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

1990’s…………….??????????

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.

Different departments work as in a highly separate water tight compartments 9. Cost determines Price 10. Emphasis on staying with existing technology and reducing costs 8. Company first determines customers needs and wants and then decides out how to deliver a product to satisfy these wants 3. Emphasis is on the product 2.Selling 1. Emphasis on innovation on every existing technology and reducing every sphere. Selling views customer as a last link in business Marketing 1. Planning is short-run-oriented in terms of today’s products and markets 5. Management is profit oriented 4. Marketing views the customer last link in business as the very purpose of the business Defining Customer Value and Satisfaction: of new products. on providing better costs value to the customer by adopting a superior technology 8. All departments of the business integrated manner. price determines cost 10. Management is sales volume oriented 4. Views business as consumer producing process satisfying process 7. Emphasis on consumer needs wants 2. Stresses needs and wants of buyers 6. . the sole purpose being generation of consumer satisfaction 9. Company Manufactures the product first 3. Planning is long-run-oriented in today’s products and terms tomorrow’s markets and future growth 5. Stresses needs of seller 6. Views business as a good producing process 7. Consumer determine price.

It is a subjective exercise but very important for marketer’s point of view. obtaining . that is not its main goal. other benefits include a long-lasting car. and long warranty period. They had been investigating how Japanese industry had been so successful.” but the buyer is promised more than just a safe car. using. 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. if the company sets expectations too low. Managers take into account all seven of these factors. For example. and was taken up as a basic tool by the global management consultancy company McKinsey. and disposing of the given marketing officering.tional. like thermometer for temperature. and advertisements. Total customer cost is the bundle of costs customers expect to incur in evaluating. According to Michael Lanning. . However. The value-delivery system includes all the experiences the customer will have on the way to obtaining and using the offering. The Seven S model was born at a meeting of these four authors in 1978. Large or small. a company must design a competitively superior value proposition aimed at a specific market segment. Since then it is known as their 7-S model. Measuring Satisfaction There are no meters to measure it.livery system.11 The value proposition consists of the whole cluster of benefits the company promises to deliver. At around the same time that Tom Peters and Robert Waterman were exploring what made a company excellent. Customer Expectation: It is formed on the basis of past buying experiences. it won’t attract enough buyers ( although it will satisfy those who do buy) If marketers raise expectations too high. the results may be lower profits. . the buyer is likely to be disappointed. in his Delivering profitable value. Volvo’s core positioning is“safety. to be sure of successful implementation of a strategy.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. Although the customer-centered firm seeks to create high customer satisfaction. good service. Together these factors determine the way in which a corporation operates. the buyer is likely to be disappointed. If the company increases customer satisfaction by lowering its price or increasing its services . advice. backed by a superior value-de. It appeared also in "In Search of Excellence" by Peters and Waterman. it is more than the core positioning of the offering. and psychological benefits customers expect from a given market offering. If marketers raise expectations too high. Total customer value is the perceived monetary value of the bundle or economic. if the company sets expectations too low. 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. However. Origin of the 7-S Framework. History The 7-S Framework was first mentioned in "The Art Of Japanese Management" by Richard Pascale and Anthony Athos in 1981. func.

4. Shared Values (also called Superordinate Goals). Strategy Plans for the allocation of a firms scarce resources. information systems. Environment. 7. Central beliefs and attitudes. a holding. Value Chain Michael Porter of Harvard proposed the value chain as a tool for identifying ways to create more customer value. over time. functional divisions (top-down). Staff Numbers and types of personnel within the organization. Structure The way in which the organization's units relate to each other: centralized. competition.The meaning of the 7 S 1. 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. Guides organizational change. a matrix. Benefits • • • • Diagnostic tool for understanding organizations that are ineffective. processes and routines that characterize how the work should be done: financial systems. promotion and performance appraisal systems. a network. Managers must act on all Ss in parallel and all Ss are interrelated. The interconnecting center of McKinsey's model is: Shared Values. What does the organization stands for and what it believes in. 5. to reach identified goals. Skills Distinctive capabilities of personnel or of the organization as a whole. . Compare: Management Styles. recruiting. 3. Combines rational and hard elements with emotional and soft elements. decentralized. Style Cultural style of the organization and how key managers behave in achieving the organization's goals. 6. customers. Strengths of the 7-S Model. Compare: Strategic Intent 2. etc. Systems The procedures.

transportation. etc • • Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Operations Outbound Marketing Service Logistics Logistics and Sales .The activities of the Value Chain Primary activities (line function) 1. assembly. Support activities (Staff functions. equipment maintenance. upgrading. accounting. or • by reconfiguring the value chain. • Operations. packaging. Includes general management. quality management. etc. 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. inventory control. The activities associated with getting buyers to purchase the product. selling. retail management. pricing. Includes technology development to support the value chain activities. . • Marketing and Sales. overhead) • • Procurement. design. Technology Development. etc. 2. finance. etc. distribution management. The activities associated with recruiting. spare parts management. Outbound Logistics. development (education). The activities required to get the finished product at the customers: warehousing. storing. installation. legal. buildings. Service. testing and all other value-creating activities that transform the inputs into the final product. Inbound Logistics. Includes receiving. repair services. spare parts. promotion. Includes machining. Procurement of raw materials. redesign. transportation planning. • 3. planning management. machines. Such as: Research and Development. Firm Infrastructure. order fulfillment. including: channel selection. Human Resource Management. retention and compensation of employees and managers. The activities that maintain and enhance the product's value. training. including: customer support. advertising. public affairs. servicing. Process automation.

8. Linkages among activities. 4. new distribution channels. 2. The sales. and how they will be coordinated. Institutional factors (regulation. Capacity utilization.A cost advantage can be created by reducing the costs of the primary activities.). 7.sources. Accountable marketing: The salesperson phones the customer to check whether the product is meeting expectations. Once the value chain has been defined. Dfferent levels of customers who have strong profit potential. ( General Electric. which is responsible. Basic marketing: The salesperson simply sells the product.time values of all of the firm’s customers. and points them all in the same direction. • The Corporate Level. "Reconfiguration" means structural changes such as: a new production process. 3. union activity. Recently there have been many companies that achieved a cost advantage by the clever use of Information Technology. 4. A cost advantage also can be pursued by "Reconfiguring" the value chain. Reactive marketing: The salesperson sells the product and encourages the customer to call if the or the has questions. It provides the logic that integrates the perspectives of functional departments and operating units.person also asks the customer for any product – or service – improvement suggestions and any specific disappointments. 1. Customer Relationship Management The aim of customer relationship management (CRM) is to produce high customer equity. Learning. A marketing plan is carried out within the context of a firm’s broader strategic business plan. but also by reducing the costs of the support activities. 3. the higher the customer equity. In most large corporations. Timing of market entry. taxes. 9. Interrelationships among business units.corporate headquarters is responsible for designing a corporate strategic plan to guide the whole enterprise. A firm develops a cost advantage by controlling these drivers better than its competitors do. A strategic marketing plan outlines the actions necessary. comments. as well as on which businesses to start or eliminate. 2. Geographic location. 10. 5. Proactive marketing: The company works continuously with its large customers to help improve their performance. or complains. has stationed engineers at large utilities to help them produce more power. or a different sales approach. for example. Customer equity is the total of the discounted life. strategic planning takes place at four levels. when and where they will be completed. etc. Firm's policy of cost or differentiation. 6. . Porter identified 10 cost drivers related to value chain activities: 1. the more loyal the customers. Economies of scale. a cost analysis can be performed by assigning costs to the value chain activities. Clearly. Strategic Planning A strategic business plan describes the overall direction an organization will pursue within its environment and also guides the allocation of re. it makes decisions on the amount of resources to be allocated to each division. Degree of vertical integration.

brand within the business unit develops a market. Public Relations.each division establishes a division plan covering the allocation of funds to each business unit within the division. The Product Level. To ensure long-term value creation. Because of the low growth. • Stars are frequently roughly in balance on net cash flow. Promotions.• The Division Level.each product line. Advertising.ing plan for achieving its objectives in its product market. or if the product's market grows faster. The Boston Consulting Group Matrix has 2 dimensions: market share and market growth.each business unit develops a strategic plan to carry that business unit into a profitable future. it is better for the company. However if needed any attempt should be made to hold your market share in Stars. For example the marketing division would formulate strategies as to how the various units within it would work. 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. investments which are needed should be low. The basic idea behind it is: if a product has a bigger market share. The units in the marketing division would be Sales. low market share) • Avoid and minimize the number of Dogs in a company. 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. • Watch out for expensive ‘rescue plans’. It was developed in the early 70s by the Boston Consulting Group. The BCG Matrix can be used to determine what priorities should be given in the product portfolio of a business unit. Stars are leaders in the business. • Cash Cows are often the stars of yesterday and they are the foundation of a company. high market share) • Stars are using large amounts of cash. Therefore they should also generate large amounts of cash. • • BOSTON CONSULTING GROUP MODEL The BCG Matrix method is the most well-known portfolio management tool. The Business Level. Dogs (low growth. because the rewards will be Cash Cows if market share is kept. Eg. high market share) • Profits and cash generation should be high. Cash Cows (low growth. Market Intelligence. It is based on product life cycle theory. . etc.

or otherwise companies are advised to disinvest. • It provides a base for management to decide and prepare for future actions. This may tempt management to emphasize a particular product. they are often allowed to reinvest substantial cash amounts in their mature businesses. Sometimes Dogs can earn even more cash as Cash Cows.• Dogs must deliver cash. Either these SBUs should receive enough investment funds to enable them to achieve a real market dominance and become Cash Cows (or Stars). Other uses and benefits of the BCG Matrix • If a company is able to use the experience curve to its advantage. or to divest prematurely. • BCG model is helpful for managers to evaluate balance in the firm’s current portfolio of Stars. Question Marks will simply absorb great amounts of cash. • If the market share remains unchanged. Once it becomes a star. it should be able to manufacture and sell new products at a price that is low enough to get early market share leadership. Their management have an easy job. now and then investments are made. low market share) • Question Marks have the worst cash characteristics of all. The model uses only two dimensions – market share and growth rate. Increase market share or deliver cash. There is no clear definition of what constitutes a "market". A high market share does not necessarily lead to profitability all the time. High market share is not the only success factor. such as a generic growth target (9 percent per year) or a generic return on capital of say 9. The model neglects small competitors that have fast growing market shares . In this way they can never become Cash Cows. These inadequate invested sums of money are a waste of money. These are hopeless attempts to "turn the business around". or invest nothing and generate any cash that you can. The executives are often praised anyhow. otherwise they must be liquidated. because of their low market share. In such a scenario: • • • Cash Cows Business Units will reach their profit target easily. or sell off. • Either invest heavily. Cash Cows. • BCG method is applicable to large companies that seek volume and experience effects. They can then try to get any possible cash from the Question Marks that were not selected. even worse. The problems of getting data on the market share and market growth. Question Marks and Dogs. Even worse. Dogs Business Units are fighting an impossible battle and.5% for an entire corporation. As a result all Question Marks and Stars receive only mediocre investment funds. A business with a low market share can be profitable too. Limitations of the BCG Matrix Some limitations of the Boston Consulting Group Matrix include: • • • • • • • • • • It neglects the effects of synergy between business units. Market growth is not the only indicator for attractiveness of a market. Question Marks (high growth. 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. it is destined to be profitable. • The model is simple and easy to understand. because they have high cash demands and generate low returns.

the growth-share matrix can be seen as a special case of a multifactor portfolio matrix such as that pioneered by General Electric.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. The above two factors make excellent marketing sense for rating a business. This indicates a “green light” to invest in this product/service. Organisation must therefore exercise caution when making additional investments in this product/service. 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. If the enterprise falls in this zone the business is in a favorable position with relatively attractive growth opportunities. BUSINESS STRENGTH • Market share • Share growth • Product quality • Brand reputation • Distribution network • Promotional effectiveness • Productive capacity • Productive efficiency • Unit costs • Material supplies AND BUSINESS . The model is based on the company’s seven businesses. The blocks with plain Zone consists of the three diagonal cells from the lower left to the upper right. If additional factors are considered. The nine cells are grouped into three zones: The block with the Lateral Zone consists of the three cells in the upper left corner. yielding nine cells. If one of these factors is missing. A position in the yellow zone is viewed as having medium attractiveness. The blocks with a Diagonal Zone consists of the three cells in the lower right corner. FACTORS UNDERLYING MARKET ATTRACTIVENESS STRENGTH IN GE MULTIFACTOR PORTFOLIO MODEL 1 . Companies are successful to the extent that they enter attractive markets and possess the required business strengths to succeed in those markets. Both axes are divided into three segments. Neither a strong company operating in an unattractive market nor a weak company operating in an attractive market will do very well. 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 . The suggested strategy is that management should begin to make plans to exit the industry. A position in the red zone is not attractive. the business will not produce outstanding results. The suggested strategy is to seek to maintain share rather than growing or reducing share.

economic events. cash cows. etc. Management should also forecast each SBU’s expected position in the next three to five years given the current strategy. recognize what factors affect performance. Rather. The three cells in the lower-right corner indicate SBUs that are low in overall attractiveness.• • R & D performance Mangerial personnel STRATEGIES The GE matrix is divided into nine cells. new technologies. know which products are stars. understand their industries. The diagonal cells stretching from the lower left to the upper right indicate SBUs that are medium in overall attractiveness. Evaluation of Strategic Planning Approaches Many firms assess alternative market opportunities. 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. and realize they can target broad or narrow customer bases. question marks. Making this determination involves analyzing where each product is in its product life cycle as well as expected competitor strategies. Marketing contributes to assessing each SBU’s sales and profit potential. but once the SBU’s objective and budget are set. Thus. The major strengths of the approaches are that they allow a firm to do the following: . The three cells in the upper left corner indicate strong SBUs in which the company should invest or grow. marketing’job is to carry out the plan efficiently and profitably. the task of marketing management is to manage demand or revenue to the target level negotiated with corporate management. and dogs. the company’s objective is not always to build sales in each SBU.

• They may not adequately consider environmental factors. • Compute marketing and other resources needs. • Study various strategy effects. prod. market development. • They are arbitrary in defining SBUs and evaluative criteria. • These techniques only aid planning. Current Products Current Markets New Products New Markets . and diversification. • Learn the opportunities to pursue and which threats to avoid. • They may overvalue market share. See accompanying figure. The approaches have these weaknesses: • They may be difficult to implement. 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. 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 may be too simplistic and omit key factors.uct development. firm. • Study competitors’ actions and trends.• Analyze each of its SBUs and products. • Focus on meaningful differential advantages. • They are often used by staff planners rather than line managers. • They may not be applicable to all firms and situations. • Discover principles for improving performance. • Compare performance with designated goals. and SBUs.

the company goes for diversification. In that case. However. appeal to segments it is not yet satisfying. management may discover several ways to grow. three strategies have been formulated to overcome this gap. reposition products. By examining these three intensive growth strategies. management must also examine integrative growth opportunities. 2. provided that the government does not bar this move(horizontal integration). a firm becomes involved with new products aimed at new markets. Next it considers whether it can find or develop new markets for its current products (market-development strategy). INTENSIVE GROWTH. these new sources may still not deliver the desired sales volume. forward or horizontal integration within the industry. It can enter new markets. In that case company must consider diversification. This is possible in three kinds: • Concentric Diversification Strategy-The company could seek new products that have technological or marketing synergies with existing product lines.• In market penetration. a firm seeks to expand the sales of its present products in its present markets through more intensive distribution. and other minor innovations and markets them to loyal consumers. In market development. a firm seeks greater sales of present products from new markets or new product uses. In product development. aggressive promotion. and use new distribution methods. 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.corporate management’s first course of action should be a review of whether any opportunities exist for improving its existing businesses’ performance. especially if they are highly profitable(forward integration). In diversification. Finally if the company decides to acquire one or more competitors. It might acquire some wholesalers or retailers. and competitive pricing. Distribution and promotion orientations are different from those traditionally used by the firm. 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. Ansoff model propounded by Igor Ansoff is a useful framework for detecting new intensive growth opportunities called a “Product-Market Expansion Grid”. INTEGRATIVE GROWTH – Often a business’s sales and profits can be increased through backward. Later it will also review opportunities to develop new products for new markets(diversification strategy). They can be either completely new products or existing product extensions. Horizontal Diversification Strategy. better quality. It emphasizes new models. a firm develops new or modified products to appeal to present markets. 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. 3. Still. that growth may not be enough. The company first considers whether it could gain more market with its current products in their current markets(market penetration strategy). • .graphic factors. This can be either based on demographic or geographic or psycho. 1. Then it considers whether it can develop new products of potential interest to its current markets(productdevelopment strategy).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. But here the company should take care as this involves high risk and the firm might loose focus. • • • While the corporations are faced with ever increasing strategic planning gap. even though the new product themselves may appeal to a different group of customers. The products may be new to the industry or to the company.

