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Marketing is not a new word but evokes feelings of freshness each time it is used. For there is so much happening in this field that even the oldies have something new to learn every day. In your class itself, I am sure that there are quite a few students opting for marketing than any other discipline. Surely, there must be something in this word marketing, that everyone feels attracted to it. Marketing is ancient art. The first marketing trans- action can be perhaps attributed to Adam and Eve. Its emergence as a management discipline is of relatively recent origin. And within this relatively short period, it has gained a great deal of importance. In fact today marketing is regarded as most important of all management functions of business.
Some definitions of Marketing – • Much of marketing is concerned with the problem of profitably disposing of what is produced. • Marketing is the economic process by which goods and services are exchanged between the producer and the consumer and their val- ues determined in terms of money prices. • Marketing originates with the recognition of a need on the part of a consumer and terminates with the satisfaction of that need by the delivery of a usable product at the right time, at the right place and at an acceptable price. • Marketing is so basic that it cannot be con- sidered a separate function. It is really the whole business seen from the point of view of the final result, i.e., from the point of view of the customer. • Marketing is a viewpoint, which looks at the entire business process as a highly integrated effort to discover, create, arouse and satisfy consumer needs. • Marketing is the delivery of a standard of living to society. American Marketing Association – “It is the process of planning & executing the conception, pricing, promotion & distribution of ideas, goods & services to create exchange that satisfy individual & organisational goals” The Chartered Institute of Marketing defines Marketing as “Marketing is the man- agement process for identifying, anticipating & satisfying customer requirements profitably.” Peter Drucker There will always, one can as- sume, be need for some selling. But the aim of marketing is to make selling superfluous. The aim is to know and understand the customers well that the product or service fits him and sells it- self. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available
Core Marketing Concepts – Needs, Wants And Demands: Marketing thinking starts with the fact of human needs and wants. We all have some needs residing in ourselves. These needs exist. Remember that needs can never be created. Needs: Needs are the basic human requirements. People need food, air, water, clothing & shelter to survive. People also have needs for recreation, education and entertainment. Eg: Hunger food. According to Abraham Maslow’s need hierarchy, all the human needs can be categorized as shown in the diagram.
Human need is a state of felt deprivation of some basic satisfaction. Wants are desires for specific satisfiers of these deeper needs. Demands are wants for specific products that are bagged by an ability and willingness to buy them. Marketers do not create the needs. They can influence the demand by making the product appropriate, attractive, affordable and easily avail- able to target customers. Products: Anything that can be offered to satisfy a need or a want, Persons : Singer Places : Goa Activities : Sing in karaoke lounge. Organizations : Health club Ideas : Osho ashram Other terms can be : Offerings, satisfiers or resources.
Eg: A woman is not buying ‘lipstick’, she is buying ‘.hope’. She is confident that she will definitely look good after using that lipstick. And this hope brings her to the shop. A physical object is a means of packaging a service. The marketers’ job is to sell the benefit or services built in to physical products rather than just describe their physical features. Marketing Myopia Sellers who concentrate their thinking on the physical product instead of the customers need are said to suffer from ‘marketing myopia’. Wants: The needs become wants they are directed to specific objects that might satisfy the needs. “Needs Pre-exists” (can’t be created)
Demands: Demands are wants for specific products that are bagged by an ability and willingness to buy them.
Concepts of Marketing Management The philosophy of marketing which has evolved as marketing management has passed through distinct stages. The orientation of the companies have been changing from production to societal through product, sales, marketing. In this lesson we are going to discuss production and product orientations. There are various concepts of marketing that we as marketers have been following. There were times when the focus was on the production of the commodities, then the focus shifted on to the sales and distribution of the products and finally the focus moved to the real NEEDS of the consumers!
Changing Role Of Marketing Simple Trade Era Production Era Sales Era Competition Marketing Dept. Era Marketing Company Era Consumer Focused Era 1950 – 1960 began 1960’s Coordinate & Control Long – run customer satisfaction Prior to 1920’s 1920 – 1930 1930 – 1950 Sell Surplus
Increase Supply Beat
Company Orientations Towards the Market place Production Concept Product Concept Selling Concept Marketing Concept Societal Marketing Consumers prefer products that are widely available and inexpensive Consumers favor products that offer the most quality, performance, or innovative features Consumers will buy products only if the company aggressively promotes or sells these products Focuses on needs/wants of target markets & delivering value better than competitors Focuses on needs/ wants of target Concept markets & delivering value better than competitors that preserves the consumer’s and society’s well-being.
Emphasis on innovation on every existing technology and reducing every sphere. Emphasis on staying with existing technology and reducing costs 8. Emphasis is on the product 2. Company Manufactures the product first 3. Selling views customer as a last link in business Marketing 1. Marketing views the customer last link in business as the very purpose of the business Defining Customer Value and Satisfaction: of new products. Emphasis on consumer needs wants 2. Cost determines Price 10. Stresses needs and wants of buyers 6. Stresses needs of seller 6. on providing better costs value to the customer by adopting a superior technology 8. the sole purpose being generation of consumer satisfaction 9. Company first determines customers needs and wants and then decides out how to deliver a product to satisfy these wants 3. Management is profit oriented 4. Planning is long-run-oriented in today’s products and terms tomorrow’s markets and future growth 5. Different departments work as in a highly separate water tight compartments 9. Planning is short-run-oriented in terms of today’s products and markets 5. . Consumer determine price. Management is sales volume oriented 4.Selling 1. Views business as a good producing process 7. All departments of the business integrated manner. price determines cost 10. Views business as consumer producing process satisfying process 7.
