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Marketing is not a new word but evokes feelings of freshness each time it is used. For there is so much happening in this field that even the oldies have something new to learn every day. In your class itself, I am sure that there are quite a few students opting for marketing than any other discipline. Surely, there must be something in this word marketing, that everyone feels attracted to it. Marketing is ancient art. The first marketing trans- action can be perhaps attributed to Adam and Eve. Its emergence as a management discipline is of relatively recent origin. And within this relatively short period, it has gained a great deal of importance. In fact today marketing is regarded as most important of all management functions of business.
Some definitions of Marketing – • Much of marketing is concerned with the problem of profitably disposing of what is produced. • Marketing is the economic process by which goods and services are exchanged between the producer and the consumer and their val- ues determined in terms of money prices. • Marketing originates with the recognition of a need on the part of a consumer and terminates with the satisfaction of that need by the delivery of a usable product at the right time, at the right place and at an acceptable price. • Marketing is so basic that it cannot be con- sidered a separate function. It is really the whole business seen from the point of view of the final result, i.e., from the point of view of the customer. • Marketing is a viewpoint, which looks at the entire business process as a highly integrated effort to discover, create, arouse and satisfy consumer needs. • Marketing is the delivery of a standard of living to society. American Marketing Association – “It is the process of planning & executing the conception, pricing, promotion & distribution of ideas, goods & services to create exchange that satisfy individual & organisational goals” The Chartered Institute of Marketing defines Marketing as “Marketing is the man- agement process for identifying, anticipating & satisfying customer requirements profitably.” Peter Drucker There will always, one can as- sume, be need for some selling. But the aim of marketing is to make selling superfluous. The aim is to know and understand the customers well that the product or service fits him and sells it- self. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available
Core Marketing Concepts – Needs, Wants And Demands: Marketing thinking starts with the fact of human needs and wants. We all have some needs residing in ourselves. These needs exist. Remember that needs can never be created. Needs: Needs are the basic human requirements. People need food, air, water, clothing & shelter to survive. People also have needs for recreation, education and entertainment. Eg: Hunger food. According to Abraham Maslow’s need hierarchy, all the human needs can be categorized as shown in the diagram.
Human need is a state of felt deprivation of some basic satisfaction. Wants are desires for specific satisfiers of these deeper needs. Demands are wants for specific products that are bagged by an ability and willingness to buy them. Marketers do not create the needs. They can influence the demand by making the product appropriate, attractive, affordable and easily avail- able to target customers. Products: Anything that can be offered to satisfy a need or a want, Persons : Singer Places : Goa Activities : Sing in karaoke lounge. Organizations : Health club Ideas : Osho ashram Other terms can be : Offerings, satisfiers or resources.
Eg: A woman is not buying ‘lipstick’, she is buying ‘.hope’. She is confident that she will definitely look good after using that lipstick. And this hope brings her to the shop. A physical object is a means of packaging a service. The marketers’ job is to sell the benefit or services built in to physical products rather than just describe their physical features. Marketing Myopia Sellers who concentrate their thinking on the physical product instead of the customers need are said to suffer from ‘marketing myopia’. Wants: The needs become wants they are directed to specific objects that might satisfy the needs. “Needs Pre-exists” (can’t be created)
Demands: Demands are wants for specific products that are bagged by an ability and willingness to buy them.
Concepts of Marketing Management The philosophy of marketing which has evolved as marketing management has passed through distinct stages. The orientation of the companies have been changing from production to societal through product, sales, marketing. In this lesson we are going to discuss production and product orientations. There are various concepts of marketing that we as marketers have been following. There were times when the focus was on the production of the commodities, then the focus shifted on to the sales and distribution of the products and finally the focus moved to the real NEEDS of the consumers!
Changing Role Of Marketing Simple Trade Era Production Era Sales Era Competition Marketing Dept. Era Marketing Company Era Consumer Focused Era 1950 – 1960 began 1960’s Coordinate & Control Long – run customer satisfaction Prior to 1920’s 1920 – 1930 1930 – 1950 Sell Surplus
Increase Supply Beat
Company Orientations Towards the Market place Production Concept Product Concept Selling Concept Marketing Concept Societal Marketing Consumers prefer products that are widely available and inexpensive Consumers favor products that offer the most quality, performance, or innovative features Consumers will buy products only if the company aggressively promotes or sells these products Focuses on needs/wants of target markets & delivering value better than competitors Focuses on needs/ wants of target Concept markets & delivering value better than competitors that preserves the consumer’s and society’s well-being.
Selling views customer as a last link in business Marketing 1. Cost determines Price 10. price determines cost 10. Company Manufactures the product first 3. . Planning is short-run-oriented in terms of today’s products and markets 5. Views business as consumer producing process satisfying process 7. Management is sales volume oriented 4. Management is profit oriented 4. Company first determines customers needs and wants and then decides out how to deliver a product to satisfy these wants 3.Selling 1. the sole purpose being generation of consumer satisfaction 9. Marketing views the customer last link in business as the very purpose of the business Defining Customer Value and Satisfaction: of new products. Emphasis on innovation on every existing technology and reducing every sphere. Planning is long-run-oriented in today’s products and terms tomorrow’s markets and future growth 5. Different departments work as in a highly separate water tight compartments 9. Views business as a good producing process 7. All departments of the business integrated manner. Emphasis is on the product 2. Stresses needs of seller 6. Emphasis on consumer needs wants 2. on providing better costs value to the customer by adopting a superior technology 8. Consumer determine price. Emphasis on staying with existing technology and reducing costs 8. Stresses needs and wants of buyers 6.
it won’t attract enough buyers ( although it will satisfy those who do buy) Delivering High Customer Value The key to generating high customer loyalty is to deliver high customer value. backed by a superior value-de. in his Delivering profitable value. obtaining .11 The value proposition consists of the whole cluster of benefits the company promises to deliver. Total customer cost is the bundle of costs customers expect to incur in evaluating. other benefits include a long-lasting car. it is more than the core positioning of the offering. Together these factors determine the way in which a corporation operates. like thermometer for temperature. func. At around the same time that Tom Peters and Robert Waterman were exploring what made a company excellent. The value-delivery system includes all the experiences the customer will have on the way to obtaining and using the offering. a company must design a competitively superior value proposition aimed at a specific market segment. Volvo’s core positioning is“safety. .livery system. The Seven S model was born at a meeting of these four authors in 1978. What is the 7-S Framework? Description The 7-S Framework of McKinsey is a management model that describes 7 factors to organize a company in an holistic and effective way. Since then it is known as their 7-S model. . the results may be lower profits. and disposing of the given marketing officering. Measuring Satisfaction There are no meters to measure it. the buyer is likely to be disappointed. According to Michael Lanning. It is a subjective exercise but very important for marketer’s point of view. if the company sets expectations too low. History The 7-S Framework was first mentioned in "The Art Of Japanese Management" by Richard Pascale and Anthony Athos in 1981. For example. if the company sets expectations too low. that is not its main goal. Customer Expectation: It is formed on the basis of past buying experiences. the buyer is likely to be disappointed.Customer perceived value (CPV) is the difference b etween the pros p e c t i v e c u s t o m e r ’ s evaluation of all the benefits and all the costs of an offering and the perceived alternatives. advice. However. Total customer value is the perceived monetary value of the bundle or economic. If the company increases customer satisfaction by lowering its price or increasing its services . and advertisements. They had been investigating how Japanese industry had been so successful. However. Managers take into account all seven of these factors. and psychological benefits customers expect from a given market offering. It appeared also in "In Search of Excellence" by Peters and Waterman. good service. it won’t attract enough buyers ( although it will satisfy those who do buy) If marketers raise expectations too high. Origin of the 7-S Framework. and was taken up as a basic tool by the global management consultancy company McKinsey. Although the customer-centered firm seeks to create high customer satisfaction.” but the buyer is promised more than just a safe car. If marketers raise expectations too high. using. to be sure of successful implementation of a strategy. Large or small. and long warranty period.tional.
Environment. processes and routines that characterize how the work should be done: financial systems. Compare: Strategic Intent 2. Structure The way in which the organization's units relate to each other: centralized. decentralized. etc. Staff Numbers and types of personnel within the organization. Guides organizational change. 4. Managers must act on all Ss in parallel and all Ss are interrelated. . Strengths of the 7-S Model. Systems The procedures. a network. 7. Central beliefs and attitudes. information systems. Value Chain Michael Porter of Harvard proposed the value chain as a tool for identifying ways to create more customer value. The Value Chain framework of Michael Porter is a model that helps to analyze specific activities through which firms can create value and competitive advantage. over time. The interconnecting center of McKinsey's model is: Shared Values. customers. Skills Distinctive capabilities of personnel or of the organization as a whole. Style Cultural style of the organization and how key managers behave in achieving the organization's goals. competition. to reach identified goals. promotion and performance appraisal systems. 5. a holding. Combines rational and hard elements with emotional and soft elements.The meaning of the 7 S 1. 6. What does the organization stands for and what it believes in. Strategy Plans for the allocation of a firms scarce resources. Shared Values (also called Superordinate Goals). 3. recruiting. Benefits • • • • Diagnostic tool for understanding organizations that are ineffective. functional divisions (top-down). Compare: Management Styles. a matrix.
Procurement of raw materials. assembly. Includes general management. transportation planning. installation. advertising. machines. servicing. The activities required to get the finished product at the customers: warehousing. finance. including: customer support. Creating a cost advantage based on the value chain A firm may create a cost advantage • by reducing the cost of individual value chain activities. Such as: Research and Development. etc. including: channel selection. promotion. Includes technology development to support the value chain activities. Support activities (Staff functions. buildings. spare parts. legal. The activities associated with recruiting. overhead) • • Procurement. inventory control. storing. • 3. Inbound Logistics. equipment maintenance. pricing. retention and compensation of employees and managers. 2. public affairs. Technology Development. etc. spare parts management. transportation. distribution management. • Operations. etc. or • by reconfiguring the value chain. etc • • Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Operations Outbound Marketing Service Logistics Logistics and Sales . Process automation. upgrading. order fulfillment. selling. . planning management. accounting. • Marketing and Sales. testing and all other value-creating activities that transform the inputs into the final product. Service. design. Human Resource Management.The activities of the Value Chain Primary activities (line function) 1. training. Includes receiving. Includes machining. Firm Infrastructure. quality management. The activities associated with getting buyers to purchase the product. Outbound Logistics. packaging. retail management. development (education). redesign. repair services. The activities that maintain and enhance the product's value.
Porter identified 10 cost drivers related to value chain activities: 1.A cost advantage can be created by reducing the costs of the primary activities.person also asks the customer for any product – or service – improvement suggestions and any specific disappointments. Degree of vertical integration. Proactive marketing: The company works continuously with its large customers to help improve their performance. a cost analysis can be performed by assigning costs to the value chain activities. • The Corporate Level.corporate headquarters is responsible for designing a corporate strategic plan to guide the whole enterprise. 3. union activity.). and points them all in the same direction. the more loyal the customers. comments. 9. A firm develops a cost advantage by controlling these drivers better than its competitors do. Institutional factors (regulation. Firm's policy of cost or differentiation. the higher the customer equity. or complains. 2. 2. 5. Interrelationships among business units. The sales. new distribution channels. Strategic Planning A strategic business plan describes the overall direction an organization will pursue within its environment and also guides the allocation of re. Accountable marketing: The salesperson phones the customer to check whether the product is meeting expectations. Clearly. It provides the logic that integrates the perspectives of functional departments and operating units. 8. 7. 4. for example. In most large corporations. etc. A marketing plan is carried out within the context of a firm’s broader strategic business plan. taxes. Timing of market entry. 10. as well as on which businesses to start or eliminate. Economies of scale. or a different sales approach. and how they will be coordinated. Recently there have been many companies that achieved a cost advantage by the clever use of Information Technology. 6. Once the value chain has been defined. "Reconfiguration" means structural changes such as: a new production process. A cost advantage also can be pursued by "Reconfiguring" the value chain. it makes decisions on the amount of resources to be allocated to each division. Customer Relationship Management The aim of customer relationship management (CRM) is to produce high customer equity. but also by reducing the costs of the support activities. when and where they will be completed. Capacity utilization. has stationed engineers at large utilities to help them produce more power. which is responsible. 4. Learning. 1. A strategic marketing plan outlines the actions necessary. strategic planning takes place at four levels. Linkages among activities. .time values of all of the firm’s customers. 3. Reactive marketing: The salesperson sells the product and encourages the customer to call if the or the has questions. Geographic location.sources. Customer equity is the total of the discounted life. ( General Electric. Basic marketing: The salesperson simply sells the product. Dfferent levels of customers who have strong profit potential.
because the rewards will be Cash Cows if market share is kept. Stars are leaders in the business. • Stars are frequently roughly in balance on net cash flow.each product line. etc. The Product Level.each business unit develops a strategic plan to carry that business unit into a profitable future. The Business Level. . Promotions. Cash Cows (low growth. high market share) • Profits and cash generation should be high. high market share) • Stars are using large amounts of cash. The four segments of the BCG Matrix Placing products in the BCG matrix provides 4 categories in a portfolio of a company: Stars (high growth. brand within the business unit develops a market.each division establishes a division plan covering the allocation of funds to each business unit within the division. However if needed any attempt should be made to hold your market share in Stars. Advertising. The Boston Consulting Group Matrix has 2 dimensions: market share and market growth. low market share) • Avoid and minimize the number of Dogs in a company. Public Relations. The units in the marketing division would be Sales. • Watch out for expensive ‘rescue plans’. For example the marketing division would formulate strategies as to how the various units within it would work. • Cash Cows are often the stars of yesterday and they are the foundation of a company. The basic idea behind it is: if a product has a bigger market share. or if the product's market grows faster. Market Intelligence. The BCG Matrix can be used to determine what priorities should be given in the product portfolio of a business unit. Eg.• The Division Level. Therefore they should also generate large amounts of cash. a company should have a portfolio of products that contains both high-growth products in need of cash inputs and low-growth products that generate a lot of cash. It was developed in the early 70s by the Boston Consulting Group.ing plan for achieving its objectives in its product market. investments which are needed should be low. Because of the low growth. it is better for the company. It is based on product life cycle theory. Dogs (low growth. • • BOSTON CONSULTING GROUP MODEL The BCG Matrix method is the most well-known portfolio management tool. To ensure long-term value creation.
Even worse. • It provides a base for management to decide and prepare for future actions. They can then try to get any possible cash from the Question Marks that were not selected. • Either invest heavily. Limitations of the BCG Matrix Some limitations of the Boston Consulting Group Matrix include: • • • • • • • • • • It neglects the effects of synergy between business units. even worse. • BCG method is applicable to large companies that seek volume and experience effects. The executives are often praised anyhow. A business with a low market share can be profitable too. The BCG Matrix and one size fits all strategies The BCG Matrix method can help to understand a frequently made strategy mistake: having a one size fits all strategy approach. • BCG model is helpful for managers to evaluate balance in the firm’s current portfolio of Stars.5% for an entire corporation. because of their low market share. Either these SBUs should receive enough investment funds to enable them to achieve a real market dominance and become Cash Cows (or Stars). Their management have an easy job. This may tempt management to emphasize a particular product. • If the market share remains unchanged. now and then investments are made. Market growth is not the only indicator for attractiveness of a market. Cash Cows. Sometimes Dogs can earn even more cash as Cash Cows. otherwise they must be liquidated. Increase market share or deliver cash. As a result all Question Marks and Stars receive only mediocre investment funds. Dogs Business Units are fighting an impossible battle and. The problems of getting data on the market share and market growth. In such a scenario: • • • Cash Cows Business Units will reach their profit target easily. or sell off. they are often allowed to reinvest substantial cash amounts in their mature businesses. These inadequate invested sums of money are a waste of money. Question Marks will simply absorb great amounts of cash. • The model is simple and easy to understand. Once it becomes a star. it should be able to manufacture and sell new products at a price that is low enough to get early market share leadership. In this way they can never become Cash Cows.• Dogs must deliver cash. Question Marks and Dogs. such as a generic growth target (9 percent per year) or a generic return on capital of say 9. or to divest prematurely. The model uses only two dimensions – market share and growth rate. or invest nothing and generate any cash that you can. High market share is not the only success factor. because they have high cash demands and generate low returns. These are hopeless attempts to "turn the business around". it is destined to be profitable. or otherwise companies are advised to disinvest. Question Marks (high growth. There is no clear definition of what constitutes a "market". The model neglects small competitors that have fast growing market shares . A high market share does not necessarily lead to profitability all the time. low market share) • Question Marks have the worst cash characteristics of all. Other uses and benefits of the BCG Matrix • If a company is able to use the experience curve to its advantage.
A position in the red zone is not attractive. Neither a strong company operating in an unattractive market nor a weak company operating in an attractive market will do very well. If additional factors are considered. A position in the yellow zone is viewed as having medium attractiveness. It holds that a company can appropriately rate its different businesses for the purpose of strategic planning on the basis of two main parameters – Market Attractiveness and Business Strength. Companies are successful to the extent that they enter attractive markets and possess the required business strengths to succeed in those markets. Both axes are divided into three segments. the business will not produce outstanding results.THE GENERAL ELECTRIC MODEL An SBU’s appropriate objective cannot be determined solely by its position in the growth-share matrix. the growth-share matrix can be seen as a special case of a multifactor portfolio matrix such as that pioneered by General Electric. The model is based on the company’s seven businesses. MARKET ATTRACTIVENESS • Overall market size • Annual market growth rate • Historical profit margin • Competitive intensity • Technological requirements • Inflationary vulnerability • Energy requirements • Environmental impact • Socioal-political legal 2 . FACTORS UNDERLYING MARKET ATTRACTIVENESS STRENGTH IN GE MULTIFACTOR PORTFOLIO MODEL 1 . This indicates a “green light” to invest in this product/service. The above two factors make excellent marketing sense for rating a business. If one of these factors is missing. If the enterprise falls in this zone the business is in a favorable position with relatively attractive growth opportunities. The suggested strategy is that management should begin to make plans to exit the industry. BUSINESS STRENGTH • Market share • Share growth • Product quality • Brand reputation • Distribution network • Promotional effectiveness • Productive capacity • Productive efficiency • Unit costs • Material supplies AND BUSINESS . Organisation must therefore exercise caution when making additional investments in this product/service. The nine cells are grouped into three zones: The block with the Lateral Zone consists of the three cells in the upper left corner. The blocks with a Diagonal Zone consists of the three cells in the lower right corner. The blocks with plain Zone consists of the three diagonal cells from the lower left to the upper right. General Electric Approach The model to analyze the SBUs has been give by General Electric and it is even known as Market attractiveness and Company strength matrix. The suggested strategy is to seek to maintain share rather than growing or reducing share. yielding nine cells.
and dogs. The three cells in the upper left corner indicate strong SBUs in which the company should invest or grow. but once the SBU’s objective and budget are set. The three cells in the lower-right corner indicate SBUs that are low in overall attractiveness. understand their industries. marketing’job is to carry out the plan efficiently and profitably. the objective might be to maintain the existing demand with fewer marketing dollars or to take cash out of the business and allow demand to fall. The major strengths of the approaches are that they allow a firm to do the following: . the company’s objective is not always to build sales in each SBU. Making this determination involves analyzing where each product is in its product life cycle as well as expected competitor strategies. Evaluation of Strategic Planning Approaches Many firms assess alternative market opportunities. know which products are stars. Marketing contributes to assessing each SBU’s sales and profit potential. economic events. Thus.• • R & D performance Mangerial personnel STRATEGIES The GE matrix is divided into nine cells. new technologies. Management should also forecast each SBU’s expected position in the next three to five years given the current strategy. The diagonal cells stretching from the lower left to the upper right indicate SBUs that are medium in overall attractiveness. the task of marketing management is to manage demand or revenue to the target level negotiated with corporate management. cash cows. recognize what factors affect performance. Rather. and realize they can target broad or narrow customer bases. etc. question marks.
