker / greater Promoting/protecting

A Reaching / delivering
M
goods/services by
Objective purchase through the use of image among groups with
current or potential interest using Consumer-Direct
diverse incentive tools
(CD) channels
Importance
In many packaged goods
companies, accounts for 65%
of promotion spends
Does not appear to attract
K U
Traditionally treated as a
minor element; increasing
in importance
Impact usually indirect:
Rapid growth in use:
particularly with
electronic marketing
P
Limitations/ Invasion of privacy
long-term, loyal, customers so creates favourable
Shortcomings much as deal-seekers attitudes Fairness issues
U
Objectives → Tools → Program Objectives → Message → Objectives → Target →
Major decisions → Implementation Vehicle → Implementation Offer → Channel
R
Samples Coupons Direct mail
Rebates Price packs Publications
Fax
A
Consumer Gifts Prizes Events
eMail
products Free trials Warranties Sponsorships
Voice mail
Tie-in/Cross Frequency News
W
Database marketing
Speeches
Discounts Allowance Catalogue marketing
Industrial Public-service activties
S
Free goods Sales contests Telemarketing
products
Trade shows eMarketing
Publicity/PR: Lobbying
R
• “Lobbyists are the very
A lifeblood of the
Beltway…”
M • “…failing to lobby
U
effectively against the
sale of these aircraft”
K • “…no fewer than eight

law firms are singing
P
the Pak tune in various
parts of the US
U
legislative and
executive machinery”
R
COAI and AUSPI are the associations in India of GSM and CDMA based
A
telecom services respectively. They have been lobbying the government
on telecom policy, often taking adversarial positions
W
When the broad policy guidelines on auctioning of 3G spectrum was
S
announced in November 2007, COAI expressed reservations about the
policy while AUSPI was positive in its appraisal
Source: ToI – 17 Dec 2004 p 01
Direct marketing: New media
R
A
• RSS Feeds
M
K U
P
• eMail
• Web Banner Ads
R U • Click through rates

• eMail: ~ 80%
• Ad banners < 1%
A • Permission marketing
• Allow customers to say what is
W
sent to them (or opt out totally)
• Unsubscribe option
S
• Corporate
Blogs • Personalisation
• Newsletters with news of interest
Direct marketing: New media – Location-based social networking
R
A
M
K U
P
R U
A
S W
Communication
The communication process
R
Manage Integrated Marketing Communications
A
Identify Set Design Select Set
M Determine Measure
Target
Audience
Objectives Message Channels
K U Budget MarCom
Mix
Results
P
•Assess •Define •What •Personal •Depth of •Tools •Set
Image type of •How •Non- pocket •PLC metrics
U
response personal stage to
sought •When •% Sales measure
R
(ABC) •Product before-
•Content •Industry
type hand
practices
•Structure
A
•Objective
•Format -and-task
S W Based on Philip Kotler and Kevin Keller. Marketing Management, 12 ed. New Delhi.Pearson Education, 2007.
Communication
The communication process: Assess image
• Target audience and positioning define what, how, where and when to say
R
• “Share of mind” and “Share of heart” influence communications tasks
A
• Researching image: semantic differential
M
Favourably disposed 
A: High, High: Maintain
U
• Develop an optimum set of relevant
dimensions
K
B: Low, High: Reach out
• Administer to sample of respondents
• Average and map results
• Check variance
P C: High, Low: Control
U
damage; Repair
Few Flavours Many Flavours D: Low, Low: Repair
Low Nutrition
R High Nutrition Familiar with Brand 
A
Poor Taste Great Taste
High Price
W
Right Price
Unavailable Readily Available
S