Differentiation—large market and unique strategy.companies must not only develop new businesses. making optimal outsourcing and vertical integration decisions or avoiding some costs altogether. Competitive advantage (lower cost or differentiation). 3. Managers should focus on growth opportunities. not fritter away energy and re. 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. 4. Some of the ways by which firms acquire cost advantages are by improving process efficiencies. DOWNSIZING OLDER BUSINESSES.sources trying to salvage hemorrhaging businesses. Cost leadership and differentiation strategies are alternatives for large firms. products or markets. 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). gaining unique access to large source of lower cost materials. this investment represents a barrier to entry that many firms may not overcome. The following three basic strategies are identified (see Figure): 1. 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.• Conglomerate Diversification Strategy – the company might seek new businesses that have no relationship to its current technology. . Skill in designing products for efficient manufacturing. 2. Cost leadership—broad market and low cost position. the firm may be able to sustain a competitive advantage based on cost leadership. but must also carefully prune. 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. a focus strategy is available to smaller firms. The cost leadership strategy usually targets a broad market. High level of expertise in manufacturing process engineering. If competing firms are unable to lower their costs by a similar amount. harvest or divest tired old businesses in order to release needed resources and reduce costs.

disseminate. 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. Additionally. Highly skilled and creative product development team. Because of their narrow market focus. firms pursuing a focus strategy have lower volumes and thus less bargaining power with their suppliers. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. Finally. MARKETING INFORMATION SYSTEM A marketing information system (MIS) is a set of procedures and methods designed to generate. For example. other focusers may be able to carve out sub-segments that they can serve even better. other firms may be able to lower their costs as well. The premise is that the needs of the group can be better serviced by focusing entirely on it. and store anticipated marketing decision information on a regular. However. If research is done this way. The risks associated with differentiation strategy include imitation by competitors and changes in customer tastes.• • Efficient distribution channel. Information should not be approached in an infrequent manner. analyze. Corporate reputation for quality and innovation. continuous basis. firms pursuing a differentiation-focused strategy may be able to pass higher costs on to customers since close substitutes do not exist. even the low cost strategy. Furthermore. Focus Strategy : This strategy focus on narrow segment and within that segment attempts to achieve either a cost advantage or differentiation.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. As technology improves. . thus eliminating the competitive advantage. Firms that succeed in differntiation strategy often have the following internal strengths: • • • • • Access to leading scientific research. Each generic strategy has its risks. Some risks of focus strategy include imitation and changes in the target segment. a firm could face these risks: 1. Strong sales team with the ability to successfully communicate the perceives strengths of the product. There may be a lack of awareness of environmental changes and competitors’ actions. several firms follow. 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. 2. Opportunities may be missed. 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. Additionally various firms pursuing focus strategies may be able to achieve even greater differntiation in their market segments. it may be fairly easy for a broad-market cost leader to adapte its product in order to compete directly. The firm hopes that the higher price will more than cover the extra costs incurred in offering the unique product.

Actions may be reactionary rather than anticipatory. 2. and strategically for several aspects of marketing. 3. managerially. The storage of important data. and store anticipated marketing decision information on a regular. 3. . An avoidance of crises. Continuous monitoring is the procedure by which the changing environment is regularly viewed. The total information needs of the marketing department can be specified and satisfied via a marketing intelligence network. Marketing plans and decisions may not be properly reviewed. continuous basis. managerially. An information system can be used operationally. 6. Data collection may be disjointed. 1. 2. Organized data collection. 7. 5. Time lags may result if a new study is required. 4. Previous studies may not be stored in an easy to use format. 4. An MIS offers many advantages: 1. analyze. and strategically for several aspects of marketing. A marketing information system (MIS) is a set of procedures and methods designed to generate. Data collection may be difficult to analyze over several time periods.3. A broad perspective.An information system can be used operationally. disseminate. which contains three components. Marketing research is used to obtain information on particular marketing issues. Data warehousing involves the retention of all types of relevant company records. as well as the information collected through continuous monitoring and marketing research that is kept by the organization. 8.

and everything to do with the customers. An outside party or the firm itself may undertake such research. people. Focus groups 4. Primary research is conducted from scratch. marketing research into the elements of the marketing mix. ‘Market’ research is simply re. Market research and marketing research are often confused. 2. We consider some of them: 1. Mystery shopping 3. It is original and collected to solve the problem in hand. manages and implements the data collection process. 5.information used to identify and define marketing opportunities and problems. but also areas such as research into new products. It may be applied to any aspect of marketing that requires information to aid decisionmaking. also known as desk research. It must not be haphazard.search into a specific market. an impartial agency. MARKET RESEARCH Marketing research is the systematic gathering.5. 3. monitor marketing performance. Sources of Data . and analyzing of information about specific issues related to the marketing of goods. or modes of distribution such as via the Internet. already exists since it has been collected for other purposes. 8. 4.primary and secondary. ‘Marketing’ research is much broader. recording. 6. analyzes. Obviously. and analysis. designs the methods for collecting information. consumer attitude surveys). Marketing research is about researching the whole of a company’s marketing process This explanation is far more straightforward i. Diaries .. Marketing research specifies the information required to address these issues. markets. It involves a sequence of tasks: data gathering. The ability to do a cost-benefit analysis. Here are a couple of definitions: Marketing research is the function that links the consumer. It not only includes ‘market’ research. and communicates the findings and their implications. It may get enough data by analyzing internal reports or from informal meetings with customer service personnel. and improve understanding of marketing as a process. Speed in obtaining sufficient information to make decisions. competitors. A firm’s decision to use marketing research does not mean it must engage in expensive projects (test marketing. or a research specialist working for the firm. Interviews 2. It is a very narrow concept.e. places. recording. Primary Research There are many was to conduct primary research. and ideas. refine. generate. Coordinated marketing plans. Data may be available from different sources: the firm itself. Projective techniques 5. and public to the marketer through information . and evaluate marketing actions. organizations.Primary and Secondary There are two main sources of data . services. 1. Secondary research. this is a very long and involved definition of marketing research. customer. 7. Product tests 6. Data amassed and kept over several time periods. Several points about marketing research need to be emphasized. Research findings and their implications must be communicated to the appropriate decision maker(s) in the firm.

• Some respondents will give biased responses when face-to-face with a researcher. Interviews can be telephone. Other important data is collected when visitors sign up for membership. The interviews tend to be very structured and tend to lack depth. Other face-to-face interviews are more ‘in depth. 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. Some surveys are very rigid or ‘structured’ and use closed questions. • Telephone Interviews Telephone ownership is very common in developed countries. Advantages of the Internet • Relatively inexpensive • Uses graphics and visual aids • Random samples can be selected • Visitors tend to be loyal to particular sites and are willing to give up time to complete the forms Disadvantages of the Internet • Only surveys current. • The Internet The Internet can be used in a number of ways to collect primary data. . or free membership. Interviews This is the technique most associated with marketing research. face-to. Telephone interviews are cheaper to conduct than face-to-face interviews (on a per person basis).7. 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. However responses will increase if an incentive is offered such as a free newsletter. not potential customers. or over the Internet. Visitors to sites can be asked to complete electronic questionnaires. Data is easily compared. It is ideal for collecting data from a geographically dispersed sample.face. Data is collected on a survey. Omnibus Studies 1.’ and depend upon more open forms of questioning. The research will probe and develop points of interest.

Products are displayed in a mall of shopping center. and the research will probe into specific areas that are of interest to the company commission in the research. They are rare. or years).depends on very quick (subconscious) responses to words Psycho. or used. how much time the consumer spends with the product. However. Findings are reported back to the commissioning organization. They collect data on customer service and the customer experience. They are asked to complete a diary that lists and records their purchasing behavior of a period of time (weeks. Discussion. mystery shoppers will enter. and beliefs are encouraged. especially call centers. Complex to organize. months. There are many issues surrounding the ethics of such an approach to research. and many other customer focused organizations. such as the Internet and telephones. the researcher has a reasonable picture of purchasing behavior. Potential customers are asked to visit the store and their purchase behavior is observed. retailing. Lists are collated.Imagine that you are a product and describe what it is like to be operated. Mail surveys do not tend to generate more than a 5-10% response rate. However. by collecting a series of diaries with a number of entries. Projective techniques Projective techniques are borrowed from the field of psychology. 2 Mystery Shopping Companies will set up mystery shopping campaigns on an organizations behalf. • Can be very expensive in comparison to other methods 4.drama . . 6 Diaries Diaries are used by a number of specially recruited consumers. and so on. 5 Product tests Product tests are often completed as part of the ‘test’ marketing process. 3 Focus Groups Focus groups are made up from a number of selected respondents based together in the same room. a second mailing to prompt or remind respondents tends to improve response rates. posing as real customers. They will generate highly subjective qualitative data. opinion. warn. There are many examples of such approaches including: Inkblot tests . the mail survey is the most appropriate way to gather primary data. Often used in banking. cafes and restaurants. Highly experienced researchers work with the focus group to gather in depth qualitative feedback. how the packing is read.• • Needs knowledge of software to set up questionnaires and methods of processing data May deter visitors from your website. It demands a substantial commitment on the part of the respondent. Groups tend to be made up from 10 to 18 participants. Observers will contemplate how the product is handled.complete the ‘bubbles’ on a cartoon series Sentence or story completion Word association . and a pre-designed questionnaire is mailed to a sample of respondents. 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. • Mail Survey In many countries. travel. or purchased. Mail surveys are less popular with the advent of technologies.look for images in a series of inkblots Cartoons .

For example. As such. There are a number of such sources available to the marketer. making recommendations. The organization will be one of many that simply want to a straightforward answer to a simple question. analyzing information. Rather. 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. An omnibus survey could include questions from companies in sectors as diverse as heath care and tobacco. data must be collected and analyzed. the attributes that create value cannot simply be deduced from common knowledge. But the perception of value is a subjective one. generating primary data (if necessary).7 Omnibus Studies An omnibus study is where an organization purchases a single or a few questions on a ‘hybrid’ interview (either face-to-face or by telephone). The goal of marketing research is to provide the facts and direction that managers need to make their more important marketing decisions.e. and commits less time and effort than conducting your own research. The research is far cheaper. secondary data are not examined until a firm states the issue or problem to be studied. . it already exists. and what customers value this year may be quite different from what they value next year. and primary data are not generated until secondary data are thoroughly reviewed. Each step is completed in order. 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. Secondary Research Secondary (or desk) research uses data that has been collected for other objectives than your own i. Figure below that presents the complete process. examining secondary data.

Sources A. Undisclosed findings. Low costs. Issue (problem) definition is a statement of the topic to be looked into. 4. Exploratory research is undertaken when the researcher is uncertain about the precise topic to investigate or wants to informally study an issue. Source credibility. For example. Conflicting results. 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. the decision problem is translated into a research problem. Helpful for exploratory research. Secondary data have these general disadvantages: Lack of suitability. ISSUE (PROBLEM) DEFINITION A. Unknown reliability.1. 6. B. 6. Unknown methodology. small group discussions. Secondary data have these general advantages: 1. EXAMINATION OF SECONDARY DATA A. External secondary data are available from sources outside the company. sales figures.ten reports. Advantages and Disadvantages A. 4. customer billings. 5. and writ. It is also called qualitative research and may involve in-depth probing. 2. Diverse sources. also called quantitative research. It is the structured collection and analysis of data pertaining to a specific issue or problem. 1. 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. To ensure that the true decision problem is addressed. The corresponding research problem might be to assess whether the market would accept the new product . 2. inventory records. These data should always be reviewed before primary data collection. Conclusive research. is used after the problem definition is clarified. Internal secondary data are available within the company. Obsolescence. B. The use of such scenarios can ensure that the purpose of the research is agreed upon before it commences. C. They may be obtained . profit-and-loss statements. B.The objective of the research should be defined clearly. 3. 3. 5. prior research reports. Speed. B. 2. They include budgets. and understanding underlying trends. Secondary data are those that have been gathered for purposes other than solving the current problem under investigation. Access to hard-to-obtain data. a decision problem may be whether to launch a new product. Thus.

High costs. 1. B.C. Who or what should be studied? This is defined as the population. Currency. 6. sampling is usually employed. Limited perspective. There are three sources of non-government secondary data: a.search) conduct periodic and ongoing studies and make results available to many clients for a fee. Precision. monographs. members of the population are chosen on . 3. Books. Who collects the data? Data can be collected by the firm itself or by an outside company. Regular publications can be broad in scope (such as Business Week) or more specialized (such as the Journal of Advertising). Research Design A. Nielsen. 3. and Burke Marketing Re. They are necessary if secondary data are insufficient for a proper marketing decision to be made. 4. Primary data have these general advantages: 1. 4. Sampling enables the firm to analyze selected people or objects. No conflicting data. 3. every member of the designated population has an equal or known chance of being selected. For large and/or dispersed populations. GENERATION OF PRIMARY DATA A. 5. b. B. The way in which people or objects are selected must be decided. IMS Health. Secrecy. Commercial research houses (such as A. 2. With a non-probability sample. What information should be collected? It can be exploratory or conclusive in nature. 7. 1. A research design outlines the procedures for collecting and analyzing data. Only way to acquire information in some cases. Reliability determined. Inability to gather certain types of information. Advantages and Disadvantages A. a. 3. Primary data have these general disadvantages: Time consuming. c. It consists of these eight steps: 1. 5. Controlled and known methodology.from government and non-government sources. 2. Company limitations. Primary data consist of information gathered to address a specific issue or problem at hand. and other non-regular publications deal with special topics in depth and are compiled on the basis of interest by a target audience. With a probability sample. B. 2.

An experiment is a type of research in which one or more factors are manipulated under con. pre-testing. Recommendations are suggestions for a firm’s future actions. 4. support staff time. researcher time. Coding—the process by which each completed data form is numbered and response categories are labeled. C. Tabulation—the calculation of summary data for each response category.administered questionnaires. Data are collected. computer usage. Observation is a research method whereby present behavior or the results of past behavior are observed and noted. 5. interviewers. Simulation is a computer-based method to test the potential effects of various marketing factors via a software program rather than real-world applications. Figure 4-11 shows recommendations flowing from completed research. e. or by phone or mail. 2. With administered questionnaires. Data analysis consists of the following: 1.trolled conditions. the location of data collection must be outlined. Analysis—the evaluation of responses as they pertain to the specific issue or problem under investigation. ANALYSIS OF DATA A. respondents’ incentives (if any). supplies. RECOMMENDATIONS A. How long will the data-collection period be? The total time frame is specified.the basis of convenience or judgment. The semantic differential is a list of bipolar (opposite) adjective scales that provides an overall profile b. It can be conducted in person. respondents write their answers. 2. printing. d. 6. It may be human or mechanical. It can be disguised or non disguised. 8. How will the data be collected? Data collection can be administered by research personnel or be self-administered. C. In addition. Those engaged in data collection must be properly supervised and follow directions exactly. Data Collection A. B. Responses or observations must be entered correctly. How much will the study cost? Costs may include executive time. With self. When and where should information be collected? The day and time must be set. all others remain constant. Table 4-2 shows the best uses for each kind of primary data collection. based on marketing research findings. What technique of data collection should be used? a. c. The report must be written for the audience that reads it. Benefits and costs must be compared. A survey gathers information from respondents by communicating with them. postage or phone expenses. Just the factor under study is varied. special equipment. 5. B. 7. . and marketing expenses (such as ads). 4. interviewers record answers.

