MARKETING MANAGEMENT Introduction Welcome to the wonderful world of marketing!
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.
Planning is short-run-oriented in terms of today’s products and markets 5. Emphasis on staying with existing technology and reducing costs 8. Management is profit oriented 4.Selling 1. Different departments work as in a highly separate water tight compartments 9. Cost determines Price 10. Marketing views the customer last link in business as the very purpose of the business Defining Customer Value and Satisfaction: of new products. Planning is long-run-oriented in today’s products and terms tomorrow’s markets and future growth 5. the sole purpose being generation of consumer satisfaction 9. All departments of the business integrated manner. on providing better costs value to the customer by adopting a superior technology 8. price determines cost 10. Stresses needs of seller 6. Emphasis on innovation on every existing technology and reducing every sphere. Views business as a good producing process 7. Stresses needs and wants of buyers 6. Management is sales volume oriented 4. Views business as consumer producing process satisfying process 7. Emphasis on consumer needs wants 2. Company Manufactures the product first 3. Emphasis is on the product 2. Consumer determine price.
. Selling views customer as a last link in business Marketing 1. Company first determines customers needs and wants and then decides out how to deliver a product to satisfy these wants 3.
to be sure of successful implementation of a strategy. that is not its main goal. func. a company must design a competitively superior value proposition aimed at a specific market segment. in his Delivering profitable value. and psychological benefits customers expect from a given market offering. Although the customer-centered firm seeks to create high customer satisfaction. Since then it is known as their 7-S model. It is a subjective exercise but very important for marketer’s point of view. For example. 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.11 The value proposition consists of the whole cluster of benefits the company promises to deliver. like thermometer for temperature. It appeared also in "In Search of Excellence" by Peters and Waterman. the buyer is likely to be disappointed. the buyer is likely to be disappointed. History The 7-S Framework was first mentioned in "The Art Of Japanese Management" by Richard Pascale and Anthony Athos in 1981. Total customer value is the perceived monetary value of the bundle or economic.
. using. Large or small. Managers take into account all seven of these factors. if the company sets expectations too low. However. it won’t attract enough buyers ( although it will satisfy those who do buy) If marketers raise expectations too high. Volvo’s core positioning is“safety. it is more than the core positioning of the offering. . If the company increases customer satisfaction by lowering its price or increasing its services . and advertisements. The Seven S model was born at a meeting of these four authors in 1978. and long warranty period. Measuring Satisfaction There are no meters to measure it.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. and disposing of the given marketing officering. Total customer cost is the bundle of costs customers expect to incur in evaluating. and was taken up as a basic tool by the global management consultancy company McKinsey. Origin of the 7-S Framework. 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. if the company sets expectations too low. Together these factors determine the way in which a corporation operates. the results may be lower profits. 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. advice. If marketers raise expectations too high. According to Michael Lanning. backed by a superior value-de.tional. However.livery system. good service. obtaining . Customer Expectation: It is formed on the basis of past buying experiences. other benefits include a long-lasting car. They had been investigating how Japanese industry had been so successful.” but the buyer is promised more than just a safe car.
Value Chain Michael Porter of Harvard proposed the value chain as a tool for identifying ways to create more customer value. information systems. Central beliefs and attitudes.
. competition. Compare: Management Styles. 5. promotion and performance appraisal systems. 7. decentralized. a network. Guides organizational change. Combines rational and hard elements with emotional and soft elements. processes and routines that characterize how the work should be done: financial systems. etc. Skills Distinctive capabilities of personnel or of the organization as a whole. The interconnecting center of McKinsey's model is: Shared Values. Environment. Systems The procedures. 4.The meaning of the 7 S 1. over time. functional divisions (top-down). recruiting. Staff Numbers and types of personnel within the organization. Shared Values (also called Superordinate Goals). 3. Style Cultural style of the organization and how key managers behave in achieving the organization's goals. Benefits • • • • Diagnostic tool for understanding organizations that are ineffective. Strategy Plans for the allocation of a firms scarce resources. Compare: Strategic Intent 2. a holding. customers. to reach identified goals. Strengths of the 7-S Model. What does the organization stands for and what it believes in. Managers must act on all Ss in parallel and all Ss are interrelated. 6. a matrix. Structure The way in which the organization's units relate to each other: centralized. 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.
2.The activities of the Value Chain Primary activities (line function) 1. retail management. buildings. finance. overhead) • • Procurement. inventory control. packaging. design. Technology Development. The activities associated with recruiting. public affairs. spare parts. upgrading. installation. equipment maintenance. development (education). repair services. order fulfillment. selling. Human Resource Management. Such as: Research and Development. assembly. redesign. Includes general management. Includes technology development to support the value chain activities. Process automation. 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. storing. advertising. The activities associated with getting buyers to purchase the product. quality management. testing and all other value-creating activities that transform the inputs into the final product. etc
Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Operations Outbound Marketing Service Logistics Logistics and Sales . or • by reconfiguring the value chain.
3. Outbound Logistics.
. Firm Infrastructure. pricing. servicing. Support activities (Staff functions. • Marketing and Sales. distribution management. including: channel selection. Includes machining. promotion. Includes receiving. The activities that maintain and enhance the product's value. planning management. transportation. Procurement of raw materials. including: customer support. accounting. spare parts management. retention and compensation of employees and managers. The activities required to get the finished product at the customers: warehousing. transportation planning. machines. etc. etc. etc. legal. • Operations. training. Inbound Logistics.
Recently there have been many companies that achieved a cost advantage by the clever use of Information Technology. 3. 8. or a different sales approach. which is responsible. • The Corporate Level. 4. Proactive marketing: The company works continuously with its large customers to help improve their performance. Interrelationships among business units. when and where they will be completed. It provides the logic that integrates the perspectives of functional departments and operating units. Once the value chain has been defined. comments. Linkages among activities. A marketing plan is carried out within the context of a firm’s broader strategic business plan. Customer Relationship Management The aim of customer relationship management (CRM) is to produce high customer equity. the higher the customer equity. Reactive marketing: The salesperson sells the product and encourages the customer to call if the or the has questions. as well as on which businesses to start or eliminate. Capacity utilization. Timing of market entry. The sales. Strategic Planning A strategic business plan describes the overall direction an organization will pursue within its environment and also guides the allocation of re. but also by reducing the costs of the support activities.sources. and how they will be coordinated. 5.time values of all of the firm’s customers. new distribution channels. Accountable marketing: The salesperson phones the customer to check whether the product is meeting expectations. Porter identified 10 cost drivers related to value chain activities: 1. A strategic marketing plan outlines the actions necessary.). 2. In most large corporations. 1.person also asks the customer for any product – or service – improvement suggestions and any specific disappointments. strategic planning takes place at four levels. ( General Electric. and points them all in the same direction.
. A firm develops a cost advantage by controlling these drivers better than its competitors do. the more loyal the customers. etc. for example. Learning. or complains. has stationed engineers at large utilities to help them produce more power. 9. "Reconfiguration" means structural changes such as: a new production process. 6. Economies of scale.A cost advantage can be created by reducing the costs of the primary activities. it makes decisions on the amount of resources to be allocated to each division. a cost analysis can be performed by assigning costs to the value chain activities. Degree of vertical integration. 2. taxes.corporate headquarters is responsible for designing a corporate strategic plan to guide the whole enterprise. A cost advantage also can be pursued by "Reconfiguring" the value chain. 4. Dfferent levels of customers who have strong profit potential. Firm's policy of cost or differentiation. Customer equity is the total of the discounted life. 3. union activity. Clearly. Geographic location. 7. Institutional factors (regulation. 10. Basic marketing: The salesperson simply sells the product.
or if the product's market grows faster. Stars are leaders in the business.ing plan for achieving its objectives in its product market.each division establishes a division plan covering the allocation of funds to each business unit within the division. etc. Therefore they should also generate large amounts of cash. high market share) • Stars are using large amounts of cash. It is based on product life cycle theory.each business unit develops a strategic plan to carry that business unit into a profitable future. Eg. The units in the marketing division would be Sales. brand within the business unit develops a market. • Cash Cows are often the stars of yesterday and they are the foundation of a company.each product line. The basic idea behind it is: if a product has a bigger market share.
BOSTON CONSULTING GROUP MODEL The BCG Matrix method is the most well-known portfolio management tool. To ensure long-term value creation. Promotions. The BCG Matrix can be used to determine what priorities should be given in the product portfolio of a business unit. low market share) • Avoid and minimize the number of Dogs in a company. Cash Cows (low growth. The Product Level.
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. Market Intelligence. Dogs (low growth. Because of the low growth. For example the marketing division would formulate strategies as to how the various units within it would work. investments which are needed should be low. high market share) • Profits and cash generation should be high. The Boston Consulting Group Matrix has 2 dimensions: market share and market growth. Public Relations. However if needed any attempt should be made to hold your market share in Stars. • Stars are frequently roughly in balance on net cash flow. 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. because the rewards will be Cash Cows if market share is kept. • Watch out for expensive ‘rescue plans’. The Business Level.
The Division Level. It was developed in the early 70s by the Boston Consulting Group. it is better for the company.
• The model is simple and easy to understand. because they have high cash demands and generate low returns. it is destined to be profitable. • It provides a base for management to decide and prepare for future actions.•
Dogs must deliver cash. They can then try to get any possible cash from the Question Marks that were not selected. Cash Cows. or sell off. it should be able to manufacture and sell new products at a price that is low enough to get early market share leadership. A high market share does not necessarily lead to profitability all the time. High market share is not the only success factor. Question Marks and Dogs. they are often allowed to reinvest substantial cash amounts in their mature businesses. Sometimes Dogs can earn even more cash as Cash Cows. These inadequate invested sums of money are a waste of money. The model neglects small competitors that have fast growing market shares
.5% for an entire corporation. otherwise they must be liquidated. or otherwise companies are advised to disinvest. These are hopeless attempts to "turn the business around". or invest nothing and generate any cash that you can.
Other uses and benefits of the BCG Matrix • If a company is able to use the experience curve to its advantage. Increase market share or deliver cash. The problems of getting data on the market share and market growth. • BCG model is helpful for managers to evaluate balance in the firm’s current portfolio of Stars. In such a scenario: • • • Cash Cows Business Units will reach their profit target easily. or to divest prematurely. low market share) • Question Marks have the worst cash characteristics of all. Market growth is not the only indicator for attractiveness of a market.
Question Marks (high growth. Their management have an easy job. because of their low market share. • If the market share remains unchanged. There is no clear definition of what constitutes a "market". The executives are often praised anyhow. now and then investments are made. This may tempt management to emphasize a particular product. Dogs Business Units are fighting an impossible battle and. Once it becomes a star. Limitations of the BCG Matrix Some limitations of the Boston Consulting Group Matrix include: • • • • • • • • • • It neglects the effects of synergy between business units. Question Marks will simply absorb great amounts of cash. • Either invest heavily. 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 method is applicable to large companies that seek volume and experience effects. even worse. Even worse. As a result all Question Marks and Stars receive only mediocre investment funds. Either these SBUs should receive enough investment funds to enable them to achieve a real market dominance and become Cash Cows (or Stars). such as a generic growth target (9 percent per year) or a generic return on capital of say 9. A business with a low market share can be profitable too. In this way they can never become Cash Cows. The model uses only two dimensions – market share and growth rate.
BUSINESS STRENGTH • Market share • Share growth • Product quality • Brand reputation • Distribution network • Promotional effectiveness • Productive capacity • Productive efficiency • Unit costs • Material supplies AND BUSINESS
. Both axes are divided into three segments. This indicates a “green light” to invest in this product/service. The blocks with a Diagonal Zone consists of the three cells in the lower right corner. 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 growth-share matrix can be seen as a special case of a multifactor portfolio matrix such as that pioneered by General Electric. A position in the red zone is not attractive. Companies are successful to the extent that they enter attractive markets and possess the required business strengths to succeed in those markets.THE GENERAL ELECTRIC MODEL An SBU’s appropriate objective cannot be determined solely by its position in the growth-share matrix. 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. If one of these factors is missing. The suggested strategy is to seek to maintain share rather than growing or reducing share. If additional factors are considered. Organisation must therefore exercise caution when making additional investments in this product/service. If the enterprise falls in this zone the business is in a favorable position with relatively attractive growth opportunities. 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 suggested strategy is that management should begin to make plans to exit the industry. The model is based on the company’s seven businesses. FACTORS UNDERLYING MARKET ATTRACTIVENESS STRENGTH IN GE MULTIFACTOR PORTFOLIO MODEL 1 . The blocks with plain Zone consists of the three diagonal cells from the lower left to the upper right. 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 . yielding nine cells. A position in the yellow zone is viewed as having medium attractiveness. the business will not produce outstanding results. Neither a strong company operating in an unattractive market nor a weak company operating in an attractive market will do very well. The above two factors make excellent marketing sense for rating a business.
R & D performance Mangerial personnel
The GE matrix is divided into nine cells. recognize what factors affect performance. Marketing contributes to assessing each SBU’s sales and profit potential. but once the SBU’s objective and budget are set. know which products are stars. The three cells in the lower-right corner indicate SBUs that are low in overall attractiveness. Evaluation of Strategic Planning Approaches Many firms assess alternative market opportunities. The diagonal cells stretching from the lower left to the upper right indicate SBUs that are medium in overall attractiveness. Rather. cash cows. and realize they can target broad or narrow customer bases. new technologies. Management should also forecast each SBU’s expected position in the next three to five years given the current strategy. 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. Thus. question marks. the company’s objective is not always to build sales in each SBU. The major strengths of the approaches are that they allow a firm to do the following:
. the task of marketing management is to manage demand or revenue to the target level negotiated with corporate management. and dogs. Making this determination involves analyzing where each product is in its product life cycle as well as expected competitor strategies. economic events. etc. marketing’job is to carry out the plan efficiently and profitably. The three cells in the upper left corner indicate strong SBUs in which the company should invest or grow. understand their industries.
• Focus on meaningful differential advantages. market development. and diversification. The approaches have these weaknesses: • They may be difficult to implement. • Compare performance with designated goals. 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 may not adequately consider environmental factors. and SBUs. • They are often used by staff planners rather than line managers. firm. prod. • These techniques only aid planning. • Compute marketing and other resources needs. • Discover principles for improving performance.uct development. Current Products Current Markets New Products
. • Learn the opportunities to pursue and which threats to avoid. • They may not be applicable to all firms and situations. See accompanying figure. • Study various strategy effects.• Analyze each of its SBUs and products.
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. • They are arbitrary in defining SBUs and evaluative criteria. • They may overvalue market share. • Study competitors’ actions and trends. • They may be too simplistic and omit key factors.
even though the new product themselves may appeal to a different group of customers. 1. By examining these three intensive growth strategies. aggressive promotion. a firm becomes involved with new products aimed at new markets. a firm seeks to expand the sales of its present products in its present markets through more intensive distribution.graphic factors. and competitive pricing. a firm seeks greater sales of present products from new markets or new product uses. INTENSIVE GROWTH.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. INTEGRATIVE GROWTH – Often a business’s sales and profits can be increased through backward.
While the corporations are faced with ever increasing strategic planning gap. management must also examine integrative growth opportunities. In market development. Finally if the company decides to acquire one or more competitors. It can enter new markets.•
In market penetration. 2. provided that the government does not bar this move(horizontal integration). The company first considers whether it could gain more market with its current products in their current markets(market penetration strategy). three strategies have been formulated to overcome this gap. In diversification. They can be either completely new products or existing product extensions. Ansoff model propounded by Igor Ansoff is a useful framework for detecting new intensive growth opportunities called a “Product-Market Expansion Grid”. management may discover several ways to grow. 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. It emphasizes new models.
. Next it considers whether it can find or develop new markets for its current products (market-development strategy). the company goes for diversification. It might acquire some wholesalers or retailers.corporate management’s first course of action should be a review of whether any opportunities exist for improving its existing businesses’ performance. better quality. a firm develops new or modified products to appeal to present markets. Horizontal Diversification Strategy. that growth may not be enough. 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. This can be either based on demographic or geographic or psycho. 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. Later it will also review opportunities to develop new products for new markets(diversification strategy). However. 3. Distribution and promotion orientations are different from those traditionally used by the firm. In product development. and use new distribution methods. reposition products. forward or horizontal integration within the industry. Still. appeal to segments it is not yet satisfying. The products may be new to the industry or to the company. In that case company must consider diversification. In that case. especially if they are highly profitable(forward integration). these new sources may still not deliver the desired sales volume. 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. 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. Then it considers whether it can develop new products of potential interest to its current markets(productdevelopment strategy).