• Study competitors’ actions and trends. See accompanying figure. and SBUs. • Learn the opportunities to pursue and which threats to avoid. firm. • These techniques only aid planning.uct development. • Study various strategy effects. The approaches have these weaknesses: • They may be difficult to implement. • They may not adequately consider environmental factors. They do not replace the need for managers to engage in hands-on decisions by studying each situation and basing marketing strategies on the unique aspects of their industry. • They are often used by staff planners rather than line managers. • They may be too simplistic and omit key factors. • They may overvalue market share. and diversification. • They may not be applicable to all firms and situations. • Compare performance with designated goals. Current Products Current Markets New Products New Markets . • They are arbitrary in defining SBUs and evaluative criteria. • Compute marketing and other resources needs. prod.• Analyze each of its SBUs and products. • Focus on meaningful differential advantages. • Discover principles for improving performance. market development. The Product/Market Opportunity Matrix The product/market opportunity matrix identifies four alternative marketing strategies to maintain and/or increase sales of business units and products: market penetration.
Later it will also review opportunities to develop new products for new markets(diversification strategy). 1. even though the new product themselves may appeal to a different group of customers.the company might search for new products that could appeal to current customers even though the new products are technologically unrelated to its current product line. This can be done by either increasing the usage among the existing customers or switching of competitor’s customers or by adding non consumers in the consumer list. these new sources may still not deliver the desired sales volume. Distribution and promotion orientations are different from those traditionally used by the firm. This is possible in three kinds: • Concentric Diversification Strategy-The company could seek new products that have technological or marketing synergies with existing product lines. In that case. • • • While the corporations are faced with ever increasing strategic planning gap. It might acquire some wholesalers or retailers. and competitive pricing. the company goes for diversification. Ansoff model propounded by Igor Ansoff is a useful framework for detecting new intensive growth opportunities called a “Product-Market Expansion Grid”. especially if they are highly profitable(forward integration). They can be either completely new products or existing product extensions. that growth may not be enough. 3. It can enter new markets. Horizontal Diversification Strategy. But here the company should take care as this involves high risk and the firm might loose focus. and other minor innovations and markets them to loyal consumers. Finally if the company decides to acquire one or more competitors. three strategies have been formulated to overcome this gap. provided that the government does not bar this move(horizontal integration). INTENSIVE GROWTH. The company first considers whether it could gain more market with its current products in their current markets(market penetration strategy). and use new distribution methods. reposition products. Still. This can be either based on demographic or geographic or psycho. better quality. a firm develops new or modified products to appeal to present markets. a firm seeks greater sales of present products from new markets or new product uses. In product development. • . In diversification. The products may be new to the industry or to the company. DIVERSIFICATION GROWTH – When good opportunities which are highly attractive are found to be outside the present business and the company has a mix of business strengths to be successful in them. a firm becomes involved with new products aimed at new markets. Then it considers whether it can develop new products of potential interest to its current markets(productdevelopment strategy). Next it considers whether it can find or develop new markets for its current products (market-development strategy).• In market penetration. a firm seeks to expand the sales of its present products in its present markets through more intensive distribution. By examining these three intensive growth strategies.graphic factors. In that case company must consider diversification. appeal to segments it is not yet satisfying. In market development. 2. A company may acquire one or more of its suppliers to gain more control or generate more profits which would be called as backward integration. forward or horizontal integration within the industry. It emphasizes new models. management must also examine integrative growth opportunities.corporate management’s first course of action should be a review of whether any opportunities exist for improving its existing businesses’ performance. management may discover several ways to grow. However. aggressive promotion. INTEGRATIVE GROWTH – Often a business’s sales and profits can be increased through backward.
Focus—narrow target segment and either low cost position or a unique strategy. 4. The following three basic strategies are identified (see Figure): 1. DOWNSIZING OLDER BUSINESSES. a focus strategy is available to smaller firms. the firm may be able to sustain a competitive advantage based on cost leadership. Some of the ways by which firms acquire cost advantages are by improving process efficiencies. Differentiation—large market and unique strategy. harvest or divest tired old businesses in order to release needed resources and reduce costs. Competitive advantage (lower cost or differentiation). not fritter away energy and re. . products or markets. Cost Leadership strategy: This generic strategy calls for being the low cost producer in an industry for a given level of quality. 2. High level of expertise in manufacturing process engineering. Firms that succeed in cost leadership often have the following internal strengths: • • • Access to the capital required to make a significant investment in production assets.sources trying to salvage hemorrhaging businesses. The cost leadership strategy usually targets a broad market. this investment represents a barrier to entry that many firms may not overcome. Cost leadership and differentiation strategies are alternatives for large firms.• Conglomerate Diversification Strategy – the company might seek new businesses that have no relationship to its current technology. If competing firms are unable to lower their costs by a similar amount. Cost leadership—broad market and low cost position. gaining unique access to large source of lower cost materials. The firm sells its products either at average industry prices to earn a profit higher than that of rivals or below the average industry prices to gain market share. The Porter Generic Strategy Model The Porter generic strategy model identifies two key planning concepts and the alternatives available for each: • • Competitive scope (broad or narrow target).companies must not only develop new businesses. making optimal outsourcing and vertical integration decisions or avoiding some costs altogether. Skill in designing products for efficient manufacturing. but must also carefully prune. Managers should focus on growth opportunities. 3.
thus eliminating the competitive advantage. The premise is that the needs of the group can be better serviced by focusing entirely on it. If research is done this way. . continuous basis. Firms that succeed in a focus strategy are able to tailor a broad range of product development strengths to a relatively narrow market segment that they know very well. iDifferentiation Strategy : This strategy calls for the development of a product or service that offers a unique attributes that are valued by the customers and customers perceive to be better than or different from the products of the competition. Firms that succeed in differntiation strategy often have the following internal strengths: • • • • • Access to leading scientific research. A firm using a focus strategy often enjoys a high degree of customer loyalty and this entrenched loyalty discourages other firms from competing directly. Opportunities may be missed. firms pursuing a differentiation-focused strategy may be able to pass higher costs on to customers since close substitutes do not exist. Finally.ing a focus strategy and targeting various narrow markets may be able to achieve an even lower cost within their segments and as a group gain significant market share. analyze. other firms may be able to lower their costs as well. Highly skilled and creative product development team. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. As technology improves. Information should not be approached in an infrequent manner. disseminate. Additionally. other focusers may be able to carve out sub-segments that they can serve even better. firms pursuing a focus strategy have lower volumes and thus less bargaining power with their suppliers. Each generic strategy has its risks. The risks associated with differentiation strategy include imitation by competitors and changes in customer tastes. Focus Strategy : This strategy focus on narrow segment and within that segment attempts to achieve either a cost advantage or differentiation. and store anticipated marketing decision information on a regular. MARKETING INFORMATION SYSTEM A marketing information system (MIS) is a set of procedures and methods designed to generate. Furthermore. the competition may be able to leapfrog the production capabilities. it may be fairly easy for a broad-market cost leader to adapte its product in order to compete directly.• • Efficient distribution channel. even the low cost strategy. Some risks of focus strategy include imitation and changes in the target segment. The firm hopes that the higher price will more than cover the extra costs incurred in offering the unique product. Additionally various firms pursuing focus strategies may be able to achieve even greater differntiation in their market segments. several firms follow. Corporate reputation for quality and innovation. However. a firm could face these risks: 1. 2. Strong sales team with the ability to successfully communicate the perceives strengths of the product. There may be a lack of awareness of environmental changes and competitors’ actions. Because of their narrow market focus. For example.
analyze. Data collection may be disjointed. An avoidance of crises. Previous studies may not be stored in an easy to use format. 4. 3. which contains three components. Marketing plans and decisions may not be properly reviewed. Data collection may be difficult to analyze over several time periods. An MIS offers many advantages: 1. . Time lags may result if a new study is required. 2. 1. 7. Continuous monitoring is the procedure by which the changing environment is regularly viewed. managerially. disseminate. 6. An information system can be used operationally. Data warehousing involves the retention of all types of relevant company records. 5. A marketing information system (MIS) is a set of procedures and methods designed to generate. and strategically for several aspects of marketing. Organized data collection. Marketing research is used to obtain information on particular marketing issues. The storage of important data.An information system can be used operationally. 2.3. The total information needs of the marketing department can be specified and satisfied via a marketing intelligence network. and store anticipated marketing decision information on a regular. 3. 4. 8. as well as the information collected through continuous monitoring and marketing research that is kept by the organization. continuous basis. Actions may be reactionary rather than anticipatory. and strategically for several aspects of marketing. managerially. A broad perspective.
marketing research into the elements of the marketing mix. recording. designs the methods for collecting information.Primary and Secondary There are two main sources of data . and analysis. competitors. services. Obviously. It must not be haphazard. and ideas. and improve understanding of marketing as a process. Several points about marketing research need to be emphasized. Secondary research. 8. and analyzing of information about specific issues related to the marketing of goods. generate. 1. ‘Market’ research is simply re. and evaluate marketing actions. It may get enough data by analyzing internal reports or from informal meetings with customer service personnel. We consider some of them: 1. already exists since it has been collected for other purposes. consumer attitude surveys). this is a very long and involved definition of marketing research. Interviews 2. It involves a sequence of tasks: data gathering. analyzes.primary and secondary. manages and implements the data collection process. and communicates the findings and their implications. Speed in obtaining sufficient information to make decisions. 6. Focus groups 4.5. The ability to do a cost-benefit analysis. customer. recording. An outside party or the firm itself may undertake such research. Product tests 6. or modes of distribution such as via the Internet. Coordinated marketing plans. Marketing research is about researching the whole of a company’s marketing process This explanation is far more straightforward i. 3. Primary Research There are many was to conduct primary research. people. 5.e. Research findings and their implications must be communicated to the appropriate decision maker(s) in the firm. ‘Marketing’ research is much broader. 4. Primary research is conducted from scratch. places. but also areas such as research into new products. Data may be available from different sources: the firm itself. organizations. and public to the marketer through information . A firm’s decision to use marketing research does not mean it must engage in expensive projects (test marketing. monitor marketing performance. Mystery shopping 3. an impartial agency. It not only includes ‘market’ research. Here are a couple of definitions: Marketing research is the function that links the consumer. MARKET RESEARCH Marketing research is the systematic gathering.search into a specific market. Projective techniques 5. Marketing research specifies the information required to address these issues. markets.. Sources of Data . It is a very narrow concept. and everything to do with the customers. It is original and collected to solve the problem in hand. Data amassed and kept over several time periods. Diaries . refine. 2. or a research specialist working for the firm. also known as desk research. It may be applied to any aspect of marketing that requires information to aid decisionmaking. 7. Market research and marketing research are often confused.information used to identify and define marketing opportunities and problems.
Telephone interviews are cheaper to conduct than face-to-face interviews (on a per person basis). • Some respondents will give biased responses when face-to-face with a researcher.face. or over the Internet. . Data is collected on a survey. face-to. Advantages of face-to-face interviews • They allow more ‘depth’ • Physical prompts such as products and pictures can be used • Body language can emphasize responses • Respondents can be ‘observed’ at the same time Disadvantages of face-to-face interviews • Interviews can be expensive • It can take a long period of time to arrange and conduct. or free membership. The interviews tend to be very structured and tend to lack depth. However responses will increase if an incentive is offered such as a free newsletter. Interviews This is the technique most associated with marketing research. Omnibus Studies 1. Interviews can be telephone. Data is easily compared. Visitors to sites can be asked to complete electronic questionnaires. Advantages of telephone interviews • Can be geographically spread • Can be set up and conducted relatively cheaply • Random samples can be selected • Cheaper than face-to-face interviews Disadvantages of telephone interviews • Respondents can simply hang up Interviews tend to be a lot shorter • Visual aids cannot be used • Researchers cannot behavior or body language • Face-to-face Interviews Face-to face interviews are conducted between a market researcher and a respondent.’ and depend upon more open forms of questioning. Other face-to-face interviews are more ‘in depth. Other important data is collected when visitors sign up for membership. It is ideal for collecting data from a geographically dispersed sample. Some surveys are very rigid or ‘structured’ and use closed questions. not potential customers. Advantages of the Internet • Relatively inexpensive • Uses graphics and visual aids • Random samples can be selected • Visitors tend to be loyal to particular sites and are willing to give up time to complete the forms Disadvantages of the Internet • Only surveys current. • The Internet The Internet can be used in a number of ways to collect primary data. • Telephone Interviews Telephone ownership is very common in developed countries. The research will probe and develop points of interest.7.
Highly experienced researchers work with the focus group to gather in depth qualitative feedback. months. 6 Diaries Diaries are used by a number of specially recruited consumers. Observers will contemplate how the product is handled. mystery shoppers will enter. There are many issues surrounding the ethics of such an approach to research. and so on. . Products are displayed in a mall of shopping center. Potential customers are asked to visit the store and their purchase behavior is observed. They are rare. or used.• • Needs knowledge of software to set up questionnaires and methods of processing data May deter visitors from your website. • Can be very expensive in comparison to other methods 4. and many other customer focused organizations. retailing. and the research will probe into specific areas that are of interest to the company commission in the research. Mail surveys do not tend to generate more than a 5-10% response rate. However.drama . posing as real customers. Groups tend to be made up from 10 to 18 participants. opinion. a second mailing to prompt or remind respondents tends to improve response rates.complete the ‘bubbles’ on a cartoon series Sentence or story completion Word association . and a pre-designed questionnaire is mailed to a sample of respondents.Imagine that you are a product and describe what it is like to be operated. Projective techniques Projective techniques are borrowed from the field of psychology. cafes and restaurants. They will generate highly subjective qualitative data. They collect data on customer service and the customer experience. Mail surveys are less popular with the advent of technologies. 5 Product tests Product tests are often completed as part of the ‘test’ marketing process. how much time the consumer spends with the product. • Mail Survey In many countries. the researcher has a reasonable picture of purchasing behavior.depends on very quick (subconscious) responses to words Psycho. It demands a substantial commitment on the part of the respondent. Often used in banking. the mail survey is the most appropriate way to gather primary data. Lists are collated.look for images in a series of inkblots Cartoons . such as the Internet and telephones. There are many examples of such approaches including: Inkblot tests . by collecting a series of diaries with a number of entries. and beliefs are encouraged. travel. warn. However. or years). Complex to organize. Discussion. Advantages of focus groups • Commissioning marketers often observe the group from behind a one-way screen • Visual aids and tangible products can be circulated and opinions taken • All participants and the research interact • Areas of specific interest can be covered in greater depth Disadvantages of focus groups • Highly experienced researchers are needed. or purchased. They are asked to complete a diary that lists and records their purchasing behavior of a period of time (weeks. especially call centers. 3 Focus Groups Focus groups are made up from a number of selected respondents based together in the same room. 2 Mystery Shopping Companies will set up mystery shopping campaigns on an organizations behalf. how the packing is read. Findings are reported back to the commissioning organization.
Each step is completed in order. Figure below that presents the complete process. Secondary Research Secondary (or desk) research uses data that has been collected for other objectives than your own i. The goal of marketing research is to provide the facts and direction that managers need to make their more important marketing decisions.e. The organization will be one of many that simply want to a straightforward answer to a simple question. and primary data are not generated until secondary data are thoroughly reviewed. analyzing information. it already exists. secondary data are not examined until a firm states the issue or problem to be studied. data must be collected and analyzed.7 Omnibus Studies An omnibus study is where an organization purchases a single or a few questions on a ‘hybrid’ interview (either face-to-face or by telephone). THE MARKETING RESEARCH PROCESS The marketing research process consists of a series of activities: defining the issue or problem to be studied. and the following list is by no means conclusive: • Trade associations • National and local press Industry magazines • National/ international governments • Web sites • Informal contacts • Trade directories • Published company accounts • Business libraries • Professional institutes and organizations • Omnibus surveys • Previously gathered marketing research • Census data • Public records Managers need information in order to introduce products and services that create value in the mind of the customer. examining secondary data. But the perception of value is a subjective one. the attributes that create value cannot simply be deduced from common knowledge. and commits less time and effort than conducting your own research. making recommendations. and what customers value this year may be quite different from what they value next year. The research is far cheaper. As such. Rather. and implementing findings. For example. generating primary data (if necessary). . There are a number of such sources available to the marketer. An omnibus survey could include questions from companies in sectors as diverse as heath care and tobacco.
The use of such scenarios can ensure that the purpose of the research is agreed upon before it commences. and writ. prior research reports. 2. is used after the problem definition is clarified. customer billings.ten reports. Helpful for exploratory research. 5. B. 2. It is also called qualitative research and may involve in-depth probing. The decision problem faced by management must be translated into a market research problem in the form of questions that define the information that is required to make the decision and how this information can be obtained. EXAMINATION OF SECONDARY DATA A. the decision problem is translated into a research problem. small group discussions. Thus. Diverse sources. ISSUE (PROBLEM) DEFINITION A. Undisclosed findings. Exploratory research is undertaken when the researcher is uncertain about the precise topic to investigate or wants to informally study an issue. Speed. 1.1. also called quantitative research. 3. To ensure that the true decision problem is addressed. They include budgets. inventory records. C. 3. Unknown reliability. Advantages and Disadvantages A. Access to hard-to-obtain data. B. Secondary data have these general disadvantages: Lack of suitability. It is the structured collection and analysis of data pertaining to a specific issue or problem. Conclusive research. and understanding underlying trends. B. These data should always be reviewed before primary data collection. 6. Internal secondary data are available within the company. Conflicting results. Secondary data are those that have been gathered for purposes other than solving the current problem under investigation. 4. Obsolescence. For example. Issue (problem) definition is a statement of the topic to be looked into. 5. 2. B. Low costs. Sources A. a decision problem may be whether to launch a new product. it is useful for the researcher to outline possible scenarios of the research results and then for the decision maker to formulate plans of action under each scenario. Source credibility. They may be obtained . The corresponding research problem might be to assess whether the market would accept the new product . 4.The objective of the research should be defined clearly. 6. External secondary data are available from sources outside the company. profit-and-loss statements. sales figures. Secondary data have these general advantages: 1. Unknown methodology.
4. B. and other non-regular publications deal with special topics in depth and are compiled on the basis of interest by a target audience. members of the population are chosen on . and Burke Marketing Re. b. Precision. Reliability determined. 5. Nielsen. 3. sampling is usually employed. High costs. 3. B. Primary data have these general advantages: 1. The way in which people or objects are selected must be decided. Primary data consist of information gathered to address a specific issue or problem at hand.from government and non-government sources. Advantages and Disadvantages A. 2. Secrecy. 1. Commercial research houses (such as A. Inability to gather certain types of information. 7. Limited perspective. 2. Who collects the data? Data can be collected by the firm itself or by an outside company. 5. It consists of these eight steps: 1. Only way to acquire information in some cases. With a probability sample. With a non-probability sample. What information should be collected? It can be exploratory or conclusive in nature. Currency. There are three sources of non-government secondary data: a.search) conduct periodic and ongoing studies and make results available to many clients for a fee. 4. a. Regular publications can be broad in scope (such as Business Week) or more specialized (such as the Journal of Advertising). IMS Health. Company limitations. Controlled and known methodology. 3. B. Research Design A. Books. For large and/or dispersed populations. c. Primary data have these general disadvantages: Time consuming. A research design outlines the procedures for collecting and analyzing data. Sampling enables the firm to analyze selected people or objects.C. GENERATION OF PRIMARY DATA A. monographs. 1. every member of the designated population has an equal or known chance of being selected. 3. 6. They are necessary if secondary data are insufficient for a proper marketing decision to be made. No conflicting data. 2. Who or what should be studied? This is defined as the population.