Communication
The communication process: Set objectives
R
A
• Cognitive: Opinion/belief - Smoking is
unhealthy
M
Affective Cognitive
• Affective: Emotion/Feeling - I do not like
U
XYZ company because they make
cigarettes
Behavioural K
• Behavioural: Emotion-driven action - I will
P
not buy XYZ’s other products
U
ABC Components of Attitudes
Response-Hierarchy Models
Model Cognitive
R Affective Behavioural
AIDA
Hierarchy-of-Effects
AAttention 
Awareness  Knowledge 
Interest  Desire 
Liking  Preference Conviction 
Action
Purchase
W
Innovation- Awareness  Interest  Evaluation  Trial  Adoption
Adoption
Communications
S
Exposure  Reception 
Cognitive response 
|
Attitude  Intention 
Notes to supplement class discussion: Do not circulate

Behaviour
| 11.15
Communication
The communication process: Create the message
R
•What to say
A
•How to say it
Content Structure
M Format Source
U
•Who should
say it
K
P
•Appeal •Ask questions, •Print: •Celebrities
allow viewers Headlines,
•Rational •Credible
U
to form own visual, copy
sources
•Emotional conclusions
•Radio: Words,
R
vs. giving one •Expertise
•Moral voice quality,
•One-sided vs. vocalisation •Trust-
A
two-sided worthiness
•TV: Above +
arguments •Likeability
Presenter’s
W
•Order: image (if
Strongest first applicable),
S
vs. last body
language
Communication
The communication process: Select channels
R
A
• Key Buying Influences
• Opinion Leaders
Personal
Communications
M
• Testimonials
“The Law of the Few,” says

K U • Ads with high
“conversation value”
• Word-of-mouth / “Buzz”
P
Malcolm Gladwell, applies to
Selecting Word-of-Mouth: Focus on • “Viral” marketing
U
Channels Mavens, Connectors, Salesmen
R
• Print
Non-Personal
A
• Broadcast
Communications
• Network
S W
Consumer products sellers’ promotion mix
tends to use more of non-personal channels;
Industrial products promotion mix, personal
• Electronic
• Display
Communication
The communication process: Establish a budget ...1
“I know half of my advertising is wasted. The trouble is, I don’t know

R
which half”
A
- John Wanamaker (“Father” of the department store)
M
U
Affordability •A purely financial approach that ignores the
actual need for promotion; makes long-term
K
promotion planning difficult
P
•Relates spending to sales; Number normally
Percentage based on precedent; Discourages promotion
-of-Sales
U
in break-out situations when perhaps critical
Budgeting
R
Promotion •Spend industry-average, on the assumption
that this is collective wisdom and that
Competitive promotion wars are averted. However, each
A
Parity firm has its own objectives and constraints
W
•Requires assumptions of market share,
objectives, impressions needed for trial,
S
Objective-
and-Task insertions and costs to be articulated clearly
Communication
The communication process: Establish a budget ...2
RGoal: 10% of 50
A
Mn = 5 Mn Users
• Establish goal (e.g. market share)
• Likely to continue to use after trial 50 Mn

M 33% Triers loyal
U
= 15 Mn Pot. Users
• Likely to try if sufficiently exposed
K 40% Try = 37.5Mn