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). 2. 3. a focus strategy is available to smaller firms. Competitive advantage (lower cost or differentiation).
. 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.companies must not only develop new businesses. harvest or divest tired old businesses in order to release needed resources and reduce costs. If competing firms are unable to lower their costs by a similar amount. The cost leadership strategy usually targets a broad market.
The following three basic strategies are identified (see Figure): 1. DOWNSIZING OLDER BUSINESSES. this investment represents a barrier to entry that many firms may not overcome. the firm may be able to sustain a competitive advantage based on cost leadership.•
Conglomerate Diversification Strategy – the company might seek new businesses that have no relationship to its current technology. not fritter away energy and re. products or markets. Focus—narrow target segment and either low cost position or a unique strategy.
Cost Leadership strategy: This generic strategy calls for being the low cost producer in an industry for a given level of quality. but must also carefully prune. Cost leadership and differentiation strategies are alternatives for large firms. Managers should focus on growth opportunities. 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.
4. Differentiation—large market and unique strategy.sources trying to salvage hemorrhaging businesses. Some of the ways by which firms acquire cost advantages are by improving process efficiencies. Cost leadership—broad market and low cost position. making optimal outsourcing and vertical integration decisions or avoiding some costs altogether. Skill in designing products for efficient manufacturing. gaining unique access to large source of lower cost materials.
thus eliminating the competitive advantage.
Focus Strategy : This strategy focus on narrow segment and within that segment attempts to achieve either a cost advantage or differentiation. The value added by the uniqueness of the product may allow the firm to charge a premium price for it.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. For example. firms pursuing a differentiation-focused strategy may be able to pass higher costs on to customers since close substitutes do not exist. and store anticipated marketing decision information on a regular. If research is done this way. The risks associated with differentiation strategy include imitation by competitors and changes in customer tastes. it may be fairly easy for a broad-market cost leader to adapte its product in order to compete directly. 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. As technology improves. A firm using a focus strategy often enjoys a high degree of customer loyalty and this entrenched loyalty discourages other firms from competing directly. the competition may be able to leapfrog the production capabilities. a firm could face these risks: 1.
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. However. MARKETING INFORMATION SYSTEM A marketing information system (MIS) is a set of procedures and methods designed to generate. The premise is that the needs of the group can be better serviced by focusing entirely on it. continuous basis. Corporate reputation for quality and innovation. other focusers may be able to carve out sub-segments that they can serve even better. 2. The firm hopes that the higher price will more than cover the extra costs incurred in offering the unique product. disseminate. other firms may be able to lower their costs as well. Some risks of focus strategy include imitation and changes in the target segment. Strong sales team with the ability to successfully communicate the perceives strengths of the product. Furthermore. Each generic strategy has its risks. There may be a lack of awareness of environmental changes and competitors’ actions. Information should not be approached in an infrequent manner. Opportunities may be missed. Finally. analyze. Firms that succeed in differntiation strategy often have the following internal strengths: • • • • • Access to leading scientific research. Additionally various firms pursuing focus strategies may be able to achieve even greater differntiation in their market segments. even the low cost strategy.
Efficient distribution channel. firms pursuing a focus strategy have lower volumes and thus less bargaining power with their suppliers. Because of their narrow market focus. Highly skilled and creative product development team. several firms follow. Additionally.
An avoidance of crises. managerially. Continuous monitoring is the procedure by which the changing environment is regularly viewed. 4. 7. 2. Actions may be reactionary rather than anticipatory. Previous studies may not be stored in an easy to use format. 6. A broad perspective. Time lags may result if a new study is required. 3. An MIS offers many advantages: 1.
Data collection may be difficult to analyze over several time periods. Organized data collection. An information system can be used operationally. and strategically for several aspects of marketing. continuous basis. as well as the information collected through continuous monitoring and marketing research that is kept by the organization. 3. disseminate. Marketing research is used to obtain information on particular marketing issues. and store anticipated marketing decision information on a regular. which contains three components.An information system can be used operationally. 1. Data warehousing involves the retention of all types of relevant company records. and strategically for several aspects of marketing. Data collection may be disjointed.
A marketing information system (MIS) is a set of procedures and methods designed to generate. 4. analyze. 2. 5.
The total information needs of the marketing department can be specified and satisfied via a marketing intelligence network. 8. The storage of important data.3. managerially. Marketing plans and decisions may not be properly reviewed.
markets. Product tests 6. Sources of Data . generate. monitor marketing performance. It may get enough data by analyzing internal reports or from informal meetings with customer service personnel.information used to identify and define marketing opportunities and problems.5. 3. Diaries
. It is original and collected to solve the problem in hand. Speed in obtaining sufficient information to make decisions. A firm’s decision to use marketing research does not mean it must engage in expensive projects (test marketing. Data may be available from different sources: the firm itself. refine. Primary research is conducted from scratch. Mystery shopping 3. Marketing research is about researching the whole of a company’s marketing process This explanation is far more straightforward i. 5. 2. an impartial agency. Secondary research. recording. or modes of distribution such as via the Internet. and evaluate marketing actions.. marketing research into the elements of the marketing mix. people. places. this is a very long and involved definition of marketing research. analyzes. or a research specialist working for the firm. Marketing research specifies the information required to address these issues. also known as desk research. customer. The ability to do a cost-benefit analysis. It not only includes ‘market’ research.
MARKET RESEARCH Marketing research is the systematic gathering. We consider some of them: 1. organizations. and improve understanding of marketing as a process. services.e. An outside party or the firm itself may undertake such research. ‘Market’ research is simply re. and everything to do with the customers. It is a very narrow concept. Obviously. recording. Focus groups 4. It may be applied to any aspect of marketing that requires information to aid decisionmaking. and analyzing of information about specific issues related to the marketing of goods. Interviews 2. consumer attitude surveys). 6. 7. Primary Research There are many was to conduct primary research. and communicates the findings and their implications. 1. 4.
Coordinated marketing plans. designs the methods for collecting information. ‘Marketing’ research is much broader.Primary and Secondary There are two main sources of data . Market research and marketing research are often confused. already exists since it has been collected for other purposes. but also areas such as research into new products. Data amassed and kept over several time periods. Projective techniques 5. 8. It involves a sequence of tasks: data gathering.primary and secondary. Several points about marketing research need to be emphasized. competitors. and public to the marketer through information . and ideas. Research findings and their implications must be communicated to the appropriate decision maker(s) in the firm. Here are a couple of definitions: Marketing research is the function that links the consumer. manages and implements the data collection process. It must not be haphazard.search into a specific market. and analysis.
Interviews This is the technique most associated with marketing research. • Some respondents will give biased responses when face-to-face with a researcher. Telephone interviews are cheaper to conduct than face-to-face interviews (on a per person basis). Some surveys are very rigid or ‘structured’ and use closed questions. 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. face-to.
.face. 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. The research will probe and develop points of interest. Other important data is collected when visitors sign up for membership.’ and depend upon more open forms of questioning. However responses will increase if an incentive is offered such as a free newsletter. or over the Internet. The interviews tend to be very structured and tend to lack depth. Omnibus Studies 1. Data is collected on a survey.7. Interviews can be telephone. Other face-to-face interviews are more ‘in depth. • Telephone Interviews Telephone ownership is very common in developed countries. Data is easily compared. It is ideal for collecting data from a geographically dispersed sample. or free membership. • The Internet
The Internet can be used in a number of ways to collect primary data. not potential customers. Visitors to sites can be asked to complete electronic questionnaires. 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.
months. Groups tend to be made up from 10 to 18 participants. However. and many other customer focused organizations. 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. • Can be very expensive in comparison to other methods 4.Imagine that you are a product and describe what it is like to be operated.drama . Mail surveys are less popular with the advent of technologies. such as the Internet and telephones. cafes and restaurants. Potential customers are asked to visit the store and their purchase behavior is observed. They are rare. warn. Highly experienced researchers work with the focus group to gather in depth qualitative feedback. especially call centers. Projective techniques Projective techniques are borrowed from the field of psychology. There are many examples of such approaches including: Inkblot tests . a second mailing to prompt or remind respondents tends to improve response rates. or purchased. Discussion. They will generate highly subjective qualitative data.look for images in a series of inkblots Cartoons . 6 Diaries Diaries are used by a number of specially recruited consumers. Lists are collated. Products are displayed in a mall of shopping center. Often used in banking. However. 2 Mystery Shopping Companies will set up mystery shopping campaigns on an organizations behalf. travel. how the packing is read. the researcher has a reasonable picture of purchasing behavior. It demands a substantial commitment on the part of the respondent. Observers will contemplate how the product is handled. or used. posing as real customers.depends on very quick (subconscious) responses to words Psycho. or years). and the research will probe into specific areas that are of interest to the company commission in the research. retailing.
• Mail Survey In many countries. There are many issues surrounding the ethics of such an approach to research.• •
Needs knowledge of software to set up questionnaires and methods of processing data May deter visitors from your website. 3 Focus Groups Focus groups are made up from a number of selected respondents based together in the same room. Mail surveys do not tend to generate more than a 5-10% response rate. the mail survey is the most appropriate way to gather primary data. They collect data on customer service and the customer experience.
. and beliefs are encouraged. Findings are reported back to the commissioning organization. opinion. Complex to organize. by collecting a series of diaries with a number of entries. They are asked to complete a diary that lists and records their purchasing behavior of a period of time (weeks. how much time the consumer spends with the product. 5 Product tests Product tests are often completed as part of the ‘test’ marketing process. and so on. and a pre-designed questionnaire is mailed to a sample of respondents.complete the ‘bubbles’ on a cartoon series Sentence or story completion Word association . mystery shoppers will enter.
and primary data are not generated until secondary data are thoroughly reviewed. 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.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). There are a number of such sources available to the marketer. and commits less time and effort than conducting your own research. generating primary data (if necessary).
. An omnibus survey could include questions from companies in sectors as diverse as heath care and tobacco. The research is far cheaper. secondary data are not examined until a firm states the issue or problem to be studied. For example. Each step is completed in order. Figure below that presents the complete process. The goal of marketing research is to provide the facts and direction that managers need to make their more important marketing decisions. The organization will be one of many that simply want to a straightforward answer to a simple question. the attributes that create value cannot simply be deduced from common knowledge. As such. THE MARKETING RESEARCH PROCESS The marketing research process consists of a series of activities: defining the issue or problem to be studied. and implementing findings. examining secondary data. Rather. it already exists. and what customers value this year may be quite different from what they value next year. data must be collected and analyzed. making recommendations. But the perception of value is a subjective one. analyzing information.e. Secondary Research Secondary (or desk) research uses data that has been collected for other objectives than your own i.
It is the structured collection and analysis of data pertaining to a specific issue or problem. The use of such scenarios can ensure that the purpose of the research is agreed upon before it commences. They include budgets. B. 5. 5. Issue (problem) definition is a statement of the topic to be looked into. 4. Secondary data have these general advantages: 1. It is also called qualitative research and may involve in-depth probing. EXAMINATION OF SECONDARY DATA A. a decision problem may be whether to launch a new product.ten reports. profit-and-loss statements. B. small group discussions.1. Conclusive research. Diverse sources. Internal secondary data are available within the company. Helpful for exploratory research. customer billings. and understanding underlying trends. sales figures. 1. Access to hard-to-obtain data. 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. 2. C. the decision problem is translated into a research problem. Conflicting results. Secondary data are those that have been gathered for purposes other than solving the current problem under investigation. 2. inventory records.The objective of the research should be defined clearly. 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. Thus. Low costs. For example. To ensure that the true decision problem is addressed. Unknown methodology. Speed. Source credibility. The corresponding research problem might be to assess whether the market would accept the new product . Advantages and Disadvantages 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. B. 3. 3. ISSUE (PROBLEM) DEFINITION A. B. These data should always be reviewed before primary data collection. also called quantitative research.
Sources A. Obsolescence. External secondary data are available from sources outside the company. and writ. They may be obtained
. 6. 6. prior research reports. Secondary data have these general disadvantages: Lack of suitability. 2. 4. Unknown reliability. is used after the problem definition is clarified.
c. Regular publications can be broad in scope (such as Business Week) or more specialized (such as the Journal of Advertising). No conflicting data. Company limitations.C. monographs. Primary data consist of information gathered to address a specific issue or problem at hand. 2. 3. 7. 6. Secrecy. sampling is usually employed. Nielsen. Precision. For large and/or dispersed populations. every member of the designated population has an equal or known chance of being selected. What information should be collected? It can be exploratory or conclusive in nature. Books. Only way to acquire information in some cases.
Research Design A. IMS Health. With a probability sample. Sampling enables the firm to analyze selected people or objects.from government and non-government sources. members of the population are chosen on
. a. 5. 4. Commercial research houses (such as A. It consists of these eight steps: 1. There are three sources of non-government secondary data: a. 3. b. High costs. Reliability determined. Primary data have these general advantages: 1. Limited perspective. With a non-probability sample. 5. 4. Inability to gather certain types of information. 2. They are necessary if secondary data are insufficient for a proper marketing decision to be made. Currency. 2. and other non-regular publications deal with special topics in depth and are compiled on the basis of interest by a target audience. Who collects the data? Data can be collected by the firm itself or by an outside company. Primary data have these general disadvantages: Time consuming. 1. 1. The way in which people or objects are selected must be decided. A research design outlines the procedures for collecting and analyzing data. B. Who or what should be studied? This is defined as the population. GENERATION OF PRIMARY DATA A. B.
Advantages and Disadvantages A. and Burke Marketing Re. Controlled and known methodology.search) conduct periodic and ongoing studies and make results available to many clients for a fee. 3. B. 3.
C. Table 4-2 shows the best uses for each kind of primary data collection. interviewers record answers. Analysis—the evaluation of responses as they pertain to the specific issue or problem under investigation. Observation is a research method whereby present behavior or the results of past behavior are observed and noted. 8. How will the data be collected? Data collection can be administered by research personnel or be self-administered. researcher time. e. Tabulation—the calculation of summary data for each response category. 4. Figure 4-11 shows recommendations flowing from completed research. 6. based on marketing research findings.trolled conditions. How long will the data-collection period be? The total time frame is specified. With self. computer usage. Just the factor under study is varied. interviewers. 7. A survey gathers information from respondents by communicating with them. When and where should information be collected? The day and time must be set. C. postage or phone expenses. Benefits and costs must be compared. The semantic differential is a list of bipolar (opposite) adjective scales that provides an overall profile b. the location of data collection must be outlined. Data analysis consists of the following: 1. c. d. B. Responses or observations must be entered correctly. It can be disguised or non disguised. and marketing expenses (such as ads). special equipment. ANALYSIS OF DATA A. What technique of data collection should be used? a. all others remain constant. How much will the study cost? Costs may include executive time. An experiment is a type of research in which one or more factors are manipulated under con. respondents’ incentives (if any). B. Data Collection A. In addition. 4. pre-testing. 5. Coding—the process by which each completed data form is numbered and response categories are labeled. respondents write their answers.the basis of convenience or judgment.
. RECOMMENDATIONS A. Data are collected. 2. The report must be written for the audience that reads it. Those engaged in data collection must be properly supervised and follow directions exactly. Recommendations are suggestions for a firm’s future actions. It can be conducted in person. or by phone or mail. With administered questionnaires. support staff time. supplies. It may be human or mechanical. printing. 2.administered questionnaires. Simulation is a computer-based method to test the potential effects of various marketing factors via a software program rather than real-world applications. 5.