10. It is not uncommon to find errors in sampling. Do we us a random sample. Marketing managers are most likely to implement research findings under these conditions: 1. Companies spend about $12 billion worldwide (40 percent in the United States) for data gathered by marketing research firms. An example of one follows: 1. data collection method. 8. Make sure that you agree on the problem! If you gain approval. or analytic mistakes. They have input into the research design. Scope of marketing research A. Conduct the analysis of the data. Make sure that you really ‘need’ to know something. The top 25-research firms (nearly half of which are U. The problem then becomes the focus of the research. 7. According to the American Marketing Association. They have confidence that results are accurate.Write your final report. This is in addition to government. 2. or cluster sample? 4.and institutionsponsored research. or do we arrange a focus group? The methods of data collection will be dis. the research report should be warehoused in the marketing intelligence network. Go back and speak to the managers or clients requesting the research. Watch out for errors in interpretation. 3. then move on to step seven.nies themselves. Check for errors. The research report represents feedback to marketing managers. 3. How will you collect the data that you will analyze to solve your problem? Do we conduct a telephone survey.D. Once the recommendations are passed on to the proper decision makers. This will contain charts. Define the problem. the topical areas in which . why are sales falling in New Zealand? 2. tables.000 firms accounting for the rest. How will we analyze any data collected? What software will we use? What degree of accuracy is required? 5. 6. IMPLEMENTATION OF FINDINGS A. B. Never conduct research for things that you would ‘like’ to know.cussed in more detail later. and diagrams that will communicate the results of the research.S. B. stratified sample. Decide upon a budget and a timeframe. For example.-based) account for $8 billion in yearly revenues. 6. They have broad control over marketing decisions. with more than 1. Select a sampling method. as well as efforts of the compa. and hopefully lead to a solution to your problem. 9. Go ahead and collect the data. Summary of the Marketing research Process – Marketing research is gathered using a systematic approach. who are responsible for using findings.

purchase intentions. many potential respondents are “turned off” to participating in marketing research projects. companies tend to spend about 1 percent of revenue on marketing research.5 million in 1996 to $255 million in 2000. 8. On average. Misrepresenting research projects. 4. Unrealized promises of anonymity. brand awareness and preference. Asking overly personal questions.companies are most likely to engage in or sponsor research efforts are industry/market characteristics and trends. product satisfaction. 6. Due to technological advances. To turn the situation around. 1. Customer satisfaction research is being sponsored much more than ever before. Five marketing research trends are the rapid increase in customer satisfaction studies. these practices need to be avoided: 1. C. False sponsor identification. 2. F. Here are examples of how the research is being used. Many businesspeople start their research by checking out competitors’ Web sites. 2. Misportraying research findings in ads and other communications. Yet. G. the use of the Internet. 7. Selling or fund raising under the guise of research. With more and more firms striving to expand their foreign endeavors. Selling consumer demographic information for database use without consent. In fact. using search engines. The extent of such research has more than doubled in recent years. B. Observational studies without informed consent. segmentation studies. international marketing research is taking on greater importance. and accessing online annual reports and trade publications. Firms deciding how to market to the hundreds of millions of consumers in Eastern Europe and Central Asia increasingly do market research there. a. Planet Feedback enables consumers to send their feedback to companies quickly and effortlessly. Marketing Info offers The Marketplace. ethical considerations. and concept development and testing. with many firms doing their own studies and others hiring outside specialists. c. designing and . 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. b. Due to unethical practices of some firms. and the application of single-source data collection. a lot of Americans will not answer a survey. 5. market-share analyses. Over the last few years. spending for online marketing research has grown from $3. 3. C. and the complexities of international marketing research. an easy-to-use exchange for purchasers and providers of market research and related marketing services.

. 2. 3. Communications systems. people have never been surveyed before. 4 Kodak is provided as an example of a company that had difficulty conducting market research in nine former Soviet republics. Secondary data from government agencies and trade associations may be lacking. may be below Western standards.conducting research is hard. especially phone services. 1. Many times.

Sub-cultures can include nationalities. the official six social classes in the UK are widely used to profile and predict different customer behavior. religions. Culture is the most basic cause of a person’s wants and behavior. For example. education. is influenced not only by psychological factors.nesses such as telephone banking and insurance. ready meals and direct marketing service busi. the “youth culture” or “club culture” has quite distinct values and buying characteristics from the much older “gray generation” Similarly. For example. In fact. social class is not just determined by income. perception and wants from the family and other important groups. but also by the people around the customer with whom he interact and the various social groups to which you belong. Sometimes a sub-culture will create a substantial and distinctive market segment of its own. or groups of people sharing the same geographical location. It is measured as a combination of occupation. 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. In the UK’s socioeconomic classification scheme. wealth and other variables Social factors: A customer’s buying behavior is also influenced by social factors. colleagues and co. Cultural factors: Cultural factors have a significant impact on customer behavior. Each culture contains “sub-cultures” – groups of people with share values. family. children learn basic values.workers are examples of primary . close friends. income. Similarly the increased desire for “leisure time” has resulted in increased demand for convenience products and services such as microwave ovens. neighbors. Growing up. racial groups. several individuals may interact to influence the purchase decision. such as the groups to which the customer belongs and social status. the decision to purchase and use certain products and services. personality and lifestyle. In a group. differences in social class can create customer groups. Marketers are always trying to spot “cultural shifts” which might point to new products that might be wanted by customers or to increased demand. The typical roles in such a group decision can be summarized as follows: Reference groups As a consumer.Consumer Behavior Factors affecting consumer behavior Each of these factors is discussed in more detail in the following sections on buyer behavior. 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.

whether small or large. is an important of all these groups and we shall discuss it in detail. Film stars and sports heroes are the most popular celebrities. politicians. Reference groups are used in advertising to appeal to different market segments. accountants and authors are used for establishing the benefits of the product. such as film stars. group situation with which potential customers can identify are used to promote products and services. The family. Indirect reference groups comprise those individuals or groups with whom an individual dews not have any direct face to face contact. Primary. attitudes and behavior. It demonstrates to the prospective customer that demonstrates just like him uses and is satisfied with the product. There are i) The family ii) Friendship groups. Experts such as doctors. but is not likely to be received as a member. Another reference group appeal is that which uses the testimonials of a satisfied customer. III) Membership and symbolic groups: A membership group is one to which a person belongs or qualifies for membership. shaving cream (Palmolive).pastes are examples of products. II) Formal and informal groups: Rotary. lawyer. A formal group has a highly defined structure. A symbolic group is one which an individual aspires to belong to. purchase decisions and behavior can be classified into six categories. formal or reference group is a very wide one and includes both direct and indirect or group influences. sportsman. Hidden in this appeal is the subtle inducement to the customer to identify himself with the user the product in question. as I unit. The three types of reference groups appeals most commonly used are: a) Celebrities. Direct reference groups. which exert a significant influence on consumer’s. v) Consumer action groups. TV stars. b) Experts. In contrast. social clubs and societies are other types of formal groups to which individuals may belong. toilet soaps (Lux) . Labor unions. Jaycees are some of the well – known social groups in our society. vi) Work groups. is an important consumer for many products which are purchased for consumption by all family members.groups. lions. textiles ( Dinesh . specific roles and authority positions and specific goals. iii) Formal social groups. All workers in a factory qualify for membership to the labor union. The family. We can identify two families which shape an . as a unit. an informal group is loosely defined and may have no specified roles and goals. Graviera) are advertised using celebrities from the sports and film fields. Family: The family is the most important of all these groups and we shall discuss it in detail. Colgate and Forhans tooth. Soft drink (Thums up). Secondary groups are those with which an individual interacts only occasionally and does not consider their opinion very important. Meeting your neighbors over lunch once a month for friendly exchange of news is an instance of an informal group. It is a source of major influence on the individual members’ buying behavior. iv) Formal shopping groups. 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. informal and small groups exert the maximum influence on consumers and are of great interest for marketers. 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. Different kinds of groups. 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. which use the expert reference groups appeal for promotion.

and when in your work situation you play that role. etc. Marketers often define their target market in terms of the consumers present lifecycle stage. these lines of traditional role demarcation have been getting increasingly blurred. Within the family. For instance. interest and opinions. However. The concept of lifecycle as applied to marketing will be discussed in more details. for a holiday.individual’s consumption behavior . 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. It is a person’s mode of living as identified by his or her activities. same is the case with any consumer.People buy and use products that reflect their status. He may go to Europe or U. This method is called as the psychographics-which is . The profession or the occupation a person is in again has an impact on the products they consume. rather than going to Mussoorie or Ooty. beliefs and purchase behavior patterns. It is from parents that we imbibe most of our values. In our country. the latter’s influence is extremely important. Each of these roles influences your purchase decisions. the norm for office wear includes a full – sleeved shirt and tie. His position within each group can be defined in terms of the activities he is expected to perform. The managing director of a company may drive a Mercedes to communicate his status in society. where the children are likely to have more updated information about various brands and product attributes. Thus. If marketers can identify the various groups to which potential consumers belong. Traditionally. Group norms: Are the norms of a group are the implicit rules of conduct and behavior that are expected of its member. The second type of family is the family of procreation consisting of the consumer’s spouse and children. Roles: An individual may participate in many groups. they can successfully market those products and services whose consumption is dictated by the group norms. Occupation And Income: Today people are very concerned about their image and the status in the society which is a direct outcome of their material prosperity. 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. brothers and sisters. Children are also beginning to exert their influence on the family’s purchase decisions. Life Style: Our life styles are reflected in our personalities and self-concepts. stereo music systems. it has been the wife’s role to purchase food. in different families may be made either by the husband or wife. which is the relative prestige accorded by society. You are probably a manager. different member play different roles.one is the family of orientation that is the family in which you are born and consists of your parents. This is especially true in case of products such as television. not with standing the terrible heat condition. in certain multinational companies in India. clothing and other household sundries. Personal Factors: Age and Life cycle Stage:Like the social class the human life cycle can have a significant impact on consumer behaviour. The life cycle is an orderly series of stages in which consumer attitude and behavioural tendencies evolve and occur because of developing maturity. income. the same decision. attitudes. and status.A. experience. accessories and possessions. at home you play the role of spouse and parent. while the husband played a dominant role in the purchased of automobiles and life insurance. Long after an individual has ceased to live with his parents. where children continue to live with parents even after attain adulthood. personal computers. There is a method of measuring a consumer’s lifestyle. records. Status: Each role that a person plays has status. or both may have an equal voice. But with the emergence of the working-women. The status of a person is projected through various symbols like the dress. We need to know what a life-style is made of. their influence of the sub – conscious mind still continues to be great.S. Status is often measured by the degree of influence an individual exerts in the behavior and attitude of others. Thus in different social positions you play different roles.

which are difficult to describe measure lifestyle analysis has proven valuable in segmenting and targeting consumers according to their lifestyle classification. Once they are alleviated. When these are not satisfied we may feel sickness. etc. sleep. These needs are mostly psychological in nature. By appealing to motives (reasons for behavior). Personality: personality is the sum total of an individual’s enduring internal psychological traits that make him or her unique.peoples activities. these change by situation and over time. Then based upon the combina tions of these dimensions. Love and belongingness have to wait until she is no longer in fear. water. 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. . MASLOW’S HIERACHY OF NEEDS The Hierarchy of Needs model of Abraham Maslow 1. interests and opinions. Hierarchy of Needs . goals. These feelings motivate us to alleviate them as soon as possible to establish homeostasis. Economic and emotional motives are possible. consumers are classified.the analysis technique used to mea. dominance. 2. However.Physiological needs These are the very basic needs such as air. if a family is dysfunctional caused by for example an abusive husband. irritation. We need the safety of a home and family. a marketer can generate motivation. etc. the wife cannot move to the next level. Self-confidence.sure consumer lifestyles.Safety needs These are dealing with achieving of stability and of consistency in a chaotic world. discomfort. adaptability. sex. Each person has distinct motives for purchases. 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. autonomy. we may think about other things. and emotional stability are selected personality traits. defensiveness. Hierarchy of Needs . sociability. Because she is constantly concerned for her safety. pain. and desires that impel a person to or away from certain actions. food. Motivation: Motivation involves the positive or negative needs. Unlike personality typologies.

(Graves) • Different people with different cultural backgrounds and in different situations may have different hierarchies of need. peace.Self-Esteem needs There are two types of esteem needs. oneness with God. This is similar to the belongingness level. Hierarchy of Needs . wanting admiration is related to the need for power. etc. 4. self-fulfillment. who identified needs for achievement. • Motivation factors are needed in order to motivate an employee into higher performance. We want to feel loved (non-sexual) by others. work groups. Satisfaction and psychological growth was a factor of motivation factors. Hierarchy of Needs . Herzberg developed this motivation theory during his investigation of 200 accountants and engineers in the USA. there's the attention and recognition that comes from others.Love and belongingness needs These are next on the ladder. We need to be needed. Limitations of the Hierarchy of Needs model. 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. Disadvantages • Care should be taken not to stick too rigidly to this hierarchy: • In reality. They do not cause higher levels of motivation. • In 1968. They are much less structured in the way they satisfy their needs. These factors result from internal generators in employees. however." People who have everything can maximize their potential. Second. but without them there is dissatisfaction. See McClelland. family. The first is the self-esteem which is the result from competence or mastery of a task. Maslow has himself added additional layers in his book: "Toward a Psychology of Being" The Two Factors Theory According to the Two Factor Theory of Frederick Herzberg people are influenced by two factors. Hierarchy of Needs . to be accepted by others. esthetic experiences. affiliation and power. religious groups. (Hofstede. 5. etc. Performing artists are appreciating applause. Early) • Other researchers claim that other needs are also significant or even more significant. to become everything that one is capable of becoming. They can seek knowledge. The two Factors in the Theory • Hygiene factors are needed to ensure that an employee does not become dissatisfied. gangs.3. Humans have a desire to belong to groups: clubs. Dissatisfaction was a result of hygiene factors.The need for self-actualization This is "the desire to become more and more what one is.

ears. Employees are not motivated and have lots of complaints. color. Perception can be described as “how we see the world around us”. feel. which evokes the most favorable perception in the maximum number of consumers. price and manufacture’s image. which relate to their immediate needs. Each person recognizes. the implication is that he has to carefully and accurately identifies his . taste of your product.. tastes and sensations that we feel are known as stimuli. However the salaries and work conditions are not OK. As a marketing manager. Since each individual’s needs. This is because of your selective exposures. All the time we are receding messages through our five organs viz. smells. The job is perceived as a paycheck. High Hygiene + Low Motivation: Employees have few complaints but are not highly motivated. For example. Low Hygiene + High Motivation: Employees are motivated but have a lot of complaints. Your interest is to the stimuli so that you can highlight that particular stimulus of combination of stimuli. Perception helps to explain the phenomenon of why different individuals respond differently to the same stimulus under the same condition. size. nose. • Herzberg suggests that often work can be arranged and should be arranged in the following ways: • job enlargement • job rotation. generally consumers tend to perceive the quality of performs on the basis of package. There are three aspects of perception. refrigerator. be it camera. its package. sounds.. you are providing stimulus to your consumers through the physical shape. People are more likely to notice stimuli. fragrance. motive and expectations are unique therefore each individual’s perception is unique. Low Hygiene + Low Motivation: The worst situation. brand name. mouth and skin. television or any other high value product or services. and/or • job enrichment. selective distortion and selective retention. The different sights. These are selective exposure. Perception The second major psychological factor that influences consumer behavior is perception. organizes and interprets thes3e stimuli in his own individual manner based in his needs. A situation where the job is exciting and challenging. which are of immediate interest to the marketer. eyes. Selective exposure: you must have noticed that when you are on the look out for purchasing a specific product. For the marketer. values and expectations and this is known as perception. advertisement and commercials. you suddenly seem to notice more than the usual number of advertisements pertaining to that specific product.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. selects.

where and how the housewife responds. . Cues are minor stimuli that determine when. Selective retention: people forget much of the stimuli which they receive3 and only retain that information which reinforces their clause and decision. which you have made. because it implies that consumers can be made to learn the desired behaviors through in interplay of motives. Beliefs & Attitudes Attitudes or opinions are positive. The stimuli are the various advertisements about the product. but a five year old clamoring for chocolate or chewing gum is the result of learned behavior. The beliefs constitute the brand image about the brand. 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. This belief may be based on some real facts or it may merely be a notion or opinion that the person has. evaluation and tendency towards a particular idea or object. Suppose the housewife buys the pressure cooker and is satisfied with its performance. experience and influence. Much of an adult’s human behavior sis leaned behaviors. Selective Distortion: let us suppose you have decided to purchase a specific brand “A” of pressure cooker. 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. seeing it on display in a showwindow. This is a very significant factor marketer. Starting from childhood. The housewife’s response to pressure cookers has been reinforced. A marketer can build up demand for his brand by associating it with strong motives. services. and then the changes are that she would like to use it as often as possible. A newborn infant’s sucking at the feeding bottle is instinctive behavior. Attitude is a person’s enduring feeling. neutral. A housewife has the need is strong enough to propel her to take action it becomes a motive. the process is known as selective distortion. cues.potential customers since other customers are not at all likely to notice the stimuli. Attitudes get settled into specific patterns and are difficult to change. a special introductory price offer are all examples of cues which influence a housewife’s response to the motive for buying a pressure cooker. A person may believe that a certain coking oil ‘X’ has the lowest fat content and is best for health. issues. was correct. attitude develops over the time with each fresh knowledge input. the marketer has to ensure that the stimuli are interesting enough to attract and hold their attention. people. Thus. Since you have already made your decision you would seek only that information which reinforces the correctness of your decision. A belief is a descriptive thought that a person has about something. stimuli. Success cannot normally be attained without positive consumer attitudes. Thus making the consumer ‘learn ‘ that the brand is good and worth patronizing. or negative feelings about goods. which she sees and hears. You are more likely to remember the positive feature of brand ‘A’ pressure cooker since they help reassure you that the decision. firms. responses and reinforcements. Learning Learning refers to the skill and knowledge gained from past experience that we apply to evaluate future decisions and situations. The marketer must ensure that consumers have relevant and correct information about the brand to facilitate formation of a positive brand image. Positive feedback about pressure cooker from a friend. and/or institutions. a marketer may find that his message is often not received in the intended manner but different consumers twist it in different ways. Having identified the potential customers. The motive is directed towards the stimulus object – a pressure cooker. and in the future may buy another one.. using the appropriate stimuli and cues and providing positive reinforcement.