ANALYSIS OF DATA A. 2. What technique of data collection should be used? a. The semantic differential is a list of bipolar (opposite) adjective scales that provides an overall profile b. 2. The report must be written for the audience that reads it. A survey gathers information from respondents by communicating with them. e. . How will the data be collected? Data collection can be administered by research personnel or be self-administered. based on marketing research findings. 4. 5. Responses or observations must be entered correctly. 7. Table 4-2 shows the best uses for each kind of primary data collection.trolled conditions. Recommendations are suggestions for a firm’s future actions. It may be human or mechanical. 4. 5. Data are collected. Coding—the process by which each completed data form is numbered and response categories are labeled. and marketing expenses (such as ads). pre-testing. B. B.the basis of convenience or judgment. respondents’ incentives (if any). Those engaged in data collection must be properly supervised and follow directions exactly. How much will the study cost? Costs may include executive time. the location of data collection must be outlined. RECOMMENDATIONS A. Analysis—the evaluation of responses as they pertain to the specific issue or problem under investigation. postage or phone expenses. interviewers record answers. 8. Observation is a research method whereby present behavior or the results of past behavior are observed and noted. respondents write their answers.administered questionnaires. C. supplies. all others remain constant. Figure 4-11 shows recommendations flowing from completed research. Data Collection A. Benefits and costs must be compared. C. With administered questionnaires. It can be conducted in person. special equipment. Data analysis consists of the following: 1. c. How long will the data-collection period be? The total time frame is specified. interviewers. printing. It can be disguised or non disguised. d. Simulation is a computer-based method to test the potential effects of various marketing factors via a software program rather than real-world applications. An experiment is a type of research in which one or more factors are manipulated under con. With self. Just the factor under study is varied. Tabulation—the calculation of summary data for each response category. 6. or by phone or mail. When and where should information be collected? The day and time must be set. support staff time. researcher time. computer usage. In addition.
or analytic mistakes. This will contain charts. Do we us a random sample. the topical areas in which . Watch out for errors in interpretation. Decide upon a budget and a timeframe. This is in addition to government. Marketing managers are most likely to implement research findings under these conditions: 1. Make sure that you really ‘need’ to know something. According to the American Marketing Association.D. Never conduct research for things that you would ‘like’ to know. How will you collect the data that you will analyze to solve your problem? Do we conduct a telephone survey. Summary of the Marketing research Process – Marketing research is gathered using a systematic approach. Companies spend about $12 billion worldwide (40 percent in the United States) for data gathered by marketing research firms. or do we arrange a focus group? The methods of data collection will be dis. who are responsible for using findings. B. stratified sample. 6. Select a sampling method. and hopefully lead to a solution to your problem.S. The problem then becomes the focus of the research.cussed in more detail later. 3. They have broad control over marketing decisions. or cluster sample? 4. B. How will we analyze any data collected? What software will we use? What degree of accuracy is required? 5. They have input into the research design. Go back and speak to the managers or clients requesting the research. For example. data collection method.Write your final report. with more than 1. Once the recommendations are passed on to the proper decision makers. The top 25-research firms (nearly half of which are U.000 firms accounting for the rest. 7. An example of one follows: 1. Define the problem. 3.-based) account for $8 billion in yearly revenues. 9. 2.and institutionsponsored research. 10. Conduct the analysis of the data. Make sure that you agree on the problem! If you gain approval. Go ahead and collect the data. why are sales falling in New Zealand? 2. They have confidence that results are accurate. then move on to step seven. tables.nies themselves. Scope of marketing research A. 8. IMPLEMENTATION OF FINDINGS A. the research report should be warehoused in the marketing intelligence network. It is not uncommon to find errors in sampling. as well as efforts of the compa. and diagrams that will communicate the results of the research. 6. The research report represents feedback to marketing managers. Check for errors.
Yet. B. an easy-to-use exchange for purchasers and providers of market research and related marketing services. 3. with many firms doing their own studies and others hiring outside specialists. international marketing research is taking on greater importance. On average. In fact. companies tend to spend about 1 percent of revenue on marketing research. a. G. and accessing online annual reports and trade publications. Observational studies without informed consent. Selling consumer demographic information for database use without consent. 7. 8. a lot of Americans will not answer a survey. purchase intentions. the use of the Internet. and the application of single-source data collection. using search engines. Planet Feedback enables consumers to send their feedback to companies quickly and effortlessly. Here are examples of how the research is being used.5 million in 1996 to $255 million in 2000. spending for online marketing research has grown from $3. segmentation studies. The extent of such research has more than doubled in recent years. Customer satisfaction research is being sponsored much more than ever before.companies are most likely to engage in or sponsor research efforts are industry/market characteristics and trends. many potential respondents are “turned off” to participating in marketing research projects. 4. C. False sponsor identification. 5. Firms deciding how to market to the hundreds of millions of consumers in Eastern Europe and Central Asia increasingly do market research there. 1. and the complexities of international marketing research. With more and more firms striving to expand their foreign endeavors. Due to technological advances. Many businesspeople start their research by checking out competitors’ Web sites. brand awareness and preference. single-source data collection—whereby research firms track the activities of individual consumer households from the programs they watch on TV to the products they purchase at stores—is now possible. and concept development and testing. Asking overly personal questions. designing and . Unrealized promises of anonymity. Five marketing research trends are the rapid increase in customer satisfaction studies. 6. these practices need to be avoided: 1. Due to unethical practices of some firms. To turn the situation around. Misportraying research findings in ads and other communications. ethical considerations. 2. C. market-share analyses. Over the last few years. 2. Misrepresenting research projects. b. Marketing Info offers The Marketplace. product satisfaction. F. Selling or fund raising under the guise of research. c.
people have never been surveyed before. 1.conducting research is hard. 4 Kodak is provided as an example of a company that had difficulty conducting market research in nine former Soviet republics. Secondary data from government agencies and trade associations may be lacking. especially phone services. may be below Western standards. Many times. 3. 2. . Communications systems.
In fact. social class is not just determined by income. or groups of people sharing the same geographical location. For example. the decision to purchase and use certain products and services. Culture is the most basic cause of a person’s wants and behavior. In a group. It is measured as a combination of occupation. Marketers are always trying to spot “cultural shifts” which might point to new products that might be wanted by customers or to increased demand. Cultural factors: Cultural factors have a significant impact on customer behavior. the cultural shift towards greater concern about health and fitness has created opportunities (and now industries) servicing customers who wish to buy: • Low calorie foods • Health club memberships • Exercise equipment • Activity or health-related holidays etc. religions. income. racial groups. Similarly the increased desire for “leisure time” has resulted in increased demand for convenience products and services such as microwave ovens. but also by the people around the customer with whom he interact and the various social groups to which you belong. wealth and other variables Social factors: A customer’s buying behavior is also influenced by social factors. education.nesses such as telephone banking and insurance. For example. Sub-cultures can include nationalities. colleagues and co. In the UK’s socioeconomic classification scheme. Each culture contains “sub-cultures” – groups of people with share values. several individuals may interact to influence the purchase decision. the official six social classes in the UK are widely used to profile and predict different customer behavior. differences in social class can create customer groups. such as the groups to which the customer belongs and social status. neighbors. The groups with whom he interact directly or indirectly influence your purchase decisions and thus their study is of great importance to marketer to understand are: I) Primary and secondary groups: a primary group is one with which an individual interacts on a regular basis and whose opinion is of importance to him. close friends. the “youth culture” or “club culture” has quite distinct values and buying characteristics from the much older “gray generation” Similarly. is influenced not only by psychological factors. Sometimes a sub-culture will create a substantial and distinctive market segment of its own.workers are examples of primary . Growing up. children learn basic values. family. The typical roles in such a group decision can be summarized as follows: Reference groups As a consumer. personality and lifestyle. perception and wants from the family and other important groups.Consumer Behavior Factors affecting consumer behavior Each of these factors is discussed in more detail in the following sections on buyer behavior. ready meals and direct marketing service busi.
as I unit. The three types of reference groups appeals most commonly used are: a) Celebrities. shaving cream (Palmolive). There are i) The family ii) Friendship groups. textiles ( Dinesh . c) The ‘common man’ Celebrities are well known people (in their specific field of activity) who are admired and their fans aspire to emulate their behavior. is an important of all these groups and we shall discuss it in detail. formal or reference group is a very wide one and includes both direct and indirect or group influences. A symbolic group is one which an individual aspires to belong to. social clubs and societies are other types of formal groups to which individuals may belong. Any of these groups can sever as a reference group for a consumer if it serves as a point of reference or comparison ion the formation of the values. toilet soaps (Lux) . The family. but is not likely to be received as a member. vi) Work groups. Primary. TV stars. Reference groups are used in advertising to appeal to different market segments.groups. Experts such as doctors. accountants and authors are used for establishing the benefits of the product. specific roles and authority positions and specific goals. All workers in a factory qualify for membership to the labor union. sportsman. which use the expert reference groups appeal for promotion. II) Formal and informal groups: Rotary. lions. A head clerk in an office may act as if he belongs to the top membership and symbolic groups influence consumer behaviors but membership groups have a more direct influence. is an important consumer for many products which are purchased for consumption by all family members. an informal group is loosely defined and may have no specified roles and goals.pastes are examples of products. In contrast. lawyer. Labor unions. v) Consumer action groups. Another reference group appeal is that which uses the testimonials of a satisfied customer. Jaycees are some of the well – known social groups in our society. iv) Formal shopping groups. It demonstrates to the prospective customer that demonstrates just like him uses and is satisfied with the product. such as film stars. b) Experts. Different kinds of groups. We can identify two families which shape an . It is a source of major influence on the individual members’ buying behavior. politicians. as a unit. Indirect reference groups comprise those individuals or groups with whom an individual dews not have any direct face to face contact. purchase decisions and behavior can be classified into six categories. attitudes and behavior. Film stars and sports heroes are the most popular celebrities. III) Membership and symbolic groups: A membership group is one to which a person belongs or qualifies for membership. Colgate and Forhans tooth. iii) Formal social groups. Graviera) are advertised using celebrities from the sports and film fields. A formal group has a highly defined structure. group situation with which potential customers can identify are used to promote products and services. Family: The family is the most important of all these groups and we shall discuss it in detail. Direct reference groups. Meeting your neighbors over lunch once a month for friendly exchange of news is an instance of an informal group. informal and small groups exert the maximum influence on consumers and are of great interest for marketers. Hidden in this appeal is the subtle inducement to the customer to identify himself with the user the product in question. Secondary groups are those with which an individual interacts only occasionally and does not consider their opinion very important. Soft drink (Thums up). whether small or large. The family. which exert a significant influence on consumer’s.
The second type of family is the family of procreation consisting of the consumer’s spouse and children.S. etc. where the children are likely to have more updated information about various brands and product attributes. Group norms: Are the norms of a group are the implicit rules of conduct and behavior that are expected of its member. in different families may be made either by the husband or wife. it has been the wife’s role to purchase food. at home you play the role of spouse and parent. or both may have an equal voice. the latter’s influence is extremely important. stereo music systems. for a holiday. Thus. But with the emergence of the working-women. You are probably a manager. Long after an individual has ceased to live with his parents. Roles: An individual may participate in many groups.individual’s consumption behavior . Traditionally. and status. these lines of traditional role demarcation have been getting increasingly blurred. The status of a person is projected through various symbols like the dress. Life Style: Our life styles are reflected in our personalities and self-concepts. If marketers can identify the various groups to which potential consumers belong. It is from parents that we imbibe most of our values. It is a person’s mode of living as identified by his or her activities. The profession or the occupation a person is in again has an impact on the products they consume. Marketers are interested in finding out exactly the role played by individual members so that they can appropriately design their promotion strategy to suit these differing roles. Personal Factors: Age and Life cycle Stage:Like the social class the human life cycle can have a significant impact on consumer behaviour.People buy and use products that reflect their status.A. Husbands now have to shoulder a greater part of the household duties while women are asserting themselves in areas so far treated as the husband’s domain. Marketers often define their target market in terms of the consumers present lifecycle stage. The managing director of a company may drive a Mercedes to communicate his status in society. This method is called as the psychographics-which is . rather than going to Mussoorie or Ooty. Status: Each role that a person plays has status. experience. Each of these roles influences your purchase decisions. clothing and other household sundries. same is the case with any consumer. The life cycle is an orderly series of stages in which consumer attitude and behavioural tendencies evolve and occur because of developing maturity. Children are also beginning to exert their influence on the family’s purchase decisions. This is especially true in case of products such as television. brothers and sisters.one is the family of orientation that is the family in which you are born and consists of your parents. interest and opinions. Status is often measured by the degree of influence an individual exerts in the behavior and attitude of others. not with standing the terrible heat condition. For instance. the norm for office wear includes a full – sleeved shirt and tie. their influence of the sub – conscious mind still continues to be great. However. We need to know what a life-style is made of. in certain multinational companies in India. where children continue to live with parents even after attain adulthood. attitudes. income. which is the relative prestige accorded by society. The concept of lifecycle as applied to marketing will be discussed in more details. Within the family. different member play different roles. records. accessories and possessions. In our country. beliefs and purchase behavior patterns. Thus in different social positions you play different roles. the same decision. while the husband played a dominant role in the purchased of automobiles and life insurance. and when in your work situation you play that role. He may go to Europe or U. His position within each group can be defined in terms of the activities he is expected to perform. personal computers. There is a method of measuring a consumer’s lifestyle. they can successfully market those products and services whose consumption is dictated by the group norms. Occupation And Income: Today people are very concerned about their image and the status in the society which is a direct outcome of their material prosperity.
Safety needs These are dealing with achieving of stability and of consistency in a chaotic world. interests and opinions. autonomy. Many in our society cry out for law and order because they do not feel safe enough to go for a walk in their neighborhood. sex. which are difficult to describe measure lifestyle analysis has proven valuable in segmenting and targeting consumers according to their lifestyle classification. these change by situation and over time. Because she is constantly concerned for her safety. sleep. etc. We need the safety of a home and family. Love and belongingness have to wait until she is no longer in fear. dominance. food. discomfort. I would like to cite one example which I have come across was the a company had organized this study to identify the market segments of their place for the television sets. pain. MASLOW’S HIERACHY OF NEEDS The Hierarchy of Needs model of Abraham Maslow 1. Then based upon the combina tions of these dimensions. water.peoples activities. Once they are alleviated. consumers are classified. sociability.the analysis technique used to mea. Motivation: Motivation involves the positive or negative needs. Hierarchy of Needs . goals. . Economic and emotional motives are possible. These needs are mostly psychological in nature. defensiveness. Self-confidence. and emotional stability are selected personality traits. Hierarchy of Needs .Physiological needs These are the very basic needs such as air. and desires that impel a person to or away from certain actions. adaptability. When these are not satisfied we may feel sickness. if a family is dysfunctional caused by for example an abusive husband. Unlike personality typologies. These feelings motivate us to alleviate them as soon as possible to establish homeostasis. irritation. 2. Personality: personality is the sum total of an individual’s enduring internal psychological traits that make him or her unique. However. etc.sure consumer lifestyles. By appealing to motives (reasons for behavior). Each person has distinct motives for purchases. the wife cannot move to the next level. we may think about other things. a marketer can generate motivation.
who identified needs for achievement. • In 1968. etc. They do not cause higher levels of motivation. See McClelland.Love and belongingness needs These are next on the ladder. but without them there is dissatisfaction. gangs. (Graves) • Different people with different cultural backgrounds and in different situations may have different hierarchies of need. We want to feel loved (non-sexual) by others. self-fulfillment. people don't work necessarily one by one through these levels. Disadvantages • Care should be taken not to stick too rigidly to this hierarchy: • In reality. wanting admiration is related to the need for power. The two Factors in the Theory • Hygiene factors are needed to ensure that an employee does not become dissatisfied. Dissatisfaction was a result of hygiene factors. to become everything that one is capable of becoming. Limitations of the Hierarchy of Needs model. They are much less structured in the way they satisfy their needs. religious groups. • Motivation factors are needed in order to motivate an employee into higher performance. The first is the self-esteem which is the result from competence or mastery of a task.3. They can seek knowledge. Second. Early) • Other researchers claim that other needs are also significant or even more significant. Humans have a desire to belong to groups: clubs." People who have everything can maximize their potential. This is similar to the belongingness level. etc. Performing artists are appreciating applause. peace.Self-Esteem needs There are two types of esteem needs. affiliation and power. there's the attention and recognition that comes from others. to be accepted by others. Hierarchy of Needs . Maslow has himself added additional layers in his book: "Toward a Psychology of Being" The Two Factors Theory According to the Two Factor Theory of Frederick Herzberg people are influenced by two factors. Hierarchy of Needs . We need to be needed. 4.The need for self-actualization This is "the desire to become more and more what one is. Hierarchy of Needs . (Hofstede. family. 5. Satisfaction and psychological growth was a factor of motivation factors. These factors result from internal generators in employees. esthetic experiences. work groups. however. Herzberg developed this motivation theory during his investigation of 200 accountants and engineers in the USA. oneness with God. Typical Hygiene Factors • • • • • • • • • Working conditions Quality of supervision Salary Status Safety Company Job Company policies and administration Interpersonal relations .
and/or • job enrichment. television or any other high value product or services. nose. These are selective exposure. • Herzberg suggests that often work can be arranged and should be arranged in the following ways: • job enlargement • job rotation. Low Hygiene + High Motivation: Employees are motivated but have a lot of complaints. organizes and interprets thes3e stimuli in his own individual manner based in his needs. the implication is that he has to carefully and accurately identifies his .. High Hygiene + Low Motivation: Employees have few complaints but are not highly motivated. Each person recognizes. advertisement and commercials. be it camera.. Perception can be described as “how we see the world around us”. fragrance. tastes and sensations that we feel are known as stimuli. smells. mouth and skin.Typical Motivation Factors • • • • • • Achievement Recognition for achievement Responsibility for task Interesting job Advancement to higher level tasks Growth Combining the hygiene and motivation factors results in four scenario's • • • High Hygiene + High Motivation: The ideal situation where employees are highly motivated and have few complaints. Perception The second major psychological factor that influences consumer behavior is perception. Perception helps to explain the phenomenon of why different individuals respond differently to the same stimulus under the same condition. brand name. The different sights. A situation where the job is exciting and challenging. price and manufacture’s image. generally consumers tend to perceive the quality of performs on the basis of package. which are of immediate interest to the marketer. refrigerator. Employees are not motivated and have lots of complaints. motive and expectations are unique therefore each individual’s perception is unique. Since each individual’s needs. ears. sounds. its package. taste of your product. you are providing stimulus to your consumers through the physical shape. size. As a marketing manager. selective distortion and selective retention. Selective exposure: you must have noticed that when you are on the look out for purchasing a specific product. There are three aspects of perception. For the marketer. Your interest is to the stimuli so that you can highlight that particular stimulus of combination of stimuli. you suddenly seem to notice more than the usual number of advertisements pertaining to that specific product. The job is perceived as a paycheck. This is because of your selective exposures. selects. For example. However the salaries and work conditions are not OK. which evokes the most favorable perception in the maximum number of consumers. color. People are more likely to notice stimuli. feel. which relate to their immediate needs. values and expectations and this is known as perception. Low Hygiene + Low Motivation: The worst situation. All the time we are receding messages through our five organs viz. eyes.