3. Once the recommendations are passed on to the proper decision makers. Go ahead and collect the data. This is in addition to government. stratified sample. 6. Make sure that you agree on the problem! If you gain approval. Do we us a random sample. The problem then becomes the focus of the research. Make sure that you really ‘need’ to know something. 9. or analytic mistakes. It is not uncommon to find errors in sampling. who are responsible for using findings. then move on to step seven. The research report represents feedback to marketing managers.cussed in more detail later.and institutionsponsored research. Summary of the Marketing research Process – Marketing research is gathered using a systematic approach. the topical areas in which
.-based) account for $8 billion in yearly revenues. How will you collect the data that you will analyze to solve your problem? Do we conduct a telephone survey. This will contain charts. tables. 3. They have input into the research design. 6. How will we analyze any data collected? What software will we use? What degree of accuracy is required? 5. Never conduct research for things that you would ‘like’ to know.S. Go back and speak to the managers or clients requesting the research. 7. and diagrams that will communicate the results of the research. data collection method. 8. IMPLEMENTATION OF FINDINGS A. as well as efforts of the compa.000 firms accounting for the rest. Conduct the analysis of the data. An example of one follows: 1. Companies spend about $12 billion worldwide (40 percent in the United States) for data gathered by marketing research firms. Scope of marketing research A. Define the problem. with more than 1. According to the American Marketing Association. Select a sampling method. Decide upon a budget and a timeframe. They have broad control over marketing decisions. why are sales falling in New Zealand? 2. B.D. the research report should be warehoused in the marketing intelligence network. They have confidence that results are accurate. or cluster sample? 4. 10. Watch out for errors in interpretation. The top 25-research firms (nearly half of which are U. B. Check for errors. Marketing managers are most likely to implement research findings under these conditions: 1. 2. For example. or do we arrange a focus group? The methods of data collection will be dis. and hopefully lead to a solution to your problem.nies themselves.Write your final report.
Customer satisfaction research is being sponsored much more than ever before. designing and
.companies are most likely to engage in or sponsor research efforts are industry/market characteristics and trends. Misrepresenting research projects. Yet. Due to unethical practices of some firms. Selling or fund raising under the guise of research. 2. many potential respondents are “turned off” to participating in marketing research projects. 3. purchase intentions.5 million in 1996 to $255 million in 2000. segmentation studies. and accessing online annual reports and trade publications. Many businesspeople start their research by checking out competitors’ Web sites. with many firms doing their own studies and others hiring outside specialists. On average. 4. C. With more and more firms striving to expand their foreign endeavors. 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. Five marketing research trends are the rapid increase in customer satisfaction studies. To turn the situation around. a lot of Americans will not answer a survey. G. c. Asking overly personal questions. these practices need to be avoided: 1. False sponsor identification. ethical considerations. and concept development and testing. Unrealized promises of anonymity. Here are examples of how the research is being used. product satisfaction. b. Over the last few years. Due to technological advances. and the application of single-source data collection. 6. companies tend to spend about 1 percent of revenue on marketing research. brand awareness and preference. Planet Feedback enables consumers to send their feedback to companies quickly and effortlessly. 8. F. market-share analyses. Marketing Info offers The Marketplace. In fact. and the complexities of international marketing research. using search engines. 5. international marketing research is taking on greater importance. Misportraying research findings in ads and other communications. spending for online marketing research has grown from $3. Firms deciding how to market to the hundreds of millions of consumers in Eastern Europe and Central Asia increasingly do market research there.
1. Observational studies without informed consent. 2. a. 7. Selling consumer demographic information for database use without consent. B. an easy-to-use exchange for purchasers and providers of market research and related marketing services. the use of the Internet. C. The extent of such research has more than doubled in recent years.
Communications systems. may be below Western standards.
.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. people have never been surveyed before. Secondary data from government agencies and trade associations may be lacking. 3. 1. Many times. especially phone services. 2.
racial groups. the “youth culture” or “club culture” has quite distinct values and buying characteristics from the much older “gray generation” Similarly. It is measured as a combination of occupation. education. is influenced not only by psychological factors. such as the groups to which the customer belongs and social status. ready meals and direct marketing service busi.workers are examples of primary
. Sub-cultures can include nationalities. the decision to purchase and use certain products and services. perception and wants from the family and other important groups. personality and lifestyle. For example. Sometimes a sub-culture will create a substantial and distinctive market segment of its own. Growing up. neighbors. the official six social classes in the UK are widely used to profile and predict different customer behavior.nesses such as telephone banking and insurance. In a group. several individuals may interact to influence the purchase decision. 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. Similarly the increased desire for “leisure time” has resulted in increased demand for convenience products and services such as microwave ovens. children learn basic values. The typical roles in such a group decision can be summarized as follows: Reference groups As a consumer. family. Marketers are always trying to spot “cultural shifts” which might point to new products that might be wanted by customers or to increased demand. close friends. For example. 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. income. social class is not just determined by income.
Cultural factors: Cultural factors have a significant impact on customer behavior. differences in social class can create customer groups. Each culture contains “sub-cultures” – groups of people with share values. 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. In the UK’s socioeconomic classification scheme.Consumer Behavior Factors affecting consumer behavior Each of these factors is discussed in more detail in the following sections on buyer behavior. or groups of people sharing the same geographical location. colleagues and co. In fact. Culture is the most basic cause of a person’s wants and behavior.
accountants and authors are used for establishing the benefits of the product. Family: The family is the most important of all these groups and we shall discuss it in detail. In contrast. such as film stars. Graviera) are advertised using celebrities from the sports and film fields. vi) Work groups.groups. which exert a significant influence on consumer’s. We can identify two families which shape an
. Colgate and Forhans tooth. politicians. Meeting your neighbors over lunch once a month for friendly exchange of news is an instance of an informal group. 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. Film stars and sports heroes are the most popular celebrities. group situation with which potential customers can identify are used to promote products and services. informal and small groups exert the maximum influence on consumers and are of great interest for marketers. b) Experts. Different kinds of groups. Hidden in this appeal is the subtle inducement to the customer to identify himself with the user the product in question. There are i) The family ii) Friendship groups. It is a source of major influence on the individual members’ buying behavior. TV stars. whether small or large. The family. Jaycees are some of the well – known social groups in our society. toilet soaps (Lux) . The three types of reference groups appeals most commonly used are: a) Celebrities. A symbolic group is one which an individual aspires to belong to. Experts such as doctors. lions. lawyer. purchase decisions and behavior can be classified into six categories. v) Consumer action groups. social clubs and societies are other types of formal groups to which individuals may belong. Labor unions. as a unit. is an important consumer for many products which are purchased for consumption by all family members. iv) Formal shopping groups. II) Formal and informal groups: Rotary. which use the expert reference groups appeal for promotion. iii) Formal social groups. All workers in a factory qualify for membership to the labor union. Direct reference groups. formal or reference group is a very wide one and includes both direct and indirect or group influences. It demonstrates to the prospective customer that demonstrates just like him uses and is satisfied with the product. III) Membership and symbolic groups: A membership group is one to which a person belongs or qualifies for membership. 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. attitudes and behavior. A formal group has a highly defined structure. Secondary groups are those with which an individual interacts only occasionally and does not consider their opinion very important. Primary. The family. Indirect reference groups comprise those individuals or groups with whom an individual dews not have any direct face to face contact. an informal group is loosely defined and may have no specified roles and goals.pastes are examples of products. Reference groups are used in advertising to appeal to different market segments. as I unit. is an important of all these groups and we shall discuss it in detail. shaving cream (Palmolive). specific roles and authority positions and specific goals. Soft drink (Thums up). but is not likely to be received as a member. Another reference group appeal is that which uses the testimonials of a satisfied customer. 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. sportsman. textiles ( Dinesh .
not with standing the terrible heat condition.People buy and use products that reflect their status. they can successfully market those products and services whose consumption is dictated by the group norms. He may go to Europe or U. while the husband played a dominant role in the purchased of automobiles and life insurance. it has been the wife’s role to purchase food. Status: Each role that a person plays has status. There is a method of measuring a consumer’s lifestyle. The concept of lifecycle as applied to marketing will be discussed in more details. However. The life cycle is an orderly series of stages in which consumer attitude and behavioural tendencies evolve and occur because of developing maturity. Status is often measured by the degree of influence an individual exerts in the behavior and attitude of others. their influence of the sub – conscious mind still continues to be great. The profession or the occupation a person is in again has an impact on the products they consume. experience. where the children are likely to have more updated information about various brands and product attributes. personal computers. brothers and sisters.A. 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. the same decision. in different families may be made either by the husband or wife. Thus. same is the case with any consumer. or both may have an equal voice. stereo music systems. Thus in different social positions you play different roles. But with the emergence of the working-women. records. It is a person’s mode of living as identified by his or her activities. Traditionally. Life Style: Our life styles are reflected in our personalities and self-concepts. Within the family. It is from parents that we imbibe most of our values. interest and opinions. This is especially true in case of products such as television. beliefs and purchase behavior patterns. at home you play the role of spouse and parent. If marketers can identify the various groups to which potential consumers belong. Roles: An individual may participate in many groups. The second type of family is the family of procreation consisting of the consumer’s spouse and children. The managing director of a company may drive a Mercedes to communicate his status in society. Long after an individual has ceased to live with his parents. rather than going to Mussoorie or Ooty. We need to know what a life-style is made of.individual’s consumption behavior . the latter’s influence is extremely important. accessories and possessions. in certain multinational companies in India. His position within each group can be defined in terms of the activities he is expected to perform. attitudes. This method is called as the psychographics-which is
. and status. The status of a person is projected through various symbols like the dress. the norm for office wear includes a full – sleeved shirt and tie. Marketers often define their target market in terms of the consumers present lifecycle stage. 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. these lines of traditional role demarcation have been getting increasingly blurred. Group norms: Are the norms of a group are the implicit rules of conduct and behavior that are expected of its member. You are probably a manager. income. clothing and other household sundries. In our country. For instance. 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. different member play different roles. for a holiday. etc. where children continue to live with parents even after attain adulthood. and when in your work situation you play that role. Each of these roles influences your purchase decisions.S. Personal Factors: Age and Life cycle Stage:Like the social class the human life cycle can have a significant impact on consumer behaviour. which is the relative prestige accorded by society.one is the family of orientation that is the family in which you are born and consists of your parents. Children are also beginning to exert their influence on the family’s purchase decisions.
Self-confidence. Personality: personality is the sum total of an individual’s enduring internal psychological traits that make him or her unique. Unlike personality typologies. sleep. By appealing to motives (reasons for behavior). etc. we may think about other things. these change by situation and over time. 2. and desires that impel a person to or away from certain actions. a marketer can generate motivation.the analysis technique used to mea. However. Then based upon the combina tions of these dimensions. dominance. 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. Once they are alleviated. 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. Hierarchy of Needs .sure consumer lifestyles. These needs are mostly psychological in nature. which are difficult to describe measure lifestyle analysis has proven valuable in segmenting and targeting consumers according to their lifestyle classification. sex. These feelings motivate us to alleviate them as soon as possible to establish homeostasis. discomfort. defensiveness. sociability. Each person has distinct motives for purchases. interests and opinions. MASLOW’S HIERACHY OF NEEDS
The Hierarchy of Needs model of Abraham Maslow 1.
. the wife cannot move to the next level. and emotional stability are selected personality traits. Hierarchy of Needs . if a family is dysfunctional caused by for example an abusive husband. irritation. goals. pain. etc. Motivation: Motivation involves the positive or negative needs. We need the safety of a home and family. adaptability. food. Because she is constantly concerned for her safety. Love and belongingness have to wait until she is no longer in fear. Economic and emotional motives are possible. consumers are classified. water. When these are not satisfied we may feel sickness. autonomy.peoples activities.Physiological needs These are the very basic needs such as air.Safety needs These are dealing with achieving of stability and of consistency in a chaotic world.
but without them there is dissatisfaction. These factors result from internal generators in employees. Second. Hierarchy of Needs . to become everything that one is capable of becoming.The need for self-actualization This is "the desire to become more and more what one is. 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. They can seek knowledge. there's the attention and recognition that comes from others. • Motivation factors are needed in order to motivate an employee into higher performance. however. (Hofstede. We want to feel loved (non-sexual) by others. See McClelland. 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. 4. self-fulfillment. peace. gangs. work groups." People who have everything can maximize their potential. Early) • Other researchers claim that other needs are also significant or even more significant. Hierarchy of Needs . The first is the self-esteem which is the result from competence or mastery of a task.3. This is similar to the belongingness level. to be accepted by others. Performing artists are appreciating applause. affiliation and power. • In 1968. (Graves) • Different people with different cultural backgrounds and in different situations may have different hierarchies of need. etc.Love and belongingness needs These are next on the ladder. Hierarchy of Needs . Humans have a desire to belong to groups: clubs. oneness with God. Typical Hygiene Factors • • • • • • • • • Working conditions Quality of supervision Salary Status Safety Company Job Company policies and administration Interpersonal relations
. people don't work necessarily one by one through these levels. wanting admiration is related to the need for power. We need to be needed. family. They are much less structured in the way they satisfy their needs. Disadvantages • Care should be taken not to stick too rigidly to this hierarchy: • In reality. who identified needs for achievement.Self-Esteem needs There are two types of esteem needs. Satisfaction and psychological growth was a factor of motivation factors. Herzberg developed this motivation theory during his investigation of 200 accountants and engineers in the USA. 5. They do not cause higher levels of motivation. religious groups. etc. esthetic experiences. Limitations of the Hierarchy of Needs model.
which evokes the most favorable perception in the maximum number of consumers. generally consumers tend to perceive the quality of performs on the basis of package. which relate to their immediate needs. smells. you suddenly seem to notice more than the usual number of advertisements pertaining to that specific product. advertisement and commercials. brand name. Perception helps to explain the phenomenon of why different individuals respond differently to the same stimulus under the same condition. which are of immediate interest to the marketer. size. nose. High Hygiene + Low Motivation: Employees have few complaints but are not highly motivated. A situation where the job is exciting and challenging. taste of your product. tastes and sensations that we feel are known as stimuli. People are more likely to notice stimuli. All the time we are receding messages through our five organs viz. selects. sounds. Low Hygiene + Low Motivation: The worst situation.. be it camera. Perception can be described as “how we see the world around us”. you are providing stimulus to your consumers through the physical shape. Low Hygiene + High Motivation: Employees are motivated but have a lot of complaints. values and expectations and this is known as perception. There are three aspects of perception. Each person recognizes. organizes and interprets thes3e stimuli in his own individual manner based in his needs. feel.. eyes. The job is perceived as a paycheck. mouth and skin. However the salaries and work conditions are not OK. color. fragrance. These are selective exposure. Perception The second major psychological factor that influences consumer behavior is perception. television or any other high value product or services. For example.
Herzberg suggests that often work can be arranged and should be arranged in the following ways: • job enlargement • job rotation. Since each individual’s needs. its package. refrigerator. The different sights. Selective exposure: you must have noticed that when you are on the look out for purchasing a specific product. the implication is that he has to carefully and accurately identifies his
. Employees are not motivated and have lots of complaints. This is because of your selective exposures. selective distortion and selective retention. and/or • job enrichment.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. As a marketing manager. For the marketer. Your interest is to the stimuli so that you can highlight that particular stimulus of combination of stimuli. ears. motive and expectations are unique therefore each individual’s perception is unique. price and manufacture’s image.
. attitude develops over the time with each fresh knowledge input. A belief is a descriptive thought that a person has about something. The beliefs constitute the brand image about the brand. firms. a marketer may find that his message is often not received in the intended manner but different consumers twist it in different ways. Thus making the consumer ‘learn ‘ that the brand is good and worth patronizing. which you have made. Selective retention: people forget much of the stimuli which they receive3 and only retain that information which reinforces their clause and decision. A newborn infant’s sucking at the feeding bottle is instinctive behavior. Thus. because it implies that consumers can be made to learn the desired behaviors through in interplay of motives. Positive feedback about pressure cooker from a friend. and then the changes are that she would like to use it as often as possible. Since you have already made your decision you would seek only that information which reinforces the correctness of your decision. This belief may be based on some real facts or it may merely be a notion or opinion that the person has. The housewife’s response to pressure cookers has been reinforced. Attitudes get settled into specific patterns and are difficult to change. Success cannot normally be attained without positive consumer attitudes. services. or negative feelings about goods. 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. and/or institutions. neutral. experience and influence. Starting from childhood. Having identified the potential customers. Selective Distortion: let us suppose you have decided to purchase a specific brand “A” of pressure cooker. which she sees and hears. but a five year old clamoring for chocolate or chewing gum is the result of learned behavior. stimuli. using the appropriate stimuli and cues and providing positive reinforcement. 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. the process is known as selective distortion. The motive is directed towards the stimulus object – a pressure cooker.potential customers since other customers are not at all likely to notice the stimuli. The marketer must ensure that consumers have relevant and correct information about the brand to facilitate formation of a positive brand image. responses and reinforcements. evaluation and tendency towards a particular idea or object. where and how the housewife responds. Much of an adult’s human behavior sis leaned behaviors. This is a very significant factor marketer. 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. A housewife has the need is strong enough to propel her to take action it becomes a motive. cues. Attitude is a person’s enduring feeling. 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. people. Cues are minor stimuli that determine when. the marketer has to ensure that the stimuli are interesting enough to attract and hold their attention. issues. and in the future may buy another one. a special introductory price offer are all examples of cues which influence a housewife’s response to the motive for buying a pressure cooker. Suppose the housewife buys the pressure cooker and is satisfied with its performance. You are more likely to remember the positive feature of brand ‘A’ pressure cooker since they help reassure you that the decision. The stimuli are the various advertisements about the product. A marketer can build up demand for his brand by associating it with strong motives.
