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MARKETING MANAGEMENT NOTES UNIT 1

Marketing Management (Guru Gobind Singh Indraprastha University)

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GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY, DELHI

BACHELOR OF BUSINESS ADMINISTRATION (BBA)
Unit- I

BBA-205: Marketing Management

L-4 T-0 Credits -4

Objectives: The objective of this paper is to identify the foundation terms and concepts that are
commonly used in marketing. It also identifies the essential elements for effective marketing
practice. This course will give complete relationship between marketing and other management
functions.

Introduction to Marketing: Nature, Scope and Importance of Marketing, Basic concepts,

Marketing Environment, Market Segmentation, Targeting and Positioning.

The term ‘market’ originates from Latin noun ‘Marcatus’ which mean “a place where business is
conducted”.

Market is generally known as the place or geographical area where buyers and sellers meet and enter into
transactions involving transfer of ownership of goods, services, securities etc.

It is a place where potential buyers meet seller to exchange goods and services freely.

Marketing

Meeting Needs Profitably.

According to Kotler, “ A societal process by which individuals and groups obtain what they need through
creating , offering and freely exchanging products and services of value with others”.

According to AMA “Marketing may be defined as the performance of business activities that direct flow
of goods and services through producers to consumer or user”.

Marketing Management is planning and executing the conception , pricing , promotion and distribution of
ideas , goods and services to create exchange that satisfy individual and organization goals.

Elements of Marketing

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1)Two Parties- Though ,there are several parties involved in the marketing process but the most vital
amongst them are the buyer and seller.

2)Exchange of Value The parties involved in the process exchange value with each other.

3)Transportation – In the marketing besides the purchase and sale , those activities too are included which
are concerned with the transportation of the commodities from production to the consumption.

4)Satisfaction – The objective of activities pertaining to marketing to satisfy the human needs i.e to
satisfy customer and to encourage the prospective customer is also the object of marketing.

5)Independence- The parties are free to interact and accept or reject the offer to each other.

6)Growth and Development- Plans for developing the business and the activities related to the increase in
prices , are also included within marketing.

1.1 Nature of Marketing

1. Marketing is Consumer-oriented:

A business exist to satisfy human needs. Therefore, business must find out what the
customers want and then produce goods according to the needs of the consumers. Only
such products should be produced which best satisfy consumer needs and at the profit to
the maker.

2. Modern Marketing Precedes and succeeds Production.

Today, all the organization s accept that the marketing activities must start far ahead of
production. It is not enough if the activities are begun after the product is ready.
Marketing would have authority over product innovation and planning, production
scheduling as well as over the sale. In companies operating under the marketing concept
entire marketing is designed to serve consumer needs.

3. Marketing is a Science as well as Art:

Marketing is a science as it provides some general principles to guide the managers in

their working. Marketing is an art as every situation requires to be tackled differently and
in an effective manner.

Neither the science should be over-emphasized nor should art be discounted. The reality
is that both of them go together and are both mutually interdependent and
complementary.

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4. Marketing is a System:
Marketing is a System consisting of several interdependent and interacting sub-systems.
It obtain the inputs from the environment (Supra system), transforms these inputs and
supplies the output (customer satisfaction, profits etc )

5. Exchange process is the Essence of Marketing

Exchange implies transactions between buyers and seller. The seller hands over a product
or service to the buyer who in turns give money. there is exchange of information
between buyers and sellers.

6. Marketing is Goal-oriented:
The ultimate aim of marketing is to generate profits through the satisfaction of human
wants.

The following aims are sought to be achieved by studying marketing:

1. To provide guiding policies regarding marketing procedures and their

implementation.
2. To study marketing problems according to circumstances and to suggest
solutions.
3. To analyze the shortcomings in the exiting pattern of marketing.
4. To enable managers to assess and decide a particular course of action.
5. To develop an intelligent appreciation of modern marketing practices.

7. Marketing is a Process:
It is a dynamic process because it keeps on adjusting to the changes in the environment of
business. Marketing is also a social process in the sense that it is concerned with human
needs. Marketing is a managerial process as it involves the functions of planning and
control

8. Marketing is a Managerial function

According to managerial or systems approach - "Marketing is the combination of
activities designed to produce profit through ascertaining, creating, stimulating, and
satisfying the needs and/or wants of a selected segment of the market."

According to this approach the emphasis is on how the individual organisation processes
marketing and develops the strategic dimensions of marketing activities.

9. Marketing is a social process

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Marketing is the delivery of a standard of living to society. According

to Cunningham and Cunningham (1981) societal marketing performs three essential
functions:-
Knowing and understanding the consumer's changing needs and wants;
Efficiently and effectively managing the supply and demand of products and services;
and
Efficient provision of distribution and payment processing systems.

1.2 Scope of Marketing

The scope of marketing is very wide. It may be analyzed in the term of marketing performance
through various functions. These functions are to be performed on the basis of various utilities.

1. Buying Function
A) Functions 2. Assembling Function
of Exchange 3. Selling Function

MARKETING B) Functions of 1. Transportation

FUNCTIONS Physical 2. Inventory Management
Dustribution 3. Warehousing
4. Material Handling

C) Functions of 1. Financing
Facilities 2. Risk Taking
3. Standardisation
4. After Sales Service

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A) Functions of exchange:

Buying Function: A manufacturer is required to buy raw materials for production

purposes. Similarly, a wholesaler has to buy goods from manufacturer for the purposes of
sales to retailers. A retailer has to sell the goods to consumers. Thus functions of buying
have to be performed at various levels.