and in the future may buy another one. issues. the marketer has to ensure that the stimuli are interesting enough to attract and hold their attention. attitude develops over the time with each fresh knowledge input. Selective Distortion: let us suppose you have decided to purchase a specific brand “A” of pressure cooker. neutral. The beliefs constitute the brand image about the brand. Suppose the housewife buys the pressure cooker and is satisfied with its performance. using the appropriate stimuli and cues and providing positive reinforcement.. which you have made. Attitudes get settled into specific patterns and are difficult to change. experience and influence. It is easier to market product that fits in well with the existing patterns of attitudes rather than change the attitudes to fit a new product concept. Starting from childhood. Having identified the potential customers. Much of an adult’s human behavior sis leaned behaviors. which she sees and hears. Attitude is a person’s enduring feeling. . Success cannot normally be attained without positive consumer attitudes. A marketer can build up demand for his brand by associating it with strong motives. firms. but a five year old clamoring for chocolate or chewing gum is the result of learned behavior.potential customers since other customers are not at all likely to notice the stimuli. and/or institutions. A newborn infant’s sucking at the feeding bottle is instinctive behavior. stimuli. Cues are minor stimuli that determine when. and then the changes are that she would like to use it as often as possible. was correct. A person may believe that a certain coking oil ‘X’ has the lowest fat content and is best for health. Beliefs & Attitudes Attitudes or opinions are positive. You are more likely to remember the positive feature of brand ‘A’ pressure cooker since they help reassure you that the decision. where and how the housewife responds. or negative feelings about goods. Thus. This belief may be based on some real facts or it may merely be a notion or opinion that the person has. a special introductory price offer are all examples of cues which influence a housewife’s response to the motive for buying a pressure cooker. because it implies that consumers can be made to learn the desired behaviors through in interplay of motives. cues. This is a very significant factor marketer. people. Learning Learning refers to the skill and knowledge gained from past experience that we apply to evaluate future decisions and situations. seeing it on display in a showwindow. Thus making the consumer ‘learn ‘ that the brand is good and worth patronizing. services. The motive is directed towards the stimulus object – a pressure cooker. responses and reinforcements. Positive feedback about pressure cooker from a friend. Since you have already made your decision you would seek only that information which reinforces the correctness of your decision. a marketer may find that his message is often not received in the intended manner but different consumers twist it in different ways. If you hear some positive remarks made about brands ‘B’ you would tend to find some shortcoming or flaw in that brand so that you so not feel that you have made a wrong decision by buying brand ‘A’ when you attempt to fit information to suit your join ideas or personal meaning. evaluation and tendency towards a particular idea or object. The housewife’s response to pressure cookers has been reinforced. A housewife has the need is strong enough to propel her to take action it becomes a motive. The marketer must ensure that consumers have relevant and correct information about the brand to facilitate formation of a positive brand image. the process is known as selective distortion. A belief is a descriptive thought that a person has about something. Selective retention: people forget much of the stimuli which they receive3 and only retain that information which reinforces their clause and decision. The stimuli are the various advertisements about the product.
the performance of a specific service. Seven useful sources are provided. Factors affecting the process are a consumer’s demographic. other times. the consumer recognizes that the good. Purchase decisions remaining at this stage center on the place of purchase. PURCHASE . The Internet has become a major source for consumer shopping information. social. service. place. Many consumers are hesitant to react to unfulfilled desires because there are risks and the benefits may be hard to judge. people. EVALUATION OF ALTERNATIVES: The alternatives are evaluated on the basis of the consumer’s criteria and the relative importance of these criteria. They are then ranked and a choice made. the amount of information sought also increases. it may be ended. the consumer engages in post-purchase behavior.STEPS IN CONSUMER DECISION MAKING PROCESS The final consumer’s decision process is the way in which people gather and assess information and make choices among alternative goods. INFORMATION SEARCH: Information search involves listing alternatives that will solve the problem at hand and a determination of the characteristics of each. services. PROBLEM AWARENESS: During problem awareness. a consumer will make a purchase. or idea may solve a problem of shortage or unfulfilled desire. A stimulus can be any of the following: • Social. organizations. Buying one item may lead to the purchase of another. A prospective consumer may be exposed to any or all of these types of stimuli. STIMULUS: A stimulus is a cue or drive meant to motivate a person to act. or support in return of ownership of a specific good. If the above elements are acceptable. It consists of the process itself and factors affecting the process. and so on. If a person is sufficiently stimulated. only a few steps are utilized At any point in the process. terms. places.The purchase act involves the exchange of money or a promise to pay for a product. person. • Noncommercial. • Physical. and psychological characteristics. Sometimes. he or she will go on to the next step in the decision process. • Commercial. Re-evaluation of the .As risk increases. all six stages in the process are used. The decision process consists of six basic stages (the next six sections). and ideas. Search can be internal and/or external . organization. POST-PURCHASE BEHAVIOR: Frequently. it must be determined whether the shortage or unfulfilled desire can be satisfied by any alternative. availability. Once the information search is completed.
purchase occurs when the consumer rates the alternative selected against performance standards. Cognitive dissonance, doubt that a correct purchase decision has been made, can be reduced by follow-up calls, extended warranties, and post-purchase advertisements. MARKETING SEGMENTATION It is widely thought in marketing that than segmentation is an art, not a science. The key task is to find the variable, or variables that split the market into actionable segments There are two types of segmentation variables: (1) Needs (2) Profilers
The basic criteria for segmenting a market are customer needs. To find the needs of customers in a market, it is necessary to undertake market research. Profilers are the descriptive, measurable customer characteristics (such as location, age, nationality, gender, income) that can be used to inform a segmentation exercise. The most common profilers used in customer segmentation include the following: Profiler Examples A Demographic „ Age, sex, family size „ Income, occupation, education „ Religion, race, nationality B Geographic „ Region of the country „ Urban or rural C Behavioral „ Product usage - e.g. light, medium, heavy users „ Brand loyalty: none, medium, high „ Type of user (e.g. with meals, special occasions) D Psycho graphic „ Social class „ Lifestyle type „ Personality type
Market segmentation process There are several important reasons why businesses should attempt to segment their markets carefully. These are summarized below.
Better matching of customer needs - Customer needs differ. Creating separate offers for each segment makes sense and provides customers with a better solution
Enhanced profits for business - Customers have different disposable income. They are, there- fore, different in how sensitive they are to price. By segmenting markets, businesses can raise average prices and subsequently enhance profits Better opportunities for growth - Market segmentation can build sales. For example, customers can be encouraged to “trade-up” after being introduced to a particular product with an introductory, lower-priced product Retain more customers - Customer circumstances change, for example they grow older, form families, change jobs or get promoted, change their buying patterns. By marketing products that appeal to customers at different stages of their life (“life-cycle”), a business can retain customers who might otherwise switch to competing products and brands Target marketing communications - Businesses need to deliver their marketing message to a relevant customer audience. If the target market is too broad, there is a strong risk that (1) the key customers are missed and (2) the cost of communicating to customers becomes too high / un profit- able. By segmenting markets, the target customer can be reached more often and at lower cost Gain share of the market segment - Unless a business has a strong or leading share of a market, it is unlikely to be maximizing its profitability. Minor brands suffer from lack of scale economies in production and marketing, pressures from distributors and limited space on the shelves. Through careful segmentation and targeting, businesses can often achieve competitive production and marketing costs and become the preferred choice of customers and distributors. In other words, segmentation offers the opportunity for smaller firms to compete with bigger ones. BABSES OF SEGMENTATION Demographic segmentation It consists of dividing the market into groups based on variables such as age; gender family size, income, occupation, education, religion, race and nationality. demographic segmentation variables are amongst the most popular bases for segmenting customer groups. This is partly because customer wants are closely linked to variables such as income and age. Also, for practical reasons, there is often much more data available to help with the demographic segmentation process. The main demographic segmentation variables are summarized below: Age: Consumer needs and wants change with age although they may still wish to consumer the same types of product. So Marketers design, package and promote products differently to meet the wants of different age groups. Good examples include the marketing of toothpaste (contrast the branding of toothpaste for children and adults) and toys (with many age-based segments). Life-cycle stage A consumer stage in the life cycle is also an important variable. Young child: Leo toys, Barbie dolls (Again these can be segmented by gender basis for small girls and boys) Adolescent: Trendy products and services like Jeans, T-shirts, and Coffee shops Young Adults: Mobikes, music systems, mobile phones Old people: Investment instruments, health packages for old Gender: Gender segmentation is widely used in consumer marketing. The best examples include clothing, hairdressing, magazines and toiletries and cosmetics. You have footwear exclusively for males, females and kids. For example, you have ‘Action’ School shoes exclusively for school-going children. Soft perfumes for women and deodorants for men.
Kinetic scooters are targeted more at women. Magazines dedicated to women like Femina. Income: You might have noticed that income is another popular basis for segmentation. Many companies target affluent consumers with luxury goods and convenience services. Good examples include Mercedes, Pizza Hut Pizzas, Ebony and Parker pen. By contrast, many companies focus on marketing products that appeal directly to consumers with relatively low incomes. Examples include Nirma, and Reliance phones besides others. Market segmentation - geographic segmentation Geographic segmentation tries to divide markets into different geographical units. These units include, Regions: e.g. in India, you can talk of North India, West India, as regions or zones and Delhi, Mumbai, Chennai as metropolitan cities and Jaipur, Lucknow and Baroda as smaller cities. Countries: perhaps categorized by size, development or membership of geographic region City / Town size: e.g. population within ranges or above a certain level Population density: e.g. urban, suburban, rural, and semi-rural Climate: e.g. Northern, Southern Geographic segmentation is an important process - particularly for multi-national and global businesses and brands. Many such companies have regional and national marketing programmes that alter their products, advertising and promotion to meet the individual needs of geographic units. Market segmentation - behavioral segmentation Behavioral segmentation divides customers into groups based on the way they respond to, use or know of a product. Behavioral segments can group consumers in terms of: Occasions: When a product is consumed or purchased. For example, cereals have traditionally been marketed as a breakfast-related product. Kelloggs have always encouraged consumers to eat break- fast cereals on the “occasion” of getting up. More recently, they have tried to extend the consumption of cereals by promoting the product as an ideal, anytime snack food. In India, lots of home shopping takes place on the occasion of ‘Divali’. TV sets sales goes up during world cup cricket. Usage: Some markets can be segmented into light, medium and heavy user groups Loyalty: Loyal consumers - those who buy one brand all or most of the time - are valuable customers. Many companies try to segment their markets into those where loyal customers can be found and retained compared with segments where customers rarely display any product loyalty. The holiday market is an excellent example of this. The “mass-market” overseas tour operators such as SOTC, Thomson, JMC and First Choice have very low levels of customer loyalty - which means that customers need to be recruited again every year. Compare this with specialist, niche operators such as those specializing for Bangkok and Singapore only; customers who have traveled with the brand in each of the last 15-20 years. Benefits Sought: You may note that this is a different and an important form of behavioral segmentation. Benefit segmentation requires Marketers to understand and find the main benefits customers look for in a product. An excellent example is the toothpaste market where research has found four main “benefit segments” - economic; medicinal, cosmetic and taste. Market segmentation – Psycho graphic segmentation Lifestyle: Marketers are increasingly interested in the effect of consumer “lifestyles” on demand. Unfortunately, there are many different lifestyle categorization systems, many of them designed by advertising and marketing agencies as a way of winning new marketing clients and campaigns! A. Lifestyles are the ways in which people live and spend time and money.
B. You can target final consumers by segmenting by social class and stage in the family cycle. C. A heavy-usage segment is a consumer group that accounts for a large proportion of an item’s sales relative to the segment’s size. D. Benefit segmentation groups consumers into markets on the basis of different benefits sought from a product. some example here: • Citibank International Gold card is for the ‘affluent’ people who travel abroad frequently • Five Star Hotels are for the foreigners, top business and corporate class to whom comfort and convenience are the parameters of ‘value’ • Black and White TV still sells in upcountry areas, small hotels and small shops to lower middle class TARGETING THE MARKET IDENTIFYING POTENTIAL MARKET SEGMENT : A firm develops consumer profiles after establishing bases of segmentation .These profiles identify potential market segments by aggregating consumers with similar characteristics and needs, and separating them from consumers with different characteristics and needs. You can understand from the following sections how a variety of firms could identify potential market segments and develop consumer profiles. Undifferentiated Marketing (Mass Marketing) A. An undifferentiated marketing approach aims at a large, broad consumer market through one basic marketing plan. B. 1. 2. 3. 4. Use of this approach has declined in recent years due to the following: Growth of competition. Stimulated demand by appealing to specific segments. Improved marketing research that pinpoints desires of different segments. A reduction in total production and marketing costs because of segmentation.
C. A major objective of undifferentiated marketing is to maximize sales. D. For successful pure mass marketing, a large group of consumers must have a desire for the same product attributes or consumer demand must be so diffused that it would not be worthwhile for a firm to aim marketing plans at specific segments. 1. A firm sells items through all possible outlets. 2. Both total and long run profits should be considered. Concentrated Marketing A. A concentrated marketing approach aims at a narrow, specific consumer group through one specialized marketing plan catering to the needs of that segment. B. Concentrated marketing is popular for small firms for these reasons: 1. Mass production, mass distribution, and mass advertising are not necessary. 2. It can succeed with limited resources and abilities by concentrating efforts. C. If concentrated marketing is used, it is essential for a firm to do a better job than competitors in several areas. 1. The company needs to tailor its marketing program for its segment better than competitors. 2. Competitors’ strengths should be avoided and weaknesses exploited. D. The majority fallacy, appealing to a large segment that is laden with competition,
B. 3. Sales maximization. A company must be careful to maintain product distinctiveness in each consumer segment and to guard its image.g. E. such as Hyundai. Others. and Microsoft appeal to two or more segments. A firm must balance revenues obtained from selling to multiple segments against the costs. offers a degree of exclusivity. such as Time Inc.TARGET . F. Differentiated marketing should enable the firm to achieve several objectives: 1. Per unit profits can be maximized through market segmentation. G. 1. A potentially profitable segment may be one ignored by other firms. 2. They have one or more major brands for the mass market and secondary brands geared toward specific segments. value for money in terms of worth. E. use both undifferentiated marketing and concentrated marketing approaches in their multiple-segmentation strategy. C.. • Positioning is all about ‘perception’. because it enables them to reach different consumers. Differentiated marketing combines the best attributes of undifferentiated marketing and concen trated marketing. It appeals to two or more distinct market segments. 2. Wholesalers and retailers usually find differentiated marketing to be desirable.should be avoided. A distinct niche can be carved out for a particular brand. H. Diversification. but not all segments. depending on modifications needed. F. allows orders to be concen. I. etc. with a different marketing plan for each. so do the results of the positioning map e. Company resources and abilities must be able to produce and market two or more different sizes.POSTION process • Positioning is undoubtedly one of the simplest and most useful tools to marketers. or products. brands. POSITIONING AND DIFFERENTIATION Positioning is defined as the act of designing the company’s offering and image to occupy distinctive place in the target market’s mind The main points that to be rememberd are: • Positioning is the final part of the SEGMENT . is different to my perception. the greater the opportunity for differentiated marketing. Total profits should rise as the number of segments serviced increases. there will . because only one segment is sought. As perception differs from person to person. G. The more clusters facing the firm. Differentiated marketing can be achieved without involvement in the majority fallacy. Firms such as Maruti-Suzuki use differentiated marketing to attract all segments.trated. D. Some companies. Differentiated Marketing (Multiple Segmentation) A. what you perceive as quality. Two or more sizable and distinct consumer groups are necessary. Total profits are not maximized. and encourages private labels. However. Costs vary. Recognition as a specialist.
therefore re-emphasizing the importance of perception!! New Product—need to communicate benefits POSITIONING ERRORS POSITIONING TYPES. next step will be to position a product within that market. Thailand promotes the friendliness of its people with the statement “The world meets in the land of smiles. For this strategy.be similarities in certain cases. in the minds of the consumer. positions itself as the place “where people who run things can stop running.tial development in Florida. positioning features the people who should visit the destination. Bermuda positions itself to the American meetings market with “Sometimes you have to leave the country to get any work done” which promises productive meetings in a relaxed environment. feature. emphasis is placed on the benefits of the particular features or attributes of the destination. a major tourist site in Hong Kong: Fisher Island.” With this positioning statement Malaysia is appealing not only to the sense of value (more for the money) but also to its natural attractions.” Positioning according to the users or class of users In this case. or customer benefit. value offered to visitors can be effectively utilized as exemplified by Malaysia which claims “Malaysia gives more natural value.” Positioning by Price Value International destinations are not usually positioned on the basis of price because lower prices may be perceived as connoting lower quality. How new and current items in the product mix are perceived. • After segmenting a market and then targeting a consumer.” Positioning with respect to a product class This technique is often used to associate a destination with experiences that are .APPROACHES Positioning by attribute. Mexico is positioned as “The meeting place for sun worshipers. send them to the peak. Positioning with respect to use or application Here a destination is positioned based on the reasons for visiting it.” referring to Victoria Peak. a luxury residen. However. Hong Kong appeals to the incentive travel market with the statement ‘When they’ve reached the top. Cancun. For example. relative to competing offerings. It refers to a place that the product offering occupies in • consumers’ minds on important attributes.
shape. location. to bring out differences between destinations. This approach is not used frequently in international tourism destination marketing since it may involve negative statements about another country or region. For example. product features. Durability: D urability in the product me a n s expecting the product to be operating under natural or stressful conditions. Performance quality: is the level. Consumers who perceive that a product is unique in servicing their needs often become brand loyal and are more willing to pay a premium price in order to gain the product benefits. TYPES OF DIFFERENTIATION Product differentiation In this the marketing mix variable are used to make unique product offer that stands out from the competitors. Conformance quality: C onformance for quality.” What is Differentiation? The task of positioning is to deliver a central idea about a company or an offering to the target market. cost and price. packaging. here’s one that’s close to heaven” for Israel. Visa credit cards compete with American Express by showing examples of places from around the world that do not accept American Express and only Visa cards are accepted. Differentiation is the process of adding a set of meaningful and valued differences to distinguish the company offering from competitors offerings. For example. It is important for products such as vehicles and kitchen appliances to be durable. However. This strategy is aggressive. coating and action time. Marketers have identified that the products are capable of higher differentiation than services such as automobile and furniture. which the product’s primary characteristics operate. and the shape of the product. which can be in many forms like Disprin. it can be differentiated by the dosage size. The problem with low conformance quality is that the product will disappoint some buyers. it is regularly employed in product and services marketing. Example of any product. Marketers starts by asking recent buyers about additional features that would improve satisfaction. in this the company is focusing on besting the competition and at the same time they are satisfying the consumers and gaining higher profits. promotion. Reliability: on reliability basis one is normally ready to pay a premium. quality. image. which are very important they are basically there to support the basic functions of the product. Yet there are diminishing return to higher performance quality so marketers must choose a level suited to the target market and rival performance levels. the size. The tools that are used to differentiate products include branding. Positioning simplifies what one is thinking of the entity. However the extra price must not be excessive and the product must not be subjected to rapid technological obsolescence. which is in terms of degree to which all of the produced units are identical and are able to meet the promised specification. given the potential market.” or holding a convention in Thailand is “Smooth as silk where the sky’s the limit.that is the physical structure. or “If your looking for an ideal meeting place. Features: they are the characteristics. it is basically a .extraordinary and/ or unique. you deserve a hotel that has none. Differentiation goes beyond positioning to spin a complex web of differences characterizing that entity. then determining which would be profitable to add. Ritz-Carlton Hotels is a little more subtle when they say. innovation and different service levels. As Disprin is essentially a commodity. ‘After a day of competition. Form: Companies can differentiate products on the basis of form. Positioning vis-à-vis the competition This approach is used when it is necessary to meet the competition head-on. the Principality of Monaco is positioned as “The fairy tale that does not end at midnight. The strategic planning institute found a significantly positive correlation between relative product quality and return on investment.
covering speed. durability. . provide customers with research so they can make more educated judgments and fell comfortable asking for help. install. repair and dispose of. Deluxe check printer. Installation: refers to the work done to make a product operational in its planned location. strong style does not always means high performance. the key to competitive success may lie in adding valued services and improving their quality. On the Web. Apple computers. reparability and style.com to offer even more health-related information. cuistomers are normally willing to pay a premium for products that are attractively styled.selves with little cost or time. An automobile made with standard parts that are easily replaced has highly reparability. a well-designed product is one that is pleasant to look at and easy to open. use. consumers can now order and receive groceries without going to the supermarket business web-based service such as peapod and net grocer. an important consideration for many products. Design is the integrating force that incorporates all of the qualities. Differentiation by installation is particularly important for companies that offer complex products such as computers.Davidson motorcycle. The main service differentiators are: Ordering ease: refers to how easy it is for cusotmer to place an order with the company. performance. the Rite aid drugstore chain’s communications program. To the company. Customer training refers to how the customer’s employees are trained to use the vendor’s equipment properly and efficiently. but also gives extensive training to users of this equipment. Delivery: it is related to how well the product or service is delivered to the customer. feature development.without being late once in 18 years. information system and advising services that the seller offers to buyers. General Electric not only sells installs expensive X-rays equipment in hospitals. this means the designer has to figure out how much to invest in form. Design: as competition intensifies. Rite Aid has teamed with drugstore. Baxter Healthcare has eased the ordering process by supplying hospitals with computer through which they send orders directly to Baxter.. which manufacturers major home appliances. Style has the advantage of creating distinctiveness that is difficult to copy. Ideal reparability would exist if users could fix the product them. inc. have an outstanding reputation for creating reliable appliances? Reparability: buyers prefer products that are easy to repair. has built an impressive reputation for shipping out its checks one day after receiving an order. However. For example. conformance. accuracy and customer care. Style: Style is look and feel of the product to the customer. Maintenance and repair: describes the service program for helping customers keep purchasing products in good working order.measure of the probability that a product will not malfunction or fail within a specified time period. Aesthetics have played a key role in such brands as Absolute vodka. For a company a well-designed product is one that is easy to manufacture and distribute. Godiva chocolate and Harley. Most of the time. Customer consulting refers to data. reliability. called the Vitamin Institute. The designer has to take all of these factors into account Service differentiation: When the physical product cannot be differentiated easily. May tag. Reparability is a measure of the ease of fixing a product when it malfunctions or fails. design offers a potent way to differentiate and position a company’s products and services. Buyers of heavy equipment expect good installation service..