Many consumers are hesitant to react to unfulfilled desires because there are risks and the benefits may be hard to judge. and ideas. or idea may solve a problem of shortage or unfulfilled desire.The purchase act involves the exchange of money or a promise to pay for a product. 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. all six stages in the process are used. PROBLEM AWARENESS: During problem awareness. Purchase decisions remaining at this stage center on the place of purchase. organization. it may be ended.As risk increases. Seven useful sources are provided. It consists of the process itself and factors affecting the process. • Noncommercial. A stimulus can be any of the following: • Social. the performance of a specific service. place. Buying one item may lead to the purchase of another. Once the information search is completed. services.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. availability. he or she will go on to the next step in the decision process. it must be determined whether the shortage or unfulfilled desire can be satisfied by any alternative. If the above elements are acceptable. social. A prospective consumer may be exposed to any or all of these types of stimuli. service. the consumer recognizes that the good. Search can be internal and/or external . organizations. POST-PURCHASE BEHAVIOR: Frequently. The Internet has become a major source for consumer shopping information. or support in return of ownership of a specific good. other times. Factors affecting the process are a consumer’s demographic. INFORMATION SEARCH: Information search involves listing alternatives that will solve the problem at hand and a determination of the characteristics of each. Re-evaluation of the
. and so on. terms. the consumer engages in post-purchase behavior. If a person is sufficiently stimulated. • Physical. people. • Commercial. only a few steps are utilized At any point in the process. PURCHASE . STIMULUS: A stimulus is a cue or drive meant to motivate a person to act. and psychological characteristics. a consumer will make a purchase. person. places.
The decision process consists of six basic stages (the next six sections). Sometimes. the amount of information sought also increases.
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,
The more clusters facing the firm. is different to my perception. D. I. It appeals to two or more distinct market segments.trated. etc. A firm must balance revenues obtained from selling to multiple segments against the costs. Per unit profits can be maximized through market segmentation. value for money in terms of worth.should be avoided. Differentiated Marketing (Multiple Segmentation) A. but not all segments. because only one segment is sought. the greater the opportunity for differentiated marketing.g. what you perceive as quality. or products. with a different marketing plan for each. Sales maximization. Differentiated marketing should enable the firm to achieve several objectives: 1. Costs vary. such as Hyundai. E. Recognition as a specialist. allows orders to be concen. Differentiated marketing can be achieved without involvement in the majority fallacy. 1. B. there will
. and Microsoft appeal to two or more segments. use both undifferentiated marketing and concentrated marketing approaches in their multiple-segmentation strategy. H. Diversification. F. Two or more sizable and distinct consumer groups are necessary. G. such as Time Inc. E.TARGET . Wholesalers and retailers usually find differentiated marketing to be desirable. so do the results of the positioning map e. and encourages private labels. • Positioning is all about ‘perception’. 2. because it enables them to reach different consumers. Company resources and abilities must be able to produce and market two or more different sizes. As perception differs from person to person. However. G. Total profits are not maximized. Total profits should rise as the number of segments serviced increases. A distinct niche can be carved out for a particular brand. A company must be careful to maintain product distinctiveness in each consumer segment and to guard its image. Some companies. 2.
C. Firms such as Maruti-Suzuki use differentiated marketing to attract all segments. brands. Differentiated marketing combines the best attributes of undifferentiated marketing and concen trated marketing. 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 . A potentially profitable segment may be one ignored by other firms. F.. They have one or more major brands for the mass market and secondary brands geared toward specific segments. depending on modifications needed. offers a degree of exclusivity. 3. Others.POSTION process • Positioning is undoubtedly one of the simplest and most useful tools to marketers.
positioning features the people who should visit the destination.” 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. positions itself as the place “where people who run things can stop running. For this strategy. Thailand promotes the friendliness of its people with the statement “The world meets in the land of smiles. therefore re-emphasizing the importance of perception!! New Product—need to communicate benefits POSITIONING ERRORS
POSITIONING TYPES.APPROACHES Positioning by attribute. • 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
.” Positioning according to the users or class of users In this case. 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. It refers to a place that the product offering occupies in • consumers’ minds on important attributes. emphasis is placed on the benefits of the particular features or attributes of the destination. Positioning with respect to use or application Here a destination is positioned based on the reasons for visiting it. send them to the peak. value offered to visitors can be effectively utilized as exemplified by Malaysia which claims “Malaysia gives more natural value. Hong Kong appeals to the incentive travel market with the statement ‘When they’ve reached the top.tial development in Florida. or customer benefit. relative to competing offerings. For example.be similarities in certain cases. a major tourist site in Hong Kong: Fisher Island. in the minds of the consumer.” referring to Victoria Peak. Mexico is positioned as “The meeting place for sun worshipers. How new and current items in the product mix are perceived. However. a luxury residen.” With this positioning statement Malaysia is appealing not only to the sense of value (more for the money) but also to its natural attractions. Cancun. next step will be to position a product within that market. feature.
coating and action time. location. Reliability: on reliability basis one is normally ready to pay a premium. which is in terms of degree to which all of the produced units are identical and are able to meet the promised specification. This strategy is aggressive. However. it can be differentiated by the dosage size. The problem with low conformance quality is that the product will disappoint some buyers. the Principality of Monaco is positioned as “The fairy tale that does not end at midnight.” What is Differentiation? The task of positioning is to deliver a central idea about a company or an offering to the target market. Form: Companies can differentiate products on the basis of form. promotion. or “If your looking for an ideal meeting place. here’s one that’s close to heaven” for Israel. Performance quality: is the level. Features: they are the characteristics. innovation and different service levels. then determining which would be profitable to add. For example. the size. shape. quality. cost and price. Conformance quality: C onformance for quality. given the potential market. 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. Positioning simplifies what one is thinking of the entity. to bring out differences between destinations. Ritz-Carlton Hotels is a little more subtle when they say. Yet there are diminishing return to higher performance quality so marketers must choose a level suited to the target market and rival performance levels. It is important for products such as vehicles and kitchen appliances to be durable. which the product’s primary characteristics operate. in this the company is focusing on besting the competition and at the same time they are satisfying the consumers and gaining higher profits. As Disprin is essentially a commodity. and the shape of the product. Durability: D urability in the product me a n s expecting the product to be operating under natural or stressful conditions. This approach is not used frequently in international tourism destination marketing since it may involve negative statements about another country or region. Differentiation is the process of adding a set of meaningful and valued differences to distinguish the company offering from competitors offerings. Positioning vis-à-vis the competition This approach is used when it is necessary to meet the competition head-on. product features. packaging. ‘After a day of competition. Marketers starts by asking recent buyers about additional features that would improve satisfaction. which can be in many forms like Disprin. Marketers have identified that the products are capable of higher differentiation than services such as automobile and furniture. you deserve a hotel that has none. The strategic planning institute found a significantly positive correlation between relative product quality and return on investment.extraordinary and/ or unique. it is regularly employed in product and services marketing. which are very important they are basically there to support the basic functions of the product.” or holding a convention in Thailand is “Smooth as silk where the sky’s the limit. image. 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.that is the physical structure. Example of any product. For example. The tools that are used to differentiate products include branding. Differentiation goes beyond positioning to spin a complex web of differences characterizing that entity. it is basically a
. TYPES OF DIFFERENTIATION Product differentiation In this the marketing mix variable are used to make unique product offer that stands out from the competitors. However the extra price must not be excessive and the product must not be subjected to rapid technological obsolescence.
selves with little cost or time. a well-designed product is one that is pleasant to look at and easy to open. cuistomers are normally willing to pay a premium for products that are attractively styled. reparability and style. For example. Maintenance and repair: describes the service program for helping customers keep purchasing products in good working order. Rite Aid has teamed with drugstore.com to offer even more health-related information.. the key to competitive success may lie in adding valued services and improving their quality. Deluxe check printer. Customer consulting refers to data. However. provide customers with research so they can make more educated judgments and fell comfortable asking for help. performance.Davidson motorcycle. The designer has to take all of these factors into account Service differentiation: When the physical product cannot be differentiated easily. conformance. an important consideration for many products. feature development. On the Web. Style: Style is look and feel of the product to the customer. Delivery: it is related to how well the product or service is delivered to the customer. Design: as competition intensifies. consumers can now order and receive groceries without going to the supermarket business web-based service such as peapod and net grocer. inc. The main service differentiators are: Ordering ease: refers to how easy it is for cusotmer to place an order with the company. this means the designer has to figure out how much to invest in form. have an outstanding reputation for creating reliable appliances? Reparability: buyers prefer products that are easy to repair. For a company a well-designed product is one that is easy to manufacture and distribute. General Electric not only sells installs expensive X-rays equipment in hospitals. repair and dispose of. has built an impressive reputation for shipping out its checks one day after receiving an order. Design is the integrating force that incorporates all of the qualities. Buyers of heavy equipment expect good installation service. Differentiation by installation is particularly important for companies that offer complex products such as computers. strong style does not always means high performance. Most of the time.
. install. durability. To the company. Reparability is a measure of the ease of fixing a product when it malfunctions or fails. Baxter Healthcare has eased the ordering process by supplying hospitals with computer through which they send orders directly to Baxter. An automobile made with standard parts that are easily replaced has highly reparability. Installation: refers to the work done to make a product operational in its planned location. Apple computers. May tag. but also gives extensive training to users of this equipment. Customer training refers to how the customer’s employees are trained to use the vendor’s equipment properly and efficiently.without being late once in 18 years. design offers a potent way to differentiate and position a company’s products and services. which manufacturers major home appliances. Ideal reparability would exist if users could fix the product them. Godiva chocolate and Harley. reliability. information system and advising services that the seller offers to buyers. called the Vitamin Institute. Style has the advantage of creating distinctiveness that is difficult to copy.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. use.. covering speed. accuracy and customer care. the Rite aid drugstore chain’s communications program.
it conveys this character in a distinctive way and it delivers emotional power beyond a mental image. Setting the Price. For example. PRICING Price is the amount of money charged for a product or service. including logos. Caterpillar’s success in the construction –equipment industry is based partly on superior channel development. Image differentiation Customer will response differently to company and brand image. “One can define price as that which people have to forego in order to acquire a product or service.” What does a buyer think? To a buyer. Its dealers are found in more locations. are better trained and performance more reliability than competitors dealers. price is the sum of all the values that consumers exchange for the benefits of having or using the product or service.Pricing Policy: A firm must set a price for the first time when it develops a new product. responsiveness and communication. Frito-Lay. More broadly. Dell computers has also distinguished itself by developing and managing superior direct-marketing channels using telephone and internet sales. when it introduces its regular product into a new distribution channel or geographical area. and wealth. Image is affected by many factors beyond the company’s control. reliability. courtesy. An effective image establishes the product’s character and value proposition. The McDonald’s people are courteous. whereas image is the way the public perceives the company or its products. Cisco.The amt of money charged for a product or service. who prefers Airwalk and other alternative brands that convey amore extreme sports image. Purchasing power depends on a buyer’s income. the IBM people are professional and the Disney people are upbeat. Channel differentiation Companies can achieve competitive advantage through the way they design their distribution channels’ coverage.trained personnel exhibit six characteristics: competence. For the image to work. credibility. price is the value placed on what is exchanged. Nike mainstream popularity turns off 12-to24-years-olds. Identity comprises the ways that a company aims to identify or position itself or its product. and Northwestern Mutual life enjoy an excellent reputation. expertise and performance. or the sum of the values that consumers exchange for the benefits of having or using the product or service. credit. Something of value -usually purchasing power . media and special events. PRICE. it must be conveyed through every available communication vehicle and brand contact.Personnel differentiation Companies can gain a strong competitive advantage through having better-trained people. and when it enter bids on new contract work. The sales forces of such companies as General Electric.is exchanged for satisfaction or utility. Singapore Airlines enjoys an excellent reputation in large part because of its fight attendants. Well. According to Kotler an organization goes through the following steps in setting its pricing policy: -
. Companies pursue survival.Following the identification of objectives. They set the lowest price. Many companies try to set a price that will maximize current profits. 2. the easier it is to set price. or changing consumer wants. as their major objective if they are plagued with overcapacity intense competition. Some companies want to maximize their market share. Sony is a frequent practitioner of market skimming pricing. maximum market skimming. The clearer a firm’s objectives. maximum market share. They estimate the demand and costs associated with alternative prices and choose the price that produces maximum current profit. the firm must learn how to add value or face extinction. This strategy assumes that the firm has knowledge of its demand and cost functions.Selecting the pricing Objective The company first decides where it wants to position its marketing offering. Survival is a short-run objective: in the long run. Production and distribution costs fall with accumulated production experience. In the normal case. or product-quality leadership. cash flow or rate of return on investment. Each price will lead to a different level of demand and therefore have a different impact on a company’s marketing objectives. maximum current profit. As long as prices cover variable costs and some fixed costs. in reality these are difficult to estimate. assuming the market is price sensitive. They believe that a higher sales volume will lead to lower unit costs and higher long-run profit. and a low price stimulates market growth. Determining the demand . the firm needs to determine demand. A company can pursue any of five major objectives through pricing: survival. a low price discourages actual and potential competition Companies unveiling a new technology favor setting high prices to “skim” the market. The following conditions favor setting a low price The market is highly price sensitive. the company stays in business.
tween point you must consider in setting prices. The process of estimating demand therefore leads to i.Costs change as a result of a concentrated effort by designers. They are also less price-sensitive when price is only a small part of the total cost of obtaining. These costs tend to be constant per unit produced. Learn the price and quality of each competitor’s product or service by sending out comparison shoppers to price and compare. Company should also be aware that competitors might even change their prices in response to your price. They are called variable because their total varies with the number of units produced.In the case of prestige goods. Variable costs vary directly with the level of production. These c o s t s r e l a t e with pricing. the lower the demand . They deduct the desired profit margin from this price. Selecting a pricing method -
. the level of demand may fall. engineers and purchasing agents to reduce them. management needs to know how its costs vary with different levels of produc tion. To price intelligently.and price are inversely related: the higher the price. If your product or service is inferior. Acquire competitors’ price lists and buy competitors’ products and analyze them. Determining price elasticity of demand. Regardless of output. salaries and so on. Then they determine the price at which the product will sell. While demand sets a ceiling and costs set a floor to pricing. and this leaves the target cost they must achieve. E. Total and variable costs for any given level of production. Perfume Company raised its price and sold more perfume rather than less! Some consumers take the higher price to signify a better product. A company’s cost take two forms. . Within the range of possible prices determined by market demand and company costs. the firm must take the competitor’s costs. then you will have to price close to the competitor or lose sales. it is equal to total costs divided by production. operating and servicing the product over its lifetime. given its appeal and competitor’s prices. 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). prices and offers A nalyzing competitor’s costs. 5. TARGET COSTING . There are different costs of organization. competitors’ prices provide an in be. interest. A company must pay bills each month for rent heat. the demand curve sometimes slopes upward. prices and possible price reactions into account. 4. prices and offers is also important factor in setting prices . Estimating and analyzing demand curve iii. 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. If your product or service is similar to a major competitor’s product or service. fixed and variable. The Japanese use a method called target costing.g.