However. It is a subjective exercise but very important for marketer’s point of view. good service. History The 7-S Framework was first mentioned in "The Art Of Japanese Management" by Richard Pascale and Anthony Athos in 1981. The Seven S model was born at a meeting of these four authors in 1978. If the company increases customer satisfaction by lowering its price or increasing its services .tional. Customer Expectation: It is formed on the basis of past buying experiences. Together these factors determine the way in which a corporation operates. Large or small. the results may be lower profits. that is not its main goal. If marketers raise expectations too high. in his Delivering profitable value. and advertisements. it won’t attract enough buyers ( although it will satisfy those who do buy) If marketers raise expectations too high. However.” but the buyer is promised more than just a safe car. Measuring Satisfaction There are no meters to measure it. . advice. if the company sets expectations too low. . Total customer value is the perceived monetary value of the bundle or economic. to be sure of successful implementation of a strategy.11 The value proposition consists of the whole cluster of benefits the company promises to deliver. Although the customer-centered firm seeks to create high customer satisfaction. other benefits include a long-lasting car. Total customer cost is the bundle of costs customers expect to incur in evaluating. Managers take into account all seven of these factors. and disposing of the given marketing officering. For example. At around the same time that Tom Peters and Robert Waterman were exploring what made a company excellent. Origin of the 7-S Framework. and was taken up as a basic tool by the global management consultancy company McKinsey. if the company sets expectations too low. Since then it is known as their 7-S model. using. obtaining . like thermometer for temperature. 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. They had been investigating how Japanese industry had been so successful. 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. a company must design a competitively superior value proposition aimed at a specific market segment. the buyer is likely to be disappointed. Volvo’s core positioning is“safety.livery system. According to Michael Lanning. and long warranty period. The value-delivery system includes all the experiences the customer will have on the way to obtaining and using the offering. backed by a superior value-de.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. It appeared also in "In Search of Excellence" by Peters and Waterman. and psychological benefits customers expect from a given market offering. func. the buyer is likely to be disappointed. it is more than the core positioning of the offering.
Value Chain Michael Porter of Harvard proposed the value chain as a tool for identifying ways to create more customer value. Strategy Plans for the allocation of a firms scarce resources. Skills Distinctive capabilities of personnel or of the organization as a whole. Systems The procedures. Structure The way in which the organization's units relate to each other: centralized. Managers must act on all Ss in parallel and all Ss are interrelated. 3. Central beliefs and attitudes. decentralized. . functional divisions (top-down). Combines rational and hard elements with emotional and soft elements. Shared Values (also called Superordinate Goals). Compare: Strategic Intent 2. recruiting. Staff Numbers and types of personnel within the organization. The interconnecting center of McKinsey's model is: Shared Values. 6. processes and routines that characterize how the work should be done: financial systems. a matrix. 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. competition. information systems. 5.The meaning of the 7 S 1. customers. etc. Guides organizational change. over time. a network. 4. Compare: Management Styles. What does the organization stands for and what it believes in. Strengths of the 7-S Model. 7. Style Cultural style of the organization and how key managers behave in achieving the organization's goals. a holding. promotion and performance appraisal systems. Environment. to reach identified goals. Benefits • • • • Diagnostic tool for understanding organizations that are ineffective.
The activities of the Value Chain Primary activities (line function) 1. Outbound Logistics. etc • • Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Operations Outbound Marketing Service Logistics Logistics and Sales . retail management. retention and compensation of employees and managers. • 3. Includes receiving. Support activities (Staff functions. finance. training. spare parts management. servicing. Firm Infrastructure. order fulfillment. Inbound Logistics. planning management. • Marketing and Sales. 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. installation. legal. spare parts. including: customer support. The activities that maintain and enhance the product's value. buildings. overhead) • • Procurement. Human Resource Management. Procurement of raw materials. or • by reconfiguring the value chain. Includes general management. quality management. distribution management. repair services. upgrading. promotion. etc. development (education). advertising. Includes machining. accounting. Such as: Research and Development. transportation. public affairs. pricing. assembly. Includes technology development to support the value chain activities. Service. 2. storing. packaging. transportation planning. etc. equipment maintenance. Process automation. • Operations. design. The activities required to get the finished product at the customers: warehousing. The activities associated with recruiting. including: channel selection. . etc. machines. redesign. testing and all other value-creating activities that transform the inputs into the final product. The activities associated with getting buyers to purchase the product. selling. inventory control. Technology Development.
7. 8.). for example. a cost analysis can be performed by assigning costs to the value chain activities. Linkages among activities. Capacity utilization. or complains. Customer Relationship Management The aim of customer relationship management (CRM) is to produce high customer equity. has stationed engineers at large utilities to help them produce more power. A marketing plan is carried out within the context of a firm’s broader strategic business plan.corporate headquarters is responsible for designing a corporate strategic plan to guide the whole enterprise. Clearly. "Reconfiguration" means structural changes such as: a new production process. strategic planning takes place at four levels. Recently there have been many companies that achieved a cost advantage by the clever use of Information Technology. A firm develops a cost advantage by controlling these drivers better than its competitors do. and points them all in the same direction. Once the value chain has been defined. 4. In most large corporations. Dfferent levels of customers who have strong profit potential. it makes decisions on the amount of resources to be allocated to each division. Timing of market entry. Reactive marketing: The salesperson sells the product and encourages the customer to call if the or the has questions. 4. 10. Degree of vertical integration. ( General Electric. 9. • The Corporate Level. taxes. A cost advantage also can be pursued by "Reconfiguring" the value chain. It provides the logic that integrates the perspectives of functional departments and operating units. Porter identified 10 cost drivers related to value chain activities: 1. when and where they will be completed.time values of all of the firm’s customers. Economies of scale. Proactive marketing: The company works continuously with its large customers to help improve their performance. Interrelationships among business units. 5. 1. 2. Accountable marketing: The salesperson phones the customer to check whether the product is meeting expectations. Basic marketing: The salesperson simply sells the product. which is responsible. 3. Institutional factors (regulation.sources. 3. the higher the customer equity. but also by reducing the costs of the support activities. 6. union activity. Strategic Planning A strategic business plan describes the overall direction an organization will pursue within its environment and also guides the allocation of re. The sales.A cost advantage can be created by reducing the costs of the primary activities. 2.person also asks the customer for any product – or service – improvement suggestions and any specific disappointments. Geographic location. Learning. the more loyal the customers. or a different sales approach. . and how they will be coordinated. A strategic marketing plan outlines the actions necessary. new distribution channels. etc. Firm's policy of cost or differentiation. Customer equity is the total of the discounted life. comments. as well as on which businesses to start or eliminate.