Nike mainstream popularity turns off 12-to24-years-olds. reliability. Purchasing power depends on a buyer’s income. An effective image establishes the product’s character and value proposition. For example. According to Kotler an organization goes through the following steps in setting its pricing policy: - . the IBM people are professional and the Disney people are upbeat. and when it enter bids on new contract work. Singapore Airlines enjoys an excellent reputation in large part because of its fight attendants. Caterpillar’s success in the construction –equipment industry is based partly on superior channel development. responsiveness and communication. More broadly.Personnel differentiation Companies can gain a strong competitive advantage through having better-trained people. courtesy. and Northwestern Mutual life enjoy an excellent reputation.Pricing Policy: A firm must set a price for the first time when it develops a new product. Well. Something of value -usually purchasing power . expertise and performance. Identity comprises the ways that a company aims to identify or position itself or its product. credibility. Setting the Price. when it introduces its regular product into a new distribution channel or geographical area. Frito-Lay. or the sum of the values that consumers exchange for the benefits of having or using the product or service. Dell computers has also distinguished itself by developing and managing superior direct-marketing channels using telephone and internet sales. PRICING Price is the amount of money charged for a product or service. Its dealers are found in more locations. whereas image is the way the public perceives the company or its products.” What does a buyer think? To a buyer. For the image to work. including logos. and wealth.The amt of money charged for a product or service. Image differentiation Customer will response differently to company and brand image. PRICE. price is the value placed on what is exchanged. price is the sum of all the values that consumers exchange for the benefits of having or using the product or service.trained personnel exhibit six characteristics: competence. credit. it must be conveyed through every available communication vehicle and brand contact. Channel differentiation Companies can achieve competitive advantage through the way they design their distribution channels’ coverage.is exchanged for satisfaction or utility. “One can define price as that which people have to forego in order to acquire a product or service. media and special events. are better trained and performance more reliability than competitors dealers. it conveys this character in a distinctive way and it delivers emotional power beyond a mental image. The McDonald’s people are courteous. Cisco. The sales forces of such companies as General Electric. who prefers Airwalk and other alternative brands that convey amore extreme sports image. Image is affected by many factors beyond the company’s control.
They estimate the demand and costs associated with alternative prices and choose the price that produces maximum current profit. the firm needs to determine demand.Selecting the pricing Objective The company first decides where it wants to position its marketing offering. The following conditions favor setting a low price The market is highly price sensitive. as their major objective if they are plagued with overcapacity intense competition. in reality these are difficult to estimate. This strategy assumes that the firm has knowledge of its demand and cost functions. assuming the market is price sensitive. demand . maximum current profit. As long as prices cover variable costs and some fixed costs. or changing consumer wants. and a low price stimulates market growth. A company can pursue any of five major objectives through pricing: survival. Some companies want to maximize their market share. maximum market skimming. Determining the demand . Each price will lead to a different level of demand and therefore have a different impact on a company’s marketing objectives. Companies pursue survival. The clearer a firm’s objectives. In the normal case. the easier it is to set price.Following the identification of objectives. Survival is a short-run objective: in the long run. the firm must learn how to add value or face extinction. cash flow or rate of return on investment. 2. the company stays in business. They believe that a higher sales volume will lead to lower unit costs and higher long-run profit. a low price discourages actual and potential competition Companies unveiling a new technology favor setting high prices to “skim” the market. They set the lowest price. Sony is a frequent practitioner of market skimming pricing. or product-quality leadership. Many companies try to set a price that will maximize current profits. Production and distribution costs fall with accumulated production experience. maximum market share.
interest. Determining price elasticity of demand.In the case of prestige goods. Perfume Company raised its price and sold more perfume rather than less! Some consumers take the higher price to signify a better product. salaries and so on. fixed and variable. management needs to know how its costs vary with different levels of produc tion. The process of estimating demand therefore leads to i. While demand sets a ceiling and costs set a floor to pricing. They use market research to establish a new product’s desired functions. They deduct the desired profit margin from this price. To price intelligently. A company must pay bills each month for rent heat.Demand sets a ceiling on the price the company can charge for its product. Analyzing competitor ’s costs. operating and servicing the product over its lifetime. Total and variable costs for any given level of production. If your product or service is similar to a major competitor’s product or service. They are also less price-sensitive when price is only a small part of the total cost of obtaining. Within the range of possible prices determined by market demand and company costs.tween point you must consider in setting prices. However if the price is too high. If your product or service is inferior. Estimating and analyzing demand curve iii. prices and offers is also important factor in setting prices . Learn the price and quality of each competitor’s product or service by sending out comparison shoppers to price and compare. 5. prices and possible price reactions into account. TARGET COSTING . Estimating Price sensitivity of market ii. A company’s cost take two forms.and price are inversely related: the higher the price. Estimating Costs . the lower the demand . given its appeal and competitor’s prices. and this leaves the target cost they must achieve. Average cost is the cost per unit at the level of production. the demand curve sometimes slopes upward. They are called variable because their total varies with the number of units produced. it is equal to total costs divided by production. Company should also be aware that competitors might even change their prices in response to your price. engineers and purchasing agents to reduce them. Acquire competitors’ price lists and buy competitors’ products and analyze them. . These costs tend to be constant per unit produced. Variable costs vary directly with the level of production. The Japanese use a method called target costing. E. These c o s t s r e l a t e with pricing. Also ask customers how they perceive the price and quality of each competitor’s product or service.Costs change as a result of a concentrated effort by designers. Then they determine the price at which the product will sell. prices and offers A nalyzing competitor’s costs. There are different costs of organization. A seller can charge a higher price than competitors and still get the business if the company can convince the customer that it offers the lowest total cost of ownership (TCO). Selecting a pricing method - . you will not be able to charge as much as the competitor. 4. Fixed costs (also known as overhead) are costs that do not vary with production or sales revenue.g. then you will have to price close to the competitor or lose sales. Customers are most price-sensitive to products that cost a lot or are bought frequently? They are less price-sensitive to low –cost items or items they buy infrequently. competitors’ prices provide an in be. the firm must take the competitor’s costs. the level of demand may fall. Regardless of output. 3.
the company must consider additional factors. In sealed-bid pricing (i. For new products. Indirect or fixed costs (plant. The way around this problem is to recognize that the pricing deci. and the impact of price on other parties. These remaining seats may be offered at a discount so that some contribution is made to the flight expenses. the firm bases its price largely on competitors’ prices. The process is illogical also because to arrive at a cost per unit the firm must anticipate how many products they are going to sell. gain and risk pricing.There are three pricing methods that can be employed by a firm: 1. Marketing Oriented Pricing Cost Oriented Pricing . aircraft seats or hotel rooms lie idle. The most usual process is the drawing up of detailed specifications for a product and putting the contract out for tender. machinery etc) will remain unaffected whether one unit or one thousand units are produced. Potential suppliers quote a price. The risk here is that other customers who paid the full price may find out about the discounted offer and complain.The price of a product should be set in line with the marketing strategy. Consider aircraft seats. strategic objectives. Competitor Oriented Pricing 3. 6. The is an almost impossible prediction. . with less attention paid to its own costs or to demand. distribution and product benefits. Competitive Bidding .e. Marketing Oriented Pricing . Direct (or marginal) Cost Pricing . which are likely to increase as output increases. and for existing products price will be affected by strate. firms bid for jobs. promotion. only known to client and not to the other parties tendering for the service). the influence of other marketing –mix elements on price. including psychological pricing. The first problem with Full-cost pricing is that it leads to an increase in price as sales fall.This involves the calculation of only those costs. This method focuses upon the internal costs of the firm as opposed to the prospective customers’ willingness to pay. Competition-based approach . indicate the lowest price at which it is sensible to take business if the alternative is to let machinery. Selecting the final Price .Going-Rate Pricing In going-rate pricing. The firm might charge the same. more. Two methods are normally used Full cost pricing . Where the products offered by firms in a certain industry are very similar the public often finds difficulty in perceiving which firm meets there needs best. Like full cost pricing. All other things being equal the buyer will select the supplier that offers the lowest price. Direct costs then. which is confidential to themselves and the buyer. price will depend upon positioning. with the firms basing the price on what it thinks other firms will be bidding rather than on its own costs or demand. company –pricing policies.Many contracts are won or lost on the basis of competitive bidding. Direct cost approach is useful when pricing services for example. or less than its major competitors. In selecting that price.Here the firm determines the direct and fixed costs for each unit of product. if they are unused on a flight then the revenue is lost. strategy.Companies often use cost oriented pricing methods when setting prices. this method will include a profit margin in the final price. In cases like this (for example in financial services and delivery services) the firm may attempt to differentiate on delivery or service quality in an attempt to justify a higher selling price.sion is dependent on other earlier decisions in the marketing planning process.Pricing methods narrow the range from which the company must select its final price.gic objectives. The danger is that if price is viewed in isolation (as would be the case with full cost pricing) with no reference to other marketing decisions such as positioning. Cost Oriented Pricing 2.
or technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment. . Buyback arrangement: The seller sells a plant. This is not to say that there is anything particularly wrong with price dis. Price discounts and allowances .DIFFERENT PRICING STRATEGIES 1. The trouble is that. For example. Counter trade. buyback agreements. a practice known as counter trade. American compa nies are often forced _o engage in counter trade if they want the business. However. 2. and offset. For example. Barter) .Geographical pricing involves the’ company in deciding how to price its products to different. Barter: The direct exchange of goods.less carefully controlled and conceived as part of your overall marketing strategy. with no money and no third party involved Compensation deal: The seller receives some percentage of the payment in cash and the rest in products. Many buyers want to offer other items in payment. Discounting is common in many industries . Chemical company built a plant for an Indian company and accepted partial payment in cash and the remainder in chemicals manufactured at the plant. equipment. Customers in different locations and countries. discounting can be dangerous un. PepsiCo sells its cola syrup to Russia for rubles and agrees to buy Russian vodka at a certain rate for sale in the United States. A US. companies get themselves embroiled in a complex structure of cash. Geographical pricing (cash.The role of discount Offering discounts can be a useful tactic in response to aggressive competition by a competitor. A British aircraft manufacturer sold planes to Brazil for 70 percent cash and the rest in coffee. Offset: The seller receives full payment in cash but agrees to spend a substantial amount of the money in that country within a stated time period.in some it is so endemic as to render normal price lists practically meaningless. compensation deals. This issue is critical when buyers lack sufficient hard currency to pay for their purchases. quantity and other discounts. should the company charge higher prices to distant customers to cover the higher shipping costs or a lower price to win additional business? Another issue is how to get paid.counting provided that you are getting something specific that you want in return. Counter trade may account for 15 to 25 percent of world trade and takes several forms: barter. whilst getting absolutely nothing in return except a lower profit margin. all too often.
especially mortgage banks and auto companies.e. keep standard discounts low to retain maximum flexibility and ensure that they are consistent with your overall marketing and pricing strategy.cost warranty or service contract.Clearly the role of discounts will vary from one type of business to another and not all of the com. locations. 3.. Price discrimination occurs when a company sells a product or service at two or more prices that do not reflect a proportional difference in costs. This pays if the revenue on the additional sales compensates for the lower margins on the) boss-leader items. Manufacturers of loss-leader brands typically object because this practice can dilute the brand image and bring complaints from retailers who charge the list price. Automakers have even announced no-interest financing to attract Customers. and how long they are expected to last. the interest rate) of a loan and more about whether they can afford the monthly payment.age purchase of the manufacturers’ products within a specified time period. products. whatever business you are in. Low-interest financing: Instead of cutting its price. the seller charges a separate price to each customer depending on the intensity of his or her demand.Companies often adjust their basic price to accommodate differences in customers. and so on. Promotional Pricing . Consumers often worry less about the cost (i. as in the following cases: . or eliminate them altogether.degree price discrimination. If they do not work.tomers Cash rebates: Auto companies and other consumer-goods companies offer cash rebates to Encour. the company can offer customers lowinterest financing. Warranties and service contracts: Companies can promote sales by adding a free or low. Psychological discounting: This strategy involves setting an artificially high price and then offering the product at substantial savings Promotional-pricing strategies are often a zero-sum game. Manufacturers have tried to restrain intermediaries from loss leader pricing through lobbying for retail-price -maintenance laws. the seller charges less to buyers who buy a larger volume. Special-event pricing: Sellers will establish special prices in certain seasons to draw in more cus. will depend on the non-price benefits of your product.Companies can use several pricing techniques to stimulate early pur. If they work. but these laws have been revoked. In general. the seller charges different amounts to different classes of buyers. Discriminatory pricing . 4.chase: Loss-leader pricing: Supermarkets and department stores often drop the price on wellKnown brands to stimulate additional store traffic. In second-degree price discrimination.ments above will apply to you. they waste money that could have been put into other marketing tools. In first. But. competitors Copy them and they lose their effectiveness. you should always ask yourself what your discounts are supposed to achieve. Rebates can help clear inventories without cutting the stated list price. In part your ability to minimize discounts. stretch loans over longer periods and thus lower the monthly payments. In third-degree price discrimination. such as building up product quality and service or strengthening product image through advertising. Longer payment terms: Sellers. whether they are effective.
past business. Hotels and airlines use yield pricing. optional-feature pricing. by-product pricing.cial users by time of day and weekend versus weekday. Airlines are using yield pricing to capture as much revenue as possible.200. how-ever. New software applications. competitors have increased their use of discrimina. captive-product pricing. However.Customer-segment pricing: Different customer groups are charged different prices for the same product or service. the particular form of price discrimi.nate between sellers by comparing prices instantaneously. depending on the seat. For price discrimination to work. a fast-food restaurant. the person’s company. sellers use well-established price . Channel pricing: Coca-Cola carries a different price depending on whether it is purchased ill a fine restaurant. Sixth. A perfume manufacturer can put the perfume in one bottle. Time pricing: Prices are varied by season. Product-mix pricing .Price-setting logic must be modified when. Computer technology is making it easier for sellers to practice discriminatory pricing. and price it at Rest. the time of day (morning or night coach). Pricing is difficult because the various products have demand and cost interrelationships and are subject to different degrees of competition. Must not be able to resell the product to the higherprice segment. Fourth. museums often charge a lower admission fee to students and senior citizens. Location pricing: The same product is priced differently at different locations even though the cost of offering at each location is the same. the day of the week (workday or weekend). the season. day. Airlines charge different fares to passengers on the same flight. members in the lower. 5. the product is part of a product mix. Restaurants charge less to “early bird” customers. are also allowing buyers to discrimi. First. Coca-Cola considered raising its vending machine soda prices on hot days using wireless technology. It can put the same perfume in another bottle with a different name and image and price it at Rs. Second. 50. and product-bundling pricing. Of status (youth.nation must not be illegal. In this case. As a result of deregulation in several industries. Hotels charge less’ on weekends. give it a name and image. Product-form pricing: Different versions of the product ‘are priced differently but not proportionately to their respective costs Image pricing: Some companies price the same product two different levels based on image differ. the market must be segment able and the segments must show different intensities of demand. Product line Pricing: Companies normally develop product lines rather than single products and introduce price steps.ing class. We can distinguish six situations involving product-mix pricing: product-line pricing. or hour. or a vending machine.tory pricing. they can use software that monitors customers’ movements over the Web and allows them to cus. In many lines of trade. customers so disliked the idea that Coke abandoned it. two-part pricing. For instance. For example. by which they offer lower rates on unsold inventory just before it expires.ences at. Fifth. the firm searches for a set of prices that maximizes profits on the total mix. the cost of segmenting and policing the market must not exceed the extra revenue derived from price discrimination. Public utilities vary energy rates to commer. Third. military. senior citizen).tomize offers and prices. certain conditions must exist. the practice must not breed customer resentment and ill will.price segment. and so on. A theater varies its seat prices according to audience preferences for different locations. and lowering the price on cold days. competitors must not be able to undersell the firm in the higher-price segment.
or captive. The fixed fee should be low enough to induce purchase of the ser-vice. Telephone users pay a minimum monthly fee plus charges for calls beyond the minimum number. consisting of a fixed fee plus a variable usage fee.1500. Pricing is a sticky problem. they should be priced on their value. Any income earned on the by-products will make it easier for the company to charge a lower price on its main product if competition forces it to do so. features. and other chemi. Optional-feature pricing ‘Many companies offer optional products. Because customers may not have planned to buy all the components. The key issues associated with initiating price changes are the circumstances that may lead a company to raise or lower prices. Two-part pricing . An auto manufacturer might offer an option package at less than the cost of buying all the options separately. automobiles companies must decide which items to include in the price and which to offer as options. petroleum products. Restaurants face a similar pricing problem. A men’s clothing store might carry men’s suits at three price levels: Rs800.points for the products in their line.facturers of razors and cameras often price them low and set high markups on razor blades and film. The options available to the organization for making changes in prices would generally include the following: Initiating price cuts Either the company starts with lower costs than its competitors or it initiates price cuts in the hope of gaining market share and lower costs.The production of certain goods. Product-Bundling pricing . This explains why servers often press hard to get customers to order drinks.Some products requires the use of ancillary.cals—often results in by-products. the savings on the price bundle must be substantial enough to induce them to buy the bundle. Rs. Amusement parks charge an admission fee plus fees for rides over a certain minimum.Service firms often engage in two-part pricing.Sellers often bundle products and features. The service firm faces a problem sin1ilar to captive product pricing-namely. the seller offers goods both individually and in bun-dles. Manu. and high-quality suits with the three price points. defoggers. and estimating competitor reactions. The automobile buyer can order electric window controls. When offering a mixed bundle. A cellular service operator may give a cellular phone free if the person commits to buying two years of phone service. Many restaurants price their liquor high and their food low. Initiating price increases Like price cuts . Customers can often order liquor in addition to the meal. respectively. The food revenue covers costs. how much to charge for the basic service and how much for the variable usage. and the liquor produces the profit.4500. products. Customers will associate low-. the tactics that can be used. In mixed bundling. Other restaurants price their liquor low and food high to draw in a drinking crowd. and services along with their main product. The seller’s task is to establish perceivedquality differences that justify the price differences. If the by-products have value to a customer group. By-product pricing . Pure bundling occurs when a firm only offers its products as a bundle. average-. Captive-product pricing .meats. the profit can then be made on the usage fees. A successful price increase . the seller normally charges less for the bundle than if the items were purchased separately. and Rs. PRICE CHANGES Companies often face situations where they may need to cut or raise prices. light dimmers. and an extended warranty. A theater company will price a season subscription at less than the cost of buying all the performances separately. a firm can also initiate to increase the price.