3. However if the price is too high. Fixed costs (also known as overhead) are costs that do not vary with production or sales revenue. Analyzing competitor ’s costs. They use market research to establish a new product’s desired functions.Demand sets a ceiling on the price the company can charge for its product. Estimating Costs . Average cost is the cost per unit at the level of production. Estimating Price sensitivity of market ii. Also ask customers how they perceive the price and quality of each competitor’s product or service. you will not be able to charge as much as the competitor.
The is an almost impossible prediction. The firm might charge the same. Marketing Oriented Pricing Cost Oriented Pricing . 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.Pricing methods narrow the range from which the company must select its final price.Going-Rate Pricing In going-rate pricing. gain and risk pricing. promotion. The way around this problem is to recognize that the pricing deci. These remaining seats may be offered at a discount so that some contribution is made to the flight expenses. distribution and product benefits.The price of a product should be set in line with the marketing strategy.sion is dependent on other earlier decisions in the marketing planning process. only known to client and not to the other parties tendering for the service). Potential suppliers quote a price. including psychological pricing. Marketing Oriented Pricing . with the firms basing the price on what it thinks other firms will be bidding rather than on its own costs or demand.e. and the impact of price on other parties. The risk here is that other customers who paid the full price may find out about the discounted offer and complain. All other things being equal the buyer will select the supplier that offers the lowest price.This involves the calculation of only those costs. more. Competition-based approach . firms bid for jobs. Two methods are normally used Full cost pricing .Many contracts are won or lost on the basis of competitive bidding. 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. For new products. aircraft seats or hotel rooms lie idle. Selecting the final Price . company –pricing policies. the firm bases its price largely on competitors’ prices. 6. this method will include a profit margin in the final price. and for existing products price will be affected by strate.
. the company must consider additional factors. This method focuses upon the internal costs of the firm as opposed to the prospective customers’ willingness to pay.There are three pricing methods that can be employed by a firm: 1. strategy. Consider aircraft seats. Like full cost pricing. The most usual process is the drawing up of detailed specifications for a product and putting the contract out for tender. Cost Oriented Pricing 2.gic objectives.Here the firm determines the direct and fixed costs for each unit of product. or less than its major competitors. In sealed-bid pricing (i. price will depend upon positioning. the influence of other marketing –mix elements on price. strategic objectives. indicate the lowest price at which it is sensible to take business if the alternative is to let machinery. Direct cost approach is useful when pricing services for example. 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. In selecting that price. which is confidential to themselves and the buyer. Competitor Oriented Pricing 3. machinery etc) will remain unaffected whether one unit or one thousand units are produced. Indirect or fixed costs (plant. Competitive Bidding . if they are unused on a flight then the revenue is lost. 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. Direct (or marginal) Cost Pricing . The first problem with Full-cost pricing is that it leads to an increase in price as sales fall. with less attention paid to its own costs or to demand. Direct costs then. which are likely to increase as output increases.Companies often use cost oriented pricing methods when setting prices.
Counter trade. 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. whilst getting absolutely nothing in return except a lower profit margin. all too often. This is not to say that there is anything particularly wrong with price dis. A British aircraft manufacturer sold planes to Brazil for 70 percent cash and the rest in coffee. This issue is critical when buyers lack sufficient hard currency to pay for their purchases. Buyback arrangement: The seller sells a plant. companies get themselves embroiled in a complex structure of cash.The role of discount Offering discounts can be a useful tactic in response to aggressive competition by a competitor. Barter) . Discounting is common in many industries .Geographical pricing involves the’ company in deciding how to price its products to different. A US.
. 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. or technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment. 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. equipment.counting provided that you are getting something specific that you want in return.less carefully controlled and conceived as part of your overall marketing strategy. American compa nies are often forced _o engage in counter trade if they want the business. 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 practice known as counter trade. Price discounts and allowances .in some it is so endemic as to render normal price lists practically meaningless. The trouble is that. 2. For example. Chemical company built a plant for an Indian company and accepted partial payment in cash and the remainder in chemicals manufactured at the plant. Barter: The direct exchange of goods. Counter trade may account for 15 to 25 percent of world trade and takes several forms: barter. Customers in different locations and countries.DIFFERENT PRICING STRATEGIES
1. However. quantity and other discounts. compensation deals. and offset. discounting can be dangerous un. buyback agreements. Geographical pricing (cash. Many buyers want to offer other items in payment. For example.
whatever business you are in. the seller charges different amounts to different classes of buyers.degree price discrimination. If they do not work. Special-event pricing: Sellers will establish special prices in certain seasons to draw in more cus. 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. In general. Promotional Pricing .Companies often adjust their basic price to accommodate differences in customers. such as building up product quality and service or strengthening product image through advertising.e.age purchase of the manufacturers’ products within a specified time period. locations. the interest rate) of a loan and more about whether they can afford the monthly payment. Low-interest financing: Instead of cutting its price. and how long they are expected to last.chase: Loss-leader pricing: Supermarkets and department stores often drop the price on wellKnown brands to stimulate additional store traffic. the seller charges a separate price to each customer depending on the intensity of his or her demand. or eliminate them altogether. Rebates can help clear inventories without cutting the stated list price. In third-degree price discrimination. you should always ask yourself what your discounts are supposed to achieve. keep standard discounts low to retain maximum flexibility and ensure that they are consistent with your overall marketing and pricing strategy.ments above will apply to you. Manufacturers have tried to restrain intermediaries from loss leader pricing through lobbying for retail-price -maintenance laws.
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. In first.tomers Cash rebates: Auto companies and other consumer-goods companies offer cash rebates to Encour. 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.Companies can use several pricing techniques to stimulate early pur. as in the following cases:
. will depend on the non-price benefits of your product. Discriminatory pricing . stretch loans over longer periods and thus lower the monthly payments.cost warranty or service contract. competitors Copy them and they lose their effectiveness. products. the company can offer customers lowinterest financing. In part your ability to minimize discounts.Clearly the role of discounts will vary from one type of business to another and not all of the com. In second-degree price discrimination. the seller charges less to buyers who buy a larger volume. Warranties and service contracts: Companies can promote sales by adding a free or low. This pays if the revenue on the additional sales compensates for the lower margins on the) boss-leader items. and so on. whether they are effective. but these laws have been revoked. But.. Consumers often worry less about the cost (i. 3. 4. especially mortgage banks and auto companies. they waste money that could have been put into other marketing tools. If they work. Longer payment terms: Sellers. Automakers have even announced no-interest financing to attract Customers.
the firm searches for a set of prices that maximizes profits on the total mix. 50. how-ever. Hotels charge less’ on weekends. competitors have increased their use of discrimina. the market must be segment able and the segments must show different intensities of demand.tory pricing. Fifth. As a result of deregulation in several industries. Coca-Cola considered raising its vending machine soda prices on hot days using wireless technology.price segment. First.nation must not be illegal. captive-product pricing. they can use software that monitors customers’ movements over the Web and allows them to cus. Restaurants charge less to “early bird” customers. Must not be able to resell the product to the higherprice segment. by-product pricing. and so on. the particular form of price discrimi. Product-mix pricing . In many lines of trade. However. Airlines charge different fares to passengers on the same flight. Second. In this case. For instance.Customer-segment pricing: Different customer groups are charged different prices for the same product or service. For example. the practice must not breed customer resentment and ill will.nate between sellers by comparing prices instantaneously. day. the time of day (morning or night coach). give it a name and image.tomize offers and prices. are also allowing buyers to discrimi. or a vending machine.Price-setting logic must be modified when. Public utilities vary energy rates to commer. 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.ences at. competitors must not be able to undersell the firm in the higher-price segment. members in the lower. Pricing is difficult because the various products have demand and cost interrelationships and are subject to different degrees of competition. Of status (youth. by which they offer lower rates on unsold inventory just before it expires. a fast-food restaurant. 5. past business. Sixth. customers so disliked the idea that Coke abandoned it. Product line Pricing: Companies normally develop product lines rather than single products and introduce price steps. Time pricing: Prices are varied by season. or hour. Third. two-part pricing. optional-feature pricing. We can distinguish six situations involving product-mix pricing: product-line pricing. museums often charge a lower admission fee to students and senior citizens. New software applications. For price discrimination to work. the product is part of a product mix. It can put the same perfume in another bottle with a different name and image and price it at Rs.200. and product-bundling pricing. Computer technology is making it easier for sellers to practice discriminatory pricing. A theater varies its seat prices according to audience preferences for different locations. Channel pricing: Coca-Cola carries a different price depending on whether it is purchased ill a fine restaurant.cial users by time of day and weekend versus weekday. depending on the seat. and price it at Rest. the cost of segmenting and policing the market must not exceed the extra revenue derived from price discrimination. military. Hotels and airlines use yield pricing. certain conditions must exist. the day of the week (workday or weekend). the season. senior citizen). Fourth. A perfume manufacturer can put the perfume in one bottle. Airlines are using yield pricing to capture as much revenue as possible. and lowering the price on cold days. sellers use well-established price
.ing class. the person’s company. Location pricing: The same product is priced differently at different locations even though the cost of offering at each location is the same.
The service firm faces a problem sin1ilar to captive product pricing-namely. 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. the seller normally charges less for the bundle than if the items were purchased separately. average-. Product-Bundling pricing . By-product pricing . features. Two-part pricing . A theater company will price a season subscription at less than the cost of buying all the performances separately. A cellular service operator may give a cellular phone free if the person commits to buying two years of phone service. When offering a mixed bundle. An auto manufacturer might offer an option package at less than the cost of buying all the options separately. Pure bundling occurs when a firm only offers its products as a bundle. Restaurants face a similar pricing problem. they should be priced on their value. Optional-feature pricing ‘Many companies offer optional products.The production of certain goods. Rs. light dimmers.1500. Initiating price increases Like price cuts . petroleum products. Manu. or captive. and an extended warranty. The food revenue covers costs. the tactics that can be used. The key issues associated with initiating price changes are the circumstances that may lead a company to raise or lower prices. 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. Many restaurants price their liquor high and their food low.Some products requires the use of ancillary. The automobile buyer can order electric window controls. Other restaurants price their liquor low and food high to draw in a drinking crowd. consisting of a fixed fee plus a variable usage fee. Customers can often order liquor in addition to the meal.cals—often results in by-products. This explains why servers often press hard to get customers to order drinks. the seller offers goods both individually and in bun-dles.Sellers often bundle products and features. PRICE CHANGES Companies often face situations where they may need to cut or raise prices. the profit can then be made on the usage fees. and other chemi. In mixed bundling. If the by-products have value to a customer group. the savings on the price bundle must be substantial enough to induce them to buy the bundle.Service firms often engage in two-part pricing. A men’s clothing store might carry men’s suits at three price levels: Rs800. Customers will associate low-. and Rs.points for the products in their line. and high-quality suits with the three price points. defoggers.4500. Telephone users pay a minimum monthly fee plus charges for calls beyond the minimum number. Captive-product pricing . Amusement parks charge an admission fee plus fees for rides over a certain minimum. how much to charge for the basic service and how much for the variable usage. and estimating competitor reactions. The seller’s task is to establish perceivedquality differences that justify the price differences. Because customers may not have planned to buy all the components. and services along with their main product.meats. products. The fixed fee should be low enough to induce purchase of the ser-vice. A successful price increase
. respectively. Pricing is a sticky problem. a firm can also initiate to increase the price. automobiles companies must decide which items to include in the price and which to offer as options. and the liquor produces the profit.facturers of razors and cameras often price them low and set high markups on razor blades and film.
such as industrial construction and heavy equipment. in anticipation of further inflation and govt. We define a value network as follows: A value network is a system of partnerships and alliances that a firm creates to source. the automaker cannot buy them out the next day and replace them with. For example.crease that takes place before delivery. Over demand: when a company cannot supply all of its customers. price controls. The company’s pricing depends on whether it uses mass-merchandisers or high. such as free delivery or installation. The circumstances provoking price increases are generally as follows: Cost inflation: A major circumstance provoking price increases is cost inflation. augment. Company -owned outlets. ration supplies to its customers. it can raise its prices. When an automaker signs up independent dealers to sell its automobiles. or both. Distribution Channel Function: All channel functions have three things in common: • • • They use up scarce resources.
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. like aircraft con. the company’s channel decisions involve relatively long-term commitments to other firms.
. in a practice called anticipatory pricing. The channels chosen intimately affect all the other marketing decisions. They can be shifted among channel members. Reduction of discounts: The company instructs its sales force not to offer its normal cash and quantity discounts. Unbundling: The Company maintains its price but removes or prices separately one or more ele. 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.quality boutiques. if the company’s profit margin is 3% of sales. The firm’s sales force and advertising decisions depend on how much training and motivation dealers need. This pricing is prevalent in industries with long production lead times. Companies often raise their prices by more than cost increase. 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. Escalator clauses are found in contracts for major industrial projects.ments that were part of the former offer. In addition.matched by productivity gains squeeze profit margins and lead companies to regular rounds of price increases.struction and bridge building. a 1% increase will increase profits by 33% if sales volume is unaffected. An escalator clause bases price increases on some specified price index. They can often be performed better through specialization.can raise profits considerably. Rising costs un. Escalator clauses: The company requires paying today’s price and all or part of any inflation in.
Channels produce five service outputs Lot size : The number of units the channel permits a typical customer to purchase on one occasion. 3. Channel objectives vary with product characteristics. Non standardized products. Products requiring installation or maintenance services. Effective planning requires determining which market segments to serve and the best channels to use in each case.vided by the-marketing channel. the marketer must understand the service output levels de. 2. repairs) provided by the channel. Perishable products require more direct marketing. Evaluating major channel alternatives
1. such as building materials. several market segments that desire differing service output levels can be identified. channel institutions should arrange their functional tasks to minimize total channel costs with respect to desired levels of service outputs Usually. Establish Objectives and Constraints Channel objectives should be stated in terms of targeted service out. the greater the work provided by the channel. Bulky products. cus.sired by target customers. customers normally prefer fast delivery channels.DITRIBUTION CHANNEL FUCTION DAIGRAM
CHANNEL DESIGN DECISIONS: Following four steps help design a channel system :1. Waiting time : The average time customers of that channel wait for receipt of the goods. Identifying major channel alternatives 4. The greater the service backup. Analyzing customer needs 2.tomers prefer a greater assortment because more choices increase the chance of finding what they need. require channels that minimize the ship. Spatial convenience : The degree to which the marketing channel makes it easy for customers to purchase the product Product variety: The assortment breadth pro. Analyze Customers’ Desired Service Output Levels It is imperative to understand that in designing the marketing channel.put levels under competitive conditions. Identify Major Channel Alternatives Companies can choose from a wide variety of channels for reaching customers-from
. Normally. delivery. such as custom-built machinery and specialized business forms.ping distance and the amount of handling. are sold directly by company sales representatives. Establishing channel objectives 3. installation. Service backup: The add-on services (credit.
Conditions of sale 3. 5.actions.effective trade relations mix. Distributors’ territorial rights
4. 1.sales forces to agents. telemarketing. Each channel hopefully reaches a different segment of buyers and delivers the right products to each at the least cost. 1. The aim is to build a “partnership” feeling and joint distribution programming. 2. cost. A channel alternative is described by three elements • The types of available business intermediaries. Price policy 2. Distributors can create sales. The problem is further complicated by the fact that most companies now use a mix of channels. 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. Intensive distribution the terms and responsibilities of each channel member. Exclusive distribution 2. distributors. there is usually channel conflict and excessive cost. Each channel has unique strengths as well as weaknesses. but it cannot handle complex products. Sales forces can handle complex products and trans. and 1. direct mail. The Internet is much less expensive. 3. 4. but they are expensive. and the Internet. When this does not hap.
Evaluate the Major Alternatives
(time. • the number of intermediaries needed.pen. Selecting Channel Members Training Channel Members Motivating Channel Members Evaluating Channel Members Modifying Channel Arrangements
. dealers. Selective distribution 4. Exclusive dealing 3. but the company loses direct contact with customers.
inefficient. To customers. 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. 3. and other capability-building programs to improve intermediaries’ performance. Selecting channel members would therefore involve evaluate experience. number of lines carried.cause they will be viewed as the company by end users . Training channel members Companies need to plan and implement careful training programs for their intermediaries. retrained. Selecting Channel Members Companies need to select their channel members carefully. be. re motivated. or terminated. and reputation 2.1. Under performers need to be counseled. cooperativeness. Consider the negative impression you would get of McDonald’s. . customer delivery time treatment of damaged and lost goods. Motivating channel members A. and cooperation in promotional and training programs. It needs-to determine intermediaries’ needs and construct a channel positioning such that its. channel offering is tailored to provide superior value to these intermediaries Producers vary in their ability to attract intermediaries . or Hyundai if one or more of their outlets or dealers consistently appeared dirty.pany should provide training programs. Company needs to view its intermediaries in the same way it views its end users. 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. or unpleasant. 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.vice. the channels are the company. market research programs. Evaluating channel members Producers must periodically evaluate intermediaries’ performance against such standards as sales-quota attainment.