it is better for the company. For example the marketing division would formulate strategies as to how the various units within it would work. Therefore they should also generate large amounts of cash. Advertising. Cash Cows (low growth. Dogs (low growth. The Business Level.• The Division Level. It was developed in the early 70s by the Boston Consulting Group. Because of the low growth.ing plan for achieving its objectives in its product market. It is based on product life cycle theory. • Stars are frequently roughly in balance on net cash flow. • Cash Cows are often the stars of yesterday and they are the foundation of a company. brand within the business unit develops a market. To ensure long-term value creation. high market share) • Stars are using large amounts of cash.each division establishes a division plan covering the allocation of funds to each business unit within the division. Eg. 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. The BCG Matrix can be used to determine what priorities should be given in the product portfolio of a business unit. Market Intelligence. The Boston Consulting Group Matrix has 2 dimensions: market share and market growth. The units in the marketing division would be Sales. low market share) • Avoid and minimize the number of Dogs in a company. The Product Level.each product line. • • BOSTON CONSULTING GROUP MODEL The BCG Matrix method is the most well-known portfolio management tool.each business unit develops a strategic plan to carry that business unit into a profitable future. The basic idea behind it is: if a product has a bigger market share. Stars are leaders in the business. investments which are needed should be low. . high market share) • Profits and cash generation should be high. because the rewards will be Cash Cows if market share is kept. Promotions. • Watch out for expensive ‘rescue plans’. etc. or if the product's market grows faster. However if needed any attempt should be made to hold your market share in Stars. 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. Public Relations.
Market growth is not the only indicator for attractiveness of a market. it should be able to manufacture and sell new products at a price that is low enough to get early market share leadership. In such a scenario: • • • Cash Cows Business Units will reach their profit target easily. Dogs Business Units are fighting an impossible battle and. These inadequate invested sums of money are a waste of money. Increase market share or deliver cash. High market share is not the only success factor. they are often allowed to reinvest substantial cash amounts in their mature businesses. Even worse. Limitations of the BCG Matrix Some limitations of the Boston Consulting Group Matrix include: • • • • • • • • • • It neglects the effects of synergy between business units. The executives are often praised anyhow. Either these SBUs should receive enough investment funds to enable them to achieve a real market dominance and become Cash Cows (or Stars). because of their low market share. In this way they can never become Cash Cows. • BCG method is applicable to large companies that seek volume and experience effects. Their management have an easy job. A business with a low market share can be profitable too. They can then try to get any possible cash from the Question Marks that were not selected. There is no clear definition of what constitutes a "market". A high market share does not necessarily lead to profitability all the time. Once it becomes a star. The model neglects small competitors that have fast growing market shares . Other uses and benefits of the BCG Matrix • If a company is able to use the experience curve to its advantage. Question Marks will simply absorb great amounts of cash. These are hopeless attempts to "turn the business around". • It provides a base for management to decide and prepare for future actions. now and then investments are made. or invest nothing and generate any cash that you can. Question Marks and Dogs.• Dogs must deliver cash. because they have high cash demands and generate low returns. otherwise they must be liquidated.5% for an entire corporation. Sometimes Dogs can earn even more cash as Cash Cows. As a result all Question Marks and Stars receive only mediocre investment funds. low market share) • Question Marks have the worst cash characteristics of all. • Either invest heavily. or sell off. even worse. • BCG model is helpful for managers to evaluate balance in the firm’s current portfolio of Stars. Cash Cows. The model uses only two dimensions – market share and growth rate. • If the market share remains unchanged. 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. Question Marks (high growth. This may tempt management to emphasize a particular product. such as a generic growth target (9 percent per year) or a generic return on capital of say 9. or to divest prematurely. • The model is simple and easy to understand. The problems of getting data on the market share and market growth. it is destined to be profitable. or otherwise companies are advised to disinvest.