Assembly Function: Assembling is different and separate from buying. Buying involves
transfer of ownership of the goods from seller to the buyer; whereas in assembling, goods
are purchased from various sources and assembled at one place to suit the requirement of
the buyer.

Selling Function: Selling involves transfer of ownership from seller to the buyer. Selling
function is vital to the success of any firm. Its importance has been continuously
increasing in all organizations due to the emergence of severe competition. Producing
goods is easy but it is very difficult to sell them.

B) Functions of Physical Distribution:

Transportation: It refers to physical movement of goods from the places of production to

places of consumption. It is an essential part of the process of marketing. It helps to widen the
market and create place utility. Improvement in means of transportation made buying and selling
possible from distant places.

Storage and Warehousing:

Storage is the process of holding and preserving goods between the time of the of their
sale /resale. Warehousing help in having a central place for keeping goods from where
the distribution could be made easily and according to needs. Ultimately, it tends to
adjust the supply to demand so as to equalize them in the interest of the manufacturers,
middlemen and consumers.

C) Functions of Facilities:

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1. Risk Taking :
There are innumerable risks in the process of marketing of goods and services. Risks
arise due to unforeseen circumstances. Risks can be insured also. For example, the risk
due to fire and accidents may be covered by insurance. But the risks due to changes in
government policies, risks due to increased competition, technological risks and business
cycle risks cannot be insured.

2. Standardization:

Buyers and sellers always prefer to have standardized goods and services. This will
relieve buyers from examining the product and wasting time. That is why standardization
has now been accepted as a convenient and ethical basis of marketing.

3. After sales service:

The importance of after sales service facilitates as a marketing tool cannot be ignored.
Hence arrangement of after sales service has become an increasingly important function.
Therefore, a marketer has to plan for after sales service.
For example: Repairs, replacements, maintenance etc.

4. Financing
It means money and credit necessary for producer or seller to make goods available to
the consumer. Arrangement of finance has become an increasingly important function.
Therefore, a marketer can plan for various kinds of finance: short term finance, Medium
term finance and Long term finance.
There are various sources of finance for example, commercial banks, co-operative banks,
credit societies, government agencies etc.
5. Marketing Research
It means gathering , recording and analyzing all facts about the problems relating to
marketing .It is systematic investigation of facts relevant to various aspects in marketing .
The basic purpose is to facilitate decision making process.. The basic purpose is to

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facilitate decision making process. Primary and secondary data is used. It helps in
knowing reactions of customer towards product and price.

1.3 Importance of Marketing

1) Marketing process brings goods and services to satisfy the needs and wants of the people.
2) It helps to bring new varieties and quality goods to consumers.
3) By making goods available at al places, it brings equipment distribution.
4) Marketing converts latent demand into effective demand.
5) It gives wide employment opportunities.
6) It creates time, place and possession utilities to the products.
7) Efficient marketing results in lower cost of marketing and ultimately lower prices to consumers.
8) It is vital link between production and consumption and primarily responsible to keep the wheel
of production and consumption constantly moving.
9) It creates to keep the standard of living of the society.

1.4 Basic Concepts

Needs Wants and Demands

The basic human requirement are food, clothing , air, water and shelter . Humans also have strong needs
for recreation , education and entertainment. These needs become wants when they are directed to
specific objects that directly or indirectly satisfy the need. Want may differ from country to country ,
society to society and culture to culture.

For example , a person in India needs food but chapattis , rice etc. whereas a person in Afghanistan need
food but want rice, lamb etc.

Demands are those wants for products which are backed by ability to pay. Many people want a Audi car ;
only a few are able to buy one

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Difference between Marketing and Selling

Basis Marketing Selling

Focus Marketing focuses in the Selling focuses on the sellers

customer’s need of want need i.e converting goods into
satisfying goods. cash.

Sequence It begins before actual It take place after production

production

Aim It aims at profit through It aims at profit through sales

customer satisfaction volume

Approach Integrated approach to Fragmented approach to

marketing is followed. It selling is followed. Attempt is
includes marketing research, made to sell whatever is
product planning , advertising produced
etc

Pre-Dominance Customer is treated as King. Product enjoys supreme

He is given supreme importance.
importance

Perspective It has long perspective as it lays It has short term perspective as

emphasis on growth and it emphasize on profit
stability of sale. maximization

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What is Marketed

1)Goods- Physical goods such as refrigerators, television sets, food products etc

2)Services- Services includes the work of airlines , hotels, car rentals and professionals such as
Accountants, bankers, lawyers, engineers, doctor etc.

3)Experience – By orchestrating several services and goods , a firm create , stage and market experience
travels, climbing Mount Everest etc

4)Events –Marketers promote time based events such as trade shows, artistic performance, Asian games
etc

5)Persons- Celebrity marketing is major business for example movie star, music artist , musician.

6)Places – Cities , states , regions and whole nation compete actively to attract tourist, factories ,company
headquarter and new residents.

7)Properties- Properties are intangible rights of ownership of either real property or financial property.
Properties are bought and sold and this requires marketing.

8)Organizations – Organizations actively works to build strong , favorable and unique image in the mind
of target publics. For eg Universities, museums

9)Information- can be produced and marketed as a product. This is essentially when school and
universities produce and distribute at a price to parents or students. For example magazines , encyclopedia
etc.