such as industrial construction and heavy equipment. it can raise its prices. Company -owned outlets. ration supplies to its customers.crease that takes place before delivery. They can often be performed better through specialization. price controls. or both. When an automaker signs up independent dealers to sell its automobiles. Escalator clauses are found in contracts for major industrial projects. The company’s pricing depends on whether it uses mass-merchandisers or high. a 1% increase will increase profits by 33% if sales volume is unaffected. if the company’s profit margin is 3% of sales. The channels chosen intimately affect all the other marketing decisions.quality boutiques. like aircraft con. The circumstances provoking price increases are generally as follows: Cost inflation: A major circumstance provoking price increases is cost inflation. and deliver its offerings Marketing channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption! Marketing-channel decisions are among the most critical decisions facing management. Unbundling: The Company maintains its price but removes or prices separately one or more ele. For example. Over demand: when a company cannot supply all of its customers. DISTRIBUTION Distribution as follows :A channel of distribution comprises a set of institutions which perform all of the activities utilised to move a product and its title from production to consumption. the automaker cannot buy them out the next day and replace them with.can raise profits considerably.matched by productivity gains squeeze profit margins and lead companies to regular rounds of price increases.ments that were part of the former offer. They can be shifted among channel members. in anticipation of further inflation and govt. such as free delivery or installation. Escalator clauses: The company requires paying today’s price and all or part of any inflation in. In addition. the company’s channel decisions involve relatively long-term commitments to other firms. Rising costs un. augment. We define a value network as follows: A value network is a system of partnerships and alliances that a firm creates to source. The firm’s sales force and advertising decisions depend on how much training and motivation dealers need. Companies often raise their prices by more than cost increase. in a practice called anticipatory pricing.struction and bridge building. This pricing is prevalent in industries with long production lead times. Reduction of discounts: The company instructs its sales force not to offer its normal cash and quantity discounts. . The price can be increased in the following ways: Methods of dealing with over demand: Delayed quotation pricing: The company does not set a final price until the product is finished or delivered. An escalator clause bases price increases on some specified price index. Distribution Channel Function: All channel functions have three things in common: • • • They use up scarce resources.
customers normally prefer fast delivery channels. Perishable products require more direct marketing. 2. Waiting time : The average time customers of that channel wait for receipt of the goods. Analyzing customer needs 2.DITRIBUTION CHANNEL FUCTION DAIGRAM CHANNEL DESIGN DECISIONS: Following four steps help design a channel system :1. Evaluating major channel alternatives 1. installation. such as building materials. several market segments that desire differing service output levels can be identified. Effective planning requires determining which market segments to serve and the best channels to use in each case. are sold directly by company sales representatives. Identifying major channel alternatives 4. channel institutions should arrange their functional tasks to minimize total channel costs with respect to desired levels of service outputs Usually.tomers prefer a greater assortment because more choices increase the chance of finding what they need. Service backup: The add-on services (credit.vided by the-marketing channel. repairs) provided by the channel. Analyze Customers’ Desired Service Output Levels It is imperative to understand that in designing the marketing channel. the greater the work provided by the channel. Establish Objectives and Constraints Channel objectives should be stated in terms of targeted service out. delivery.put levels under competitive conditions. Channels produce five service outputs Lot size : The number of units the channel permits a typical customer to purchase on one occasion. require channels that minimize the ship. Channel objectives vary with product characteristics. Establishing channel objectives 3.ping distance and the amount of handling. Products requiring installation or maintenance services. The greater the service backup.sired by target customers. Non standardized products. Bulky products. such as custom-built machinery and specialized business forms. cus. Identify Major Channel Alternatives Companies can choose from a wide variety of channels for reaching customers-from . 3. Normally. the marketer must understand the service output levels de. Spatial convenience : The degree to which the marketing channel makes it easy for customers to purchase the product Product variety: The assortment breadth pro.
Conditions of sale 3. there is usually channel conflict and excessive cost. Intensive distribution the terms and responsibilities of each channel member. direct mail. Selective distribution 4. Exclusive dealing 3.actions. distributors. cost. 1. and the Internet. but the company loses direct contact with customers. 3. telemarketing. 5.effective trade relations mix. 2. Each channel hopefully reaches a different segment of buyers and delivers the right products to each at the least cost. Each channel has unique strengths as well as weaknesses.sales forces to agents. Distributors’ territorial rights 4. Selecting Channel Members Training Channel Members Motivating Channel Members Evaluating Channel Members Modifying Channel Arrangements . The problem is further complicated by the fact that most companies now use a mix of channels. Evaluate the Major Alternatives (time. Price policy 2. Sales forces can handle complex products and trans. A channel alternative is described by three elements • The types of available business intermediaries. 4. • the number of intermediaries needed. image parameters particularly) Economic criteria—sales versus costs Control and adaptive criteria—degree of intermediary commitment Channel Management Decision: Channel management calls for selecting particular middlemen and motivating them with a cost. 1. The Internet is much less expensive. Exclusive distribution 2. and 1. The aim is to build a “partnership” feeling and joint distribution programming. When this does not hap. but they are expensive.pen. dealers. Distributors can create sales. but it cannot handle complex products.
growth and profit record solvency. A producer will occasionally discover that it is paying too much to particular intermediaries for what they are actually doing. Company needs to view its intermediaries in the same way it views its end users. Training channel members Companies need to plan and implement careful training programs for their intermediaries. or unpleasant. and reputation 2. They can exercise the following types of power Coercive power Reward power Legitimate power Expert power Referent power More sophisticated companies try to form partnerships and can evolve into long-term distribution programming. inefficient. 3. number of lines carried. One manufacturer that was compensating a distributor for holding inventories found that the inventories were actual held in a public warehouse at its expense. Selecting Channel Members Companies need to select their channel members carefully. Motivating channel members A. customer delivery time treatment of damaged and lost goods. be.vice. average inventory levels. channel offering is tailored to provide superior value to these intermediaries Producers vary in their ability to attract intermediaries .cause they will be viewed as the company by end users . 3. re motivated. and other capability-building programs to improve intermediaries’ performance. and cooperation in promotional and training programs. or Hyundai if one or more of their outlets or dealers consistently appeared dirty. Under performers need to be counseled. To customers. . or terminated. retrained. Producers should set up functional discounts in which they pay specified amounts for the trade channel’s performance of each agreed-upon ser. They prepare the channel member employees to perform more effectively and efficiently The com. It needs-to determine intermediaries’ needs and construct a channel positioning such that its. Selecting channel members would therefore involve evaluate experience.pany should provide training programs. Consider the negative impression you would get of McDonald’s. Evaluating channel members Producers must periodically evaluate intermediaries’ performance against such standards as sales-quota attainment. . the channels are the company.1. cooperativeness. market research programs.
the mar. has contracts with them. B.They are evaluated on the following parameters sales quota attainment.fication to meet new conditions in the market. bargaining power. wholesalers. customer delivery time. Corporate VMS 2. or has so much power that they all cooperate. innovative distribution channels emerge. Therefore the system will require periodic modi. VMS achieve economies through size.place . treatment of damaged and lost goods. Channel Dynamics: A. Vertical marketing system comprises of 1. wholesalers. and retailers each a separate business seeking to maximize its own profits even at the expense of profits for the system as a whole . and the product moves into later stage in the product life cycle. Vertical Marketing System A distribution channel structure in which producers. Modifying channel arrangements A producer must periodically review and modify its channel arrangement. cooperation in promotional and training programs 4. Administered VMS 3. Conventional Marketing System A channel consisting of one or more independent producers. average inventory levels. A. Contractual VMS . One channel member owns the others. result of strong channel members’ attempts to control channel behavior and eliminate the conflict that results when independent members pursue their own objectives. and retailers act as a unified system. VMS s arose as. and elimination of duplicated ser-vices. consumer buying patterns change.ket expands new competition arises. Modification becomes necessary when the „ „ „ „ „ distribution channel is not working as planned.
Two or more unrelated firms put together re. Franchise organizations d. Multi channel Marketing Systems A distribution system in which a single firm sets up two or more marketing channels to reach one or more customer segments. Amount of service 2. Amount of service A Self-service retailers Customers are willing to self-serve to save money . customized selling ii. Can be permanent or temporary D. Organizational approach 1. complementers. outside innovators) What is Retailing? Retailing includes all the activities involved in selling goods or services directly to final consumers for personal. Corporate VMS A vertical marketing system that combines successive stages of production and distribution under single ownership—channel leadership is established through common ownership. Planning channel architecture (companies thinking through their channel architecture— which are efficient and not. technology. ii. Horizontal Marketing Systems A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity. Retailer cooperatives c. A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing. strivers. ii. not through common ownership or contractual ties.ties. Types of Retailing. Multi channel marketing—single firm uses two or more marketing channels to reach one or more customer segments—advantages: increased coverage. and developing new means) iii. Roles of individual firms in a multi channel system: (insiders. Relative prices 4. i. 1.i. marketing resources or other variables to take on the venture alone iii. but through the size and power of one of the par. Manufacturer-sponsored retailer franchise or manufacturer-sponsored wholesaler franchise C. Contractual VMS could have the following forms a Wholesaler-sponsored voluntary chains b.sources or programs. Contractual VMS A vertical marketing system in which independent firms at different levels of production and distribution join together through contracts to obtain more economies or sales impact than they could achieve alone. Administered VMS A vertical marketing system that coordinates successive stages of production and distribution. lower cost. transients. i. iii. Product lines 3. non business use. Each firm lacks the capital.
B Discount stores Limited-service retailers Most department stores C Full-service retailers Salespeople assist customers in every aspect of shopping experience High-end department stores Specialty stores 3. Superstores Food. nonfood. Supermarkets D. Product lines A Specialty stores Narrow product lines with deep assortments B Department stores Wide variety of product lines C. Category killers Giant specialty stores 3. Organizational approach A Corporate chain stores Commonly owned / controlled B Voluntary chains Wholesaler-sponsored groups of independent retailers C Retailer cooperatives Groups of independent retailers who buy in bulk D Franchise organizations Based on something unique E Merchandising conglomerates Diversified retailing lines and forms under central ownership . and services F. Relative prices A Discount stores Low margins are offset by high volume B Off-price retailers C Independent off-price retailers D Factory outlets E Warehouse clubs 4. Convenience stores Limited line E.
. The retailer’s product assortment must match the target market’s shopping expectations. Price Prices are a key positioning factor and must be decided in relation to the target market. trade ins. 5. retailing too is concerned with defining its target market. Promotion methods include :Ads Special sales Money saving coupons Sample distribution etc. The challenge is to develop a product-different ion strategy. check cashing . The store can adopt the following options :Feature exclusive national brands that are not available at competing retailers Feature blockbuster distinctive merchandise events Feature surprise or ever-changing merchandise Feature the latest or newest merchandise first Offer merchandise customizing services Offer a highly targeted assortment 3.accepting telephone and mail orders. The retailer has to decide on product assortment.breadth and depth . They will plan marks down on slower –moving merchandise . adjustments and returns. Until the target market is defined and profiled . 2. alterations and tailoring . advertising messages and media. the retailer cannot make consistent decisions on product assortment .gift wrapping . Post purchase include – shipping and delivery . Target Marketing and Positioning Like other marketing activities. advertising. the product and service assortment mix and competition.installations. They will run storewide sales. store décor. parking . Promotion Retailers use a wide range of promotion tools to generate traffic and purchases. shopping hours. repairs etc. Service mix and Store’s atmosphere The retailers must also decide on the service mix to offer customers Pre-purchase services. Most retailers will put low prices on some items to serve as traffic builders or loss leaders. Product assortment. 4. price. store’s atmosphere Price Promotion Place (location) 1.Retail Marketing decisions Various marketing decisions affecting the retail business :Target marketing and positioning Product assortment. Retailers must also pay attention to pricing tactics. and service levels. Ancillary services –general information . Service mix. window and interior display . All retailers would like to achieve high volumes and high gross margins. restaurants . fitting rooms . engraving. fashion shows.
There has been a boom in retail trade in India owing to a gradual increase in the disposable in. these modern formats are showing robust growth as several retail chains have established a base in metropolitan cities. This trend towards larger outlets is leading to a rise in average retail space.039. chemist shops. However.ever. Growth of giant retail 4 . worth approximately Rs7. The retailing sector in India is highly fragmented and predominantly consists of small independent. supermarkets. there were an estimated 11. More and more players are coming into the retail business in India to introduce new formats like malls. not just goods Retailing in India: Are you game for it!!!!! They say ‘If you aren’t in IT or entertainment. Growing investment in technology 5 .7 billion. a billion people in overall population leads to very large numbers. Organized retailing represent a small fraction of the Indian retail market. especially in south India.’ In India. There are no hypermarkets in the country as yet. Retail Infrastructure In 2001.4 sq m per outlet. Retailers can locate their stores in the central business district. Growth of intertype competition. the country is also dotted with low-cost kiosks and pushcarts. organised retail trade in India was worth Rs11.5 billion. More so.comes of the middle class households. the non-food retailing sector registered faster year-on-year growth than food sales. space and rentals are proving to be the largest constraints to development of large formats in metropolitan cities.2 billion in 2001 while non. The share was 62.tail outlets in the country. with an average selling space of 29. since retailers are aiming the prime . a community shopping center TRENDS IN RETAILING the trends in retail business and the main developments retailers and manufacturers need to take into account in planning competitive strategies 1. However. and are spreading all over India at a rapid pace. you ought to be in retailing. In 2001. Total retail sales area in India was estimated at 328 million sq m in 2001.ing the boom times altogether.2 million re.food sales were worth Rs4189.6. it could still add up to say the sizeable number. 3 .228. Global presence of major retailers 6. owner-managed shops. Place Location is often described as the most successful strategy for retailing. How. discount stores. a regional shopping center . and furnishing stores. New retail forms and combinations 2 . While the middle class may not be as big as expected. Selling an experience. department stores and even changing the traditional looks of book. Food sales constitute a high proportion of total retail sales.stores. The concept of retailing chain stores is at a very nascent stage in India.7% in 2001. There are some 12 million retail outlets in India. Besides. the retail sector is the second largest employer after agriculture. Or you’re miss.
Competitive Environment Bata India Ltd is one of the largest retailer. There is also a strong trend in favour of onestop shops like supermarkets and department stores. each retail business at the time of writing was run as a separate entity.stant. as many as 50 new malls will be coming up by 2005 in the smaller cities as well.069. . Another strong retailer is Subhiksha. The demand for frozen. while Health & Glow by RPG Group.keting arrangement with Lotto and Nike as well.locations. with a mar. in both food and non-food segments. Each mall typically has an anchor. The anchor is expected to attract a variety of con. is the second largest fascia in the country with retail sales of Rs2. The K Raheja-run department store chain.3 billion by 2006. They have big label stores as well as in.kets Ltd. Rising incomes has led to increasing demand for better quality products while lack of time has led a demand for convenience and service. The mid 1990s marked the arrival of new. airy and equipped with modern amenities. in order to protect the interests of the small retailers. with further growth of organised retailing. The proportion of sales through organised retailing is estimated to increase to around 6% by 2010. It has also acquired the Crossword chain of book. and a retail turnover of Rs6 billion in 2001. The real estate development group has converted its retailing operation into an Indian success story.stores. Health & Glow. According to estimates apart from the metropolitan and larger cities. In urban India. in.house eateries and entertainment zones. The lobby is based on the premise that modern retail will impact the livelihood of millions of small family-run businesses.7 billion in 2001. which occupies a sizeable percentage of the total usable area. ready-to-cook. whose discounters and chemists/druggist chain is very popular in South India. with 1600 footwear stores spread across the country. with interests in supermarkets. More and more women are also turning to corporate jobs. Key Developments in Retailing 100% foreign direct investment (FDI) in the re. families are experiencing growth in income and dearth of time. Foodworld is operated by Foodworld Supermar. Spencer & Co Ltd another large retail group in the country. The stores retail mainly Bata products. The turnover from private labels by major retail chains was estimated at around Rs 1200 million in 2001. The number of large mega-malls is expected to increase significantly as India is now experiencing a “mall boom”. which is adding to the family income but making lifestyles extremely busy. which are spacious. With almost a monopolistic presence in the organised footwear market until the 1980s. The trend to market private labels by a specific retail chain is catching on in India as it helps to improve margins. Shopping malls is set to one of the most visible faces of the Indian retail scene by the end of 2002. ready-to-eat food has been on the rise. Retail Forecasts The retail business is expected to reach Rs19. especially in the metropolitan and large cities in India. music stores and the beauty and health chain.sumers and hence is the key to increasing foot traffic. Shoppers Stop.endowed malls and shopping centres. There is a strong lobby of small traders that has been vocal on the issue of not permitting FDI into retail. well. Bata is synony.mous with footwear in middleclass India.tailing sector is not permitted yet. However.
Wholesalers who fail to carry adequate assortments and inventory and provide satisfactory ser. In the future. Customers are also looking for ambience and convenience in shopping.riod. make deliveries.General-merchandise wholesalers carry several merchandise lines. Full-Service Wholesalers: Carry stock. in both food and nonfood sectors. 1.General-line wholesalers carry one or two lines. Progressive wholesalers. maintain a sales force. or mill supply houses and fall into two categories: full service and limited service. offer credit. pricing. offering credit. but at the same time.vice are likely to be bypassed by manufacturers. In such a scenario. distributors. They are called jobbers. Following are the functions performed by wholesalers. . This would continue more strongly in the forecast pe. the consumer ability to spend will increase. Merchant Wholesalers: Independently owned businesses that take title to the merchandise they handle. . the more successful ones will be those that provide faster service. adapt marketing concepts and streamline their costs of doing business. the retailers will have to increasingly develop shopping as an experience and at the same time.Specialty wholesalers carry only part of a line (2) Industrial distributors sell to manufacturers rather than to retailers and provide several services—carrying stock. and providing delivery.There is already a strong trend in favour of large format retail outlets. promotion. What is Wholesaling? Wholesaling includes all the activities involved in selling goods or services to those who are buying for the purpose of resale or for business use. as people are showing preference for one-stop shops. with more dual income families. There are two types of full-service wholesalers (1) Wholesale merchants sell primarily to retailers and provide a full range of service . Selling and promoting Buying and assortment building Bulk breaking Warehousing Transportation Financing Risk bearing Market information Management services and counseling Types of Wholesaling. on the other hand. product assortment and services. Wholesaler Marketing Decisions Wholesalers also must make decisions on their target market. it is predicted that the time available for shopping will go down. Target Market Product Assortment and Services . and provide management assistance. and place.