Neither a strong company operating in an unattractive market nor a weak company operating in an attractive market will do very well. 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. A position in the yellow zone is viewed as having medium attractiveness. If one of these factors is missing. 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 blocks with plain Zone consists of the three diagonal cells from the lower left to the upper right. Both axes are divided into three segments. FACTORS UNDERLYING MARKET ATTRACTIVENESS STRENGTH IN GE MULTIFACTOR PORTFOLIO MODEL 1 .THE GENERAL ELECTRIC MODEL An SBU’s appropriate objective cannot be determined solely by its position in the growth-share matrix. Companies are successful to the extent that they enter attractive markets and possess the required business strengths to succeed in those markets. The blocks with a Diagonal Zone consists of the three cells in the lower right corner. The suggested strategy is that management should begin to make plans to exit the industry. The model is based on the company’s seven businesses. A position in the red zone is not attractive. The nine cells are grouped into three zones: The block with the Lateral Zone consists of the three cells in the upper left corner. Organisation must therefore exercise caution when making additional investments in this product/service. the growth-share matrix can be seen as a special case of a multifactor portfolio matrix such as that pioneered by General Electric. The suggested strategy is to seek to maintain share rather than growing or reducing share. If additional factors are considered. the business will not produce outstanding results. yielding nine cells. This indicates a “green light” to invest 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. The above two factors make excellent marketing sense for rating a business. 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 diagonal cells stretching from the lower left to the upper right indicate SBUs that are medium in overall attractiveness. but once the SBU’s objective and budget are set. economic events. cash cows. the task of marketing management is to manage demand or revenue to the target level negotiated with corporate management. etc. new technologies.• • R & D performance Mangerial personnel STRATEGIES The GE matrix is divided into nine cells. understand their industries. The three cells in the lower-right corner indicate SBUs that are low in overall attractiveness. know which products are stars. Evaluation of Strategic Planning Approaches Many firms assess alternative market opportunities. Management should also forecast each SBU’s expected position in the next three to five years given the current strategy. and realize they can target broad or narrow customer bases. The three cells in the upper left corner indicate strong SBUs in which the company should invest or grow. Making this determination involves analyzing where each product is in its product life cycle as well as expected competitor strategies. question marks. marketing’job is to carry out the plan efficiently and profitably. The major strengths of the approaches are that they allow a firm to do the following: . the objective might be to maintain the existing demand with fewer marketing dollars or to take cash out of the business and allow demand to fall. the company’s objective is not always to build sales in each SBU. Rather. Marketing contributes to assessing each SBU’s sales and profit potential. recognize what factors affect performance. Thus. and dogs.
• They may not adequately consider environmental factors. They do not replace the need for managers to engage in hands-on decisions by studying each situation and basing marketing strategies on the unique aspects of their industry. • They may not be applicable to all firms and situations. • They are arbitrary in defining SBUs and evaluative criteria. • Study competitors’ actions and trends. • Focus on meaningful differential advantages. and SBUs. firm.uct development. • Discover principles for improving performance. The approaches have these weaknesses: • They may be difficult to implement.• Analyze each of its SBUs and products. • These techniques only aid planning. • They may overvalue market share. See accompanying figure. • Learn the opportunities to pursue and which threats to avoid. market development. Current Products Current Markets New Products New Markets . prod. • Compare performance with designated goals. • They are often used by staff planners rather than line managers. • Study various strategy effects. • Compute marketing and other resources needs. and diversification. • They may be too simplistic and omit key factors. 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.
Distribution and promotion orientations are different from those traditionally used by the firm. a firm seeks greater sales of present products from new markets or new product uses. • . 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. In market development. aggressive promotion. especially if they are highly profitable(forward integration). the company goes for diversification. In diversification. This can be either based on demographic or geographic or psycho. But here the company should take care as this involves high risk and the firm might loose focus. Horizontal Diversification Strategy. forward or horizontal integration within the industry. management must also examine integrative growth opportunities. • • • While the corporations are faced with ever increasing strategic planning gap. appeal to segments it is not yet satisfying. Later it will also review opportunities to develop new products for new markets(diversification strategy). management may discover several ways to grow. 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. and competitive pricing. However. It can enter new markets. The products may be new to the industry or to the company. It might acquire some wholesalers or retailers. a firm develops new or modified products to appeal to present markets. and other minor innovations and markets them to loyal consumers. Ansoff model propounded by Igor Ansoff is a useful framework for detecting new intensive growth opportunities called a “Product-Market Expansion Grid”.graphic factors. In that case. 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. 1. Finally if the company decides to acquire one or more competitors. In that case company must consider diversification. Still. 2. three strategies have been formulated to overcome this gap. 3. reposition products. Next it considers whether it can find or develop new markets for its current products (market-development strategy). It emphasizes new models. In product development. a firm seeks to expand the sales of its present products in its present markets through more intensive distribution. provided that the government does not bar this move(horizontal integration). 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).corporate management’s first course of action should be a review of whether any opportunities exist for improving its existing businesses’ performance. these new sources may still not deliver the desired sales volume. INTENSIVE GROWTH. 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. 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. By examining these three intensive growth strategies. even though the new product themselves may appeal to a different group of customers. INTEGRATIVE GROWTH – Often a business’s sales and profits can be increased through backward.• In market penetration. and use new distribution methods. a firm becomes involved with new products aimed at new markets. better quality. They can be either completely new products or existing product extensions.
products or markets. the firm may be able to sustain a competitive advantage based on cost leadership. not fritter away energy and re. harvest or divest tired old businesses in order to release needed resources and reduce costs.sources trying to salvage hemorrhaging businesses.companies must not only develop new businesses. 2. The following three basic strategies are identified (see Figure): 1. 3. The cost leadership strategy usually targets a broad market. Competitive advantage (lower cost or differentiation). but must also carefully prune. Some of the ways by which firms acquire cost advantages are by improving process efficiencies. a focus strategy is available to smaller firms.• Conglomerate Diversification Strategy – the company might seek new businesses that have no relationship to its current technology. The firm sells its products either at average industry prices to earn a profit higher than that of rivals or below the average industry prices to gain market share. The Porter Generic Strategy Model The Porter generic strategy model identifies two key planning concepts and the alternatives available for each: • • Competitive scope (broad or narrow target). 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. High level of expertise in manufacturing process engineering. Cost leadership—broad market and low cost position. making optimal outsourcing and vertical integration decisions or avoiding some costs altogether. Skill in designing products for efficient manufacturing. gaining unique access to large source of lower cost materials. 4. Cost leadership and differentiation strategies are alternatives for large firms. . Differentiation—large market and unique strategy. If competing firms are unable to lower their costs by a similar amount. DOWNSIZING OLDER BUSINESSES. 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. Managers should focus on growth opportunities. this investment represents a barrier to entry that many firms may not overcome.