. average inventory levels. One manufacturer that was compensating a distributor for holding inventories found that the inventories were actual held in a public warehouse at its expense. 3.
ket expands new competition arises. customer delivery time. and elimination of duplicated ser-vices. Corporate VMS 2.place . Modification becomes necessary when the „ „ „ „ „ distribution channel is not working as planned. A. Modifying channel arrangements A producer must periodically review and modify its channel arrangement. VMS achieve economies through size. wholesalers. cooperation in promotional and training programs 4.They are evaluated on the following parameters sales quota attainment. VMS s arose as. One channel member owns the others.fication to meet new conditions in the market. Vertical Marketing System A distribution channel structure in which producers. innovative distribution channels emerge. Conventional Marketing System A channel consisting of one or more independent producers. or has so much power that they all cooperate. wholesalers. has contracts with them. Administered VMS 3. average inventory levels. Vertical marketing system comprises of 1. and the product moves into later stage in the product life cycle. bargaining power. the mar. B. consumer buying patterns change. result of strong channel members’ attempts to control channel behavior and eliminate the conflict that results when independent members pursue their own objectives.
Channel Dynamics: A. and retailers act as a unified system. treatment of damaged and lost goods.
Therefore the system will require periodic modi. and retailers each a separate business seeking to maximize its own profits even at the expense of profits for the system as a whole . Contractual VMS
Two or more unrelated firms put together re. Relative prices 4.sources or programs. non business use. Manufacturer-sponsored retailer franchise or manufacturer-sponsored wholesaler franchise C. but through the size and power of one of the par. Planning channel architecture (companies thinking through their channel architecture— which are efficient and not. Amount of service A Self-service retailers Customers are willing to self-serve to save money
. A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing. transients. lower cost. iii. Retailer cooperatives c. Multi channel marketing—single firm uses two or more marketing channels to reach one or more customer segments—advantages: increased coverage. 1. Amount of service 2. strivers. customized selling ii. 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. Can be permanent or temporary D. ii. i. Organizational approach 1. Horizontal Marketing Systems A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity. Contractual VMS could have the following forms a Wholesaler-sponsored voluntary chains b. technology. outside innovators)
What is Retailing? Retailing includes all the activities involved in selling goods or services directly to final consumers for personal. Roles of individual firms in a multi channel system: (insiders. Administered VMS A vertical marketing system that coordinates successive stages of production and distribution. i. ii. Types of Retailing. not through common ownership or contractual ties. 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. Corporate VMS A vertical marketing system that combines successive stages of production and distribution under single ownership—channel leadership is established through common ownership. Each firm lacks the capital. and developing new means) iii.ties. complementers. marketing resources or other variables to take on the venture alone iii.i. Product lines 3.
Product lines A Specialty stores Narrow product lines with deep assortments B Department stores Wide variety of product lines C. Convenience stores Limited line E.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. nonfood. and services F. Superstores Food. Supermarkets D. 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
. 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. Category killers Giant specialty stores 3.
Service mix. price. fashion shows.accepting telephone and mail orders. store décor. fitting rooms . advertising messages and media. store’s atmosphere Price Promotion Place (location) 1. Retailers must also pay attention to pricing tactics. Promotion methods include :Ads Special sales Money saving coupons Sample distribution etc. adjustments and returns. trade ins. parking . check cashing . the retailer cannot make consistent decisions on product assortment . They will run storewide sales. Promotion Retailers use a wide range of promotion tools to generate traffic and purchases. The retailer has to decide on product assortment. Post purchase include – shipping and delivery . alterations and tailoring . They will plan marks down on slower –moving merchandise . engraving.Retail Marketing decisions Various marketing decisions affecting the retail business :Target marketing and positioning Product assortment. Target Marketing and Positioning Like other marketing activities. restaurants . The challenge is to develop a product-different ion strategy. Ancillary services –general information . Price Prices are a key positioning factor and must be decided in relation to the target market. advertising. 5. retailing too is concerned with defining its target market.installations. The retailer’s product assortment must match the target market’s shopping expectations. Service mix and Store’s atmosphere The retailers must also decide on the service mix to offer customers Pre-purchase services.gift wrapping . Most retailers will put low prices on some items to serve as traffic builders or loss leaders. and service levels.
. 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. 4. Until the target market is defined and profiled . repairs etc. All retailers would like to achieve high volumes and high gross margins. Product assortment. shopping hours. the product and service assortment mix and competition. window and interior display .breadth and depth .
New retail forms and combinations 2 . 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. Growth of intertype competition. not just goods Retailing in India: Are you game for it!!!!! They say ‘If you aren’t in IT or entertainment. Global presence of major retailers 6. There are no hypermarkets in the country as yet. discount stores. Growth of giant retail 4 . since retailers are aiming the prime
.ing the boom times altogether.2 million re.comes of the middle class households.228.5 billion. Retail Infrastructure In 2001. Organized retailing represent a small fraction of the Indian retail market. More and more players are coming into the retail business in India to introduce new formats like malls.stores. Selling an experience. chemist shops. However. supermarkets. However. the retail sector is the second largest employer after agriculture. More so. 3 . worth approximately Rs7. In 2001. department stores and even changing the traditional looks of book. the non-food retailing sector registered faster year-on-year growth than food sales. Growing investment in technology 5 . and are spreading all over India at a rapid pace. owner-managed shops. a billion people in overall population leads to very large numbers. space and rentals are proving to be the largest constraints to development of large formats in metropolitan cities. Retailers can locate their stores in the central business district. and furnishing stores. Food sales constitute a high proportion of total retail sales.food sales were worth Rs4189. Place Location is often described as the most successful strategy for retailing.tail outlets in the country. these modern formats are showing robust growth as several retail chains have established a base in metropolitan cities. There are some 12 million retail outlets in India. organised retail trade in India was worth Rs11. There has been a boom in retail trade in India owing to a gradual increase in the disposable in. especially in south India. you ought to be in retailing. While the middle class may not be as big as expected. the country is also dotted with low-cost kiosks and pushcarts.6. there were an estimated 11. The concept of retailing chain stores is at a very nascent stage in India.2 billion in 2001 while non. it could still add up to say the sizeable number. Or you’re miss. How. Besides.4 sq m per outlet.’ In India. Total retail sales area in India was estimated at 328 million sq m in 2001. with an average selling space of 29. This trend towards larger outlets is leading to a rise in average retail space. The retailing sector in India is highly fragmented and predominantly consists of small independent.7 billion.7% in 2001.ever. The share was 62.039. a regional shopping center .
whose discounters and chemists/druggist chain is very popular in South India.sumers and hence is the key to increasing foot traffic. The turnover from private labels by major retail chains was estimated at around Rs 1200 million in 2001. with 1600 footwear stores spread across the country. Shopping malls is set to one of the most visible faces of the Indian retail scene by the end of 2002. The anchor is expected to attract a variety of con.069.stant. Key Developments in Retailing 100% foreign direct investment (FDI) in the re.tailing sector is not permitted yet. which are spacious. Shoppers Stop. Retail Forecasts The retail business is expected to reach Rs19. Spencer & Co Ltd another large retail group in the country. More and more women are also turning to corporate jobs. Each mall typically has an anchor. which occupies a sizeable percentage of the total usable area. Foodworld is operated by Foodworld Supermar.locations. music stores and the beauty and health chain. with interests in supermarkets. which is adding to the family income but making lifestyles extremely busy. Bata is synony. With almost a monopolistic presence in the organised footwear market until the 1980s. as many as 50 new malls will be coming up by 2005 in the smaller cities as well.house eateries and entertainment zones.
. families are experiencing growth in income and dearth of time. with a mar. In urban India. There is also a strong trend in favour of onestop shops like supermarkets and department stores. The stores retail mainly Bata products. especially in the metropolitan and large cities in India. ready-to-cook.stores.mous with footwear in middleclass India. ready-to-eat food has been on the rise. The proportion of sales through organised retailing is estimated to increase to around 6% by 2010.3 billion by 2006. The mid 1990s marked the arrival of new.kets Ltd. The lobby is based on the premise that modern retail will impact the livelihood of millions of small family-run businesses. The trend to market private labels by a specific retail chain is catching on in India as it helps to improve margins. They have big label stores as well as in. However. in both food and non-food segments.7 billion in 2001. while Health & Glow by RPG Group. airy and equipped with modern amenities. It has also acquired the Crossword chain of book. each retail business at the time of writing was run as a separate entity. Rising incomes has led to increasing demand for better quality products while lack of time has led a demand for convenience and service.keting arrangement with Lotto and Nike as well. According to estimates apart from the metropolitan and larger cities. The demand for frozen.endowed malls and shopping centres. The number of large mega-malls is expected to increase significantly as India is now experiencing a “mall boom”. Health & Glow. is the second largest fascia in the country with retail sales of Rs2. The real estate development group has converted its retailing operation into an Indian success story. The K Raheja-run department store chain. well. Competitive Environment Bata India Ltd is one of the largest retailer. in order to protect the interests of the small retailers. Another strong retailer is Subhiksha. and a retail turnover of Rs6 billion in 2001. There is a strong lobby of small traders that has been vocal on the issue of not permitting FDI into retail. in. with further growth of organised retailing.
Full-Service Wholesalers: Carry stock. offering credit. 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. with more dual income families. . and provide management assistance. This would continue more strongly in the forecast pe.There is already a strong trend in favour of large format retail outlets.vice are likely to be bypassed by manufacturers. In the future.
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. promotion. but at the same time. or mill supply houses and fall into two categories: full service and limited service. Target Market Product Assortment and Services
. .General-line wholesalers carry one or two lines. Following are the functions performed by wholesalers. offer credit. pricing.riod. make deliveries. maintain a sales force. Wholesalers who fail to carry adequate assortments and inventory and provide satisfactory ser. and providing delivery. Wholesaler Marketing Decisions Wholesalers also must make decisions on their target market. as people are showing preference for one-stop shops. In such a scenario. the more successful ones will be those that provide faster service. Merchant Wholesalers: Independently owned businesses that take title to the merchandise they handle.General-merchandise wholesalers carry several merchandise lines. distributors. 1. Progressive wholesalers. and place. the consumer ability to spend will increase. it is predicted that the time available for shopping will go down. on the other hand. Selling and promoting Buying and assortment building Bulk breaking Warehousing Transportation Financing Risk bearing Market information Management services and counseling Types of Wholesaling. product assortment and services. There are two types of full-service wholesalers (1) Wholesale merchants sell primarily to retailers and provide a full range of service .Specialty wholesalers carry only part of a line (2) Industrial distributors sell to manufacturers rather than to retailers and provide several services—carrying stock. Customers are also looking for ambience and convenience in shopping. They are called jobbers. in both food and nonfood sectors.
They provide storage facilities. and many others. A wholesaler will often take on the some of the marketing responsibilities. and Alisuper.g. a ‘stockist agent’ will hold consignment stock (i. This means that capital is not tied up in goods. Channel Intermediaries . They buy from producers and resell to retailers. This approach is used where goods need to get into a market soon after the order is placed e. They do not tend to take title to the goods. over.Price Decision Promotion Decision Place Decision Types of Channel Intermediaries And Their Functions There are many types of intermediaries such as wholesalers. There are low barriers low barriers to entry as set up costs are low. agents. foodstuffs). Retailers often have a strong ‘brand’ them. Ross and Wall-Mart in the USA. and Jumbo in Portugal. An agent will typically secure an order for a producer and will take a commission. Agents can be very expensive to train. The retailer will give the final selling price to the product. The main benefit of the Internet is that niche products reach a wider audience e. retailers. The retailer will hold several other brands and products. For example. or sales force costs.g. the Internet. Channel Intermediaries .Retailers Retailers will have a much stronger personal relationship with the consumer. They sell on to a wholesaler that will store it and eventually resell to a retailer.ages for resale by a retailer. or travel agents.Wholesalers They break down ‘bulk’ into smaller pack.
. Modelo. direct marketing (from manufacturer to user without an intermediary). They take ownership or ‘title’ to goods whereas agents do not (see below). cheese manufacturers seldom wait for their product to mature. 1. Channel Intermediaries .
4.e. customer service costs.Agents Agents are mainly used in international markets.selves e. will store the stock. There is a paradigm shift in commerce and consumption which benefits distribution via the Internet. Channel Intermediaries . A consumer will expect to be ex. They are difficult to keep control of due to the physical distances involved. Many produce their own brochures and use their own telesales operations.
3. Scottish Salmon direct from an Inverness fishery. but the title will remain with the producer.g.osed to many products.tact cost between the producer and consumer e. However.
2.seas distributors. electrical wholesalers. They are difficult to motivate. Retailers will often offer credit to the customer e.g. Products and services are promoted and merchandised by the retailer. Wholesalers offer reduce the physical con.g. The main modes of distribution will be looked at in more detail.Internet The Internet has a geographically disperse market.
Developing an Effective Communications 1.INTEGRATED MARKETING COMMUNICATION Marketing communications which is one of the four major elements of the company’s marketing mix. or the general public. affective. when to say it. To monitor the responses. That is. Figure above shows a communication model with nine elements. THE COMMUNICATION PROCESS:
The whole marketing mix must be integrated to deliver a consistent message and strategic positioning. read articles. Identify the target audience -The process must start with a clear target audience in mind: potential buyers of the company’s products. Definition: Promotion is communication about an organization and its products that is intended to inform. The last element in the system is noise (random and competing messages that may interfere with the intended com. see television ads.PROMOTION. The starting point is an audit of all the potential interactions target customers may have with the product and the company.
. Two represent the major parties in a communication – sender and receiver. This understanding will help them allocate communications dollars more efficiently. individuals. look for information on the Internet. They must encode their messages so that the target audience can decode them. groups. and to whom to say it. how to say it. The target audience is a critical influence on the communicator’s decisions on what to say. and feedback. Four represent major communication function – encoding.forming and persuading one or more of the audiences to accept an organisation’s prod. Promotion’s role is to communicate with individuals.one interested in purchasing a new computer would talk to others. cur. Marketers also need to understand the fundamental elements of effective communications.rent users. The more the sender’s field of experience overlaps with that of the receiver. or influencers. Senders must know what audiences they want to reach and what responses they want to get. Two represent the major communication tools – message and media. where to say it. deciders. the marketer might want to put something into the consumer’s mind. groups. deconding. particular publics.rectly or indirectly facilitate exchanges by in. or organisations to di. 2. Marketers need to assess which experiences and impressions will have the most influence at each stage of the buying process. persuade. response. The model emphasizes the key factors in effective communication. the more effective the message is likely to be.munication). or remind target market members.The marketer can be seeking a cognitive. For example. some. or behavioral response. Determine the communication objectives . A promotion mix (sometimes called a marketing communications mix) is the particular combination of promotional methods a firm uses to reach a target market. and observe computers in a store.ucts. They must transmit the message through media that reach the target audience and develop feedback channels.
and who should say it (message source). posture.
. Ideally. If the message is to be carried on television or in person. the message should gain attention. There are three types of appeals: rational. Message structure Effectiveness depends on structure as well as content Message format The message format needs to be strong.3. Message content: In determining message content. size. and elicit action Formulating the message will require solving four problems: what to say ( message content. the communicator has to pay attention to color. all these elements plus body language ( nonverbal clues) have to be planned.) how to say it logically ( message structure ). the communicator has to decide on headline. and vocalizations. Hold interest. illustration. Design the message . The “sound” of an announcer promoting a used automobile has to be different from one promoting a new Cadillac.What is important is the spokesperson’s credibility. copy. voice qualities. arouse desire. how to say it symbolically ( message format). gestures. In a print ad. Presenters have to pay attention to facial expressions. theme. idea. and hairstyle. dress. Anti drug crusaders will use ex-drug addicts because they have higher credibility for students than teachers do. and moral. Pharmaceutical companies what doctors to testify about product benefits because doctors have high credibility. or unique selling proposition ( USP). and shape Message source Message delivered by attractive or popular sources achieve higher attention and recall. scent. For a radio message. the communicator has to choose words.Having defined the desired response. management searches for an appeal. If the message is carried by the product or its packaging. the communicator moves to developing an effective message. emotional. This is why advertisers often use celebrities . and color. texture.