This means that capital is not tied up in goods. There are low barriers low barriers to entry as set up costs are low. They do not tend to take title to the goods. 2. Retailers often have a strong ‘brand’ them. . They provide storage facilities. foodstuffs). Channel Intermediaries . and many others. An agent will typically secure an order for a producer and will take a commission.g. but the title will remain with the producer. or travel agents. will store the stock. For example. They take ownership or ‘title’ to goods whereas agents do not (see below). and Jumbo in Portugal.seas distributors. direct marketing (from manufacturer to user without an intermediary).tact cost between the producer and consumer e.Agents Agents are mainly used in international markets.g. Scottish Salmon direct from an Inverness fishery. Channel Intermediaries .Wholesalers They break down ‘bulk’ into smaller pack. There is a paradigm shift in commerce and consumption which benefits distribution via the Internet.osed to many products.Internet The Internet has a geographically disperse market. The retailer will give the final selling price to the product. 1. a ‘stockist agent’ will hold consignment stock (i. The main benefit of the Internet is that niche products reach a wider audience e. Many produce their own brochures and use their own telesales operations. The retailer will hold several other brands and products.g. Channel Intermediaries . Modelo.g. They are difficult to motivate. agents.Price Decision Promotion Decision Place Decision Types of Channel Intermediaries And Their Functions There are many types of intermediaries such as wholesalers. or sales force costs.Retailers Retailers will have a much stronger personal relationship with the consumer. Channel Intermediaries . retailers.e. over.ages for resale by a retailer. They buy from producers and resell to retailers. customer service costs. Ross and Wall-Mart in the USA. 4.g. cheese manufacturers seldom wait for their product to mature. The main modes of distribution will be looked at in more detail. 3. and Alisuper. A consumer will expect to be ex. They are difficult to keep control of due to the physical distances involved.selves e. electrical wholesalers. Wholesalers offer reduce the physical con. They sell on to a wholesaler that will store it and eventually resell to a retailer. the Internet. Products and services are promoted and merchandised by the retailer. This approach is used where goods need to get into a market soon after the order is placed e. A wholesaler will often take on the some of the marketing responsibilities. However. Agents can be very expensive to train. Retailers will often offer credit to the customer e.
when to say it. affective. and to whom to say it. response. Marketers also need to understand the fundamental elements of effective communications. Four represent major communication function – encoding.rent users. Two represent the major parties in a communication – sender and receiver. They must encode their messages so that the target audience can decode them. deciders. look for information on the Internet. particular publics. This understanding will help them allocate communications dollars more efficiently.PROMOTION. The model emphasizes the key factors in effective communication. Senders must know what audiences they want to reach and what responses they want to get. Figure above shows a communication model with nine elements. They must transmit the message through media that reach the target audience and develop feedback channels. or remind target market members. The target audience is a critical influence on the communicator’s decisions on what to say. 2. The more the sender’s field of experience overlaps with that of the receiver. where to say it. Determine the communication objectives . the marketer might want to put something into the consumer’s mind. or organisations to di. THE COMMUNICATION PROCESS: The whole marketing mix must be integrated to deliver a consistent message and strategic positioning. and observe computers in a store. or influencers. A promotion mix (sometimes called a marketing communications mix) is the particular combination of promotional methods a firm uses to reach a target market. the more effective the message is likely to be. or the general public. The last element in the system is noise (random and competing messages that may interfere with the intended com. deconding. groups.munication). The starting point is an audit of all the potential interactions target customers may have with the product and the company. . Developing an Effective Communications 1. groups. and feedback. Promotion’s role is to communicate with individuals.The marketer can be seeking a cognitive. some.INTEGRATED MARKETING COMMUNICATION Marketing communications which is one of the four major elements of the company’s marketing mix. persuade. To monitor the responses. Identify the target audience -The process must start with a clear target audience in mind: potential buyers of the company’s products. Marketers need to assess which experiences and impressions will have the most influence at each stage of the buying process. cur.rectly or indirectly facilitate exchanges by in. or behavioral response. see television ads. That is.ucts.one interested in purchasing a new computer would talk to others. how to say it. Definition: Promotion is communication about an organization and its products that is intended to inform. For example. Two represent the major communication tools – message and media.forming and persuading one or more of the audiences to accept an organisation’s prod. individuals. read articles.
illustration. arouse desire. the communicator moves to developing an effective message. Ideally.What is important is the spokesperson’s credibility. Presenters have to pay attention to facial expressions.Having defined the desired response.) how to say it logically ( message structure ). Pharmaceutical companies what doctors to testify about product benefits because doctors have high credibility. The “sound” of an announcer promoting a used automobile has to be different from one promoting a new Cadillac. and color. Anti drug crusaders will use ex-drug addicts because they have higher credibility for students than teachers do. Hold interest. management searches for an appeal. and vocalizations. copy. In a print ad.3. scent. Message structure Effectiveness depends on structure as well as content Message format The message format needs to be strong. If the message is carried by the product or its packaging. posture. voice qualities. For a radio message. This is why advertisers often use celebrities . how to say it symbolically ( message format). texture. emotional. idea. dress. theme. and elicit action Formulating the message will require solving four problems: what to say ( message content. and hairstyle. the message should gain attention. the communicator has to choose words. Design the message . size. and who should say it (message source). and shape Message source Message delivered by attractive or popular sources achieve higher attention and recall. and moral. or unique selling proposition ( USP). all these elements plus body language ( nonverbal clues) have to be planned. Message content: In determining message content. the communicator has to pay attention to color. . the communicator has to decide on headline. gestures. There are three types of appeals: rational. If the message is to be carried on television or in person.
and even telemarketing. Establish the total marketing communication budget .motion budget over the give promotional tools – advertising. sales promotion.Companies must allocate the pro. quick. Deciding on the marketing communications mix . special interest magazines. public relations and publicity. “ know that half of my advertising is wasted. but I don’t know which half. For example.ness. and convincing. B. trustworthiness. C. the Internet. attractive. and likability. the department. Their presentation must be crisp.The communicator must select efficient channels to carry the message. pharmaceutical company salespeople can rarely wrest more than five minutes’ time from a busy physician. D. John Wanamaker. CD ROMS. What Is Integrated Marketing Communications? A. Here is how one company touches several bases. 4. 5. such as cable TV. This makes pharmaceutical sales calling extremely expensive. Database marketing is also allowing marketers to be more precise in targeting individual customers.store magnate. Marketers can now take advantage of more precisely targeted promotional tools. The industry has had to expand its battery of communication channels. Integrated marketing communications is the coordination of promotion efforts to ensure the maximum informational persuasive impact on customers. and voice broadcasts. passing out free samples. . A major goal of integrated marketing communications is to send a consistent message to customers. sending direct mail ( including audio and videotapes ). The concept of integrated marketing communications has been increasingly accepted for a number of reasons. and direct marketing. sales force. Select the communication channels . once said.One of the most difficult marketing decisions is determining how much to spend on promotion. direct mail. These include placing ads in medical journals.” 6.What factors underlie source credibility? The three most often identified are expertise. This approach fosters long-term customer relationships and the efficient use of promotional resources. Mass media advertising is used less today because of its high costs and less predictable audience sizes.
and the Phoenicians painted pictures promoting their wares on large rocks along parade routes. Informative advertising aims to create awareness and knowledge of new products or new features of existing products. Persuasive advertising aims to create liking. remind. Setting the advertising objectives . and purchase of a product or service. four-color Coca-Cola ads in magazines are intended to remind people to pur. Reminder advertising aims to stimulate re. setting the advertising budget. goods. Ex. and evaluating advertising campaigns.The advertising objectives must flow from prior decisions on target market. The Romans painted walls to announce gladiator fights. Archaeologists working in the countries around the Mediterranean Sea have dug up signs announcing various events and offers. Modern advertising.Define Advertising Advertising.form.” Comparative advertising works best when it elicits cognitive and affective motivations simultaneously. developing advertising strategy (message decisions and media decisions). and marketing mix.chase Coca-Cola Reinforcement advertising aims to convince current purchasers that they made the right choice. 1. Automobile ads often depict satisfied customers enjoying special features of their new car. which makes an explicit comparison of the attributes of two or more brands. market positioning.uct image building and tend to under spend There are five specific factors to consider when setting the advertising budget: . or services by an identified sponsor.pensive. or reinforce. and that industrial companies underestimate the power of company and prod. Advertising objectives can be classified according to whether their aim is to in.Some critics charge that large. preference. Some persuasive advertising uses comparative advertising. however. Advertising can be traced back to the very beginnings of recorded history. conviction. Deciding on the advertising budget .peat purchase of products and services..Any paid form of non personal presentation and promotion of ideas. 2. consumer packaged-goods firms tend to overspend on advertising as a form of insurance against not spending enough. persuade. DEVELOPINGADVERTISEMENT PROGRAM Marketers must make four important decisions when developing an advertising program. is a far cry from these early efforts. setting advertising objectives.
Then the results of these decisions need to be evaluated 5.ness. and deciding on geographical media allocation. The steps here are deciding on desired reach. such as detergents.High. 5. 2. Still.market-share brands usually require less advertising expenditure as a percentage of sales to maintain share. Choosing the advertising message: Message generation: advertising people have proposed different theories for creating an effective message. Some ads aim for rational positioning and other for emotional positioning.In a market with a large number of competitions and high advertising spending. soft drinks ) re. Evaluating advertising effectiveness . Newspaper advertising accounts for almost one-fourth of all advertising expenditures.quire heavy advertising to establish a differential image. .per-impression basis. but often more important. Stage in the product life cycle . Market share and consumer base . 3. 4. cigarettes.1. Most marketers work hard to communicate openly and honestly with consumers. coffee. abuses occur. 3. exclusive. and public policy makers have developed a substantial body of laws and regulations to govern advertising.New products typically receive large advertising budgets to build awareness and to gain consumer trial. selecting specific media vehicles. 4. and vodka. and impact. Product substitutability: Brands in a commodity class ( cigarettes. Deciding on media and measuring effectiveness After choosing the message.ket size requires larger expenditures. frequency. To build share by increasing mar.sage to consumers has an important impact on the advertising budget. beer. Newspapers. Advertising frequency: The number of repetitions needed to put across the brand’s mes. Advertising is also important when a brand can offer unique physical benefits or features. deciding on media timing. Social responsibility review advertisers and their agencies must be sure their “creative” advertising does not overstep social and legal norms. Dik Twedt suggested that messages be rated on desirability.Good planning and control of advertising depend on measures of advertising effectiveness. Message evaluation and selection a good ad normally focuses on one core selling proposition. DIFFERENTADVERTISING MEDIA The advertising media are the various forms of communication through which advertising reaches its audience. on how it is said. Yet the amount of fundamental research on effectiveness is appallingly small. a brand must advertise more heavily to be heard. it is less expensive to reach consumers of a widely used brand than to reach consumers of lowshare brands. On a cost. Message execution can be decisive for highly similar products. Competition and cluster . Even simple cluster from advertisements not directly competitive to the brand creates a need for heavier advertising. Established brands usually are supported with lower advertising budgets as a ratio to sales. the advertiser’s next task is to choose media to carry it. and believability Message execution The message’s impact depends not only on what is said. choosing among major media types.
posters. However. Marketers cannot target specific markets through newspaper ads. Ads are usually read once and then discarded. The major disadvantages of magazine advertising are high cost and lack of timeliness. the message must be limited to a few words. and signs. A direct-mail campaign may fail if the mailing list is outdated and the mailing does not reach the right people. There are some drawbacks to newspaper advertising It has a short life span. . The advertising revenues of magazines have been climbing. IV. and it provides highquality color reproduction. and it is fairly inexpensive. Some organizations are using direct e-mail. Magazines. II. Direct Mail. Because it provides only local coverage. It is also timely. Direct-mail advertising is promotional material mailed directly to individuals. Magazine advertisements have a longer life span.. The effectiveness of direct-mail advertising can be measured because the advertiser has a record of who received the advertisement and can track who responds. Magazine advertising is more prestigious than newspaper advertising. Sign and billboard advertising allow the marketer to focus on a particular geographic area. Color reproduction is usually poor. III. Outdoor Advertising. advertising dollars are not wasted in reaching people who are outside the market area. A number of magazines like Time and Cosmopolitan publish regional editions. The medium is especially suitable for products that lend themselves to pictorial display. because most outdoor advertising is directed at a mobile audience. Direct mail is the most selective medium: Mailing lists are available (or can be compiled) to reach almost any target audience.Newspaper advertising is used extensively by retailers because it is relatively inexpensive com. Advertisers can reach very specific market segments through ads in special-interest magazines.boards. Outdoor advertising consists of short promotional messages on bill. which provide advertisers with geographic flexibility.pared to other media.
20-. or 60-second commercial during or between programs. Advertisers 8 percent of total expenditures. Radio can be less expensive than other media. Keyword ads. VII. Infomercial. An infomercial is a program-length (usually a half-hour) televised commercial message resembling an entertainment or consumer affairs programs. Button ads are small squarish ads appearing at the bottom of a web page. Both national and local firms may buy local time on a single station that covers a particular geographic selling area. and whether the station broadcasts on AM. radio advertising offers selectivity. To an extent.V. a target level of product trial. featured primarily on Internet search engines. on level . DECIDING ON MEDIA AND MEASURING EFFECTIVENESS The steps here are Deciding on desired reach. the number of commercials contracted for. VI. Television. Internet. and perhaps like newspaper ads. 30-. and impact Media selection is finding the most cost-effective media to deliver the desired number and type of exposures to the target audience. the time period specified. Interstitial ads (in-your-face ads) pop up to display a product ad when viewers click on a web site. Even small retailers are able to afford radio advertisements. A national advertiser may buy network time. Advertisers may sponsor an entire show. Radio. Television advertising is the primary medium for larger firms whose objective is to reach national or regional markets. television advertising has a short life. on radio advertising Like magazine ad vertising. Deciding on media timing. frequency. FM. Choosing among major media types selecting specific media vehicles. Presumably. The rate of product trial will depend. or they may buy spot time for a single 10-. which means that its message usually will be broadcast by hundreds of local affiliated stations. Actual rates depend on geographic coverage. frequency . they contain only a corporate or brand name. or both. and Evaluatiing Effectivness (i) Deciding on reach. Television ranks number one in total revenue. the advertiser is seeking a specified advertising objective and response from the target audience – for example. Sponsorship (or co-branded) ads integrate a company’s brand with editorial comment. among other things. Unlike magazine advertising. they may select their audience by choosing the day of the week and the time of day when their ads will be shown. The Internet is the newest advertising medium and is growing in popularity. Thereare five types of Internet advertisements. Banner ads are rectangular graphics appearing at the top of most consumer web sites. and impact. link a specific ad to text or subject matter that an information seeker may enter. Television advertising rates are based on the number of people expected to be watching when a commercial is aired.
the advertiser faced both a macroscheduling and a micro scheduling problem involves scheduling the advertising in relation to seasons and the business cycle. Most firms pursue a seasonal policy. The firm can vary its advertising expenditures to following the seasonal pattern. or newspaper. and Polaroid cameras are best demonstrated on television. believability. explanation.of brand awareness. Media planners make their choice among media categories by considering the following variables: Target-audience media habits: For example . frequency. What counts is the cost-per-thousand exposures. This resulted in increased non seasonal consumption of its brand. Many advertising agencies use a computer program to select the initial media and then make further improvements based on subjective factors. or to be constant throughout the year. TV. . while not hurting seasonal consumption. Yet some year ago. Audience: The number of people exposed to the vehicle. a soft.drink manufacturer put more money into off-season advertising. and impact: Reach : The number of different persons or households exposed to a particular media schedule at least once during a specified time period. Effective ad-exposed audience: The number of people with target audience characteristics who actually saw the ad. Cost: Television is very expensive. (If the vehicle has pass-on readership. radio and television are the most effective media for reaching teenagers. and color. frequency. Women’s dresses are best shown in color magazines . and the result was a more balanced consumption patters. and impact. A message announcing a major sale tomorrow will require radio. (ii) Choosing among major media types The media planner has to know the capacity of the major media types to deliver reach. then the audience is larger than circulation) Effective audience: The number of people with target audience characteristics exposed to the vehicle. The advertiser who decides to buy 30 seconds of Audience size has several possible measures: Circulation: The number of physical units carrying the advertising. The effect of exposures on audience awareness depends on the exposures’ reach. to oppose the seasonal pattern. Other soft drink manufactures started to do the same. Product characteristics: Media types have different potentials for demonstration. A message containing a great deal of technical data might require specialized magazines or mailings. whereas newspaper advertising is relatively inexpensive. Media planners are increasingly using more sophisticated measures of effectiveness and employing them in mathematical models to arrive at the best media mix. visualization. Frequency (F): The number of times within the specified time period that an average person or household is exposed to the message Impact (I ): The qualitative value of an exposure through a given medium (thus a food ad in Good Housekeeping would have a higher impact than in the Police Gazette). (iii) Selecting specific vehicles The media planner must search for the most costeffective vehicles within each chosen media type. (iv) Deciding on media timing. Message Characteristics: Timeliness and information content will influence media choice.In choosing media. Suppose 70 percent of a product’s sales occur between June and September.
festival. and events. 3 . a. and dealers. public relations would mean . and stationery are also public relations tools.public relations. Press relations: Presenting news and information about the organiza. 5 . PR Tools: In brief one can summarize the tools as follows :• Public relations professionals prepare written materials such as brochures.pany magazines. Counseling: Advertising management about public issues and com. Product publicity: Sponsoring efforts to publicize specific products. Public relations (PR) involves a variety of programs designed to promote or protect a company’s image or its individual products.tion through internal and external communications. 4. business cards.pany positions and image during good times and crises. Public Relations perform the following five functions: 1 . building up a good “corporate image. Not only must the company relate constructively to customers. but it must also relate to a large number of interested publics. stories. com.PUBLIC RELATIONS Another major mass-promotion tool is. .building good relations with the company’s various publics by obtaining favorable publicity. and news releases. • Corporate identity material such as logos. A public is any group that has an actual or potential interest in or impact on a company’s ability to achieve its objectives. suppliers. Corporate communication: Promoting understanding of the organiza. Sponsoring special events is an effective way for an organization to increase brand recognition and receive media coverage with relatively little investment.” and handling or heading off unfavorable rumors. annual reports. Lobbying: Dealing with legislators and government officials to pro. and events. • Event sponsorship is a public relations tool in which a company pays for all or part of a special event such as a concert. signs. stories. and handling or heading off unfavorable rumors. Public relations departments may perform any or all of the following functions Public relations Building good relations with the company’s various publics by obtaining favorable publicity. building up a good corporate image. 2 . Simply speaking . sports competition. newsletters.mote or defeat legislation and regulation.tion in the most positive light. or play.
its products. Composition of the target audience b. Captioned photograph–a picture accompanied by a brief explanation d . • Some public relations tools are associated specifically with publicity. Significance of the news item Sales promotion Short-term incentives to encourage the purchase or sale of a product or service. It is about stimulating customers to buy a product. You would agree that more than any other element of the promotional mix. . 1. a. Sales promotion is commonly referred to as “Below the Line” promotion.ments and receive supplementary textual materials and photographs • The specific types of public relations tools chosen depend on several factors. Most sales promotional methods can be classified as promotion tech. Press conference–a meeting at which invited media personnel hear important news announce. 2. • • • Advertising and personal selling Sales promotion can be directed at: The ultimate consumer (a “pull strategy” encouraging purchase) The distribution channel (a “push strategy” encouraging the channels to stock the product). Sales promotion consists of short-term incentives to encourage purchase or sales of a product or service. News release–a typed page of about 300 words provided by an organization to the media as a form of publicity b . A consumer sales promotion method attracts consumers to particular retail stores and motivates them to purchase certain new or established products. Publicity-based public relations tools include: a . This is usually known as “selling into the trade” Sales Promotion Methods. Feature article–a piece (of up to 3. sales promotion is about “action”.000 words) prepared by an organization for inclusion in a particular publication c. such as grand openings.niques either for consumer sales or for trade sales. whereas advertising and personal selling offer reasons to buy a product or service. Publicity is communication in news story form about an organization. sales promotion offers reasons to buy now.b. 3 . Response of media personnel c. to create news about a company. Public relations personnel sometimes organize events. A trade sales promotion method encourages wholesalers and retailers to stock and actively promote a manufacturer’s products. A number of factors enter into marketing decisions about which and how many sales promotion methods to use. or both.. It is not designed to be informative – a role which advertising is much better suited to.