10)Ideas- Every market offering includes basic idea. Social marketers are busy promoting such ideas.

Marketing Concepts and Philosophies

Marketing involves exchange of values between the marketer and the customer. But
marketing efforts of different firms may be guided by different philosophies or concepts

1)The Production Concept- This philosophy is based on the belief that high production
efficiency and mass production would sell the product offered to the market. High
Production efficiency will lead to economies of scale and decline in the cost per unit.
Thus , the production concept hold that customer favors product that are offered at lower
price and are easily available. In short , mass production and distribution are the essence
of the production concept

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2) The Product Concept- The companies following this philosophy believe that by
producing superior products and improving their feature over time , they would be able to
attract more customers. The underlying assumption is that customer favors product
quality , performance, innovation features etc. Under the product, superior product are
always welcomed by the customer.

3)The Selling Concept- This concept is based on the adoption of aggressive selling and
promotional effort because of customer buying inertia and resistance. The assumption is
that customer , if left alone would not buy enough of firm’s product. The firm must push
its products through aggressive selling and promotional efforts. The firms following the
selling concepts rely upon the power of advertising and other promotional techniques to
maximize their sales.

4)The Marketing concept- The marketing concept emphasize the determination of the
requirements of potential customers and supplying products to satisfy their requirements.
The firms following customer orientation regard the creation of customer and satisfaction
of his wants as the justification of business. Determination of wants of the customers
takes precedence over production of goods and services. In other words, products are
produced and sold to satisfy the needs and wants of the customer.

5)The Societal Marketing Concept- The critics of marketing concepts argue that blindly
following the goals of identifying customer needs and satisfying them has led to some
social and environmental problems such as pollution , ecological imbalance , wastage of
natural resources, drug abuse etc.Therfore social objectives must be considered as an
integral part of the process of consumer satisfaction. Thus business firms need to be
concerned about the ecological and ethical aspects of marketing besides customer
satisfaction and company’s profitability.

CONCEPT OF MARKETING MIX:

The idea of the ‘mix’ of marketing functions was conceived by Prof. Neil H. Borden of the
Harvard Business School.

According to him, “ the marketing mix refers to the combination, the designing and integration
of the elements of marketing into a programme or mix which on the basis on an appraisal of the
market forces, will best achieve the objectives of an enterprise at a given time”

Marketing mix represents the total marketing programme of a firm. It involves decisions regard
to product, price, place and promotion.

4 Ps may described as 4Cs:

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____4Ps 4Cs_______________

Product Customer Solution

Price Customer cost

Place Convenience

_____Promotion Communication______

Marketing mix serves as the linkage between a business firm and its customers.

Marketing mix is a dynamic concept as it keeps on changing with changes in market conditions
and the environment.

Elements of Marketing mix:

1. Product: A product is any good or service that consumers want. It is a bundle of

utilities or a cluster of tangible and intangible attributes. Product components of
marketing involves planning, developing and producing the right type of product and
services. It deals with dimensions of product line, durability and other qualities.

2. Price : Pricing decisions and policies have a direct influence on sales volume and
profits of business. A lot of exercise and innovation is required to determine the price
that will enable the firm to sell its products successfully. Demand, cost, competition,
government regulation etc. are the vital factors that must be taken into consideration
in the determination of price.

Price mix involves decision regarding base price, discounts, allowances, freight
payment etc.

3. Place :This element involves choice of the place where products are to be displayed
and made available to the customers. It is concerned with decisions relating to the wholesale and
retail outlets or channels of distribution. The objective of selecting and managing trade channels
is to provide the products to the right customer at the right time at right place on continuous
basis. In deciding where and through whom to sell, management should consider where goods
through whom to sell, management should consider where the customers wants the goods to be
available.

Tata partners with a large body of the independently owned dealerships that sell the company
many different models. Tata selects dealers carefully and support them strongly the dealers keeps

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an inventory of Tata automobiles, demonstrate them to potential buyers, negotiate prices, close
sales and service the cars after the sale.

4. Promotion: Promotion is concerned with bringing products to the knowledge of customers

and persuading them to buy. Promotion Mix involves decision with respect to advertising,
personal selling and sales promotion. Promotion means activities that communicate the merits of
the product and persuade target customers to buy it. Tata Motors spends a huge amount each
year on advertising to tell consumers about the company and its many products.

Significance of Marketing Mix

Marketing Mix implies a firm’s total marketing programme. It involves decision with regard
to product , price , place and promotion. These four elements differ from firm to firm and
each firm must determine its own mix taking into consideration the changes in the marketing
environment, It serves the firm in the following manner

1)Linking Pin- Marketing Mix serves as a linking pin between the firm and its customers. It
focuses on satisfying the need of the customers at the right time , at right place and with right
product.

2)Increasing Sales- By taking are of need of the consumers and serving them in an effective
way, it helps in increasing the sales volume of the firm and thereby earning higher profits.

3)Meeting Different Requirement- With the help of its four P’s , it identifies the different and
changing needs of customer. For eg product designing takes place after the firm undertakes
the research with respect to what customer wants.

4)Decision Making – Marketing Mix stresses that different elements are interrelated and
independent .Decision in any one element affect other element . It helps in integrated
decision making.

1.5 Marketing Environment

Marketing activities are influenced by several factors inside and outside a business firm. These
factors or forces influencing marketing decision making are collectively called marketing
environment.