Mass media advertising is used less today because of its high costs and less predictable audience sizes. Establish the total marketing communication budget . passing out free samples.
. “ know that half of my advertising is wasted. and convincing. John Wanamaker. Database marketing is also allowing marketers to be more precise in targeting individual customers. and likability. public relations and publicity.
What Is Integrated Marketing Communications? A. This approach fosters long-term customer relationships and the efficient use of promotional resources. These include placing ads in medical journals.The communicator must select efficient channels to carry the message. trustworthiness.ness. but I don’t know which half. and voice broadcasts. Here is how one company touches several bases. pharmaceutical company salespeople can rarely wrest more than five minutes’ time from a busy physician. This makes pharmaceutical sales calling extremely expensive. D. quick. Integrated marketing communications is the coordination of promotion efforts to ensure the maximum informational persuasive impact on customers. and direct marketing. Their presentation must be crisp.Companies must allocate the pro. and even telemarketing. CD ROMS. Marketers can now take advantage of more precisely targeted promotional tools. such as cable TV.motion budget over the give promotional tools – advertising.What factors underlie source credibility? The three most often identified are expertise. the department. The industry has had to expand its battery of communication channels. Select the communication channels . once said. sales force.” 6. 4.store magnate. sending direct mail ( including audio and videotapes ). attractive. special interest magazines. A major goal of integrated marketing communications is to send a consistent message to customers. sales promotion. For example. B. 5. the Internet. The concept of integrated marketing communications has been increasingly accepted for a number of reasons. Deciding on the marketing communications mix .One of the most difficult marketing decisions is determining how much to spend on promotion. direct mail. C.
Define Advertising Advertising. and evaluating advertising campaigns. and purchase of a product or service.chase Coca-Cola Reinforcement advertising aims to convince current purchasers that they made the right choice. The Romans painted walls to announce gladiator fights. persuade. Informative advertising aims to create awareness and knowledge of new products or new features of existing products.pensive. however. setting the advertising budget.” Comparative advertising works best when it elicits cognitive and affective motivations simultaneously. Advertising can be traced back to the very beginnings of recorded history. Modern advertising. Advertising objectives can be classified according to whether their aim is to in. conviction.
2.form.uct image building and tend to under spend There are five specific factors to consider when setting the advertising budget:
DEVELOPINGADVERTISEMENT PROGRAM Marketers must make four important decisions when developing an advertising program.peat purchase of products and services. and the Phoenicians painted pictures promoting their wares on large rocks along parade routes. Automobile ads often depict satisfied customers enjoying special features of their new car. or services by an identified sponsor. four-color Coca-Cola ads in magazines are intended to remind people to pur. goods. 1.Any paid form of non personal presentation and promotion of ideas. preference. Setting the advertising objectives .. which makes an explicit comparison of the attributes of two or more brands. Deciding on the advertising budget . Persuasive advertising aims to create liking. Ex.Some critics charge that large. setting advertising objectives. developing advertising strategy (message decisions and media decisions). Reminder advertising aims to stimulate re. consumer packaged-goods firms tend to overspend on advertising as a form of insurance against not spending enough. market positioning. Some persuasive advertising uses comparative advertising. is a far cry from these early efforts. or reinforce. and marketing mix. remind. Archaeologists working in the countries around the Mediterranean Sea have dug up signs announcing various events and offers.The advertising objectives must flow from prior decisions on target market. and that industrial companies underestimate the power of company and prod.
Newspapers. Market share and consumer base . frequency. 4.In a market with a large number of competitions and high advertising spending. a brand must advertise more heavily to be heard. 4. and public policy makers have developed a substantial body of laws and regulations to govern advertising. Then the results of these decisions need to be evaluated 5. and believability Message execution The message’s impact depends not only on what is said. Dik Twedt suggested that messages be rated on desirability. soft drinks ) re. abuses occur.New products typically receive large advertising budgets to build awareness and to gain consumer trial. the advertiser’s next task is to choose media to carry it. Choosing the advertising message: Message generation: advertising people have proposed different theories for creating an effective message. 5.quire heavy advertising to establish a differential image. To build share by increasing mar. Most marketers work hard to communicate openly and honestly with consumers. Stage in the product life cycle . but often more important. Message evaluation and selection a good ad normally focuses on one core selling proposition.per-impression basis. coffee. 2. exclusive. Still. Some ads aim for rational positioning and other for emotional positioning. and impact.Good planning and control of advertising depend on measures of advertising effectiveness. Product substitutability: Brands in a commodity class ( cigarettes. beer. deciding on media timing. cigarettes. and vodka. Deciding on media and measuring effectiveness After choosing the message.High.1. selecting specific media vehicles.ness. Advertising frequency: The number of repetitions needed to put across the brand’s mes. The steps here are deciding on desired reach. it is less expensive to reach consumers of a widely used brand than to reach consumers of lowshare brands. and deciding on geographical media allocation. such as detergents. On a cost. Evaluating advertising effectiveness . Even simple cluster from advertisements not directly competitive to the brand creates a need for heavier advertising.ket size requires larger expenditures. 3. Competition and cluster .
DIFFERENTADVERTISING MEDIA The advertising media are the various forms of communication through which advertising reaches its audience. Yet the amount of fundamental research on effectiveness is appallingly small. Newspaper advertising accounts for almost one-fourth of all advertising expenditures. Message execution can be decisive for highly similar products.market-share brands usually require less advertising expenditure as a percentage of sales to maintain share. Advertising is also important when a brand can offer unique physical benefits or features. 3. Established brands usually are supported with lower advertising budgets as a ratio to sales.sage to consumers has an important impact on the advertising budget. Social responsibility review advertisers and their agencies must be sure their “creative” advertising does not overstep social and legal norms. on how it is said.
. choosing among major media types.
Outdoor Advertising. There are some drawbacks to newspaper advertising It has a short life span. and it provides highquality color reproduction. It is also timely. and signs. Direct Mail.
III. Magazines. The advertising revenues of magazines have been climbing.
IV. Magazine advertising is more prestigious than newspaper advertising. Magazine advertisements have a longer life span. advertising dollars are not wasted in reaching people who are outside the market area. posters. The major disadvantages of magazine advertising are high cost and lack of timeliness. Some organizations are using direct e-mail.
.Newspaper advertising is used extensively by retailers because it is relatively inexpensive com. which provide advertisers with geographic flexibility. the message must be limited to a few words. Advertisers can reach very specific market segments through ads in special-interest magazines. Color reproduction is usually poor. Because it provides only local coverage.. and it is fairly inexpensive. Direct mail is the most selective medium: Mailing lists are available (or can be compiled) to reach almost any target audience.pared to other media. Sign and billboard advertising allow the marketer to focus on a particular geographic area. Marketers cannot target specific markets through newspaper ads. However.
II. A direct-mail campaign may fail if the mailing list is outdated and the mailing does not reach the right people. Ads are usually read once and then discarded. The medium is especially suitable for products that lend themselves to pictorial display. because most outdoor advertising is directed at a mobile audience. A number of magazines like Time and Cosmopolitan publish regional editions. 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. Outdoor advertising consists of short promotional messages on bill.boards. Direct-mail advertising is promotional material mailed directly to individuals.
Sponsorship (or co-branded) ads integrate a company’s brand with editorial comment. Radio can be less expensive than other media. a target level of product trial. Thereare five types of Internet advertisements. Television. among other things. An infomercial is a program-length (usually a half-hour) televised commercial message resembling an entertainment or consumer affairs programs.
VII. 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 advertiser is seeking a specified advertising objective and response from the target audience – for example. Banner ads are rectangular graphics appearing at the top of most consumer web sites.
Internet. or both. Radio. Television advertising rates are based on the number of people expected to be watching when a commercial is aired. Even small retailers are able to afford radio advertisements. Advertisers 8 percent of total expenditures. A national advertiser may buy network time. Actual rates depend on geographic coverage. which means that its message usually will be broadcast by hundreds of local affiliated stations. and Evaluatiing Effectivness (i) Deciding on reach. Choosing among major media types selecting specific media vehicles. Advertisers may sponsor an entire show. Infomercial.V. To an extent. radio advertising offers selectivity. Television advertising is the primary medium for larger firms whose objective is to reach national or regional markets. the number of commercials contracted for. on radio advertising Like magazine ad vertising. and perhaps like newspaper ads. Presumably. on level
. television advertising has a short life. Interstitial ads (in-your-face ads) pop up to display a product ad when viewers click on a web site. or 60-second commercial during or between programs. Both national and local firms may buy local time on a single station that covers a particular geographic selling area. Keyword ads. the time period specified. FM. VI. 30-. Television ranks number one in total revenue. they contain only a corporate or brand name. Button ads are small squarish ads appearing at the bottom of a web page. Unlike magazine advertising. The rate of product trial will depend. frequency . or they may buy spot time for a single 10-. and whether the station broadcasts on AM. featured primarily on Internet search engines. 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.
DECIDING ON MEDIA AND MEASURING EFFECTIVENESS The steps here are Deciding on desired reach. link a specific ad to text or subject matter that an information seeker may enter. 20-. Deciding on media timing. and impact. frequency.
and the result was a more balanced consumption patters. The firm can vary its advertising expenditures to following the seasonal pattern. and color. Effective ad-exposed audience: The number of people with target audience characteristics who actually saw the ad. believability. Message Characteristics: Timeliness and information content will influence media choice. A message containing a great deal of technical data might require specialized magazines or mailings.drink manufacturer put more money into off-season advertising. Other soft drink manufactures started to do the same. Many advertising agencies use a computer program to select the initial media and then make further improvements based on subjective factors. What counts is the cost-per-thousand exposures. Media planners are increasingly using more sophisticated measures of effectiveness and employing them in mathematical models to arrive at the best media mix. while not hurting seasonal consumption. Yet some year ago. explanation. Women’s dresses are best shown in color magazines . Media planners make their choice among media categories by considering the following variables: Target-audience media habits: For example . A message announcing a major sale tomorrow will require radio. and impact. The advertiser who decides to buy 30 seconds of Audience size has several possible measures: Circulation: The number of physical units carrying the advertising. Audience: The number of people exposed to the vehicle. TV. or newspaper. to oppose the seasonal pattern. Suppose 70 percent of a product’s sales occur between June and September. then the audience is larger than circulation) Effective audience: The number of people with target audience characteristics exposed to the vehicle. Most firms pursue a seasonal policy. (iii) Selecting specific vehicles The media planner must search for the most costeffective vehicles within each chosen media type.
.In choosing media. Cost: Television is very expensive. whereas newspaper advertising is relatively inexpensive. Product characteristics: Media types have different potentials for demonstration. This resulted in increased non seasonal consumption of its brand. a soft. and impact: Reach : The number of different persons or households exposed to a particular media schedule at least once during a specified time period. (ii) Choosing among major media types The media planner has to know the capacity of the major media types to deliver reach. or to be constant throughout the year. The effect of exposures on audience awareness depends on the exposures’ reach. frequency. and Polaroid cameras are best demonstrated on television. radio and television are the most effective media for reaching teenagers. (If the vehicle has pass-on readership. frequency.of brand awareness. the advertiser faced both a macroscheduling and a micro scheduling problem involves scheduling the advertising in relation to seasons and the business cycle. (iv) Deciding on media timing. 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). visualization.
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. • Corporate identity material such as logos.tion through internal and external communications. but it must also relate to a large number of interested publics. and dealers. festival. 4. Sponsoring special events is an effective way for an organization to increase brand recognition and receive media coverage with relatively little investment. PR Tools: In brief one can summarize the tools as follows :• Public relations professionals prepare written materials such as brochures. business cards. Counseling: Advertising management about public issues and com. 2 .” and handling or heading off unfavorable rumors. 5 . annual reports. Not only must the company relate constructively to customers. and events. Simply speaking .
. suppliers. Public Relations perform the following five functions:
1 . Public relations (PR) involves a variety of programs designed to promote or protect a company’s image or its individual products. and news releases. building up a good “corporate image. Lobbying: Dealing with legislators and government officials to pro. stories. or play. Product publicity: Sponsoring efforts to publicize specific products. building up a good corporate image. and handling or heading off unfavorable rumors. Press relations: Presenting news and information about the organiza. signs. A public is any group that has an actual or potential interest in or impact on a company’s ability to achieve its objectives. sports competition.PUBLIC RELATIONS Another major mass-promotion tool is. • Event sponsorship is a public relations tool in which a company pays for all or part of a special event such as a concert. Corporate communication: Promoting understanding of the organiza. and events.tion in the most positive light. 3 .building good relations with the company’s various publics by obtaining favorable publicity. a.mote or defeat legislation and regulation.public relations.pany positions and image during good times and crises. and stationery are also public relations tools. public relations would mean . stories. com. newsletters.pany magazines.
to create news about a company. Significance of the news item
Sales promotion Short-term incentives to encourage the purchase or sale of a product or service.
. A consumer sales promotion method attracts consumers to particular retail stores and motivates them to purchase certain new or established products. It is about stimulating customers to buy a product.niques either for consumer sales or for trade sales.b. Feature article–a piece (of up to 3. A number of factors enter into marketing decisions about which and how many sales promotion methods to use. A trade sales promotion method encourages wholesalers and retailers to stock and actively promote a manufacturer’s products. This is usually known as “selling into the trade”
Sales Promotion Methods. 3 . Press conference–a meeting at which invited media personnel hear important news announce. whereas advertising and personal selling offer reasons to buy a product or service. Public relations personnel sometimes organize events.000 words) prepared by an organization for inclusion in a particular publication c. Response of media personnel c. Composition of the target audience b. Publicity is communication in news story form about an organization. • Some public relations tools are associated specifically with publicity. sales promotion is about “action”. It is not designed to be informative – a role which advertising is much better suited to. Most sales promotional methods can be classified as promotion tech. You would agree that more than any other element of the promotional mix. Publicity-based public relations tools include: a . such as grand openings. or both. Sales promotion consists of short-term incentives to encourage purchase or sales of a product or service. Sales promotion is commonly referred to as “Below the Line” promotion. 1. News release–a typed page of about 300 words provided by an organization to the media as a form of publicity b ..ments and receive supplementary textual materials and photographs • The specific types of public relations tools chosen depend on several factors. its products. a. sales promotion offers reasons to buy now. • • • 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). Captioned photograph–a picture accompanied by a brief explanation d . 2.
Coupons may also offer free merchandise. A buying allowance may serve as an incentive to resellers to handle new products. straightforward. stimulate pur. A sample is a free product given to customers to encourage trial.
Direct Marketing Direct marketing has been defined by the Institute of Direct Marketing as: The planned recording. 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. and in shelf dispensers in the store.fully targeted individual consumers to obtain an immediate response. • Point-of-Purchase Displays. These coupons may be worth anywhere from a few cents to a few dollars. online. Most point-of-purchase displays are prepared and set up by manufacturers and wholesalers. Usually the rebate is offered by the producer to consumers who send in a coupon along with a specific proof of purchase. Frequent-user incentives are programs developed to reward customers who engage in repeat (frequent) purchases. Frequent-user incentives build customer loyalty. • Frequent-User Incentives. Samples are the most expensive sales promotion technique. Some trade shows are organized exclusively for dealers–to permit manufacturers and wholesal. direct mail. Direct communications with care. Rebating is a relatively low-cost promotional method. Buying allowances are simple. An airline’s frequent-flyer program is one example of a frequent-user incentive. • Premiums. or in stores. • Trade Shows.turer agrees to pay a certain amount of the retailer’s media costs for advertising the manufacturer’s product. A premium is a gift that a producer offers the customer in return for using its product.chase of items in large quantities. A point-of-purchase display is promotional material placed within a retail store. They are made available to customers through newspapers. Others are promotions designed to stimulate consumer awareness and interest. either with or without an additional purchase of the product. and easily administered. It may actually hold merchandise or inform customers of what the product offers and encourage them to buy it. magazines. • Cooperative Advertising. They can easily be copied by competitors. • Samples. • Coupons.ers to show their latest lines to retailers.chasing specified quantities of a product. A rebate is a return of part of the purchase price of a product. A trade show is an industry wide exhibit at which many sellers display their products. Samples may be offered via online coupons. direct mail.You must be familiar with many of the following sales promotion methods:• Rebates. A coupon reduces the retail price of a particular product by a stated amount at the time of purchase. • Buying Allowances. Direct marketing is the use of consumer-direct (CD) channels to reach and deliver goods
. A buying allowance is a temporary price reduction to resellers for pur. Cooperative advertising is an arrangement whereby a manufac.