it may be fairly easy for a broad-market cost leader to adapte its product in order to compete directly. Finally. Highly skilled and creative product development team.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. several firms follow. other focusers may be able to carve out sub-segments that they can serve even better. Furthermore. thus eliminating the competitive advantage. There may be a lack of awareness of environmental changes and competitors’ actions. other firms may be able to lower their costs as well. firms pursuing a differentiation-focused strategy may be able to pass higher costs on to customers since close substitutes do not exist. Additionally. Each generic strategy has its risks. 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 firm hopes that the higher price will more than cover the extra costs incurred in offering the unique product. Additionally various firms pursuing focus strategies may be able to achieve even greater differntiation in their market segments. Opportunities may be missed. MARKETING INFORMATION SYSTEM A marketing information system (MIS) is a set of procedures and methods designed to generate. continuous basis. . Firms that succeed in differntiation strategy often have the following internal strengths: • • • • • Access to leading scientific research. analyze. a firm could face these risks: 1. For example. However. disseminate. the competition may be able to leapfrog the production capabilities. Strong sales team with the ability to successfully communicate the perceives strengths of the product. If research is done this way. As technology improves.• • Efficient distribution channel. Because of their narrow market focus. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. even the low cost strategy. 2. firms pursuing a focus strategy have lower volumes and thus less bargaining power with their suppliers. The premise is that the needs of the group can be better serviced by focusing entirely on it. 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. Focus Strategy : This strategy focus on narrow segment and within that segment attempts to achieve either a cost advantage or differentiation. Information should not be approached in an infrequent manner. Some risks of focus strategy include imitation and changes in the target segment. 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. The risks associated with differentiation strategy include imitation by competitors and changes in customer tastes. and store anticipated marketing decision information on a regular. Corporate reputation for quality and innovation.
Data collection may be disjointed. 4. managerially. An avoidance of crises. 4. 3. Actions may be reactionary rather than anticipatory. The total information needs of the marketing department can be specified and satisfied via a marketing intelligence network. A broad perspective. 2. 7. Time lags may result if a new study is required. Organized data collection. 6. as well as the information collected through continuous monitoring and marketing research that is kept by the organization. 8. which contains three components. The storage of important data. disseminate. Data collection may be difficult to analyze over several time periods. 2. Marketing plans and decisions may not be properly reviewed. and strategically for several aspects of marketing. 1. analyze. continuous basis.3. . A marketing information system (MIS) is a set of procedures and methods designed to generate. and store anticipated marketing decision information on a regular. Data warehousing involves the retention of all types of relevant company records. Continuous monitoring is the procedure by which the changing environment is regularly viewed. An information system can be used operationally. and strategically for several aspects of marketing.An information system can be used operationally. Previous studies may not be stored in an easy to use format. managerially. Marketing research is used to obtain information on particular marketing issues. An MIS offers many advantages: 1. 3. 5.
7. An outside party or the firm itself may undertake such research.5. The ability to do a cost-benefit analysis.information used to identify and define marketing opportunities and problems. It is a very narrow concept. 5. ‘Marketing’ research is much broader. Focus groups 4. an impartial agency. Marketing research is about researching the whole of a company’s marketing process This explanation is far more straightforward i. manages and implements the data collection process. Coordinated marketing plans.. Data amassed and kept over several time periods. customer. Mystery shopping 3. Primary Research There are many was to conduct primary research. Projective techniques 5.primary and secondary. services. designs the methods for collecting information. Data may be available from different sources: the firm itself. It may be applied to any aspect of marketing that requires information to aid decisionmaking. and evaluate marketing actions. markets. Obviously.Primary and Secondary There are two main sources of data . It not only includes ‘market’ research.search into a specific market. Speed in obtaining sufficient information to make decisions. and everything to do with the customers. and ideas. It is original and collected to solve the problem in hand. It involves a sequence of tasks: data gathering. Product tests 6. 8. but also areas such as research into new products. also known as desk research. and communicates the findings and their implications. Secondary research. and public to the marketer through information . Here are a couple of definitions: Marketing research is the function that links the consumer. Sources of Data . people. and analyzing of information about specific issues related to the marketing of goods. this is a very long and involved definition of marketing research. and improve understanding of marketing as a process. places. 2. refine. A firm’s decision to use marketing research does not mean it must engage in expensive projects (test marketing. analyzes. marketing research into the elements of the marketing mix. consumer attitude surveys). It may get enough data by analyzing internal reports or from informal meetings with customer service personnel. competitors. 4. and analysis. 3. MARKET RESEARCH Marketing research is the systematic gathering. Several points about marketing research need to be emphasized. Interviews 2. Market research and marketing research are often confused. Primary research is conducted from scratch. 1. We consider some of them: 1. organizations. recording. 6. monitor marketing performance. or a research specialist working for the firm. or modes of distribution such as via the Internet. recording. It must not be haphazard. generate. Research findings and their implications must be communicated to the appropriate decision maker(s) in the firm. Marketing research specifies the information required to address these issues. already exists since it has been collected for other purposes.e. Diaries . ‘Market’ research is simply re.