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According to Philips Kotler, marketing environment refers to “external factors and forces that
affect the company’s ability to develop and maintain successful transactions and relationships
with its target customers”.

A company’s marketing environment consist of the actors and the forces outside marketing that
affect marketing management’s ability to build and maintain successful relationships with target
consumers.

Like, Xerox, Companies constantly watch and adapt to the changing environment.

Every manager in an organization needs to observe the outside environment, marketers

have two methods

Marketing Research Marketing Intelligence

Marketer also spend time with their customers and competitor environments to carefully
studying the environment.

The marketing environment may be broadly divided into two parts:

Micro environment Macro environment

Microenvironment consists of the actors close to the company that affect its ability to
serve its customers- the company, suppliers, marketing intermediaries, customer
markets, competitors and publics. These actors can be controlled by the company with its
own action, hence are also called Controllable Factors.

Macroenvironment consists of larger societal forces that affects the microenvironment

– demographics, economic, natural, technological, political and cultural forces which

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cannot be controlled by the company with its own actions, atleast in the short run. So
these are also called Uncontrollable factors.

MICROENVIRONMENT

Marketing success will require building relationships with other company departments, suppliers,
marketing intermediaries, customers, competitors and various publics which combine to make
up the company’s value delivery network.

It implies the factors and forces in the immediate environment which affect the
company’s ability to serve its market.

1. The Company:
In designing marketing plans, marketing management takes other groups in company into
account –groups such as top management, finance, research and development,
purchasing, operations and accounting. All of these interrelated groups form internal
environment. Top management sets the company mission, policies and strategies
marketing managers make decisions within the strategies and plans made by top
management.
Marketing managers must work closely with other company departments. Other
departments have an impact on the marketing department’s plans and actions.

2. Suppliers:

Suppliers provide resources that are needed by the company. The company necessarily should go
for developing specifications, searching the potential suppliers, identifying and analyzing the
suppliers and chose those suppliers who offer best mix of quality, delivery reliability, credits,
and warranties at low costs.

Marketing managers must watch supply availability and costs. Supply shortages or delays, labor
strikes, and other events can cost sales in the short run and damage customer satisfaction in the

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long run. Rising supply costs may force price may force price increase that can harm the
company’s sales volume.

Today, most of the marketers treat their suppliers as partners in creating and delivering customer
value. For example, Home Depot a leading retailer in Unites states works closely with its army
of almost 1200 suppliers.

3. Market Intermediaries:

These are either business houses or individuals who come to the company for promoting, selling
and distributing the goods to the ultimate consumers.

They include resellers, physical distribution firms, marketing service agencies and financial
intermediaries.

a. Resellers are distribution channel firms that help the company find customers or make sales
to them. These include wholesalers and retailers who buy and resell merchandise. Traditionally,
it has not been very difficult for companies to select partner with resellers, partly because of their
strong brand franchise and partly because of the fragmented and small size of most sellers in the
Indian subcontinent. However the future is going to be very different. In India, manufacturer
now face reseller organizations such Big Bazaar, Pantaloon, Shoppers Stop.

b. Physical Distribution Firms help the company to stock and move goods from their points
of origin to their destinations.

c. Marketing Service Agencies are the marketing research firms, advertising agencies, media
firms and marketing consulting firms that help the company target and promote its products to
the right markets.

d. Financial Intermediaries include banks, insurance companies and other businesses that
help finance transactions ot insure against risks associated with buying and selling of goods.

Todays, marketers recognize the importance of working with their intermediaries as partners
rather than simply as channels through which they sell their product. For Example when Coco

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Cola signs on as the exclusive beverage provider for a fast food chain, such Mc Donald’s or
Subway, it provide much more than just soft drinks.

4. Customers:

Customers are the most important actors in the company’s microenvironment.

The target market of the company is usually of the following types:

1. Consumer Market : i.e individuals and households.

2. Industrial market : i.e. organizations buying for producing(manufacturing) other
products and services for the purpose of either earning profits or fulfilling other
objectives or both
3. Reseller market: organizations buying goods and services with a view to sell them to
others for a profit. These may be selling wholesalers and retailers.
4. Government and the other non-profit market: i.e those buying for goods and services in
order to produce public services.. they transfer these goods and services to those who
need them for consumption in most of the cases.
5. International market: individuals and organizations of nations other than homeland who
buy for either consumption or for industrial use or for both.

5. Competitors:

No company stands alone in serving and satisfying the needs of a customer market. The
marketing concept states that to be successful, a company must provide greater customer value
and satisfaction than its competitors do.

It is impossible for an organization to develop strong competitive positioning strategies without a

good understanding of its competitors and the strengths and weaknesses of the competitors. No
single competitive marketing strategy is best for all companies. Each firm should consider its
own size and industry position compared to those of its competitors. Large firms with dominant
positions in an industry can use certain strategies that smaller firms cannot afford. And small
firms can develop strategies that give them better rates of return than large firms enjoy

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Three levels of competition exist. :

1. Direct competitors are firms competing for the same customers with the similar products (ex.
grocery stores).
2. Competition exists between products that can be substituted for one another (ex. margarine for
butter).
3. Competition exists among all organizations that compete for the consumer's purchasing power
(ex. entertainment).

6. Public

A public is defined as “any group that has an actual or potential interest in or impact on a
company’s ability to achieve its objectives.”To build goodwill and to seek favorable response, it
is very much necessary to satisfy the public as well.