All major players in India are affiliated to IDSA. Lotus Learning Pvt Ltd. Britannia.
DIRECT MARKETING BENEFITS
. Marico. 90% of goods sold by the direct sellers in India are sourced from goods manufactured within the country.vices to customers without using marketing middlemen. direct selling is growing at a fast pace. • • • • Amway is the largest player in India with annual sales exceeding Rs5bn Other major players are Avon Beauty Products (I) Pvt Ltd. Mass-market penetration is now catching up within the Rs 1. personal products.1. Direct Marketing in India: • In India. Dabur. Godrej and Tata Tea. Nestle. Tupperware and Avon now seem to be following the path charted by FMCG giants such as Hindustan Lever. • Most of the Direct Selling companies operating in India today are in the field of cosmetics.800-crore direct selling industry as well. • India was the fastest growing market in 2000 in terms of revenues from direct selling. household products. cookware and healthfood. Total sales through direct selling route in 2002 was Rs. Oriflame India Pvt Ltd.723. and direct selling majors such as Amway.and ser. 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. Tupperware India Pvt Ltd.7 crore. registering a 54% yoy growth.
Almost every company as had spectacular failures.
. even for a skillful marketer. Even a brand that has achieved acceptance in other markets will require introduction in new markets. 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. and the composition of the market. ‘The PLC concept can be applied to a product category (perfumes). Introducing new product is always a risky venture.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. buyer behavior. 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.
duce their own brands. It is during this stage that marketers are focusing effort on extending the lives of their existing brands. the most successful ones are actually evolving to meet changing consumer needs. At this point of time company need to add new dealers and distributors. New product forms and brands enter. which makes the competition even tougher. Middlemen often intro. As new customers are attracted. There is little growth potential for the product. 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. 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. They should consider modifying the market.
. In this stage you will find that many products may appear unchanged. By spending a lot of money on product development. the company can capture a dominant position. product and marketing mix. competitive product forms. Thus price competition develops along with heavy promotions of whatever unique brand fea.Growth Stage At a growth stage where the company has successfully launched its product. This is the stage of peak profits. but total industry sales are still rising. promotion. attracting competitors who copy and improve on the features of the new product. In doing so h owever. the market expands.
Maturity Stage At this stage company will find greater number of competitors. In this phase. as new customers enter the market and old customers make repeat purchases. new pack sizes may need to be introduced. the sales have begun to increase rapidly in this stage. and distribution. Most of the times it will find that the sales are repeat sales to earlier buyers.tures still exist. and brands exist in the maturity stage. company will find decline in industry profits accelerates further. Competition intensifies and industry profits begin to decline at the end of the growth stage. the company faces a trade-off between high market share and high current profit. it gives up current profit and hopes to make it up in the next stage. Rivals copy product features of successful brands and they become more alike.
frequent inventory re-adjustments. Sales and profits decline rapidly and competitors become more cost conscious. sales force attention. Product forms and brands typically enter into decline. At times man. Thus Sanifresh is still a leading toilet cleaner though its powdered form is less popular than liquids. There are hidden costs in terms of management time. 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
. stages while product categories last longer.agement may decide to maintain its brand without changes in the hope that some competitors will leave the market. and advertising changes.Decline Stage Now the company reaches to the final stage of the life cycle. Brands with strong acceptance by some customer segments may continue to produce profits. companies need to pay attention to their dying products.. It is basically because of Competitions that the product forms and brands enter into the decline stage.
5% to adopt the product.The Adoption & Diffusion Process – The PLC concept is related to the adoption and diffusion processes. The early majority represents 34% of consumers. 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 adoption process affects the length of a products life cycle. the product is doomed D failure.
Innovators . The late majority represents about 34% of consumers. early adopters then begin to purchase the product.resent the first 2. Early majority – they are people who are careful consumers who tend to avoid risk. They rely on recommen. But if innovators and early adopters do not adopt. The adoption process is the series of stages a prospective buyer goes through in deciding to buy and make regular use of the product. The five categories of adopters (1) Innovators (2) Early adopters. Early adopters tend to be educated opinion leaders and represent about 13. Laggards .dations from others who have experience with the product. Innovators rep.
. Late majority .based on the positive response of innovators.those who avoid change and may not adopt a new product until traditional alternatives no longer are available.5% of consumers. Laggards represent about 16% of consumers. (3) Early majority (4) Late majority and (5) Laggards. the early majority adopts the product once it has been proven by the early adopters. Early adopters .somewhat skeptical consumers who acquire a product only after it has become commonplace.well-informed risk-takers who are willing to try an unproven product.
government reports. a product concept is a detailed version of the idea stated in meaningful consumer terms. Almost 28% of new product ideas come from watching and listening to customers. a physical presentation will increase the reliability of the concept test. The company can watch competitors’ ads. distributors and suppliers. This is different again from a product image. press releases and write-ups in the press about their activities. The purpose of this stage is to pare these down to those that are genuinely worth pursuing.New Product Development Process – Figure will show the complete process of new product development lets discuss them one by one. Customers: even create new products on their own. advertising agencies and new product consultants.cient. however. Companies also buy competitors information and pay for industrial espionage. market research firms. customers. The company
. 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. a word or a picture may be suffi. Idea Screening: -The purpose of idea generation is to create a large pool of ideas. Concept Development and Testing . 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. Companies have different methods for doing this from product review committees to formal market research.
New Product Development starts with idea generation A company has to generate many ideas in order to find one that is worth pursuing. management can assess how well the idea fits with the company’s marketing skills and experience and other capabilities. can often pass on information about new develop. shows and seminars. 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.ners’ recipes. competitors. these need to be tested with con. After being exposed to the concept. One of Pillsbury’s four cake mix lines and several variations of another came directly from Bake-Off win. Almost 55% of all new product ideas come from internal sources according to one study.An attractive idea has to be developed into a Product concept.ments. About 30% of new product ideas come from analysis of competitors’ products. As opposed to a product idea that is an idea for a product that the company can see itself marketing to customers. For some concept tests. which is the consumers’ perception of an actual or potential product. Other sources are trade magazines. Resellers and others who are close to the market. Against these. Once the concepts are developed. The Major sources of new product ideas include internal sources. It. Finally. the management can obtain an overall rating of the company’s ability to launch the product successfully.sumers either symbolically or physically. Companies like 3M and Toyota have put in special incentive programs or their employees to come up with workable ideas.
egy statement consists of three parts: the first part describes the target market. The third part of the marketing strategy statement describes the planned long-run sales.can then project these findings to the full market to estimate sales volume. the planned product positioning and the sales. distribution. The strat. market share and profit goals for the first few years. Marketing Strategy Development .This is the next step in new product development. Business Analysis . profit goals.
. If they do. it can evaluate the attractiveness of the business proposal. Business analysis involves the review of projected sales. The second part outlines the product’s planned price. and the marketing mix strategy. costs and profits to find out whether they satisfy a company’s objectives. and marketing budget for the first year. the product can move to the product development stage.Once the management has decided on the marketing strategy.
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. R&D or engineering develops the product concept into a physical product. This step calls for a large investment. management may decide to do away with this stage and proceed straight to the next one:
If the company goes ahead with commercialization . the next step is test marketing: the stage at which the product and the marketing program are introduced to a more realistic market settings. they must be tested.Here. See Figure 10. nationally advertised items like cigarettes. The system works because many consumers behave alike in buying a given type of product. or blades and matchboxes.
Classification of Products The most common basis for classifying consumer products is based on buyer behavior. Hence. This depends a lot on the ability of the company to bear risk and the reach of its distribution network. Three subclasses are:
. The classification is based on differences in the buying behavior of the people who buy the prod. Functional tests are then conducted under laboratory and field conditions to ascertain whether the product performs safely and effectively. Test marketing gives the marketer an opportunity to tweak the marketing mix before the going into the expense of a product launch.Product Development . Test Marketing . They are widely available at many outlets. It will show whether the product idea can be developed into a full. They are basically low-priced. Costs of test marketing can be enormous and it can also allow competitors to launch a “me.ping products (3) Specialty products. The amount of test marketing varies with the type of product. The company will have to decide on the timing of the launch (seasonality) and the location (whether regional. national or international).too” product or even sabotage the testing so that the marketer gets skewed results.If the product passes the functional tests. First. When the prototypes are ready. R&D will develop prototypes that will satisfy and excite customers and that can be produced quickly and at budgeted costs. It gives you a brief description of consumer goods.fledged workable product. This helps marketers in making generalizations to guide development of their marketing mixes. at times. Four classes of consumer products are (1) Convenience products (2) Shop. and (4) Unsought products. toffee.introducing the product to the market-it will face high costs for manufacturing and advertising and promotion.ucts (it is basically how you perceive and buy the products) not on the differences in the products themselves.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. bread. cost and effort to compare because they perceive a higher risk in buying these products. distance from stations and so on.Heterogeneous Shopping Products they are product that are considered to be unlike or non.Impulse Products: Purchases of Impulse products are absolutely unplanned exposure to the product triggers the want. But specialty product can be less intensively distributed than a convenience or shopping product because buyers will search to find it. Shopping Shopping Products These products involve price and quality comparisons. The desire to buy staple products may cause the consumer to go shopping. Price often is secondary to style and quality when price comparisons are difficult to make. If the rent is reasonable compared to the alternatives. style. “‘insist on the real thing”. 1. jewellery. and so on. Marketers try to create specialty status for their products with advertising phrases like “accept no substitutes”.Emergency Products: Purchases of emergency products result from urgent and compelling needs. 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. They build customer loyalty when consumers consider their brands to be specialty products. Stardust and Savvy magazines. Often a consumer pays more than if this need had been anticipated. butter which are bought routinely because the family regularly consumes them. Consumers shop for the best price quality combination.Ban glasses. Specialty Special Products In this case you as a consumers will make a special effort to buy specialty products. you are aware that most of the brands are very similar then you will limit your shopping effort to price comparisons. A retailer might advertise that the Color TV’s price includes 6 months or free interest financing. 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. Doctors. Using price to compare clothing. Thus sellers tend to engage in price competition. This is why impulse products are located where they can be easily noticed. Just suppose you want to buy a colour television. which are considered to be alike. Shoppers spend more time. Lawyers and Accountants who enjoy a large following are selling specialty products. furniture and apartments is tough because quality and style vary within each product class. price becomes important. cars. Once they find the right one. Shopping products can be homogeneous or heterogeneous. floor plans. Ray. The decision to buy these products is programmed after the first time when the consumer puts them on his list of regular items.1. 3. 2. The desire to buy impulse is a result of the shopping trip. There is no Comparison Shopping. eggs. 2. One might set up service centers to differentiate its product from rivals. For these products consumers have strong convictions as to brand.
. Just suppose a couple is searching for a flat may spend a lot of time comparing decor. toffees and chocolates (placed at a child’s eye-level) are examples of impulse products. or type.standardized. Staple Products: this includes milk. Leica Cameras and Johnny Walker Scotch Whisky are examples.Homogeneous Shopping Products: they are products. Consumers will go out of their way to locate and buy these products because they perceive quality and other benefits in owning them. they probably will lease it. Mitsubishi Lancers.
Lux. a lawyer’s services in contesting a will. i. although they may eventually purchase them. Brand names simplify shopping. BRANDING . Like Life Insurance. A brand is defined: “As a name. guarantee a certain level of quality and allow for self-expres. Rin detergent powder. • Brand name is that part that can be spoken. marketing and or production considerations.sion. 7UP. sign. „ 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. • Brand mark-elements of the brand that cannot not be spoken. and Surf Ultra are part of Lever’s detergents line and Le Sancy. Rin.
PRODUCT AND PRODUCT MIX Any organization is marketing more than one product then it has a product mix.e. are part of its soaps line. 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. There are two types: regularly unsought products and new unsought products. Rexona. Chicago). Wheel. Lifebuoy. A brand differentiates these products from those of competitors” (American Marketing Association. term. These are basically existing products but the consumers do not want to buy this product now. words and numbers.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. Marketers face a tough challenge in persuading consumers to buy their new unsought products.e. Surf. Rin Solarox. including letters.symbol
. When we are discussing about a typical large multi-product firm’s product mix includes new. maturing and declining productst. i. The marketer’s task here is to inform target consumers of the products existence and stimulate demand for it. growing. a wreath and a doctor’s services in an emergency are regularly unsought products. But heavy promotion and acceptance of the product practically eradicated polio. Oral polio vaccine was once a new unsought product.
etc. SERVICE MAREKTING A service is an activity which has some element of intangibility associated with it. fair price and so on. rather for leisure. We expect a Mercedes to be driven by an executive or a top-class businessman. We know what a Garden Woman is. e.. Coke is an icon of American culture. not the name for a specific product. computer-programming. and that are not necessarily tied to the sale of a product or another service. legal and medical advice.”
. Personality: A brand projects a personality. insurance.g. W. research.• Trade Character i. MRF suggests a muscle man and Rin suggests a lighting flash. 56.515 new in that year.e. es. are reflected by the brand. Then there are services which are provided by professionals but consumed for reasons not of business. fine arts. thus Tata stand for quality. and does not result in a transfer of ownership.sentially intangible activities which provide want-satisfaction. while Shilpa Bindis are typically Indian. We know that Sunny is for teenagers. Culture: A brand also represents a certain culture.e. Charlie Chaplin and Cherry Blossom. Sometimes a brand may take on the personality of an actual person. Ronald McDonald. User: The brand suggests its own target audience. I. marketing. recreation. A change in condition may occur and production of the service may or may not be closely associated with a physical product. Because of the imagery associated with the brands they actually have the power to enhance or limit a consumer’s perceived image or selfimage. culture and personality of the brand. what would come to our mind? Like Videocon suggests a lion.000 trademarks registered. Ford. These users correspond to the values.g. Pillsbury Doughboy • Trade mark-legal designation that the owner has exclusive rights to the brand or part of a brand. US Patent & Trademark Office had 680. • Trade name-The full legal name of the organization. It includes a wide variety of services. There are the business and professional services such as advertising.1990. entertainment and fulfillment of other psychological and emotional needs such as education.. e. which involves some interaction with customer or with property in their possession. “services are those separately identifiable.J Stanton “Services as fulfilling certain wants and states that. Attributes of Brand Values: The values. banking. which govern a producer. Had the brand been an animal or an object or a person.
1. which is lost forever. stored.The most basic and universally cited. Services cannot be felt.
Inseparability . and therefore fluctuations in demand are often difficult to manage. or telephone line capacity not used cannot be reclaimed and used or resold at a later time. Because services are perform In most cases services cannot be separated from the person or firm providing it. Teaching is an intangible service. Yet resort owners have the same number of rooms to sell Yetround. A seat on an airplane or in a restaurant. A car mechanic who has no cars to repair today. resold. A plumber has to be physically present to provide the service. unsold seats in a cinema hall represent service capacity.Characteristics of services. or spare berths on a train. difference between goods and services is intangibility. but little demand in July.
. there is tremendous demand for resort accommodations in XYZ in February. an hour of a lawyer’s time. For example. the beautician has to be available to perform the massage
Perishability .It basically refers to the fact that services cannot be saved.turned. Intangibility actually presents several marketing challenges: Services cannot be inventoried. and new service concepts can therefore easily be copied by competitors. tasted. touched or seen in the same way as goods. A person who possesses a particular skill provides Service. Services cannot be patented legally.
the other dimension of this. certain train routes are always more heavily booked than others. or even re-turned if the consumer is unhappy.
. There is a peak demand time for buses in morning and evening (office hours).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.