It is ideal for collecting data from a geographically dispersed sample. Telephone interviews are cheaper to conduct than face-to-face interviews (on a per person basis). The research will probe and develop points of interest. • The Internet The Internet can be used in a number of ways to collect primary data. Omnibus Studies 1. face-to. Some surveys are very rigid or ‘structured’ and use closed questions. Data is collected on a survey. or free membership. not potential customers. Advantages of the Internet • Relatively inexpensive • Uses graphics and visual aids • Random samples can be selected • Visitors tend to be loyal to particular sites and are willing to give up time to complete the forms Disadvantages of the Internet • Only surveys current. Visitors to sites can be asked to complete electronic questionnaires. or over the Internet. 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.7.’ and depend upon more open forms of questioning. 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. Interviews This is the technique most associated with marketing research. Data is easily compared. . However responses will increase if an incentive is offered such as a free newsletter. The interviews tend to be very structured and tend to lack depth. Interviews can be telephone. Other important data is collected when visitors sign up for membership.face. • Some respondents will give biased responses when face-to-face with a researcher. Other face-to-face interviews are more ‘in depth. • Telephone Interviews Telephone ownership is very common in developed countries.
or purchased. Groups tend to be made up from 10 to 18 participants. Often used in banking. opinion. They collect data on customer service and the customer experience. 6 Diaries Diaries are used by a number of specially recruited consumers. Discussion. cafes and restaurants. 3 Focus Groups Focus groups are made up from a number of selected respondents based together in the same room. However.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. They are rare. warn. • Mail Survey In many countries. 5 Product tests Product tests are often completed as part of the ‘test’ marketing process. months. such as the Internet and telephones. There are many examples of such approaches including: Inkblot tests . There are many issues surrounding the ethics of such an approach to research. and the research will probe into specific areas that are of interest to the company commission in the research. Highly experienced researchers work with the focus group to gather in depth qualitative feedback. especially call centers.depends on very quick (subconscious) responses to words Psycho. It demands a substantial commitment on the part of the respondent. However.• • Needs knowledge of software to set up questionnaires and methods of processing data May deter visitors from your website. how much time the consumer spends with the product. • Can be very expensive in comparison to other methods 4. the researcher has a reasonable picture of purchasing behavior. posing as real customers. Lists are collated. and many other customer focused organizations.complete the ‘bubbles’ on a cartoon series Sentence or story completion Word association . mystery shoppers will enter. 2 Mystery Shopping Companies will set up mystery shopping campaigns on an organizations behalf. and a pre-designed questionnaire is mailed to a sample of respondents. Products are displayed in a mall of shopping center. Complex to organize. Mail surveys are less popular with the advent of technologies. They will generate highly subjective qualitative data. Potential customers are asked to visit the store and their purchase behavior is observed. or years). travel. Projective techniques Projective techniques are borrowed from the field of psychology. They are asked to complete a diary that lists and records their purchasing behavior of a period of time (weeks. by collecting a series of diaries with a number of entries. and beliefs are encouraged.look for images in a series of inkblots Cartoons . Findings are reported back to the commissioning organization. and so on. how the packing is read.drama . retailing. 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. a second mailing to prompt or remind respondents tends to improve response rates. . Observers will contemplate how the product is handled. the mail survey is the most appropriate way to gather primary data. or used.
and commits less time and effort than conducting your own research. The research is far cheaper. data must be collected and analyzed.e. An omnibus survey could include questions from companies in sectors as diverse as heath care and tobacco. examining secondary data. The goal of marketing research is to provide the facts and direction that managers need to make their more important marketing decisions. 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. it already exists. Rather. There are a number of such sources available to the marketer. generating primary data (if necessary). Figure below that presents the complete process. The organization will be one of many that simply want to a straightforward answer to a simple question. As such. . Each step is completed in order.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). and implementing findings. For example. and primary data are not generated until secondary data are thoroughly reviewed. the attributes that create value cannot simply be deduced from common knowledge. analyzing information. But the perception of value is a subjective one. Secondary Research Secondary (or desk) research uses data that has been collected for other objectives than your own i. and what customers value this year may be quite different from what they value next year. making recommendations. THE MARKETING RESEARCH PROCESS The marketing research process consists of a series of activities: defining the issue or problem to be studied. secondary data are not examined until a firm states the issue or problem to be studied.
4. They include budgets. also called quantitative research. Sources A. Secondary data have these general advantages: 1. profit-and-loss statements. 4. Exploratory research is undertaken when the researcher is uncertain about the precise topic to investigate or wants to informally study an issue. B. prior research reports. C. Secondary data have these general disadvantages: Lack of suitability.ten reports. Obsolescence. Low costs.The objective of the research should be defined clearly. The corresponding research problem might be to assess whether the market would accept the new product . 6. Advantages and Disadvantages A. 2. Internal secondary data are available within the company. External secondary data are available from sources outside the company. B. 1. Speed. To ensure that the true decision problem is addressed. Access to hard-to-obtain data. Thus. 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. EXAMINATION OF SECONDARY DATA A. the decision problem is translated into a research problem. Undisclosed findings. ISSUE (PROBLEM) DEFINITION A. 5. 2. 3. B. Helpful for exploratory research. For example. Unknown reliability. Diverse sources. 6. B. inventory records. Conflicting results. Unknown methodology. These data should always be reviewed before primary data collection. 3. and writ. 2. They may be obtained . a decision problem may be whether to launch a new product. Source credibility.1. Issue (problem) definition is a statement of the topic to be looked into. Secondary data are those that have been gathered for purposes other than solving the current problem under investigation. 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. small group discussions. and understanding underlying trends. It is also called qualitative research and may involve in-depth probing. customer billings. It is the structured collection and analysis of data pertaining to a specific issue or problem. sales figures. The use of such scenarios can ensure that the purpose of the research is agreed upon before it commences. 5. Conclusive research. is used after the problem definition is clarified.