There are seven types of Public:

1. Financial Publics: this group influences the company’s ability to obtain funds. Banks,
Investment houses and stockholders are the major financial publics.
2. Media Publics: This group carries news, features and editorial opinion. It include
newspapers, magazine and radio and television stations.
3. Government Publics: Management must take government developments into account.
Marketers must often consult the company’s lawyers on issue of product safety, truth in
advertisement and other matters. For example, mobilink, advertisements promoting
tourism in Pakistan recognizes the importance of government and general public
4. Local Publics: This group include neighborhood and residents and community
organizations.
5. General Public: a company need to be concerned about the general public’s attitude
towards its products and activities.
6. Internal Publics: This group includes workers, managers, volunteers and Board of
Directors. Large companies use newsletters and other means to inform and motivate their
internal publics. When employ feels good about company, they spread positive attitude
over to external Publics.

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MACRO ENVIRONMENT

Macro environment consists of six major forces viz, demographic, economic, physical,
technological, political/ legal and socio-cultural. The trends in each macro environment
components and their implications on marketing are discussed below:

DEMOGRAPHIC ENVIRONMENT

Demography is the study of human population in terms of size, density, location, age,
gender, occupation etc. The demographic environment is of major interest to marketers because
it involves people the people make up markets.

The world population and the Indian population in particular is growing at an explosive
rate. This has major implications for business. A growing population means growing human
needs. Depending on purchasing powers, it may also mean growing market opportunities. On the
other hand, decline in population is a threat so some industrial and the boon to others. The
marketing executives of toy-making industry spend a lot of energy and efforts and developed
fashionable toys, and even advertise “Babies are our business-our only business”, but quietly
dropped this slogan when children population gone down due to declining birth rate and later

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shifted their business to life insurance for old people and changed their advertisement slogan as
“the company has not babies the over 50s”.

The increased divorce rate shall also have the impact on marketing decisions. The higher
divorce rate results in additional housing units, furniture, appliances and other house-hold
appliances. Similarly, when spouses work at two different places, that also results in additional
requirement for housing, furniture, better clothing, and so on.

Thus, marketers keep close tract of demographic trends developments in their markets
and accordingly evolve a suitable marketing programme.

ECONOMIC ENVIRONMENT

Markets require purchasing power as well as people. Total purchasing power is functions
of current income, prices, savings and credit availability. Marketers should be aware of four
main trends in the economic environment.

(i) Decrease in Real Income Growth

Although money incomer per capita keeps raising, real income per capita has decreased
due to higher inflation rate exceeding the money income growth rate, unemployment rate
and increase in the tax burden.

These developments had reduced disposable personal income; which is the amount
people have left after taxes. Further, many people have found their discretionary income
reduced after meeting the expenditure for necessaries. Availability of discretionary
income shall have the impact on purchasing behaviour of the people.

(ii) Continued Inflationary Pressure

The continued inflationary pressure brought about a substantial increase in the prices of
several commodities. Inflation leads consumers to research for opportunities to save
money, including buying cheaper brands, economy sizes, etc.

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(iii) Low Savings and High Debt

Consumer expenditures are also affected by consumers savings and debt patterns. The
level of savings and borrowings among consumers affect the marketing. When marketers
make available high consumer credit, it increases market opportunities.

(iv) Changing Consumer Expenditure Patterns

Consumption expenditure patters in major goods and services categories have been
changing over the years. For instance, when family income rises, the percentage spent on
food declines, the percentage spent on housing and house hold operations remain
constant, and the percentage spent on other categories such as transportation and
education increase.

These changing consumer expenditure patterns has an impact on marketing and the
marketing executives need to know such changes in economic environment for their
marketing decisions.

PHYSICAL ENVIRONMENT

There are certain finite renewable resources such as wood and other forest materials
which are now dearth in certain parts of world. Similarly there are finite non-renewable
resources like oil coal and various minerals, which are also not short in supply. In such cases, the
marketers have to find out some alternative resources. For instance, the marketers of wooden
chairs, due to shortage and high cost of wood shifted to steel and later on fiber chairs. Similarly
scientists all over the world are constantly trying to find out alternative sources of energy for oil
due to dearth in supply.

There has been increase in the pollution levels in the country due to certain chemicals. In
Mumbai-Surat-Ahemedabed area, are facing increased pollution due to the presence of different
industries.

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Marketers should be aware of the threats and opportunities associated with the physical
environment and have to find our alternative sources of physical resources.

SOCIO CULTURAL ENVIRONMENT

The socio-cultural environment comprises of the basic beliefs, values and norms which
shapes the people. Some of the main cultural characteristics and trends which are of interest to
the marketers are:

(i) Core Cultural Values

People in a given society hold many core beliefs and values, that will tend to persist.
People’s secondary beliefs and values are more open to change. Marketers have more
chances of changing secondary values but little chance of changing core values.

(ii) Each Culture Consists of Sub-Cultures

Each society contains sub-cultures, i.e. groups of people with shared value systems
emerging out of their common life experiences, beliefs, preferences and behaviors. To the
extent that sub-cultural groups exhibit different wants and consumption behaviour,
marketers can choose sub-cultures as their target markets.

Secondary cultural values undergo changes over time. For example ‘video-games’,
‘playboy magazines’ and other cultural phenomena have a major impact on children
hobbies, clothing and life goals. Marketers have a keen interest in anticipating cultural
shifts in order to identify new marketing opportunities and threats.