The decision process consists of six basic stages (the next six sections). PURCHASE . and psychological characteristics. it must be determined whether the shortage or unfulfilled desire can be satisfied by any alternative. terms. it may be ended. A prospective consumer may be exposed to any or all of these types of stimuli. • Commercial. other times. people.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. Buying one item may lead to the purchase of another. • Physical.As risk increases. availability. services. place. and ideas. a consumer will make a purchase. or support in return of ownership of a specific good. Once the information search is completed. the amount of information sought also increases. They are then ranked and a choice made. POST-PURCHASE BEHAVIOR: Frequently. Re-evaluation of the . places. Purchase decisions remaining at this stage center on the place of purchase. all six stages in the process are used. STIMULUS: A stimulus is a cue or drive meant to motivate a person to act. If a person is sufficiently stimulated. organization. or idea may solve a problem of shortage or unfulfilled desire. Sometimes. social. EVALUATION OF ALTERNATIVES: The alternatives are evaluated on the basis of the consumer’s criteria and the relative importance of these criteria. INFORMATION SEARCH: Information search involves listing alternatives that will solve the problem at hand and a determination of the characteristics of each. person. The Internet has become a major source for consumer shopping information. PROBLEM AWARENESS: During problem awareness. If the above elements are acceptable.The purchase act involves the exchange of money or a promise to pay for a product. Many consumers are hesitant to react to unfulfilled desires because there are risks and the benefits may be hard to judge. the consumer engages in post-purchase behavior. only a few steps are utilized At any point in the process. he or she will go on to the next step in the decision process. A stimulus can be any of the following: • Social. and so on. Factors affecting the process are a consumer’s demographic. service. • Noncommercial. Search can be internal and/or external . organizations. Seven useful sources are provided. the consumer recognizes that the good. the performance of a specific service. It consists of the process itself and factors affecting the process.

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,

I. D.POSTION process • Positioning is undoubtedly one of the simplest and most useful tools to marketers. there will .. However. G. H. depending on modifications needed. but not all segments. Company resources and abilities must be able to produce and market two or more different sizes. Others. value for money in terms of worth. A potentially profitable segment may be one ignored by other firms. such as Hyundai. Differentiated marketing should enable the firm to achieve several objectives: 1. The more clusters facing the firm. Per unit profits can be maximized through market segmentation. etc. and Microsoft appeal to two or more segments. so do the results of the positioning map e. 1. 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 . use both undifferentiated marketing and concentrated marketing approaches in their multiple-segmentation strategy. E. Some companies. allows orders to be concen. Two or more sizable and distinct consumer groups are necessary. Sales maximization. F. Costs vary. with a different marketing plan for each. As perception differs from person to person. Differentiated Marketing (Multiple Segmentation) A. is different to my perception. B. They have one or more major brands for the mass market and secondary brands geared toward specific segments. A firm must balance revenues obtained from selling to multiple segments against the costs. A distinct niche can be carved out for a particular brand.trated. F. Differentiated marketing combines the best attributes of undifferentiated marketing and concen trated marketing.g. because it enables them to reach different consumers. Wholesalers and retailers usually find differentiated marketing to be desirable. G. and encourages private labels. such as Time Inc. offers a degree of exclusivity. 3. Total profits are not maximized. Diversification.should be avoided. 2. brands. E.TARGET . Differentiated marketing can be achieved without involvement in the majority fallacy. Recognition as a specialist. C. 2. or products. • Positioning is all about ‘perception’. what you perceive as quality. because only one segment is sought. the greater the opportunity for differentiated marketing. Total profits should rise as the number of segments serviced increases. Firms such as Maruti-Suzuki use differentiated marketing to attract all segments. It appeals to two or more distinct market segments. A company must be careful to maintain product distinctiveness in each consumer segment and to guard its image.

therefore re-emphasizing the importance of perception!! New Product—need to communicate benefits POSITIONING ERRORS POSITIONING TYPES. positions itself as the place “where people who run things can stop running. For this strategy. or customer benefit. Mexico is positioned as “The meeting place for sun worshipers. next step will be to position a product within that market. How new and current items in the product mix are perceived. Positioning with respect to use or application Here a destination is positioned based on the reasons for visiting it.” referring to Victoria Peak. Bermuda positions itself to the American meetings market with “Sometimes you have to leave the country to get any work done” which promises productive meetings in a relaxed environment. feature. For example.” Positioning with respect to a product class This technique is often used to associate a destination with experiences that are . Hong Kong appeals to the incentive travel market with the statement ‘When they’ve reached the top. value offered to visitors can be effectively utilized as exemplified by Malaysia which claims “Malaysia gives more natural value.tial development in Florida. in the minds of the consumer. a major tourist site in Hong Kong: Fisher Island. Thailand promotes the friendliness of its people with the statement “The world meets in the land of smiles. • After segmenting a market and then targeting a consumer. However. It refers to a place that the product offering occupies in • consumers’ minds on important attributes. positioning features the people who should visit the destination. relative to competing offerings.” 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. emphasis is placed on the benefits of the particular features or attributes of the destination. a luxury residen. send them to the peak. Cancun.be similarities in certain cases.” With this positioning statement Malaysia is appealing not only to the sense of value (more for the money) but also to its natural attractions.APPROACHES Positioning by attribute.” Positioning according to the users or class of users In this case.

Positioning vis-à-vis the competition This approach is used when it is necessary to meet the competition head-on. and the shape of the product. Example of any product. innovation and different service levels. it can be differentiated by the dosage size. Features: they are the characteristics. image. As Disprin is essentially a commodity.” or holding a convention in Thailand is “Smooth as silk where the sky’s the limit. This strategy is aggressive. shape. location. quality. 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.extraordinary and/ or unique. promotion. Conformance quality: C onformance for quality. here’s one that’s close to heaven” for Israel. the Principality of Monaco is positioned as “The fairy tale that does not end at midnight. Differentiation goes beyond positioning to spin a complex web of differences characterizing that entity. It is important for products such as vehicles and kitchen appliances to be durable. given the potential market. Differentiation is the process of adding a set of meaningful and valued differences to distinguish the company offering from competitors offerings. The strategic planning institute found a significantly positive correlation between relative product quality and return on investment. it is regularly employed in product and services marketing. Form: Companies can differentiate products on the basis of form. in this the company is focusing on besting the competition and at the same time they are satisfying the consumers and gaining higher profits. it is basically a . Performance quality: is the level. coating and action time. This approach is not used frequently in international tourism destination marketing since it may involve negative statements about another country or region. packaging. Positioning simplifies what one is thinking of the entity. For example. the size. The tools that are used to differentiate products include branding. which is in terms of degree to which all of the produced units are identical and are able to meet the promised specification. Yet there are diminishing return to higher performance quality so marketers must choose a level suited to the target market and rival performance levels. However. which can be in many forms like Disprin.that is the physical structure. which the product’s primary characteristics operate. you deserve a hotel that has none.” What is Differentiation? The task of positioning is to deliver a central idea about a company or an offering to the target market. Marketers starts by asking recent buyers about additional features that would improve satisfaction. Reliability: on reliability basis one is normally ready to pay a premium. product features. For example. The problem with low conformance quality is that the product will disappoint some buyers. then determining which would be profitable to add. ‘After a day of competition. 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. Marketers have identified that the products are capable of higher differentiation than services such as automobile and furniture. cost and price. to bring out differences between destinations. Durability: D urability in the product me a n s expecting the product to be operating under natural or stressful conditions. However the extra price must not be excessive and the product must not be subjected to rapid technological obsolescence. Ritz-Carlton Hotels is a little more subtle when they say. or “If your looking for an ideal meeting place. which are very important they are basically there to support the basic functions of the product. TYPES OF DIFFERENTIATION Product differentiation In this the marketing mix variable are used to make unique product offer that stands out from the competitors.

. The designer has to take all of these factors into account Service differentiation: When the physical product cannot be differentiated easily.com to offer even more health-related information. repair and dispose of. the key to competitive success may lie in adding valued services and improving their quality. For example. design offers a potent way to differentiate and position a company’s products and services. Baxter Healthcare has eased the ordering process by supplying hospitals with computer through which they send orders directly to Baxter.. Differentiation by installation is particularly important for companies that offer complex products such as computers. provide customers with research so they can make more educated judgments and fell comfortable asking for help. Style: Style is look and feel of the product to the customer. this means the designer has to figure out how much to invest in form. consumers can now order and receive groceries without going to the supermarket business web-based service such as peapod and net grocer. reparability and style. Maintenance and repair: describes the service program for helping customers keep purchasing products in good working order. feature development. use. Deluxe check printer. has built an impressive reputation for shipping out its checks one day after receiving an order. but also gives extensive training to users of this equipment. Delivery: it is related to how well the product or service is delivered to the customer. Godiva chocolate and Harley. covering speed. a well-designed product is one that is pleasant to look at and easy to open. The main service differentiators are: Ordering ease: refers to how easy it is for cusotmer to place an order with the company. accuracy and customer care. Most of the time.measure of the probability that a product will not malfunction or fail within a specified time period. inc. Customer consulting refers to data. an important consideration for many products. May tag. install. Style has the advantage of creating distinctiveness that is difficult to copy. Apple computers.. An automobile made with standard parts that are easily replaced has highly reparability. called the Vitamin Institute. durability. Reparability is a measure of the ease of fixing a product when it malfunctions or fails. Design: as competition intensifies. On the Web. However. Buyers of heavy equipment expect good installation service.Davidson motorcycle. cuistomers are normally willing to pay a premium for products that are attractively styled. performance. Design is the integrating force that incorporates all of the qualities. Ideal reparability would exist if users could fix the product them. which manufacturers major home appliances. Customer training refers to how the customer’s employees are trained to use the vendor’s equipment properly and efficiently. have an outstanding reputation for creating reliable appliances? Reparability: buyers prefer products that are easy to repair.selves with little cost or time. Installation: refers to the work done to make a product operational in its planned location. conformance. Rite Aid has teamed with drugstore. 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. reliability. the Rite aid drugstore chain’s communications program. strong style does not always means high performance. To the company. Aesthetics have played a key role in such brands as Absolute vodka. information system and advising services that the seller offers to buyers.without being late once in 18 years.

whereas image is the way the public perceives the company or its products. Image is affected by many factors beyond the company’s control. credit. Image differentiation Customer will response differently to company and brand image. Identity comprises the ways that a company aims to identify or position itself or its product. “One can define price as that which people have to forego in order to acquire a product or service. who prefers Airwalk and other alternative brands that convey amore extreme sports image. Channel differentiation Companies can achieve competitive advantage through the way they design their distribution channels’ coverage. it must be conveyed through every available communication vehicle and brand contact.” What does a buyer think? To a buyer. price is the sum of all the values that consumers exchange for the benefits of having or using the product or service. For the image to work. Frito-Lay. it conveys this character in a distinctive way and it delivers emotional power beyond a mental image. the IBM people are professional and the Disney people are upbeat.trained personnel exhibit six characteristics: competence. expertise and performance. responsiveness and communication.The amt of money charged for a product or service. credibility. Cisco. Setting the Price. Singapore Airlines enjoys an excellent reputation in large part because of its fight attendants. Dell computers has also distinguished itself by developing and managing superior direct-marketing channels using telephone and internet sales. For example. The sales forces of such companies as General Electric. Something of value -usually purchasing power . Purchasing power depends on a buyer’s income.Personnel differentiation Companies can gain a strong competitive advantage through having better-trained people. According to Kotler an organization goes through the following steps in setting its pricing policy: - . and Northwestern Mutual life enjoy an excellent reputation. The McDonald’s people are courteous. or the sum of the values that consumers exchange for the benefits of having or using the product or service.is exchanged for satisfaction or utility. An effective image establishes the product’s character and value proposition. PRICING Price is the amount of money charged for a product or service. Well. Nike mainstream popularity turns off 12-to24-years-olds. Its dealers are found in more locations. PRICE. including logos.Pricing Policy: A firm must set a price for the first time when it develops a new product. reliability. are better trained and performance more reliability than competitors dealers. courtesy. More broadly. Caterpillar’s success in the construction –equipment industry is based partly on superior channel development. and wealth. when it introduces its regular product into a new distribution channel or geographical area. media and special events. price is the value placed on what is exchanged. and when it enter bids on new contract work.

assuming the market is price sensitive. As long as prices cover variable costs and some fixed costs. Companies pursue survival. cash flow or rate of return on investment.Selecting the pricing Objective The company first decides where it wants to position its marketing offering. in reality these are difficult to estimate. Sony is a frequent practitioner of market skimming pricing. maximum current profit. The clearer a firm’s objectives. They believe that a higher sales volume will lead to lower unit costs and higher long-run profit. Some companies want to maximize their market share. or product-quality leadership. the easier it is to set price. The following conditions favor setting a low price The market is highly price sensitive. the firm must learn how to add value or face extinction. and a low price stimulates market growth. or changing consumer wants. the firm needs to determine demand. In the normal case. the company stays in business. Survival is a short-run objective: in the long run. Production and distribution costs fall with accumulated production experience. maximum market share. Each price will lead to a different level of demand and therefore have a different impact on a company’s marketing objectives. Determining the demand . 2. demand . Many companies try to set a price that will maximize current profits. maximum market skimming. This strategy assumes that the firm has knowledge of its demand and cost functions. as their major objective if they are plagued with overcapacity intense competition. They estimate the demand and costs associated with alternative prices and choose the price that produces maximum current profit. a low price discourages actual and potential competition Companies unveiling a new technology favor setting high prices to “skim” the market. They set the lowest price. A company can pursue any of five major objectives through pricing: survival.Following the identification of objectives.

prices and offers is also important factor in setting prices .Demand sets a ceiling on the price the company can charge for its product. interest. A company’s cost take two forms. competitors’ prices provide an in be. Determining price elasticity of demand. E. 5. They deduct the desired profit margin from this price.g. then you will have to price close to the competitor or lose sales. Within the range of possible prices determined by market demand and company costs. Then they determine the price at which the product will sell. These c o s t s r e l a t e with pricing. Estimating Price sensitivity of market ii. Also ask customers how they perceive the price and quality of each competitor’s product or service. Estimating and analyzing demand curve iii. the firm must take the competitor’s costs. TARGET COSTING . A company must pay bills each month for rent heat.In the case of prestige goods. Regardless of output.tween point you must consider in setting prices. Learn the price and quality of each competitor’s product or service by sending out comparison shoppers to price and compare. engineers and purchasing agents to reduce them. it is equal to total costs divided by production. 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. While demand sets a ceiling and costs set a floor to pricing. Perfume Company raised its price and sold more perfume rather than less! Some consumers take the higher price to signify a better product. Estimating Costs . These costs tend to be constant per unit produced. To price intelligently. Variable costs vary directly with the level of production. There are different costs of organization. They are called variable because their total varies with the number of units produced. . salaries and so on. you will not be able to charge as much as the competitor. The Japanese use a method called target costing. and this leaves the target cost they must achieve. They are also less price-sensitive when price is only a small part of the total cost of obtaining. Acquire competitors’ price lists and buy competitors’ products and analyze them. The process of estimating demand therefore leads to i. Selecting a pricing method - . the demand curve sometimes slopes upward. If your product or service is similar to a major competitor’s product or service. 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). They use market research to establish a new product’s desired functions. management needs to know how its costs vary with different levels of produc tion. However if the price is too high. Company should also be aware that competitors might even change their prices in response to your price. Fixed costs (also known as overhead) are costs that do not vary with production or sales revenue. fixed and variable. Total and variable costs for any given level of production.Costs change as a result of a concentrated effort by designers. If your product or service is inferior. given its appeal and competitor’s prices. 4. Analyzing competitor ’s costs. 3. the level of demand may fall.and price are inversely related: the higher the price. prices and offers A nalyzing competitor’s costs. Average cost is the cost per unit at the level of production. the lower the demand . operating and servicing the product over its lifetime. prices and possible price reactions into account.