• Samples. Frequent-user incentives are programs developed to reward customers who engage in repeat (frequent) purchases. Samples are the most expensive sales promotion technique. They can easily be copied by competitors. or in stores. • Trade Shows. It may actually hold merchandise or inform customers of what the product offers and encourage them to buy it. Frequent-user incentives build customer loyalty. Cooperative advertising is an arrangement whereby a manufac. Coupons may also offer free merchandise. A coupon reduces the retail price of a particular product by a stated amount at the time of purchase. • Point-of-Purchase Displays. • Premiums. Direct marketing is the use of consumer-direct (CD) channels to reach and deliver goods . Direct communications with care. magazines.ers to show their latest lines to retailers. straightforward. either with or without an additional purchase of the product. A buying allowance is a temporary price reduction to resellers for pur. • Coupons.chasing specified quantities of a product. An airline’s frequent-flyer program is one example of a frequent-user incentive. They are made available to customers through newspapers. direct mail. These coupons may be worth anywhere from a few cents to a few dollars.chase of items in large quantities. analysis and tracking of customer behavior to develop a relational marketing strategies Direct marketing Direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships. • Cooperative Advertising. direct mail. Rebating is a relatively low-cost promotional method. Buying allowances are simple. • Buying Allowances.You must be familiar with many of the following sales promotion methods:• Rebates. Usually the rebate is offered by the producer to consumers who send in a coupon along with a specific proof of purchase. A buying allowance may serve as an incentive to resellers to handle new products. Samples may be offered via online coupons. A trade show is an industry wide exhibit at which many sellers display their products. A sample is a free product given to customers to encourage trial. • Frequent-User Incentives. A premium is a gift that a producer offers the customer in return for using its product. and in shelf dispensers in the store. - - - - - Direct Marketing Direct marketing has been defined by the Institute of Direct Marketing as: The planned recording. stimulate pur. Some trade shows are organized exclusively for dealers–to permit manufacturers and wholesal. A point-of-purchase display is promotional material placed within a retail store. Others are promotions designed to stimulate consumer awareness and interest. A rebate is a return of part of the purchase price of a product. online. Most point-of-purchase displays are prepared and set up by manufacturers and wholesalers. and easily administered.turer agrees to pay a certain amount of the retailer’s media costs for advertising the manufacturer’s product.fully targeted individual consumers to obtain an immediate response.
direct selling is growing at a fast pace. personal products. Nestle. and direct selling majors such as Amway. registering a 54% yoy growth. DIRECT MARKETING BENEFITS . Dabur. Direct Marketing in India: • In India. Godrej and Tata Tea. • Most of the Direct Selling companies operating in India today are in the field of cosmetics.1. LB Publishers and Distributors Pvt Ltd and DK Family Learning The Indian Direct Selling Association is an association of companies engaged in the business of direct selling in India. • • • • Amway is the largest player in India with annual sales exceeding Rs5bn Other major players are Avon Beauty Products (I) Pvt Ltd. Tupperware India Pvt Ltd.and ser. Mass-market penetration is now catching up within the Rs 1. Britannia.7 crore. Tupperware and Avon now seem to be following the path charted by FMCG giants such as Hindustan Lever.800-crore direct selling industry as well. • India was the fastest growing market in 2000 in terms of revenues from direct selling. Oriflame India Pvt Ltd. Total sales through direct selling route in 2002 was Rs. Lotus Learning Pvt Ltd. household products. cookware and healthfood. 90% of goods sold by the direct sellers in India are sourced from goods manufactured within the country.723.vices to customers without using marketing middlemen. All major players in India are affiliated to IDSA. Marico.
and the composition of the market. A new product category requires a longer introductory period because primary demand (demand for the product category as opposed to the demand for a specific brand) must be stimulated. Almost every company as had spectacular failures. .PRODUCT LIFE CYCLE “The product life cycle (PLC) depicts a products sales history through 4 stages: (1) Introduction 2) Growth (3) Maturity and (4) Decline One thing should be clear that adjustment and changes must be made in the product’s marketing mix as it moves through its life cycle because of changes in the competitive environment. even for a skillful marketer. buyer behavior. Introducing new product is always a risky venture. ‘The PLC concept can be applied to a product category (perfumes). Even a brand that has achieved acceptance in other markets will require introduction in new markets. to a particular product form (roll-ons and sprays) or to a particular brand Introduction Stage In this stage company is basically launching a new product (from brand or category) that is the reason that it is called the introductory stage.
and brands exist in the maturity stage. the company can capture a dominant position. By spending a lot of money on product development. They should consider modifying the market. This is the stage of peak profits. Competition intensifies and industry profits begin to decline at the end of the growth stage. the most successful ones are actually evolving to meet changing consumer needs.duce their own brands. but total industry sales are still rising. There is little growth potential for the product. as new customers enter the market and old customers make repeat purchases. Middlemen often intro. new pack sizes may need to be introduced. the market expands. In this phase.tures still exist. Most of the times it will find that the sales are repeat sales to earlier buyers. Rivals copy product features of successful brands and they become more alike.Growth Stage At a growth stage where the company has successfully launched its product. Product managers has to play a very important role at this stage infact he should do more to extend the lives of their mature products rather than allowing it to coast into decline. it gives up current profit and hopes to make it up in the next stage. It is during this stage that marketers are focusing effort on extending the lives of their existing brands. company will find decline in industry profits accelerates further. At this point of time company need to add new dealers and distributors. and distribution. In this stage you will find that many products may appear unchanged. New product forms and brands enter. Maturity Stage At this stage company will find greater number of competitors. product and marketing mix. In doing so h owever. . the sales have begun to increase rapidly in this stage. promotion. attracting competitors who copy and improve on the features of the new product. Thus price competition develops along with heavy promotions of whatever unique brand fea. Industry sales peak and decline as the size of potential markets begins to shrink and wholesaler and retailer support dwindles because of declining profit margins. competitive product forms. the company faces a trade-off between high market share and high current profit. which makes the competition even tougher. As new customers are attracted.
frequent inventory re-adjustments. Sales and profits decline rapidly and competitors become more cost conscious. and advertising changes. Product forms and brands typically enter into decline.. At times man. There are hidden costs in terms of management time.Decline Stage Now the company reaches to the final stage of the life cycle. stages while product categories last longer. sales force attention. For these reasons. Or it may decide to ‘re-position the product in the hope of moving it back to the growth phase in a new avatar .agement may decide to maintain its brand without changes in the hope that some competitors will leave the market. It is basically because of Competitions that the product forms and brands enter into the decline stage. Brands with strong acceptance by some customer segments may continue to produce profits. companies need to pay attention to their dying products. Thus Sanifresh is still a leading toilet cleaner though its powdered form is less popular than liquids.
The adoption process affects the length of a products life cycle.resent the first 2.The Adoption & Diffusion Process – The PLC concept is related to the adoption and diffusion processes. A new product that has been adopted by innovators and early adopters still has 84% of its potential customers in the ton-adopter category. The five categories of adopters (1) Innovators (2) Early adopters.somewhat skeptical consumers who acquire a product only after it has become commonplace. Innovators rep. Early adopters tend to be educated opinion leaders and represent about 13. (3) Early majority (4) Late majority and (5) Laggards.those who avoid change and may not adopt a new product until traditional alternatives no longer are available. But if innovators and early adopters do not adopt. Laggards represent about 16% of consumers.dations from others who have experience with the product. Early majority – they are people who are careful consumers who tend to avoid risk. . the early majority adopts the product once it has been proven by the early adopters. Late majority . Innovators . The adoption process is the series of stages a prospective buyer goes through in deciding to buy and make regular use of the product. Early adopters . Laggards . The late majority represents about 34% of consumers. They rely on recommen.5% to adopt the product. The early majority represents 34% of consumers. early adopters then begin to purchase the product.well-informed risk-takers who are willing to try an unproven product. the product is doomed D failure.based on the positive response of innovators.5% of consumers.
Idea Screening: -The purpose of idea generation is to create a large pool of ideas. the management can obtain an overall rating of the company’s ability to launch the product successfully.cient. market research firms. Finally. and companies can benefit by finding these products and putting them on the market like Pillsbury gets promising new products from its annual Bake-off. a physical presentation will increase the reliability of the concept test. however. Almost 55% of all new product ideas come from internal sources according to one study. consumers are asked to respond to it by answering a set of questions designed to help the company decide which concept has the strongest appeal. About 30% of new product ideas come from analysis of competitors’ products. After being exposed to the concept. The company . This is different again from a product image. a product concept is a detailed version of the idea stated in meaningful consumer terms. The company can watch competitors’ ads. For some concept tests. New Product Development starts with idea generation A company has to generate many ideas in order to find one that is worth pursuing.ments. customers. competitors. which is the consumers’ perception of an actual or potential product. Against these.New Product Development Process – Figure will show the complete process of new product development lets discuss them one by one. The Major sources of new product ideas include internal sources. The purpose of this stage is to pare these down to those that are genuinely worth pursuing. Other sources are trade magazines.An attractive idea has to be developed into a Product concept. Companies also buy competitors information and pay for industrial espionage. Almost 28% of new product ideas come from watching and listening to customers. distributors and suppliers. management can assess how well the idea fits with the company’s marketing skills and experience and other capabilities. a word or a picture may be suffi. shows and seminars. these need to be tested with con. Resellers and others who are close to the market. One of Pillsbury’s four cake mix lines and several variations of another came directly from Bake-Off win. government reports.sumers either symbolically or physically. Companies have different methods for doing this from product review committees to formal market research. can often pass on information about new develop. advertising agencies and new product consultants. It. Customers: even create new products on their own. As opposed to a product idea that is an idea for a product that the company can see itself marketing to customers. is helpful at this stage to have a checklist that can be used to rate each idea based on the factors required for successfully launching the product in the marketplace and their relative importance. press releases and write-ups in the press about their activities. Companies like 3M and Toyota have put in special incentive programs or their employees to come up with workable ideas. Once the concepts are developed. Concept Development and Testing .ners’ recipes.
the planned product positioning and the sales. Business analysis involves the review of projected sales. The third part of the marketing strategy statement describes the planned long-run sales. profit goals. The strat. If they do.This is the next step in new product development. The second part outlines the product’s planned price. and marketing budget for the first year. market share and profit goals for the first few years.Once the management has decided on the marketing strategy. distribution. and the marketing mix strategy.can then project these findings to the full market to estimate sales volume. the product can move to the product development stage. it can evaluate the attractiveness of the business proposal. Business Analysis . Marketing Strategy Development .egy statement consists of three parts: the first part describes the target market. . costs and profits to find out whether they satisfy a company’s objectives.
Costs of test marketing can be enormous and it can also allow competitors to launch a “me. or blades and matchboxes. Test marketing gives the marketer an opportunity to tweak the marketing mix before the going into the expense of a product launch. management may decide to do away with this stage and proceed straight to the next one: If the company goes ahead with commercialization . Three subclasses are: . and (4) Unsought products. Classification of Products The most common basis for classifying consumer products is based on buyer behavior. R&D or engineering develops the product concept into a physical product. Four classes of consumer products are (1) Convenience products (2) Shop. R&D will develop prototypes that will satisfy and excite customers and that can be produced quickly and at budgeted costs. toffee. The company will have to decide on the timing of the launch (seasonality) and the location (whether regional. Hence.1.Here. Functional tests are then conducted under laboratory and field conditions to ascertain whether the product performs safely and effectively. It will show whether the product idea can be developed into a full. The amount of test marketing varies with the type of product.ping products (3) Specialty products. the next step is test marketing: the stage at which the product and the marketing program are introduced to a more realistic market settings.Product Development . See Figure 10. This step calls for a large investment. This depends a lot on the ability of the company to bear risk and the reach of its distribution network.too” product or even sabotage the testing so that the marketer gets skewed results. These are bought frequently but consumers rarely shop actively for them because they are low value items whose price and quality do not justify active involvement.introducing the product to the market-it will face high costs for manufacturing and advertising and promotion. They are basically low-priced. at times.If the product passes the functional tests. The classification is based on differences in the buying behavior of the people who buy the prod. Test Marketing . This helps marketers in making generalizations to guide development of their marketing mixes. First. When the prototypes are ready.ucts (it is basically how you perceive and buy the products) not on the differences in the products themselves. They are widely available at many outlets. national or international). The system works because many consumers behave alike in buying a given type of product. they must be tested. It gives you a brief description of consumer goods.fledged workable product. nationally advertised items like cigarettes.
Just suppose a couple is searching for a flat may spend a lot of time comparing decor. Doctors. This is why impulse products are located where they can be easily noticed. Ray. Mitsubishi Lancers. “‘insist on the real thing”. price becomes important. Thus sellers tend to engage in price competition. The desire to buy impulse is a result of the shopping trip. toffees and chocolates (placed at a child’s eye-level) are examples of impulse products.standardized.1. Lawyers and Accountants who enjoy a large following are selling specialty products. butter which are bought routinely because the family regularly consumes them.Heterogeneous Shopping Products they are product that are considered to be unlike or non. For these products consumers have strong convictions as to brand. 1. But most of the time you will find that the manufacturers may also stress upon on the differences on the basis of design and try to distinguish between the physical product and its product related services. Specialty Special Products In this case you as a consumers will make a special effort to buy specialty products.Emergency Products: Purchases of emergency products result from urgent and compelling needs. Often a consumer pays more than if this need had been anticipated. Example of this would be hotels permit shops vending toothbrushes and shaving blades set up in their lobbies to cater to travelers who have forgotten theirs at home. Marketers try to create specialty status for their products with advertising phrases like “accept no substitutes”. One might set up service centers to differentiate its product from rivals. distance from stations and so on. Shoppers spend more time. But specialty product can be less intensively distributed than a convenience or shopping product because buyers will search to find it. Leica Cameras and Johnny Walker Scotch Whisky are examples. Staple Products: this includes milk. Price often is secondary to style and quality when price comparisons are difficult to make. There is no Comparison Shopping. They build customer loyalty when consumers consider their brands to be specialty products. furniture and apartments is tough because quality and style vary within each product class. Stardust and Savvy magazines. 2. floor plans. Shopping products can be homogeneous or heterogeneous.Ban glasses.Homogeneous Shopping Products: they are products. 3. or type. bread.Impulse Products: Purchases of Impulse products are absolutely unplanned exposure to the product triggers the want. cost and effort to compare because they perceive a higher risk in buying these products. style. they probably will lease it. A retailer might advertise that the Color TV’s price includes 6 months or free interest financing. Shopping Shopping Products These products involve price and quality comparisons. eggs. Just suppose you want to buy a colour television. which are considered to be alike. If the rent is reasonable compared to the alternatives. you are aware that most of the brands are very similar then you will limit your shopping effort to price comparisons. cars. 2. Consumers will go out of their way to locate and buy these products because they perceive quality and other benefits in owning them. Consumers who want to stretch their disposable incomes are more likely to consider a product as a homogeneous shopping product than as a convenience product. Consumers shop for the best price quality combination. . Once they find the right one. Using price to compare clothing. and so on. The desire to buy staple products may cause the consumer to go shopping. The decision to buy these products is programmed after the first time when the consumer puts them on his list of regular items. jewellery.
Marketers face a tough challenge in persuading consumers to buy their new unsought products. Rexona. symbol or special design or some combination of these elements that is intended to identify the goods or services of one seller or a group of sellers. Lux. Chicago). „ Product item—a single product „ Product line—all items of the same type „ Product mix—total group of products that an organization markets It is basically a group of products that are related because of customer. Wheel. words and numbers. marketing and or production considerations. • Brand name is that part that can be spoken. These are basically existing products but the consumers do not want to buy this product now. There are two types: regularly unsought products and new unsought products. Rin Solarox. growing. Rin detergent powder.sion.symbol . PRODUCT AND PRODUCT MIX Any organization is marketing more than one product then it has a product mix. Like Life Insurance. Oral polio vaccine was once a new unsought product. 7UP. Brand names simplify shopping. and Surf Ultra are part of Lever’s detergents line and Le Sancy. • Brand mark-elements of the brand that cannot not be spoken. i. a lawyer’s services in contesting a will.Unsought Unsought Products They are products which are present in the market but the potential buyers do not know that such product exist or there can be a possibility that the buyer don’t want it. guarantee a certain level of quality and allow for self-expres. But heavy promotion and acceptance of the product practically eradicated polio. Surf. When we are discussing about a typical large multi-product firm’s product mix includes new. are part of its soaps line. sign.e. i. BRANDING . a wreath and a doctor’s services in an emergency are regularly unsought products. Lifebuoy. although they may eventually purchase them. A brand is defined: “As a name. A brand differentiates these products from those of competitors” (American Marketing Association.e. Rin. term. including letters. maturing and declining productst. The marketer’s task here is to inform target consumers of the products existence and stimulate demand for it.
banking. marketing. Pillsbury Doughboy • Trade mark-legal designation that the owner has exclusive rights to the brand or part of a brand.000 trademarks registered. while Shilpa Bindis are typically Indian.J Stanton “Services as fulfilling certain wants and states that. Ford.e. A change in condition may occur and production of the service may or may not be closely associated with a physical product. It includes a wide variety of services. and does not result in a transfer of ownership. • Trade name-The full legal name of the organization. culture and personality of the brand.e. es. legal and medical advice. We know that Sunny is for teenagers. We know what a Garden Woman is.” . research. Sometimes a brand may take on the personality of an actual person. and that are not necessarily tied to the sale of a product or another service. what would come to our mind? Like Videocon suggests a lion.g.• Trade Character i. There are the business and professional services such as advertising. I. computer-programming. Because of the imagery associated with the brands they actually have the power to enhance or limit a consumer’s perceived image or selfimage.1990. thus Tata stand for quality. We expect a Mercedes to be driven by an executive or a top-class businessman.g. Ronald McDonald.sentially intangible activities which provide want-satisfaction. fine arts. e. entertainment and fulfillment of other psychological and emotional needs such as education. W. recreation. e.. “services are those separately identifiable. MRF suggests a muscle man and Rin suggests a lighting flash. SERVICE MAREKTING A service is an activity which has some element of intangibility associated with it. which involves some interaction with customer or with property in their possession. Culture: A brand also represents a certain culture. which govern a producer.515 new in that year. Coke is an icon of American culture. Personality: A brand projects a personality. fair price and so on. Attributes of Brand Values: The values.. etc. not the name for a specific product. US Patent & Trademark Office had 680. insurance. Had the brand been an animal or an object or a person. Charlie Chaplin and Cherry Blossom. Then there are services which are provided by professionals but consumed for reasons not of business. These users correspond to the values. rather for leisure. 56. User: The brand suggests its own target audience. are reflected by the brand.
or telephone line capacity not used cannot be reclaimed and used or resold at a later time. and new service concepts can therefore easily be copied by competitors. stored. Yet resort owners have the same number of rooms to sell Yetround. Intangibility actually presents several marketing challenges: Services cannot be inventoried. A person who possesses a particular skill provides Service. unsold seats in a cinema hall represent service capacity. A car mechanic who has no cars to repair today. which is lost forever. there is tremendous demand for resort accommodations in XYZ in February.Characteristics of services. A seat on an airplane or in a restaurant. tasted. the beautician has to be available to perform the massage Perishability . Because services are perform In most cases services cannot be separated from the person or firm providing it. resold. or re.The most basic and universally cited. For example.turned. but little demand in July. Teaching is an intangible service. an hour of a lawyer’s time.It basically refers to the fact that services cannot be saved. . 1. difference between goods and services is intangibility. A plumber has to be physically present to provide the service. and therefore fluctuations in demand are often difficult to manage. touched or seen in the same way as goods. Services cannot be patented legally. Services cannot be felt. Inseparability . or spare berths on a train.
Apart from the fact that service is not fully utilised represents a total loss. This is in contrast to goods that can be stored in inventory or resold another day. or even re-turned if the consumer is unhappy. . the other dimension of this. certain train routes are always more heavily booked than others. There is a peak demand time for buses in morning and evening (office hours).
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