TECHNOLOGICAL ENVIRONMENT

Technology advancement has benefited the society and also caused damages. Open heart
surgery, satellites all were marvels of technology, but hydrogen bomb was on the bitter side of
technology. Technology is accelerating at a pace the many products seen yester-years have
become obsolete now. Alvin Toffler in his book ‘The Future Shock’ has made a remark on the

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accelerative thrust in the invention, exploitation and diffusion of new technologies. There could
be a new range of products and systems due to the innovations in technology.

This technology developments has tremendous impact on marketing and unless the
marketing manager cope up with this development be cannot survive in the competitive market.

POLITICAL AND LEGAL ENVIRONMENT

Marketing decisions are highly affected by changes in the political/ legal environment.
The environment is made up of laws and government agencies that influence and constraint
various organizations and individuals in society.

Legislations affecting business has steadily increased over the years. The product the
consumes and the society against unethical business behaviour and regulates the functioning of
the business organizations. Removal of restrictions to the existing capabilities, enlargement of
the spheres open to MRTP and FEMA companies and broad banding of industrial licenses were
some of the schemes evolved by the government. The legal enactments and rules and regulations
exercise a specific impact on the marketing practices, systems and institutions in the country.
Some of the acts which have direct bearing on the marketing of the company include, the
Prevention of Food Adulteration Act (1954), The Drugs and Cosmetics Act (1940), The Standard
Weights and Measures Act (1956) etc. The Packaged Commodities (Regulative) Order (1975)
provides for clearly making the prices on all packaged goods sold in retail excluding certain
items.

Similarly, when the government changes, the policy relating to commerce, trade,
economy and finance also changes resulting in changes in business. Very often it becomes a
political decisions. For instance, one Government introduce prohibition, and another government
lifts the prohibition. Also, one Government adopts restrictive policy and another Government
adopts liberal economic policies. All these will have impact on business.

Hence, the marketing executives needs a good working knowledge of the major laws
affecting business and have to adapt themselves to changing legal and political decisions.

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All the above micro environmental actors and macro environmental forces affect the
marketing systems individually and collectively. The marketing executives need to understand
the opportunities and threats caused by these forces and accordingly they must be able to evolve
appropriate marketing strategies

1.6 Market Segmentation

Companies today recognize that they cannot appeal to all buyers in the marketplace or atleast
not to all buyers in the same way. Buyers are also widely scattered and too varied in their needs
and buying practices.

Like, P&G a company must identify the parts of the market that it serve best and most profitably.
It must design customer-driven marketing strategies that build the right relationships with right
customers.

4 major steps in Customer driven marketing strategy:

In the first two steps, the company select the customers that it will serve. Market segmentation
involves dividing a market into smaller groups of buyers with different needs, characteristics or
behaviors that might require separate marketing mix or strategies.

Market targeting consists of evaluating each market segments attractiveness and selecting one or
more markets segments to enter.

Select customers to serve Decide on value proposition

Segmentation: Divide the total
market into smaller segments
Targeting: Select the segment or
segments to enter
Create value Differentiation: differentiate the market
for targeted offering to create superior customer value
customers
Positioning: Position the market offering in
minds of target customers

In the final two steps, the company decides on a value proposition-on how it will create value for
target customers. Differentiation involves actually differentiating the firm’s market offering to
create value for target customers. Positioning consists of arranging for a market offering to
occupy a clear, distinctive and desirable place relative to competing products in the minds of
target customers.

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BENEFITS OF MARKET SEGMENTATION

Market segmentation gives a better understanding of consumer needs, behaviour and

expectations to the marketers. The information gathered will be precise and definite. It helps for
formulating effective marketing mix capable of attaining objectives. The marketer need not
waste his marketing effort over the entire area. The product development is compatible with
consumer needs, pricing matches consumer expectations and promotional programmes are in
tune with consumer willingness to receive, assimilate and positively react to communications.
Specifically, segmentation analysis helps the marketing manager.

 To design product lines that are consistent with the demands of the market and that do not
ignore important segments.

 To spot the first signs of major trends in rapidly changing markets.

 To direct the appropriate promotional attention and funds to the most profitable market
segments.

 To determine the appeals that will be most effective with each market segments.

 To select the advertising media that best matches the communication patterns of each
market segment.

 To modify the timing of advertising and other promotional efforts so that they coincide
with the periods of greatest market response.

In short, the strength of market segmentation lies in matching products to consumer needs that
augment consumer satisfaction and firm’s profit position. However, the major limitation of
market segmentation is the inability of a firm to take care of all segmentation bases and their
innumerous variables. Still, the strengths of market segmentation outweigh its limits and offers
considerable opportunities for market exploitation.

Bases of Market Segmentation

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1. Geographic Segmentation:
A marketer divides the target market into different geographical units such as nations,
states and regions.

A company may decide to operate in one or a few geographical area, or to operate in

all area but pay attention to geographical differences in needs and wants .

For example Citibank offers different mixes of branch banking services depending on
neighborhood demographics areas

A particular brand can be popular only in North India then North Indian market can
be divided on the bases of zones, villages, cities, climate etc.

For example, Amul was initially marketed in Gujarat.

On a global scale, video game companies create different versions of their games
depending on the world region in which the game is sold.