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. Competitive Bidding . The firm might charge the same. All other things being equal the buyer will select the supplier that offers the lowest price. Selecting the final Price .There are three pricing methods that can be employed by a firm: 1.This involves the calculation of only those costs. distribution and product benefits. the firm bases its price largely on competitors’ prices. Indirect or fixed costs (plant. 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. Marketing Oriented Pricing . company –pricing policies. Direct cost approach is useful when pricing services for example. more. which is confidential to themselves and the buyer. aircraft seats or hotel rooms lie idle. with less attention paid to its own costs or to demand.Companies often use cost oriented pricing methods when setting prices. Competitor Oriented Pricing 3. The most usual process is the drawing up of detailed specifications for a product and putting the contract out for tender. this method will include a profit margin in the final price.e. For new products. Marketing Oriented Pricing Cost Oriented Pricing . Consider aircraft seats. This method focuses upon the internal costs of the firm as opposed to the prospective customers’ willingness to pay. the influence of other marketing –mix elements on price. or less than its major competitors. The way around this problem is to recognize that the pricing deci. including psychological pricing. The is an almost impossible prediction. Cost Oriented Pricing 2. price will depend upon positioning. . Potential suppliers quote a price. The first problem with Full-cost pricing is that it leads to an increase in price as sales fall.The price of a product should be set in line with the marketing strategy. firms bid for jobs. the company must consider additional factors. 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. Competition-based approach .gic objectives. gain and risk pricing. indicate the lowest price at which it is sensible to take business if the alternative is to let machinery. if they are unused on a flight then the revenue is lost. Direct (or marginal) Cost Pricing .sion is dependent on other earlier decisions in the marketing planning process. 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. promotion. and for existing products price will be affected by strate. 6. Two methods are normally used Full cost pricing .Many contracts are won or lost on the basis of competitive bidding. and the impact of price on other parties. strategic objectives. Like full cost pricing.Here the firm determines the direct and fixed costs for each unit of product. machinery etc) will remain unaffected whether one unit or one thousand units are produced. Direct costs then.Going-Rate Pricing In going-rate pricing. These remaining seats may be offered at a discount so that some contribution is made to the flight expenses. which are likely to increase as output increases. In sealed-bid pricing (i. with the firms basing the price on what it thinks other firms will be bidding rather than on its own costs or demand. strategy. The risk here is that other customers who paid the full price may find out about the discounted offer and complain. only known to client and not to the other parties tendering for the service).Pricing methods narrow the range from which the company must select its final price.

Barter: The direct exchange of goods. Price discounts and allowances . For example.DIFFERENT PRICING STRATEGIES 1. and offset. a practice known as counter trade. whilst getting absolutely nothing in return except a lower profit margin. A US. equipment.less carefully controlled and conceived as part of your overall marketing strategy. . buyback agreements. discounting can be dangerous un. American compa nies are often forced _o engage in counter trade if they want the business. 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. Geographical pricing (cash. Chemical company built a plant for an Indian company and accepted partial payment in cash and the remainder in chemicals manufactured at the plant. A British aircraft manufacturer sold planes to Brazil for 70 percent cash and the rest in coffee.Geographical pricing involves the’ company in deciding how to price its products to different. Buyback arrangement: The seller sells a plant. 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. Discounting is common in many industries . compensation deals.The role of discount Offering discounts can be a useful tactic in response to aggressive competition by a competitor. all too often.counting provided that you are getting something specific that you want in return. 2. This issue is critical when buyers lack sufficient hard currency to pay for their purchases. 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. Counter trade may account for 15 to 25 percent of world trade and takes several forms: barter. This is not to say that there is anything particularly wrong with price dis. For example. However. Barter) . companies get themselves embroiled in a complex structure of cash. or technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment.in some it is so endemic as to render normal price lists practically meaningless. 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. The trouble is that. Customers in different locations and countries. quantity and other discounts. Counter trade. Many buyers want to offer other items in payment.

In part your ability to minimize discounts. In first. Special-event pricing: Sellers will establish special prices in certain seasons to draw in more cus. Longer payment terms: Sellers.e. the seller charges different amounts to different classes of buyers. Manufacturers have tried to restrain intermediaries from loss leader pricing through lobbying for retail-price -maintenance laws. 3.ments above will apply to you. Rebates can help clear inventories without cutting the stated list price.tomers Cash rebates: Auto companies and other consumer-goods companies offer cash rebates to Encour.degree price discrimination. the seller charges less to buyers who buy a larger volume. you should always ask yourself what your discounts are supposed to achieve. as in the following cases: . the interest rate) of a loan and more about whether they can afford the monthly payment. 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. This pays if the revenue on the additional sales compensates for the lower margins on the) boss-leader items. competitors Copy them and they lose their effectiveness. 4. stretch loans over longer periods and thus lower the monthly payments. Promotional Pricing . In general. whether they are effective. especially mortgage banks and auto companies..cost warranty or service contract. and so on. Warranties and service contracts: Companies can promote sales by adding a free or low. If they work. In third-degree price discrimination. Consumers often worry less about the cost (i.Companies can use several pricing techniques to stimulate early pur. But. the company can offer customers lowinterest financing. Automakers have even announced no-interest financing to attract Customers. products.age purchase of the manufacturers’ products within a specified time period. but these laws have been revoked. they waste money that could have been put into other marketing tools. locations. the seller charges a separate price to each customer depending on the intensity of his or her demand. such as building up product quality and service or strengthening product image through advertising. Discriminatory pricing . If they do not work. 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.Companies often adjust their basic price to accommodate differences in customers. or eliminate them altogether. will depend on the non-price benefits of your product. whatever business you are in. 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. keep standard discounts low to retain maximum flexibility and ensure that they are consistent with your overall marketing and pricing strategy. 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. In second-degree price discrimination. Low-interest financing: Instead of cutting its price.Clearly the role of discounts will vary from one type of business to another and not all of the com.

For price discrimination to work. In many lines of trade.cial users by time of day and weekend versus weekday. the time of day (morning or night coach).nation must not be illegal.Customer-segment pricing: Different customer groups are charged different prices for the same product or service. competitors have increased their use of discrimina. Fourth.tory pricing. a fast-food restaurant. Restaurants charge less to “early bird” customers. the practice must not breed customer resentment and ill will. A perfume manufacturer can put the perfume in one bottle. or a vending machine. Sixth. Airlines charge different fares to passengers on the same flight. day. are also allowing buyers to discrimi. past business. For instance. Location pricing: The same product is priced differently at different locations even though the cost of offering at each location is the same. the day of the week (workday or weekend). the particular form of price discrimi. Third. members in the lower. military. depending on the seat. Product line Pricing: Companies normally develop product lines rather than single products and introduce price steps. Must not be able to resell the product to the higherprice segment. However.nate between sellers by comparing prices instantaneously. and price it at Rest. Time pricing: Prices are varied by season. Airlines are using yield pricing to capture as much revenue as possible. 50. For example. As a result of deregulation in several industries. the firm searches for a set of prices that maximizes profits on the total mix. they can use software that monitors customers’ movements over the Web and allows them to cus. Computer technology is making it easier for sellers to practice discriminatory pricing. Channel pricing: Coca-Cola carries a different price depending on whether it is purchased ill a fine restaurant. A theater varies its seat prices according to audience preferences for different locations.tomize offers and prices. and lowering the price on cold days. We can distinguish six situations involving product-mix pricing: product-line pricing. 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. In this case. certain conditions must exist. Pricing is difficult because the various products have demand and cost interrelationships and are subject to different degrees of competition. senior citizen). First. 5. the cost of segmenting and policing the market must not exceed the extra revenue derived from price discrimination. customers so disliked the idea that Coke abandoned it. captive-product pricing.ences at. Second. how-ever. Hotels charge less’ on weekends. sellers use well-established price .Price-setting logic must be modified when. and so on.200. or hour. New software applications. by-product pricing. give it a name and image.ing class. two-part pricing. optional-feature pricing. 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. competitors must not be able to undersell the firm in the higher-price segment. by which they offer lower rates on unsold inventory just before it expires. Public utilities vary energy rates to commer. the season. Hotels and airlines use yield pricing. Of status (youth. the market must be segment able and the segments must show different intensities of demand. Coca-Cola considered raising its vending machine soda prices on hot days using wireless technology.price segment. Product-mix pricing . museums often charge a lower admission fee to students and senior citizens. the person’s company. Fifth. and product-bundling pricing.

In mixed bundling. Captive-product pricing . Telephone users pay a minimum monthly fee plus charges for calls beyond the minimum number. PRICE CHANGES Companies often face situations where they may need to cut or raise prices. 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.1500. how much to charge for the basic service and how much for the variable usage. Because customers may not have planned to buy all the components. they should be priced on their value. The food revenue covers costs. light dimmers. Many restaurants price their liquor high and their food low. and Rs. Optional-feature pricing ‘Many companies offer optional products. A theater company will price a season subscription at less than the cost of buying all the performances separately. the profit can then be made on the usage fees. Other restaurants price their liquor low and food high to draw in a drinking crowd. The seller’s task is to establish perceivedquality differences that justify the price differences. Customers will associate low-. petroleum products.points for the products in their line. and the liquor produces the profit. and other chemi. Restaurants face a similar pricing problem. and high-quality suits with the three price points. Two-part pricing . or captive. If the by-products have value to a customer group. the seller offers goods both individually and in bun-dles.Service firms often engage in two-part pricing. a firm can also initiate to increase the price. and services along with their main product. Product-Bundling pricing . average-. automobiles companies must decide which items to include in the price and which to offer as options. By-product pricing .Some products requires the use of ancillary. This explains why servers often press hard to get customers to order drinks. The automobile buyer can order electric window controls. and an extended warranty. defoggers. Pure bundling occurs when a firm only offers its products as a bundle. A men’s clothing store might carry men’s suits at three price levels: Rs800. the savings on the price bundle must be substantial enough to induce them to buy the bundle.4500.meats. The key issues associated with initiating price changes are the circumstances that may lead a company to raise or lower prices. Amusement parks charge an admission fee plus fees for rides over a certain minimum. respectively. When offering a mixed bundle. The fixed fee should be low enough to induce purchase of the ser-vice.cals—often results in by-products. Pricing is a sticky problem.The production of certain goods. features. and estimating competitor reactions. A cellular service operator may give a cellular phone free if the person commits to buying two years of phone service. Manu. An auto manufacturer might offer an option package at less than the cost of buying all the options separately.facturers of razors and cameras often price them low and set high markups on razor blades and film. the seller normally charges less for the bundle than if the items were purchased separately. products.Sellers often bundle products and features. the tactics that can be used. Rs. Customers can often order liquor in addition to the meal. 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. consisting of a fixed fee plus a variable usage fee. Initiating price increases Like price cuts . A successful price increase . The service firm faces a problem sin1ilar to captive product pricing-namely.

if the company’s profit margin is 3% of sales. For example.matched by productivity gains squeeze profit margins and lead companies to regular rounds of price increases. Reduction of discounts: The company instructs its sales force not to offer its normal cash and quantity discounts. Escalator clauses are found in contracts for major industrial projects. The channels chosen intimately affect all the other marketing decisions. They can be shifted among channel members. Over demand: when a company cannot supply all of its customers. This pricing is prevalent in industries with long production lead times. the automaker cannot buy them out the next day and replace them with. The firm’s sales force and advertising decisions depend on how much training and motivation dealers need. Companies often raise their prices by more than cost increase. Escalator clauses: The company requires paying today’s price and all or part of any inflation in. in a practice called anticipatory pricing. Rising costs un. The company’s pricing depends on whether it uses mass-merchandisers or high. They can often be performed better through specialization. it can raise its prices. When an automaker signs up independent dealers to sell its automobiles. In addition.quality boutiques.ments that were part of the former offer. 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. . ration supplies to its customers. price controls.struction and bridge building. such as industrial construction and heavy equipment. Distribution Channel Function: All channel functions have three things in common: • • • They use up scarce resources.can raise profits considerably. An escalator clause bases price increases on some specified price index. a 1% increase will increase profits by 33% if sales volume is unaffected. Company -owned outlets. 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. in anticipation of further inflation and govt. the company’s channel decisions involve relatively long-term commitments to other firms. 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. We define a value network as follows: A value network is a system of partnerships and alliances that a firm creates to source. The circumstances provoking price increases are generally as follows: Cost inflation: A major circumstance provoking price increases is cost inflation. such as free delivery or installation. like aircraft con. augment.crease that takes place before delivery. or both. Unbundling: The Company maintains its price but removes or prices separately one or more ele.

put levels under competitive conditions. repairs) provided by the channel. 2. Channels produce five service outputs Lot size : The number of units the channel permits a typical customer to purchase on one occasion. Effective planning requires determining which market segments to serve and the best channels to use in each case. Waiting time : The average time customers of that channel wait for receipt of the goods. cus. such as building materials. channel institutions should arrange their functional tasks to minimize total channel costs with respect to desired levels of service outputs Usually. Non standardized products.sired by target customers. Products requiring installation or maintenance services. Channel objectives vary with product characteristics.ping distance and the amount of handling. Establish Objectives and Constraints Channel objectives should be stated in terms of targeted service out. Analyze Customers’ Desired Service Output Levels It is imperative to understand that in designing the marketing channel. Bulky products. Establishing channel objectives 3. 3.tomers prefer a greater assortment because more choices increase the chance of finding what they need.DITRIBUTION CHANNEL FUCTION DAIGRAM CHANNEL DESIGN DECISIONS: Following four steps help design a channel system :1. installation.vided by the-marketing channel. Spatial convenience : The degree to which the marketing channel makes it easy for customers to purchase the product Product variety: The assortment breadth pro. Analyzing customer needs 2. Normally. are sold directly by company sales representatives. Identifying major channel alternatives 4. the marketer must understand the service output levels de. The greater the service backup. the greater the work provided by the channel. Perishable products require more direct marketing. delivery. Service backup: The add-on services (credit. Evaluating major channel alternatives 1. customers normally prefer fast delivery channels. such as custom-built machinery and specialized business forms. require channels that minimize the ship. Identify Major Channel Alternatives Companies can choose from a wide variety of channels for reaching customers-from . several market segments that desire differing service output levels can be identified.

2. 1. The aim is to build a “partnership” feeling and joint distribution programming. Exclusive dealing 3. cost. The Internet is much less expensive. but they are expensive. there is usually channel conflict and excessive cost. The problem is further complicated by the fact that most companies now use a mix of channels.actions. Each channel has unique strengths as well as weaknesses. but it cannot handle complex products. 4. Exclusive distribution 2. and 1. Intensive distribution the terms and responsibilities of each channel member. Conditions of sale 3. and the Internet. Distributors can create sales. Distributors’ territorial rights 4. Selecting Channel Members Training Channel Members Motivating Channel Members Evaluating Channel Members Modifying Channel Arrangements . 5. 3. dealers. Selective distribution 4.sales forces to agents. Price policy 2. distributors. telemarketing. • the number of intermediaries needed. Each channel hopefully reaches a different segment of buyers and delivers the right products to each at the least cost. 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. Sales forces can handle complex products and trans. but the company loses direct contact with customers. direct mail. 1.pen.effective trade relations mix. Evaluate the Major Alternatives (time. A channel alternative is described by three elements • The types of available business intermediaries. When this does not hap.

cooperativeness. 3. To customers. A producer will occasionally discover that it is paying too much to particular intermediaries for what they are actually doing. Training channel members Companies need to plan and implement careful training programs for their intermediaries. market research programs. 3. Consider the negative impression you would get of McDonald’s. or terminated. Company needs to view its intermediaries in the same way it views its end users. 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. . growth and profit record solvency. It needs-to determine intermediaries’ needs and construct a channel positioning such that its. Under performers need to be counseled.cause they will be viewed as the company by end users . Selecting Channel Members Companies need to select their channel members carefully. retrained. or Hyundai if one or more of their outlets or dealers consistently appeared dirty. They prepare the channel member employees to perform more effectively and efficiently The com. and reputation 2. and cooperation in promotional and training programs. Producers should set up functional discounts in which they pay specified amounts for the trade channel’s performance of each agreed-upon ser. and other capability-building programs to improve intermediaries’ performance.1. Motivating channel members A. Evaluating channel members Producers must periodically evaluate intermediaries’ performance against such standards as sales-quota attainment.pany should provide training programs. be. One manufacturer that was compensating a distributor for holding inventories found that the inventories were actual held in a public warehouse at its expense. inefficient. the channels are the company. re motivated. number of lines carried. channel offering is tailored to provide superior value to these intermediaries Producers vary in their ability to attract intermediaries . Selecting channel members would therefore involve evaluate experience. . average inventory levels. customer delivery time treatment of damaged and lost goods. or unpleasant.