4. Primary data consist of information gathered to address a specific issue or problem at hand. 7. 6. Who or what should be studied? This is defined as the population. members of the population are chosen on . Research Design A. Secrecy. monographs. 5. Advantages and Disadvantages A. 3. 3. and Burke Marketing Re. 1. Primary data have these general advantages: 1.C. Controlled and known methodology. Inability to gather certain types of information. sampling is usually employed. They are necessary if secondary data are insufficient for a proper marketing decision to be made. B. 4. 2. Primary data have these general disadvantages: Time consuming. a. Nielsen. 3. every member of the designated population has an equal or known chance of being selected. and other non-regular publications deal with special topics in depth and are compiled on the basis of interest by a target audience. B. Reliability determined. 2. 3. Who collects the data? Data can be collected by the firm itself or by an outside company. The way in which people or objects are selected must be decided. c. A research design outlines the procedures for collecting and analyzing data. For large and/or dispersed populations. b. IMS Health. 2. 1. It consists of these eight steps: 1. Precision. B. GENERATION OF PRIMARY DATA A. There are three sources of non-government secondary data: a. Commercial research houses (such as A. Books. High costs. 5. Sampling enables the firm to analyze selected people or objects. Company limitations. With a non-probability sample.search) conduct periodic and ongoing studies and make results available to many clients for a fee. Only way to acquire information in some cases. What information should be collected? It can be exploratory or conclusive in nature. With a probability sample. Regular publications can be broad in scope (such as Business Week) or more specialized (such as the Journal of Advertising).from government and non-government sources. Currency. Limited perspective. No conflicting data.
printing. 7. Data analysis consists of the following: 1. Observation is a research method whereby present behavior or the results of past behavior are observed and noted. Tabulation—the calculation of summary data for each response category. Figure 4-11 shows recommendations flowing from completed research. d. A survey gathers information from respondents by communicating with them. respondents write their answers. Recommendations are suggestions for a firm’s future actions. It can be disguised or non disguised. C. 4. B. Benefits and costs must be compared. 6. RECOMMENDATIONS A. Just the factor under study is varied. Simulation is a computer-based method to test the potential effects of various marketing factors via a software program rather than real-world applications.trolled conditions. Coding—the process by which each completed data form is numbered and response categories are labeled. In addition. supplies. or by phone or mail. researcher time. Data Collection A. When and where should information be collected? The day and time must be set. Those engaged in data collection must be properly supervised and follow directions exactly. How long will the data-collection period be? The total time frame is specified. interviewers. What technique of data collection should be used? a. With self. pre-testing. all others remain constant. ANALYSIS OF DATA A. Table 4-2 shows the best uses for each kind of primary data collection. support staff time. It may be human or mechanical.the basis of convenience or judgment. B. It can be conducted in person.administered questionnaires. interviewers record answers. The semantic differential is a list of bipolar (opposite) adjective scales that provides an overall profile b. 5. An experiment is a type of research in which one or more factors are manipulated under con. based on marketing research findings. computer usage. respondents’ incentives (if any). special equipment. The report must be written for the audience that reads it. and marketing expenses (such as ads). C. 2. 4. How much will the study cost? Costs may include executive time. the location of data collection must be outlined. 8. c. postage or phone expenses. . Analysis—the evaluation of responses as they pertain to the specific issue or problem under investigation. Responses or observations must be entered correctly. e. 2. With administered questionnaires. How will the data be collected? Data collection can be administered by research personnel or be self-administered. Data are collected. 5.
3. Companies spend about $12 billion worldwide (40 percent in the United States) for data gathered by marketing research firms. Go ahead and collect the data.S. Once the recommendations are passed on to the proper decision makers. tables. 3. 8. 6.and institutionsponsored research. B. They have confidence that results are accurate. data collection method. Scope of marketing research A. For example. This will contain charts. with more than 1. This is in addition to government. 9.-based) account for $8 billion in yearly revenues. They have input into the research design. B. Never conduct research for things that you would ‘like’ to know. the topical areas in which . Make sure that you really ‘need’ to know something.cussed in more detail later. According to the American Marketing Association.000 firms accounting for the rest.D. Do we us a random sample. They have broad control over marketing decisions. stratified sample. Check for errors. 7. then move on to step seven. Marketing managers are most likely to implement research findings under these conditions: 1. or do we arrange a focus group? The methods of data collection will be dis. 2. Watch out for errors in interpretation. Go back and speak to the managers or clients requesting the research. 10. The top 25-research firms (nearly half of which are U. The research report represents feedback to marketing managers. or analytic mistakes. Conduct the analysis of the data. 6. or cluster sample? 4. Decide upon a budget and a timeframe. Make sure that you agree on the problem! If you gain approval. How will you collect the data that you will analyze to solve your problem? Do we conduct a telephone survey. who are responsible for using findings. Select a sampling method. Summary of the Marketing research Process – Marketing research is gathered using a systematic approach. why are sales falling in New Zealand? 2. the research report should be warehoused in the marketing intelligence network. IMPLEMENTATION OF FINDINGS A. and hopefully lead to a solution to your problem. as well as efforts of the compa.nies themselves.Write your final report. How will we analyze any data collected? What software will we use? What degree of accuracy is required? 5. An example of one follows: 1. It is not uncommon to find errors in sampling. Define the problem. and diagrams that will communicate the results of the research. The problem then becomes the focus of the research.