75% of Market
• % Market to be reached
P “Sufficiently” exposed to
ad ?% of market
R U
• Ad. impressions needed to induce trial
Try
(40%)
Stay
25 Impressions
for Trial
A
(33%)
• GRP to be bought (= Reach x Frequency) GRP = 75 x 25
= 1875
W
• Budget based on average GRP cost 5Mn
S
Avg. GRP = Rs.5000
Budget = 5000 x
1875 = Rs. 93.75L
Communication
The communication process: Determine mix- media characteristics
Advertising Sales Publicity/PR Personal
R Direct
A
Promotion Selling Marketing
Reach Very wide Wide Wide Narrow Wide
Repetition
M
U
Very High High Low Very High Medium
K
Varied; Incentives- Image most May feel Low response rate;
Response Impersonal driven effected obligated Economical
General; Can be Specific; General; Can Highly Fairly highly
P
Content very expressive temporary be dramatised customised customised
U
Credibility Medium High Very High Very High Low
R
Consumer
2 1 4 3 5
Products
A
Industrial
3 2 4 1 5
Products
W
• A “Push” strategy promotes the product through the channel - Manufacturer  Distributor  Retailer 
Consumer - primarily by personal selling and trade promotion. Industrial Products’ mix focus on this
S
• A “Pull” strategy uses promotion mainly directed at end-consumers to induce them to ask for the product,
primarily by advertising, sales promotion, and direct marketing. Consumer Products’ mix focus on this
Communication
The communication process: Determine mix- selecting media
R
Factors that influence mix
A
• Market share
Cost Effectiveness 
• Competitiveness / Clutter
M • Substitutability
U
• Buyer readiness
• PLC Stage
K Gary Lilien found, in a major
P
project (ADVISOR) that for
• Advertising / PR Industrial companies:
U
• Personal Selling • Average marketing
• Sales Promotion budgets were 7% of sales
R
Aware Informed Convinced Ordered Ongoing • 10% of this was spent on
advertisements
Buyer Readiness Stage
A
• Higher-than-average
spends were seen from
Introduction Growth Maturity Decline those with superior
W
1.Advertising/Publicity 1. Advertising 1.Sales Promotion Sales Promotion;
quality, uniqueness,
2. Word of Others decline higher frequency of
S
2.Person Selling: Dist. 2.Advertising
Mouth/ purchase or who enjoyed
3.Sales Promotion: Trial 3.Personal Selling
Demand high customer growth
MarComs mix and PLC Stage Based on Philip Kotler and Kevin Keller.Marketing Management,
12 ed. New Delhi.Pearson Education, 2007.
Communication
The communication process: IMC
“Integrated Marketing Communications is a concept of
R
marketing communications that recognises the added value of a
comprehensive plan” - AAAA A
Advertising Sales Publicity / PR
M
Personal Direct
Promotion
K U Selling Marketing
P
Seamless Integration
U
P&G requires each new
communication program to be
R
jointly designed by its:
• Advertising agency
A • PR agency
• Direct marketing units
W
Clarity
Consistency • Promotion-merchandising firms
S
Maximum • Internet operations
impact
R
A
Managing Promotional Tools: M
K
Advertising
U
P
R U
A
S W
Marketing Communications Options
Advertising
• Studies (PIMS, AC Nielsen...) have shown that advertising positively
R
A
affects brand sales
• Different media have different strengths and weaknesses: an appropriate
mix must be designed based on the communications goals
M
U
Newspapers Magazines TV Radio Outdoors
Reach Very wide Limited

K
Very wide Very wide Limited
Repetition High High
P
Low: High cost Very High Very high
Response
Impact
Varied;
Impersonal
High
R U
Incentives-
driven
High
Image most
effected
Very high
May feel
obligated
Low
Low response rate;
Economical
Medium
Credibility
A
Very high Very high High High Medium
Clutter
Local
coverage
S W
High
Medium
Medium
Medium
Very high
Low
High
High
High
Very high
Managing Promotional Tools
The 5 M’s of advertising
R
Mission Money Media Message
A Measurement
M
•Sales
Objectives
•PLC •Reach,
Frequency,
K U •Generation •Commun-
ication
P
•Share •Evaluation
Impact
•Advertising •Competition •Selection
U
Objectives •Major types •Sales
•Ad, frequency •Execution
• Inform •Specific
R
•Substitutability vehicles • Rational
• Persuade
• Emotional
•Timing
A
• Remind
•Social-
• Reinforce •Geographical
responsibility
allocation
W
review
S

Advertising: Objectives
“An advertising goal (objective) is a specific communication task

R
and achievement level to be accomplished with a specific audience
in a specific period of time” - Russell Colley A
M
Inform
K U
•Create awareness of new
products or of new features of
current products
P
•Create Liking  Preference
Persuade  Conviction  Purchase
U
Best when able to evoke
Ad. cognitive and affective
R
Objectives responses simultaneously
A
Remind •Induce repeat purchase of
products and services
W
•Reassure customers that they
made the right choice; reduce
S Reinforce cognitive dissonance
Advertising: Major media types
R
Newspapers Magazines TV Radio
A Outdoors
Reach Very wide Limited Very wide
M
Very wide Limited
Repetition
Response
High
Varied;
Impersonal
High
Incentives-
driven
U
Low: High cost
K
Image most
effected
Very High
May feel
obligated
Very high
Low response rate;