Modification becomes necessary when the „ „ „ „ „ distribution channel is not working as planned. or has so much power that they all cooperate. A.fication to meet new conditions in the market. B.place . result of strong channel members’ attempts to control channel behavior and eliminate the conflict that results when independent members pursue their own objectives. Administered VMS 3. customer delivery time. VMS achieve economies through size. has contracts with them. One channel member owns the others. average inventory levels. Therefore the system will require periodic modi. and retailers act as a unified system. cooperation in promotional and training programs 4. Conventional Marketing System A channel consisting of one or more independent producers. and the product moves into later stage in the product life cycle. bargaining power. VMS s arose as. and elimination of duplicated ser-vices. consumer buying patterns change.ket expands new competition arises. Modifying channel arrangements A producer must periodically review and modify its channel arrangement. Corporate VMS 2. Vertical Marketing System A distribution channel structure in which producers. wholesalers. wholesalers. and retailers each a separate business seeking to maximize its own profits even at the expense of profits for the system as a whole . Vertical marketing system comprises of 1. innovative distribution channels emerge. the mar. treatment of damaged and lost goods. Channel Dynamics: A.They are evaluated on the following parameters sales quota attainment. Contractual VMS .

Manufacturer-sponsored retailer franchise or manufacturer-sponsored wholesaler franchise C. Two or more unrelated firms put together re. ii. Franchise organizations d. Organizational approach 1. 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. Horizontal Marketing Systems A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity. not through common ownership or contractual ties.i.ties. Each firm lacks the capital. and developing new means) iii. Multi channel marketing—single firm uses two or more marketing channels to reach one or more customer segments—advantages: increased coverage. Planning channel architecture (companies thinking through their channel architecture— which are efficient and not. A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing. outside innovators) What is Retailing? Retailing includes all the activities involved in selling goods or services directly to final consumers for personal. non business use. Amount of service A Self-service retailers Customers are willing to self-serve to save money .sources or programs. but through the size and power of one of the par. Administered VMS A vertical marketing system that coordinates successive stages of production and distribution. technology. 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. Product lines 3. iii. Amount of service 2. transients. i. strivers. complementers. Corporate VMS A vertical marketing system that combines successive stages of production and distribution under single ownership—channel leadership is established through common ownership. customized selling ii. lower cost. marketing resources or other variables to take on the venture alone iii. i. ii. Types of Retailing. Can be permanent or temporary D. Roles of individual firms in a multi channel system: (insiders. Retailer cooperatives c. Contractual VMS could have the following forms a Wholesaler-sponsored voluntary chains b. Relative prices 4. 1.

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. 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. and services F. Supermarkets D. Superstores Food. Category killers Giant specialty stores 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. nonfood. 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 .

4. alterations and tailoring . repairs etc. restaurants . engraving. advertising messages and media. window and interior display . 5. and service levels. fitting rooms . retailing too is concerned with defining its target market. price. check cashing . Price Prices are a key positioning factor and must be decided in relation to the target market. All retailers would like to achieve high volumes and high gross margins.breadth and depth . Product assortment. store décor. Retailers must also pay attention to pricing tactics.gift wrapping .Retail Marketing decisions Various marketing decisions affecting the retail business :Target marketing and positioning Product assortment. They will run storewide sales. trade ins. advertising. adjustments and returns. the product and service assortment mix and competition. The retailer has to decide on product assortment. Ancillary services –general information . 2. Until the target market is defined and profiled . shopping hours. Service mix and Store’s atmosphere The retailers must also decide on the service mix to offer customers Pre-purchase services. fashion shows. Most retailers will put low prices on some items to serve as traffic builders or loss leaders.installations. store’s atmosphere Price Promotion Place (location) 1. Promotion methods include :Ads Special sales Money saving coupons Sample distribution etc. Post purchase include – shipping and delivery . the retailer cannot make consistent decisions on product assortment . The challenge is to develop a product-different ion strategy. parking . Service mix. The retailer’s product assortment must match the target market’s shopping expectations. They will plan marks down on slower –moving merchandise . Target Marketing and Positioning Like other marketing activities. Promotion Retailers use a wide range of promotion tools to generate traffic and purchases.accepting telephone and mail orders. 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. .

the non-food retailing sector registered faster year-on-year growth than food sales. there were an estimated 11. However. The concept of retailing chain stores is at a very nascent stage in India. There are no hypermarkets in the country as yet.’ In India. 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. and are spreading all over India at a rapid pace.4 sq m per outlet. Retailers can locate their stores in the central business district. Besides. New retail forms and combinations 2 .5 billion. not just goods Retailing in India: Are you game for it!!!!! They say ‘If you aren’t in IT or entertainment.6.comes of the middle class households. a regional shopping center .stores. Selling an experience. owner-managed shops. Total retail sales area in India was estimated at 328 million sq m in 2001. the country is also dotted with low-cost kiosks and pushcarts. these modern formats are showing robust growth as several retail chains have established a base in metropolitan cities. Retail Infrastructure In 2001. space and rentals are proving to be the largest constraints to development of large formats in metropolitan cities. chemist shops. This trend towards larger outlets is leading to a rise in average retail space.2 billion in 2001 while non.ing the boom times altogether. it could still add up to say the sizeable number. since retailers are aiming the prime . There has been a boom in retail trade in India owing to a gradual increase in the disposable in. supermarkets. The share was 62.7 billion. More and more players are coming into the retail business in India to introduce new formats like malls. Growing investment in technology 5 . you ought to be in retailing. Growth of intertype competition. Place Location is often described as the most successful strategy for retailing. Organized retailing represent a small fraction of the Indian retail market. Growth of giant retail 4 . Or you’re miss. discount stores. Global presence of major retailers 6. worth approximately Rs7. with an average selling space of 29. 3 . While the middle class may not be as big as expected.ever. However. The retailing sector in India is highly fragmented and predominantly consists of small independent. In 2001. and furnishing stores.tail outlets in the country. There are some 12 million retail outlets in India. department stores and even changing the traditional looks of book. the retail sector is the second largest employer after agriculture. How. More so. organised retail trade in India was worth Rs11.7% in 2001.228. Food sales constitute a high proportion of total retail sales.2 million re. especially in south India.039.food sales were worth Rs4189. a billion people in overall population leads to very large numbers.

With almost a monopolistic presence in the organised footwear market until the 1980s. Health & Glow. Another strong retailer is Subhiksha. with a mar. which are spacious. families are experiencing growth in income and dearth of time. In urban India. each retail business at the time of writing was run as a separate entity.3 billion by 2006. Shopping malls is set to one of the most visible faces of the Indian retail scene by the end of 2002. The number of large mega-malls is expected to increase significantly as India is now experiencing a “mall boom”. The stores retail mainly Bata products.mous with footwear in middleclass India. They have big label stores as well as in. in. However. The real estate development group has converted its retailing operation into an Indian success story. while Health & Glow by RPG Group. The turnover from private labels by major retail chains was estimated at around Rs 1200 million in 2001. especially in the metropolitan and large cities in India. The demand for frozen. ready-to-cook. airy and equipped with modern amenities. whose discounters and chemists/druggist chain is very popular in South India. There is a strong lobby of small traders that has been vocal on the issue of not permitting FDI into retail. More and more women are also turning to corporate jobs. According to estimates apart from the metropolitan and larger cities. Key Developments in Retailing 100% foreign direct investment (FDI) in the re. Bata is synony. with 1600 footwear stores spread across the country.sumers and hence is the key to increasing foot traffic. The trend to market private labels by a specific retail chain is catching on in India as it helps to improve margins. with further growth of organised retailing. with interests in supermarkets. Spencer & Co Ltd another large retail group in the country. which is adding to the family income but making lifestyles extremely busy. as many as 50 new malls will be coming up by 2005 in the smaller cities as well. and a retail turnover of Rs6 billion in 2001. Each mall typically has an anchor.stores. There is also a strong trend in favour of onestop shops like supermarkets and department stores. music stores and the beauty and health chain. which occupies a sizeable percentage of the total usable area. The anchor is expected to attract a variety of con. Retail Forecasts The retail business is expected to reach Rs19. well.tailing sector is not permitted yet. It has also acquired the Crossword chain of book. Foodworld is operated by Foodworld Supermar. ready-to-eat food has been on the rise. The mid 1990s marked the arrival of new.stant. The proportion of sales through organised retailing is estimated to increase to around 6% by 2010. The K Raheja-run department store chain.kets Ltd.locations. in order to protect the interests of the small retailers. is the second largest fascia in the country with retail sales of Rs2. Rising incomes has led to increasing demand for better quality products while lack of time has led a demand for convenience and service. The lobby is based on the premise that modern retail will impact the livelihood of millions of small family-run businesses. in both food and non-food segments.069. Shoppers Stop.keting arrangement with Lotto and Nike as well. Competitive Environment Bata India Ltd is one of the largest retailer.endowed malls and shopping centres.7 billion in 2001. .house eateries and entertainment zones.

promotion. Following are the functions performed by wholesalers. and provide management assistance.General-merchandise wholesalers carry several merchandise lines.Specialty wholesalers carry only part of a line (2) Industrial distributors sell to manufacturers rather than to retailers and provide several services—carrying stock. Progressive wholesalers. In the future. distributors. There are two types of full-service wholesalers (1) Wholesale merchants sell primarily to retailers and provide a full range of service . as people are showing preference for one-stop shops. the consumer ability to spend will increase. with more dual income families.General-line wholesalers carry one or two lines. . but at the same time. 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. Merchant Wholesalers: Independently owned businesses that take title to the merchandise they handle. Full-Service Wholesalers: Carry stock. the more successful ones will be those that provide faster service. offer credit. offering credit. They are called jobbers. Target Market Product Assortment and Services . . This would continue more strongly in the forecast pe.vice are likely to be bypassed by manufacturers. Wholesalers who fail to carry adequate assortments and inventory and provide satisfactory ser. or mill supply houses and fall into two categories: full service and limited service.There is already a strong trend in favour of large format retail outlets. and providing delivery. adapt marketing concepts and streamline their costs of doing business. on the other hand. the retailers will have to increasingly develop shopping as an experience and at the same time. maintain a sales force. Wholesaler Marketing Decisions Wholesalers also must make decisions on their target market. 1. In such a scenario. and place. Customers are also looking for ambience and convenience in shopping. pricing. Selling and promoting Buying and assortment building Bulk breaking Warehousing Transportation Financing Risk bearing Market information Management services and counseling Types of Wholesaling. in both food and nonfood sectors.riod. make deliveries. it is predicted that the time available for shopping will go down. product assortment and services.

Internet The Internet has a geographically disperse market. They take ownership or ‘title’ to goods whereas agents do not (see below). or sales force costs. There are low barriers low barriers to entry as set up costs are low. Modelo.Retailers Retailers will have a much stronger personal relationship with the consumer. An agent will typically secure an order for a producer and will take a commission. Ross and Wall-Mart in the USA. A wholesaler will often take on the some of the marketing responsibilities. cheese manufacturers seldom wait for their product to mature. and many others. The retailer will give the final selling price to the product. Channel Intermediaries . The main modes of distribution will be looked at in more detail. . 3. Retailers often have a strong ‘brand’ them. foodstuffs). Retailers will often offer credit to the customer e. agents. electrical wholesalers. over. Channel Intermediaries .seas distributors. 2.Wholesalers They break down ‘bulk’ into smaller pack. customer service costs. but the title will remain with the producer. The retailer will hold several other brands and products. and Alisuper. retailers. The main benefit of the Internet is that niche products reach a wider audience e.g. and Jumbo in Portugal. They buy from producers and resell to retailers. Products and services are promoted and merchandised by the retailer.tact cost between the producer and consumer e. Scottish Salmon direct from an Inverness fishery. This means that capital is not tied up in goods.selves e. For example. They are difficult to keep control of due to the physical distances involved.e. Channel Intermediaries . 4.g. a ‘stockist agent’ will hold consignment stock (i. or travel agents.Agents Agents are mainly used in international markets. They provide storage facilities. A consumer will expect to be ex. Agents can be very expensive to train. Channel Intermediaries . They do not tend to take title to the goods. will store the stock. This approach is used where goods need to get into a market soon after the order is placed e.g. direct marketing (from manufacturer to user without an intermediary).osed to many products. There is a paradigm shift in commerce and consumption which benefits distribution via the Internet. the Internet.ages for resale by a retailer. They are difficult to motivate. 1.g. Wholesalers offer reduce the physical con.Price Decision Promotion Decision Place Decision Types of Channel Intermediaries And Their Functions There are many types of intermediaries such as wholesalers. However. They sell on to a wholesaler that will store it and eventually resell to a retailer.g. Many produce their own brochures and use their own telesales operations.

Two represent the major parties in a communication – sender and receiver. A promotion mix (sometimes called a marketing communications mix) is the particular combination of promotional methods a firm uses to reach a target market. To monitor the responses. and to whom to say it. the more effective the message is likely to be. Senders must know what audiences they want to reach and what responses they want to get.rent users. The starting point is an audit of all the potential interactions target customers may have with the product and the company. particular publics. Marketers also need to understand the fundamental elements of effective communications. Identify the target audience -The process must start with a clear target audience in mind: potential buyers of the company’s products. or organisations to di. or remind target market members. The target audience is a critical influence on the communicator’s decisions on what to say.rectly or indirectly facilitate exchanges by in. This understanding will help them allocate communications dollars more efficiently.The marketer can be seeking a cognitive.one interested in purchasing a new computer would talk to others. deconding. 2. individuals. Promotion’s role is to communicate with individuals. response. how to say it. groups.PROMOTION. THE COMMUNICATION PROCESS: The whole marketing mix must be integrated to deliver a consistent message and strategic positioning. Two represent the major communication tools – message and media. Marketers need to assess which experiences and impressions will have the most influence at each stage of the buying process. They must encode their messages so that the target audience can decode them. affective. or the general public. read articles. They must transmit the message through media that reach the target audience and develop feedback channels. The more the sender’s field of experience overlaps with that of the receiver. where to say it. For example. and observe computers in a store. Developing an Effective Communications 1. see television ads. deciders. That is. Figure above shows a communication model with nine elements. when to say it. or influencers. and feedback. The model emphasizes the key factors in effective communication. Determine the communication objectives . look for information on the Internet.ucts. Definition: Promotion is communication about an organization and its products that is intended to inform. .munication). The last element in the system is noise (random and competing messages that may interfere with the intended com. groups. or behavioral response. Four represent major communication function – encoding.forming and persuading one or more of the audiences to accept an organisation’s prod. some. persuade.INTEGRATED MARKETING COMMUNICATION Marketing communications which is one of the four major elements of the company’s marketing mix. the marketer might want to put something into the consumer’s mind. cur.

how to say it symbolically ( message format). and who should say it (message source). the message should gain attention. Pharmaceutical companies what doctors to testify about product benefits because doctors have high credibility. Presenters have to pay attention to facial expressions.What is important is the spokesperson’s credibility.3. the communicator has to pay attention to color. For a radio message. gestures.Having defined the desired response. posture. theme. the communicator moves to developing an effective message. emotional. In a print ad. dress. and vocalizations. or unique selling proposition ( USP). and moral. copy.) how to say it logically ( message structure ). . If the message is carried by the product or its packaging. management searches for an appeal. The “sound” of an announcer promoting a used automobile has to be different from one promoting a new Cadillac. Design the message . and shape Message source Message delivered by attractive or popular sources achieve higher attention and recall. and elicit action Formulating the message will require solving four problems: what to say ( message content. illustration. Message content: In determining message content. Ideally. idea. the communicator has to choose words. arouse desire. This is why advertisers often use celebrities . Anti drug crusaders will use ex-drug addicts because they have higher credibility for students than teachers do. the communicator has to decide on headline. and color. Message structure Effectiveness depends on structure as well as content Message format The message format needs to be strong. Hold interest. scent. voice qualities. all these elements plus body language ( nonverbal clues) have to be planned. If the message is to be carried on television or in person. and hairstyle. size. texture. There are three types of appeals: rational.