2. Demographic Segmentation:

Demographic segmentation divides the market into groups based on variables,

such as age, gender, family life cycle, income, occupation, education, religion and
nationality. Demographic factors are the most popular baes for segmenting
customer groups, customer needs, wants and usage rates often very close with
demographic variables.

a. Age and Life Cycle stage: consumer needs and wants change with
age. Some companies use age and Life-cycle segmentation,
offering different products or using different marketing approaches
for different age and life cycle groups.

For examples, HDFC Standard Life Insurance has launched

pension plans retired people so that they do not have to depend on
any one for their financial needs.

b. Gender: This segmentation has been used in clothing, cosmetics

and magazines. For example, Barbie a chain of retail stores in
India offers clothing only for girls

More recently, many mostly women’s cosmetics makers have

begun marketing’s men’s lines. Nivea markets nivea for Men. A
neglected gender segment can offer new opportunities in markets
ranging from motorcycles to guitars.

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c. Income: The marketer of products and services such as

automobiles, clothing, cosmetics, financial services, and travel
have long used income segmentation. Many company target
customer with luxury goods and convenience services. For
example, for a price, luxury hotels provide amenities to attract
specific groups affluent travelers, such as families, expectant
moms, and even pet owners.

However, not all companies that use income segmentation target

the affluent. For example, many retailers, such as, Big Bazaar with
its tagline “Isse sasta aur kahan” successfully target low and
middle-income groups.

3. Behavioral segmentation:

Behavioral segmentation divides buyers into groups based on their knowledge.,

attitudes, uses, or response to a product. Many marketer believe that bahaviour
variables are the best starting point for building market segments.

a. Occasions: Buyers can be grouped according to the occasions

when they get the idea to buy, actually make their purchase or use
the purchased item. Occasion segmentation can help firms build up
product usage.

Example: Coco-Cola promotes its brands as a family drink on

occasions like diwali, Christmas and family outings. Some
occasions like Valentine Day’s were originally promoted partly to
increase the sale of candy, flowers, cards and other gifts.

Occasions

Regular occasion Seasonal

Special ooccas Holiday

b. Benefits Sought: A powerful segmentation is to group buyers

according to the different benefits that they seek from the product.
Benefit segmentation requires finding the major benefits people
look for in the product class, the kinds of the people who look for
each benefits, and the major brands that deliver each benefit.

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For example, “Fit and Polish” consumers seek a balance between

function and style- they exercise for results but want to look good
doing it. “Serious sports competitors” exercise heavily and live in
and love their activewear- they seek performance and function.

Thus, each segment seeks a different mix of benefits.

Benefits

Convenience

Speed

Quality Service Economy

c. User status: markets can be segmented into nonusers, ex-users,

potential users, first time users, and regular users of a product.
Marketers want to reinforce and retain regular users, attract
targeted nonusers and reinvigorate relationships with ex-users.

In India, parents of the bride invest heavily in gifts for their

daughter to facilitate the establishment of a new home for the
young couple. Masters reminds parents that their long-lasting
foam mattress and pillows will be the ideal gift foe a long and
happy life for their daughter. Through the use of jingles like “Meri
nanhi pari..Naey Ghar chali”, master attracts young couples-to-be
and their parents through its highly emotional message.

Uesr Status

Regular user

Nonuser

Exuser Potential user First time user

d. Usage Rate: markets can be segmented into light, medium, and

heavy product users. Heavy users are often a small percentage of
the market but account for a high percentage of the consumption.
For example, Burger King targets what it call “Super Fans”, (age
18 to 34). They eat at Burger King on average of 16 times a month.

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Usage Rate

Light user Medium user Heavy user

e. Loyalty Status: A market can also be segmented by consumer

loyalty. Consumers can be loyal to brands(colgate), stores(Big
bazaar/ Shopper’s Stop), Companies (Toyota). Buyers can be
divided into groups according to their degree of loyalty. Some
consumers are completely loyal – they buy one brand all the time.
For example, Apple has an almost cutlike following of loyal users.

Others consumers are somewhat loyal – they are loyal to two or

three brands of a given product or favor one brand while sometimes
buying others. Still other buyers show no loyalty to any brand. They either
want something different each time they buy or they buy whatever on sale.

Loyalty Status

None Strong

Medium

4. Economic Segmentation:

Market segmentation on the basis of income levels is used by most of the

marketers of consumer goods. Most of marketing research activities and studies of
consumer behavior are also based on the income levels of the consumers.

For Example : Proctor and Gamble has launched a very high-quality detergent
powder, called ARIEL MICROSYSTEM for high income levels.. Now the
company has launched a new product ARIEL GREEN for middle high income
group and is confident of penetrating into the middle high income level group. Its
sale price is about 20 percent less than that of the previous one. So, the company
decided to emphasize in a particular segment of the market base on its income
levels.

5. Psychographic Segmentation:

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It involves developing sub group identification on the basis of psychological

characteristics. For example, perceptions, attitude, opinions, interests or a
combination of these.

Psychographic segmentation divides buyers into different groups based on social

class, lifestyle or personality characteristics. People in the same demographic
group can have very different psychographic makeup’s.