Economical
Impact High High

P
Very high Low Medium
Credibility
Clutter
Very high
High
R U
Very high
Medium
High
Very high
High
High
Medium
High
Local
coverage A
Very high High Low Medium Very high
S W
Advertising: Media timing
Level Rising Falling
R
Alternating
Concentrated
A
M
(Burst)
Continuous
K U
Based on Philip Kotler and Kevin Keller. Marketing Management,

P

Msgs
Intermittent / Mth
U

12 ed.New Delhi.Pearson Education, 2007.

R
Timing should  Mth 
consider:
Application
A
• Buyer turnover
• Purchase frequency Concentrated One selling season
• Forgetting rate Continuous Level Expanding markets; Frequently purchased items;
W
(The higher the Buyer High “forgetting” rate
Turnover, Purchase
S
Frequency, Forgetting
Rate, the more
Pulsing Low continuous + Wave of heavy ads: some
continuous the ads.) consider more cost-effective than level
Intermittent (Flighting) Low funding; Infrequent purchase cycle; cyclical
Advertising: Message
Message Generation
R
• Single benefit: “Rolaid spells relief” (Rosser Reeves / Ted Bates)
A
• Character for benefits mix: Green Giant stands for fresh frozen, vacuum packed,
M
packed in butter sauce (Leo Burnett / Leo Burnett). Also Marlborough Cowboy,
Pillsbury Doughboy
Message Execution
K U
• Story highlighting problem, solution: FedEx (Doyle, Dane, Bernbach)
P
“The facts are not enough … Don’t forget that Shakespeare used some pretty
hackneyed plots, yet his message came through with great execution.”
R U
• Positioning: Rational vs. Emotional vs. Sensory
• Headlines: News / Question / Narrative / Command / 1-2-3 Ways / How-what-why
A
• Style: Lifestyle / Fantasy / Mood / Testimonial / Technical expertise / Scientific evidence
• Format Elements: Ad. size / Colour / Illustration / Configuration
S W
Print advertisement research: Picture / Headline / Copy tend to be important in that order
Research using electronic eye movement studies: Consumers can be led by placements
of dominant elements
Advertising: Measuring effectiveness
R
• Jay Forrester, “… probably no more than one fifth of one percent of total
A
advertising expenditure is used to achieve an enduring understanding of how to
spend the other 99.8%”
M
• Russell Colley has listed 52 possible advertising objectives in his DAGMAR
K U
(Defining Advertising Goals for Measured Advertising Results) model
• Most measurements in practice tend to deal with specific ads or campaigns
P
• Most often, the communication effect (awareness, liking, preference) is
U
measured; Impact on sales, while more difficult to measure, is key
R
Communication-effect research Share of
Sales-effect research
Expenditure
• Copy testing • Historical
A
(Correlation…)
• Portfolio tests Share of
Voice
• Experimental Design
W
• Laboratory tests
Share of (ANOVA…)
Mind/Heart
• In-home tests
S
Share of
Market

Reaching out to rural India
R
A
Rural Sales Rural Sales
Company % Share Industry % Share
HLL 50 Audio 40
M
Colgate 50 Refrigerators 24
Hero Honda 40 CTV’s 22
U
Cadbury 25 Pharma 20
Heinz 20 Cement 10-20 Using video to
K
Cipla 18 Washing machines 9 attract attention
Source: Ramaswamy / Namakumari: Attributed to ET Intelligence Group
P
U
Pushing products
at Melas
R “New consumers and new
A markets are emerging. Rural

markets, Tier #2 and #3 will drive
W
the economy.” - C.K. Prahalad
S
Selling
Door-to-door
Images source: www.hll.com
R
A
M
…ResearchingUMarkets/
K
P Demand
Forecasting
R U
A
S W

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