These include placing ads in medical journals. John Wanamaker. attractive. pharmaceutical company salespeople can rarely wrest more than five minutes’ time from a busy physician. 5. Integrated marketing communications is the coordination of promotion efforts to ensure the maximum informational persuasive impact on customers. and voice broadcasts. For example. The concept of integrated marketing communications has been increasingly accepted for a number of reasons. direct mail. sending direct mail ( including audio and videotapes ). sales force. Establish the total marketing communication budget . the Internet. This approach fosters long-term customer relationships and the efficient use of promotional resources. Marketers can now take advantage of more precisely targeted promotional tools.” 6.Companies must allocate the pro. Mass media advertising is used less today because of its high costs and less predictable audience sizes. B. special interest magazines. and even telemarketing. “ know that half of my advertising is wasted. . CD ROMS. the department.store magnate. and direct marketing.The communicator must select efficient channels to carry the message. Select the communication channels .What factors underlie source credibility? The three most often identified are expertise. and convincing.motion budget over the give promotional tools – advertising. What Is Integrated Marketing Communications? A. Deciding on the marketing communications mix . passing out free samples. 4. The industry has had to expand its battery of communication channels. This makes pharmaceutical sales calling extremely expensive. Their presentation must be crisp. quick. once said. but I don’t know which half. sales promotion. and likability. trustworthiness. A major goal of integrated marketing communications is to send a consistent message to customers. public relations and publicity. Database marketing is also allowing marketers to be more precise in targeting individual customers. D. Here is how one company touches several bases.ness. such as cable TV.One of the most difficult marketing decisions is determining how much to spend on promotion. C.

” Comparative advertising works best when it elicits cognitive and affective motivations simultaneously.Some critics charge that large. setting advertising objectives. conviction. Informative advertising aims to create awareness and knowledge of new products or new features of existing products. and the Phoenicians painted pictures promoting their wares on large rocks along parade routes. developing advertising strategy (message decisions and media decisions).uct image building and tend to under spend There are five specific factors to consider when setting the advertising budget: . consumer packaged-goods firms tend to overspend on advertising as a form of insurance against not spending enough. The Romans painted walls to announce gladiator fights. is a far cry from these early efforts. and purchase of a product or service. DEVELOPINGADVERTISEMENT PROGRAM Marketers must make four important decisions when developing an advertising program.form.chase Coca-Cola Reinforcement advertising aims to convince current purchasers that they made the right choice. Advertising can be traced back to the very beginnings of recorded history. Archaeologists working in the countries around the Mediterranean Sea have dug up signs announcing various events and offers. and marketing mix. preference.. Advertising objectives can be classified according to whether their aim is to in. setting the advertising budget.peat purchase of products and services. Automobile ads often depict satisfied customers enjoying special features of their new car. market positioning.The advertising objectives must flow from prior decisions on target market. 2. however. or services by an identified sponsor. Persuasive advertising aims to create liking. Ex. Some persuasive advertising uses comparative advertising. remind. or reinforce.pensive. Setting the advertising objectives .Define Advertising Advertising.Any paid form of non personal presentation and promotion of ideas. and that industrial companies underestimate the power of company and prod. 1. four-color Coca-Cola ads in magazines are intended to remind people to pur. persuade. Modern advertising. Reminder advertising aims to stimulate re. Deciding on the advertising budget . goods. and evaluating advertising campaigns. which makes an explicit comparison of the attributes of two or more brands.

The steps here are deciding on desired reach.quire heavy advertising to establish a differential image. 2. DIFFERENTADVERTISING MEDIA The advertising media are the various forms of communication through which advertising reaches its audience. Some ads aim for rational positioning and other for emotional positioning. deciding on media timing. Competition and cluster . Deciding on media and measuring effectiveness After choosing the message. coffee. abuses occur. Advertising is also important when a brand can offer unique physical benefits or features. choosing among major media types. Still. exclusive. 4. Social responsibility review advertisers and their agencies must be sure their “creative” advertising does not overstep social and legal norms. a brand must advertise more heavily to be heard. but often more important. selecting specific media vehicles. 4. Advertising frequency: The number of repetitions needed to put across the brand’s mes. 3. it is less expensive to reach consumers of a widely used brand than to reach consumers of lowshare brands.Good planning and control of advertising depend on measures of advertising effectiveness. Message evaluation and selection a good ad normally focuses on one core selling proposition. Market share and consumer base . Yet the amount of fundamental research on effectiveness is appallingly small. Evaluating advertising effectiveness . beer. such as detergents. and deciding on geographical media allocation. Then the results of these decisions need to be evaluated 5. Newspapers. To build share by increasing mar.ness.market-share brands usually require less advertising expenditure as a percentage of sales to maintain share. the advertiser’s next task is to choose media to carry it. Stage in the product life cycle . Product substitutability: Brands in a commodity class ( cigarettes.per-impression basis. and impact. Message execution can be decisive for highly similar products. Choosing the advertising message: Message generation: advertising people have proposed different theories for creating an effective message. soft drinks ) re.In a market with a large number of competitions and high advertising spending. on how it is said. 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. cigarettes. On a cost. Dik Twedt suggested that messages be rated on desirability. and believability Message execution The message’s impact depends not only on what is said. and vodka. . and public policy makers have developed a substantial body of laws and regulations to govern advertising. 5.ket size requires larger expenditures.1. Even simple cluster from advertisements not directly competitive to the brand creates a need for heavier advertising. frequency.High. Newspaper advertising accounts for almost one-fourth of all advertising expenditures.New products typically receive large advertising budgets to build awareness and to gain consumer trial. Most marketers work hard to communicate openly and honestly with consumers. 3.

Direct Mail. Outdoor Advertising. Outdoor advertising consists of short promotional messages on bill. However. Magazines. A direct-mail campaign may fail if the mailing list is outdated and the mailing does not reach the right people.boards. . and it is fairly inexpensive. Color reproduction is usually poor. and it provides highquality color reproduction. The advertising revenues of magazines have been climbing. The major disadvantages of magazine advertising are high cost and lack of timeliness. the message must be limited to a few words.pared to other media. Advertisers can reach very specific market segments through ads in special-interest magazines. Sign and billboard advertising allow the marketer to focus on a particular geographic area. Direct mail is the most selective medium: Mailing lists are available (or can be compiled) to reach almost any target audience. Marketers cannot target specific markets through newspaper ads. advertising dollars are not wasted in reaching people who are outside the market area. Magazine advertisements have a longer life span. Ads are usually read once and then discarded. II. Some organizations are using direct e-mail. which provide advertisers with geographic flexibility.Newspaper advertising is used extensively by retailers because it is relatively inexpensive com. and signs. A number of magazines like Time and Cosmopolitan publish regional editions. Because it provides only local coverage. IV.. because most outdoor advertising is directed at a mobile audience. posters. The medium is especially suitable for products that lend themselves to pictorial display. III. It is also timely. Magazine advertising is more prestigious than newspaper advertising. 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. There are some drawbacks to newspaper advertising It has a short life span. Direct-mail advertising is promotional material mailed directly to individuals.

a target level of product trial. Sponsorship (or co-branded) ads integrate a company’s brand with editorial comment. Button ads are small squarish ads appearing at the bottom of a web page. Internet. VII. featured primarily on Internet search engines. The Internet is the newest advertising medium and is growing in popularity. television advertising has a short life. and impact. Choosing among major media types selecting specific media vehicles. Infomercial. Unlike magazine advertising. 30-. on level . Interstitial ads (in-your-face ads) pop up to display a product ad when viewers click on a web site. VI. Deciding on media timing. Television. To an extent. and perhaps like newspaper ads. Both national and local firms may buy local time on a single station that covers a particular geographic selling area. A national advertiser may buy network time. frequency. Presumably. the time period specified. and Evaluatiing Effectivness (i) Deciding on reach. Actual rates depend on geographic coverage. Radio can be less expensive than other media. Television ranks number one in total revenue. they contain only a corporate or brand name. radio advertising offers selectivity. Television advertising is the primary medium for larger firms whose objective is to reach national or regional markets. and whether the station broadcasts on AM. 20-. DECIDING ON MEDIA AND MEASURING EFFECTIVENESS The steps here are Deciding on desired reach. on radio advertising Like magazine ad vertising. which means that its message usually will be broadcast by hundreds of local affiliated stations. Banner ads are rectangular graphics appearing at the top of most consumer web sites. Television advertising rates are based on the number of people expected to be watching when a commercial is aired. Thereare five types of Internet advertisements. frequency . Advertisers may sponsor an entire show. the number of commercials contracted for. or 60-second commercial during or between programs. link a specific ad to text or subject matter that an information seeker may enter. Even small retailers are able to afford radio advertisements. FM. among other things. they may select their audience by choosing the day of the week and the time of day when their ads will be shown. The rate of product trial will depend. or both. An infomercial is a program-length (usually a half-hour) televised commercial message resembling an entertainment or consumer affairs programs. and impact Media selection is finding the most cost-effective media to deliver the desired number and type of exposures to the target audience. Radio. Advertisers 8 percent of total expenditures. or they may buy spot time for a single 10-. Keyword ads. the advertiser is seeking a specified advertising objective and response from the target audience – for example.V.

while not hurting seasonal consumption. to oppose the seasonal pattern. Message Characteristics: Timeliness and information content will influence media choice.of brand awareness. . a soft. and color. or to be constant throughout the year. A message announcing a major sale tomorrow will require radio. The firm can vary its advertising expenditures to following the seasonal pattern.drink manufacturer put more money into off-season advertising. Cost: Television is very expensive. believability. and the result was a more balanced consumption patters. or newspaper. Women’s dresses are best shown in color magazines . Suppose 70 percent of a product’s sales occur between June and September. frequency. Other soft drink manufactures started to do the same. Media planners make their choice among media categories by considering the following variables: Target-audience media habits: For example . Most firms pursue a seasonal policy. Media planners are increasingly using more sophisticated measures of effectiveness and employing them in mathematical models to arrive at the best media mix. TV. (If the vehicle has pass-on readership.In choosing media. A message containing a great deal of technical data might require specialized magazines or mailings. (ii) Choosing among major media types The media planner has to know the capacity of the major media types to deliver reach. Product characteristics: Media types have different potentials for demonstration. Many advertising agencies use a computer program to select the initial media and then make further improvements based on subjective factors. then the audience is larger than circulation) Effective audience: The number of people with target audience characteristics exposed to the vehicle. whereas newspaper advertising is relatively inexpensive. The advertiser who decides to buy 30 seconds of Audience size has several possible measures: Circulation: The number of physical units carrying the advertising. the advertiser faced both a macroscheduling and a micro scheduling problem involves scheduling the advertising in relation to seasons and the business cycle. and Polaroid cameras are best demonstrated on television. The effect of exposures on audience awareness depends on the exposures’ reach. (iii) Selecting specific vehicles The media planner must search for the most costeffective vehicles within each chosen media type. explanation. Audience: The number of people exposed to the vehicle. 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). Effective ad-exposed audience: The number of people with target audience characteristics who actually saw the ad. Yet some year ago. radio and television are the most effective media for reaching teenagers. and impact. What counts is the cost-per-thousand exposures. (iv) Deciding on media timing. visualization. frequency. and impact: Reach : The number of different persons or households exposed to a particular media schedule at least once during a specified time period. This resulted in increased non seasonal consumption of its brand.

. com. PR Tools: In brief one can summarize the tools as follows :• Public relations professionals prepare written materials such as brochures. building up a good “corporate image. newsletters. or play. 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. Press relations: Presenting news and information about the organiza.tion through internal and external communications. and events. and events. and news releases.building good relations with the company’s various publics by obtaining favorable publicity. suppliers.public relations.pany magazines. festival.tion in the most positive light. stories. signs. public relations would mean .pany positions and image during good times and crises. Corporate communication: Promoting understanding of the organiza.” and handling or heading off unfavorable rumors. Public relations (PR) involves a variety of programs designed to promote or protect a company’s image or its individual products. Product publicity: Sponsoring efforts to publicize specific products. building up a good corporate image. annual reports. and stationery are also public relations tools. Sponsoring special events is an effective way for an organization to increase brand recognition and receive media coverage with relatively little investment. • Event sponsorship is a public relations tool in which a company pays for all or part of a special event such as a concert. Public Relations perform the following five functions: 1 . Not only must the company relate constructively to customers. Counseling: Advertising management about public issues and com. a.PUBLIC RELATIONS Another major mass-promotion tool is. • Corporate identity material such as logos. stories. but it must also relate to a large number of interested publics. 4. 5 . 3 . A public is any group that has an actual or potential interest in or impact on a company’s ability to achieve its objectives. and dealers. sports competition.mote or defeat legislation and regulation. Lobbying: Dealing with legislators and government officials to pro. and handling or heading off unfavorable rumors. business cards. Simply speaking . 2 .

Significance of the news item Sales promotion Short-term incentives to encourage the purchase or sale of a product or service. Response of media personnel c. to create news about a company. Sales promotion consists of short-term incentives to encourage purchase or sales of a product or service. It is not designed to be informative – a role which advertising is much better suited to. sales promotion offers reasons to buy now. Captioned photograph–a picture accompanied by a brief explanation d . . You would agree that more than any other element of the promotional mix.ments and receive supplementary textual materials and photographs • The specific types of public relations tools chosen depend on several factors. or both. It is about stimulating customers to buy a product. • • • 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). Press conference–a meeting at which invited media personnel hear important news announce. This is usually known as “selling into the trade” Sales Promotion Methods. its products. Publicity is communication in news story form about an organization. Most sales promotional methods can be classified as promotion tech. whereas advertising and personal selling offer reasons to buy a product or service. A number of factors enter into marketing decisions about which and how many sales promotion methods to use. News release–a typed page of about 300 words provided by an organization to the media as a form of publicity b . Feature article–a piece (of up to 3. 3 . • Some public relations tools are associated specifically with publicity.000 words) prepared by an organization for inclusion in a particular publication c. A trade sales promotion method encourages wholesalers and retailers to stock and actively promote a manufacturer’s products. Public relations personnel sometimes organize events.niques either for consumer sales or for trade sales.. a. A consumer sales promotion method attracts consumers to particular retail stores and motivates them to purchase certain new or established products. 1. Composition of the target audience b. Publicity-based public relations tools include: a .b. such as grand openings. Sales promotion is commonly referred to as “Below the Line” promotion. 2. sales promotion is about “action”.

either with or without an additional purchase of the product. • Buying Allowances. An airline’s frequent-flyer program is one example of a frequent-user incentive. • Samples. A trade show is an industry wide exhibit at which many sellers display their products. Some trade shows are organized exclusively for dealers–to permit manufacturers and wholesal. Rebating is a relatively low-cost promotional method.ers to show their latest lines to retailers. A premium is a gift that a producer offers the customer in return for using its product. A sample is a free product given to customers to encourage trial. Coupons may also offer free merchandise. Frequent-user incentives build customer loyalty. Direct marketing is the use of consumer-direct (CD) channels to reach and deliver goods . Others are promotions designed to stimulate consumer awareness and interest. A rebate is a return of part of the purchase price of a product. They can easily be copied by competitors. stimulate pur. • Frequent-User Incentives. 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. straightforward. direct mail. and in shelf dispensers in the store.fully targeted individual consumers to obtain an immediate response. It may actually hold merchandise or inform customers of what the product offers and encourage them to buy it. • Coupons. A buying allowance is a temporary price reduction to resellers for pur. Buying allowances are simple. They are made available to customers through newspapers. Cooperative advertising is an arrangement whereby a manufac.You must be familiar with many of the following sales promotion methods:• Rebates.chasing specified quantities of a product. • Premiums. - - - - - Direct Marketing Direct marketing has been defined by the Institute of Direct Marketing as: The planned recording. Frequent-user incentives are programs developed to reward customers who engage in repeat (frequent) purchases. and easily administered. magazines. A buying allowance may serve as an incentive to resellers to handle new products. Direct communications with care. • Cooperative Advertising.chase of items in large quantities. • Trade Shows. A coupon reduces the retail price of a particular product by a stated amount at the time of purchase. A point-of-purchase display is promotional material placed within a retail store. online. Most point-of-purchase displays are prepared and set up by manufacturers and wholesalers. or in stores. Samples may be offered via online coupons. These coupons may be worth anywhere from a few cents to a few dollars.turer agrees to pay a certain amount of the retailer’s media costs for advertising the manufacturer’s product. • Point-of-Purchase Displays. Samples are the most expensive sales promotion technique. direct mail. Usually the rebate is offered by the producer to consumers who send in a coupon along with a specific proof of purchase.