________________________________________________________________

Social Class: Lower lowers, upper lowers, working class, middle class, upper,
uppers

Lifestyle: Achievers, Strivers, Servivors

Personality: Compulsive, gregarious, authoritarian, ambitious

__________________________________________________________________

The viability of a segment is based on the following criteria:

a. Measurable: The segment should be measurable in term of the total size, purchasing power
and, demographic, geographic and psychographic characteristics.
b. Substantial: The segment should be of sufficient size so as to generate profits; it should also
have a potential for growth.
c. Accessible :It should be reachable and easy to enter or penetrate. The marketers must be
able to deliver the product or service offering and must be able to operate therein.
d. Differentiable: One segment should be easily differentiated from another; It should be
distinct from others and the people therein should react differently from other segments towards
a marketing mix program; Clear differences in consumer want, needs and preferences for the
product must exist across segments. Homogeneity within the segment; Heterogeneity with other
segments.
e. Actionable: It should be possible to design a marketing program directed towards that
segment and serve it effectively and efficiently. The marketer should be able to react to the
need, wants and preferences of the segment with the appropriate marketing mix.

Advantages of market segmentation

1. Understand potential customers.

2. Pay proper attention to particular areas.
3. Formulate marketing programmes.
4. Select channels of distribution.
5. Understand competition.

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6. Use marketing resource efficiency.

7. Advertise the products and launch sales promotion programmes.
1.7 Market Targeting
Target Market is a business term meaning the market segment to which a particular good or service is
marketed.

Target marketing involves breaking a market into segment and then concentrating the marketing efforts
on one or few key segments.

Target Market Strategies

There are several different target-market strategies that may be followed. Targeting strategies usually
can be categorized as one of the following:
1. Single-segment strategy - also known as a concentrated strategy. One market segment (not
the entire market) is served with one marketing mix. A single-segment approach often is the
strategy of choice for smaller companies with limited resources. Eg Johnson and Johnson,
sports channel
2. Selective specialization- this is a multiple-segment strategy, also known as a differentiated
strategy. Different marketing mixes are offered to different segments. The product itself may
or may not be different - in many cases only the promotional message or distribution
channels vary. HUL sells soap bars such as Pears, Lux, Rexona, Liril , Lifebuoy
3. Product specialization- the firm specializes in a particular product and tailors it to different
market segments. A firm selling microscopes to schools , Universities, Govt and Commercial
Labs
4. Market specialization- the firm specializes in serving a particular market segment and offers
that segment an array of different products. A firm selling product assortment only to
Universities
5. Full market coverage - the firm attempts to serve the entire market. This coverage can be
achieved by means of either a mass market strategy in which a single undifferentiated
marketing mix is offered to the entire market, or by a differentiated strategy in which a
separate marketing mix is offered to each segment. Pepsi & Coke

After analyzing different segments, the firm must select one or many segments to serve. The firm
can select one or more patterns from the following patterns:

1. Single Segment concentration

M1 M2 M3

P1

P2

P3

For example, Woodland Shoes, Cellular Phones

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2. Selective Specialization

M1 M2 M3

P1

P2

P3

For example, DENTA cream tooth powder (Dabur)

3. Product Specialization

M1 M2 M3

P1

P2

P3

For example, Mahindra and Mahindra jeeps, Bajaj Auto

4. Market Specialization

M1 M2 M3

P1

P2

P3

For example, Sultan Chand & sons (Books covering all type of student

needs, school, colleges and institutes).

5. Full Market Coverage

M1 M2 M3

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P1

P2

P3

For example, Pepsi, Titan, Bata

1.8 Market Positioning

Positioning is the act of designing the product and service offering of a company in the
minds of the customer’s so that:
(i) the consumer can relate the product and service offering to a need or want;
(ii) the marketer can create a distinctive image of himself.
(iii) the consumer can perceive a brand’s characteristics relative to those of competitive
offerings.

It is process of creating an image of the product and service offering in the minds of the
consumer.
As a strategy, positioning can be based on:
i) on perceived benefits, characteristics or image.
ii) on competition
iii) on a combination of both (i) and (ii).

The product positioning may be based on the following approaches

i) Product Attributes: LG Golden Eye: Auto contrast and Brightness control
ii) Benefits, Problem Solutions & Basic Needs: Pepsodent (decay prevention), Close-Up
(Fresh breath)
iii) Quality: Sony
iv) Product User: Parker (Amitabh Bachchan), Reid and Taylor (Executive/ Lifestyle)
v) Product Usage: Burnol
vi) Specific use: Greeting cards for every occasion
vii) Services: Maruti Service Station all over India
viii) Price: Pantaloon Big Bazzar
ix) Distribution: Dell (direct selling: customization)
x) Against Other Products (Competitors): Savlon vs Dettol; Savlon jalta nahin

Different Positioning Planks/Bases

Different types of positioning planks/bases are used by the marketers are

1)Economy- Product positioned towards a particular segment keeping in mind economy.

Example Maruti 800, Tata Nano, Nirma detergent.

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2)Benefit- product positioned with some beneficial features Example Pepsodent for prevention
of tooth decay,

3)Gender- Product positioned for a particular segment Example Scooty pep , Titan Raga

4)Luxury and Exclusiveness –Products or services [positioned towards luxury segment .

Example Taj group of hotel, Mercedes Benz E- class.

5)Fashion for Elite class- Product positioned for fashionable elite class or members of the
society , who always want to stay ahead in terms of fashion and demands exclusive products
only. Example Peter England, Van Heusen, Raymond etc.

6)Technology and value added features- Positioning of the product according to its
technological advancement and value added features. Example Microsoft positioning its recent
operating system Window 10 as the advanced operating system. Sony with various electronic
goods

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