• Most of the Direct Selling companies operating in India today are in the field of cosmetics. 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. Godrej and Tata Tea. 90% of goods sold by the direct sellers in India are sourced from goods manufactured within the country. registering a 54% yoy growth. Tupperware and Avon now seem to be following the path charted by FMCG giants such as Hindustan Lever. Britannia. • • • • Amway is the largest player in India with annual sales exceeding Rs5bn Other major players are Avon Beauty Products (I) Pvt Ltd.1. cookware and healthfood. Direct Marketing in India: • In India. Lotus Learning Pvt Ltd. Marico. household products.vices to customers without using marketing middlemen.7 crore. DIRECT MARKETING BENEFITS .723. direct selling is growing at a fast pace. Oriflame India Pvt Ltd. • India was the fastest growing market in 2000 in terms of revenues from direct selling. All major players in India are affiliated to IDSA.800-crore direct selling industry as well.and ser. Tupperware India Pvt Ltd. Mass-market penetration is now catching up within the Rs 1. personal products. Dabur. Nestle. and direct selling majors such as Amway. Total sales through direct selling route in 2002 was Rs.

Almost every company as had spectacular failures. 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. . Even a brand that has achieved acceptance in other markets will require introduction in new markets. even for a skillful marketer. to a particular product form (roll-ons and sprays) or to a particular brand Introduction Stage In this stage company is basically launching a new product (from brand or category) that is the reason that it is called the introductory stage. and the composition of the market. Introducing new product is always a risky venture. buyer behavior. ‘The PLC concept can be applied to a product category (perfumes).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.

tures still exist. the company faces a trade-off between high market share and high current profit. and brands exist in the maturity stage. Thus price competition develops along with heavy promotions of whatever unique brand fea. the sales have begun to increase rapidly in this stage. . new pack sizes may need to be introduced. Rivals copy product features of successful brands and they become more alike. 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. which makes the competition even tougher. New product forms and brands enter. company will find decline in industry profits accelerates further. It is during this stage that marketers are focusing effort on extending the lives of their existing brands. but total industry sales are still rising. attracting competitors who copy and improve on the features of the new product. the most successful ones are actually evolving to meet changing consumer needs. By spending a lot of money on product development. competitive product forms. At this point of time company need to add new dealers and distributors. In doing so h owever. it gives up current profit and hopes to make it up in the next stage. Most of the times it will find that the sales are repeat sales to earlier buyers. the company can capture a dominant position. and distribution. As new customers are attracted. the market expands. In this stage you will find that many products may appear unchanged. as new customers enter the market and old customers make repeat purchases. There is little growth potential for the product. product and marketing mix.Growth Stage At a growth stage where the company has successfully launched its product.duce their own brands. In this phase. They should consider modifying the market. Competition intensifies and industry profits begin to decline at the end of the growth stage. 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. This is the stage of peak profits. Middlemen often intro. Maturity Stage At this stage company will find greater number of competitors. promotion.

frequent inventory re-adjustments. At times man. There are hidden costs in terms of management time. Or it may decide to ‘re-position the product in the hope of moving it back to the growth phase in a new avatar .. companies need to pay attention to their dying products. stages while product categories last longer. For these reasons. It is basically because of Competitions that the product forms and brands enter into the decline stage.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. Sales and profits decline rapidly and competitors become more cost conscious. Brands with strong acceptance by some customer segments may continue to produce profits. Product forms and brands typically enter into decline. Thus Sanifresh is still a leading toilet cleaner though its powdered form is less popular than liquids. sales force attention.

the early majority adopts the product once it has been proven by the early adopters. The five categories of adopters (1) Innovators (2) Early adopters. But if innovators and early adopters do not adopt.based on the positive response of innovators. Innovators . Innovators rep.5% 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. Laggards . The adoption process affects the length of a products life cycle. Late majority . Early adopters . the product is doomed D failure.those who avoid change and may not adopt a new product until traditional alternatives no longer are available. The late majority represents about 34% of consumers. Early adopters tend to be educated opinion leaders and represent about 13.well-informed risk-takers who are willing to try an unproven product. early adopters then begin to purchase the product.dations from others who have experience with the product. .5% to adopt the product. Early majority – they are people who are careful consumers who tend to avoid risk. They rely on recommen. Laggards represent about 16% of consumers. The early majority represents 34% of consumers.The Adoption & Diffusion Process – The PLC concept is related to the adoption and diffusion processes. (3) Early majority (4) Late majority and (5) Laggards.resent the first 2. The adoption process is the series of stages a prospective buyer goes through in deciding to buy and make regular use of the product.somewhat skeptical consumers who acquire a product only after it has become commonplace.

Against these. however.ments. Concept Development and Testing . 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. Almost 55% of all new product ideas come from internal sources according to one study. 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. It. This is different again from a product image. can often pass on information about new develop. shows and seminars. Customers: even create new products on their own. management can assess how well the idea fits with the company’s marketing skills and experience and other capabilities. One of Pillsbury’s four cake mix lines and several variations of another came directly from Bake-Off win. The Major sources of new product ideas include internal sources. a physical presentation will increase the reliability of the concept test. Other sources are trade magazines. competitors. As opposed to a product idea that is an idea for a product that the company can see itself marketing to customers. Idea Screening: -The purpose of idea generation is to create a large pool of ideas. these need to be tested with con. Almost 28% of new product ideas come from watching and listening to customers. Resellers and others who are close to the market. the management can obtain an overall rating of the company’s ability to launch the product successfully.cient. a word or a picture may be suffi.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. 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. The company can watch competitors’ ads. The company . Finally.ners’ recipes. Once the concepts are developed. advertising agencies and new product consultants. market research firms. Companies have different methods for doing this from product review committees to formal market research. which is the consumers’ perception of an actual or potential product. a product concept is a detailed version of the idea stated in meaningful consumer terms. After being exposed to the concept.New Product Development Process – Figure will show the complete process of new product development lets discuss them one by one. distributors and suppliers. About 30% of new product ideas come from analysis of competitors’ products. For some concept tests. New Product Development starts with idea generation A company has to generate many ideas in order to find one that is worth pursuing. The purpose of this stage is to pare these down to those that are genuinely worth pursuing. press releases and write-ups in the press about their activities.An attractive idea has to be developed into a Product concept. Companies also buy competitors information and pay for industrial espionage. government reports. customers.

market share and profit goals for the first few years. The strat. and the marketing mix strategy. it can evaluate the attractiveness of the business proposal. .egy statement consists of three parts: the first part describes the target market. The second part outlines the product’s planned price.can then project these findings to the full market to estimate sales volume. If they do. the product can move to the product development stage. and marketing budget for the first year.This is the next step in new product development. Business analysis involves the review of projected sales. Marketing Strategy Development . distribution. The third part of the marketing strategy statement describes the planned long-run sales.Once the management has decided on the marketing strategy. Business Analysis . costs and profits to find out whether they satisfy a company’s objectives. profit goals. the planned product positioning and the sales.

Test marketing gives the marketer an opportunity to tweak the marketing mix before the going into the expense of a product launch. R&D will develop prototypes that will satisfy and excite customers and that can be produced quickly and at budgeted costs.too” product or even sabotage the testing so that the marketer gets skewed results. The amount of test marketing varies with the type of product. Three subclasses are: . The classification is based on differences in the buying behavior of the people who buy the prod. and (4) Unsought products. They are basically low-priced. toffee.Product Development . management may decide to do away with this stage and proceed straight to the next one: If the company goes ahead with commercialization . It will show whether the product idea can be developed into a full. This helps marketers in making generalizations to guide development of their marketing mixes. They are widely available at many outlets.ping products (3) Specialty products. First. The company will have to decide on the timing of the launch (seasonality) and the location (whether regional. the next step is test marketing: the stage at which the product and the marketing program are introduced to a more realistic market settings. When the prototypes are ready. Costs of test marketing can be enormous and it can also allow competitors to launch a “me. This depends a lot on the ability of the company to bear risk and the reach of its distribution network. nationally advertised items like cigarettes.Here.fledged workable product. national or international).If the product passes the functional tests. Test Marketing . 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. Functional tests are then conducted under laboratory and field conditions to ascertain whether the product performs safely and effectively. It gives you a brief description of consumer goods. See Figure 10. R&D or engineering develops the product concept into a physical product. they must be tested. Four classes of consumer products are (1) Convenience products (2) Shop. This step calls for a large investment. at times. Hence. Classification of Products The most common basis for classifying consumer products is based on buyer behavior. The system works because many consumers behave alike in buying a given type of product.ucts (it is basically how you perceive and buy the products) not on the differences in the products themselves. or blades and matchboxes.1.introducing the product to the market-it will face high costs for manufacturing and advertising and promotion.

1. cost and effort to compare because they perceive a higher risk in buying these products. Staple Products: this includes milk. 1. 3. or type. Marketers try to create specialty status for their products with advertising phrases like “accept no substitutes”.Impulse Products: Purchases of Impulse products are absolutely unplanned exposure to the product triggers the want. Just suppose you want to buy a colour television. This is why impulse products are located where they can be easily noticed. If the rent is reasonable compared to the alternatives. toffees and chocolates (placed at a child’s eye-level) are examples of impulse products. and so on. Leica Cameras and Johnny Walker Scotch Whisky are examples.Emergency Products: Purchases of emergency products result from urgent and compelling needs.Heterogeneous Shopping Products they are product that are considered to be unlike or non. Shoppers spend more time. Using price to compare clothing. Price often is secondary to style and quality when price comparisons are difficult to make. A retailer might advertise that the Color TV’s price includes 6 months or free interest financing. Just suppose a couple is searching for a flat may spend a lot of time comparing decor. There is no Comparison Shopping.standardized. eggs. jewellery. The desire to buy impulse is a result of the shopping trip. For these products consumers have strong convictions as to brand. Stardust and Savvy magazines. floor plans. butter which are bought routinely because the family regularly consumes them. 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. . They build customer loyalty when consumers consider their brands to be specialty products. Consumers will go out of their way to locate and buy these products because they perceive quality and other benefits in owning them. 2. Consumers shop for the best price quality combination. One might set up service centers to differentiate its product from rivals. furniture and apartments is tough because quality and style vary within each product class. Mitsubishi Lancers. Specialty Special Products In this case you as a consumers will make a special effort to buy specialty products. Often a consumer pays more than if this need had been anticipated. 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. which are considered to be alike. Thus sellers tend to engage in price competition. Ray. Shopping Shopping Products These products involve price and quality comparisons. 2. price becomes important. cars. style. Once they find the right one. you are aware that most of the brands are very similar then you will limit your shopping effort to price comparisons. The desire to buy staple products may cause the consumer to go shopping. distance from stations and so on.Homogeneous Shopping Products: they are products. “‘insist on the real thing”.Ban glasses. they probably will lease it. Lawyers and Accountants who enjoy a large following are selling specialty products. bread. The decision to buy these products is programmed after the first time when the consumer puts them on his list of regular items. Doctors. But specialty product can be less intensively distributed than a convenience or shopping product because buyers will search to find it. 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. Shopping products can be homogeneous or heterogeneous.

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. a wreath and a doctor’s services in an emergency are regularly unsought products.e.symbol . term. • Brand name is that part that can be spoken. But heavy promotion and acceptance of the product practically eradicated polio. Rexona. PRODUCT AND PRODUCT MIX Any organization is marketing more than one product then it has a product mix. although they may eventually purchase them. sign. Brand names simplify shopping. • Brand mark-elements of the brand that cannot not be spoken. Wheel. A brand is defined: “As a name. i. Rin.sion. A brand differentiates these products from those of competitors” (American Marketing Association. marketing and or production considerations. Lifebuoy. There are two types: regularly unsought products and new unsought products. When we are discussing about a typical large multi-product firm’s product mix includes new. words and numbers. maturing and declining productst. 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. These are basically existing products but the consumers do not want to buy this product now. BRANDING . Like Life Insurance. are part of its soaps line. a lawyer’s services in contesting a will. i. 7UP. Surf.e. The marketer’s task here is to inform target consumers of the products existence and stimulate demand for it. guarantee a certain level of quality and allow for self-expres. Rin detergent powder. and Surf Ultra are part of Lever’s detergents line and Le Sancy. Lux. Rin Solarox. Chicago). growing. „ 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. Marketers face a tough challenge in persuading consumers to buy their new unsought products. including letters. Oral polio vaccine was once a new unsought product.

I. Pillsbury Doughboy • Trade mark-legal designation that the owner has exclusive rights to the brand or part of a brand. fair price and so on. 56. and does not result in a transfer of ownership. e. These users correspond to the values. entertainment and fulfillment of other psychological and emotional needs such as education.J Stanton “Services as fulfilling certain wants and states that. We know that Sunny is for teenagers. Culture: A brand also represents a certain culture.1990. Coke is an icon of American culture. Sometimes a brand may take on the personality of an actual person. while Shilpa Bindis are typically Indian. research. Personality: A brand projects a personality. fine arts. Charlie Chaplin and Cherry Blossom. A change in condition may occur and production of the service may or may not be closely associated with a physical product. thus Tata stand for quality. Attributes of Brand Values: The values. MRF suggests a muscle man and Rin suggests a lighting flash. are reflected by the brand. culture and personality of the brand. computer-programming. It includes a wide variety of services. W. recreation.e. rather for leisure.. We expect a Mercedes to be driven by an executive or a top-class businessman. es. which govern a producer. User: The brand suggests its own target audience. which involves some interaction with customer or with property in their possession. insurance.515 new in that year.sentially intangible activities which provide want-satisfaction. Because of the imagery associated with the brands they actually have the power to enhance or limit a consumer’s perceived image or selfimage. marketing.g. SERVICE MAREKTING A service is an activity which has some element of intangibility associated with it. Ford. “services are those separately identifiable. and that are not necessarily tied to the sale of a product or another service. e. We know what a Garden Woman is. what would come to our mind? Like Videocon suggests a lion. Then there are services which are provided by professionals but consumed for reasons not of business. • Trade name-The full legal name of the organization.g. legal and medical advice. not the name for a specific product.” . Had the brand been an animal or an object or a person. US Patent & Trademark Office had 680.. Ronald McDonald. There are the business and professional services such as advertising. etc.e.000 trademarks registered.• Trade Character i. banking.

The most basic and universally cited. touched or seen in the same way as goods. Teaching is an intangible service. or spare berths on a train. an hour of a lawyer’s time. but little demand in July. unsold seats in a cinema hall represent service capacity. there is tremendous demand for resort accommodations in XYZ in February. . Services cannot be felt. For example. or telephone line capacity not used cannot be reclaimed and used or resold at a later time. or re. A car mechanic who has no cars to repair today. Inseparability . tasted. A plumber has to be physically present to provide the service. stored. which is lost forever. resold.turned. the beautician has to be available to perform the massage Perishability . A seat on an airplane or in a restaurant. Yet resort owners have the same number of rooms to sell Yetround. and therefore fluctuations in demand are often difficult to manage. difference between goods and services is intangibility. and new service concepts can therefore easily be copied by competitors. Services cannot be patented legally. A person who possesses a particular skill provides Service. Intangibility actually presents several marketing challenges: Services cannot be inventoried.Characteristics of services. 1.It basically refers to the fact that services cannot be saved. Because services are perform In most cases services cannot be separated from the person or firm providing it.

There is a peak demand time for buses in morning and evening (office hours). certain train routes are always more heavily booked than others. the other dimension of this. or even re-turned if the consumer is unhappy. This is in contrast to goods that can be stored in inventory or resold another day. .Apart from the fact that service is not fully utilised represents a total loss.

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