Firms deciding how to market to the hundreds of millions of consumers in Eastern Europe and Central Asia increasingly do market research there. The extent of such research has more than doubled in recent years. Yet. segmentation studies. 8. False sponsor identification.5 million in 1996 to $255 million in 2000. companies tend to spend about 1 percent of revenue on marketing research. with many firms doing their own studies and others hiring outside specialists. To turn the situation around. With more and more firms striving to expand their foreign endeavors. In fact. and accessing online annual reports and trade publications. and the complexities of international marketing research. these practices need to be avoided: 1. many potential respondents are “turned off” to participating in marketing research projects. Due to technological advances. Here are examples of how the research is being used. 6. Asking overly personal questions. b. Many businesspeople start their research by checking out competitors’ Web sites. 4. Misportraying research findings in ads and other communications. a lot of Americans will not answer a survey. F. an easy-to-use exchange for purchasers and providers of market research and related marketing services. ethical considerations. Selling consumer demographic information for database use without consent. purchase intentions. 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. international marketing research is taking on greater importance. Unrealized promises of anonymity. 2. Marketing Info offers The Marketplace. C.companies are most likely to engage in or sponsor research efforts are industry/market characteristics and trends. On average. 1. Customer satisfaction research is being sponsored much more than ever before. designing and . B. brand awareness and preference. using search engines. 5. Planet Feedback enables consumers to send their feedback to companies quickly and effortlessly. Over the last few years. and the application of single-source data collection. market-share analyses. Observational studies without informed consent. product satisfaction. Misrepresenting research projects. 3. C. 2. Five marketing research trends are the rapid increase in customer satisfaction studies. 7. Selling or fund raising under the guise of research. a. and concept development and testing. spending for online marketing research has grown from $3. c. the use of the Internet. G. Due to unethical practices of some firms.
Communications systems. 2. people have never been surveyed before. especially phone services. may be below Western standards. . Many times.conducting research is hard. 1. 3. 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.
ready meals and direct marketing service busi. family. In fact. such as the groups to which the customer belongs and social status. or groups of people sharing the same geographical location. Similarly the increased desire for “leisure time” has resulted in increased demand for convenience products and services such as microwave ovens. 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. the decision to purchase and use certain products and services.nesses such as telephone banking and insurance. racial groups. social class is not just determined by income. In the UK’s socioeconomic classification scheme. the official six social classes in the UK are widely used to profile and predict different customer behavior. Growing up. several individuals may interact to influence the purchase decision. income. personality and lifestyle. colleagues and co. wealth and other variables Social factors: A customer’s buying behavior is also influenced by social factors. Marketers are always trying to spot “cultural shifts” which might point to new products that might be wanted by customers or to increased demand. For example. The typical roles in such a group decision can be summarized as follows: Reference groups As a consumer. For example. differences in social class can create customer groups. Culture is the most basic cause of a person’s wants and behavior. education.workers are examples of primary . perception and wants from the family and other important groups. Sometimes a sub-culture will create a substantial and distinctive market segment of its own. but also by the people around the customer with whom he interact and the various social groups to which you belong. Each culture contains “sub-cultures” – groups of people with share values. is influenced not only by psychological factors. neighbors. Sub-cultures can include nationalities.Consumer Behavior Factors affecting consumer behavior Each of these factors is discussed in more detail in the following sections on buyer behavior. In a group. 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. It is measured as a combination of occupation. close friends. the “youth culture” or “club culture” has quite distinct values and buying characteristics from the much older “gray generation” Similarly. children learn basic values. Cultural factors: Cultural factors have a significant impact on customer behavior. religions.
vi) Work groups. iii) Formal social groups. whether small or large. informal and small groups exert the maximum influence on consumers and are of great interest for marketers. but is not likely to be received as a member. lions. A formal group has a highly defined structure. Meeting your neighbors over lunch once a month for friendly exchange of news is an instance of an informal group. Direct reference groups. 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. formal or reference group is a very wide one and includes both direct and indirect or group influences. In contrast. politicians. TV stars. Soft drink (Thums up). Graviera) are advertised using celebrities from the sports and film fields.groups. Indirect reference groups comprise those individuals or groups with whom an individual dews not have any direct face to face contact. Primary. III) Membership and symbolic groups: A membership group is one to which a person belongs or qualifies for membership. Reference groups are used in advertising to appeal to different market segments. which exert a significant influence on consumer’s. There are i) The family ii) Friendship groups. Secondary groups are those with which an individual interacts only occasionally and does not consider their opinion very important. is an important consumer for many products which are purchased for consumption by all family members. accountants and authors are used for establishing the benefits of the product. iv) Formal shopping groups. Family: The family is the most important of all these groups and we shall discuss it in detail. an informal group is loosely defined and may have no specified roles and goals. v) Consumer action groups. Jaycees are some of the well – known social groups in our society. specific roles and authority positions and specific goals. Different kinds of groups. All workers in a factory qualify for membership to the labor union. The family. It demonstrates to the prospective customer that demonstrates just like him uses and is satisfied with the product. as a unit. shaving cream (Palmolive). 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. The three types of reference groups appeals most commonly used are: a) Celebrities. We can identify two families which shape an . It is a source of major influence on the individual members’ buying behavior. toilet soaps (Lux) . Hidden in this appeal is the subtle inducement to the customer to identify himself with the user the product in question. attitudes and behavior. as I unit.pastes are examples of products. A symbolic group is one which an individual aspires to belong to. The family. Another reference group appeal is that which uses the testimonials of a satisfied customer. b) Experts. group situation with which potential customers can identify are used to promote products and services. Colgate and Forhans tooth. lawyer. II) Formal and informal groups: Rotary. which use the expert reference groups appeal for promotion. such as film stars. 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. purchase decisions and behavior can be classified into six categories. sportsman. Film stars and sports heroes are the most popular celebrities. Experts such as doctors. Labor unions. social clubs and societies are other types of formal groups to which individuals may belong. textiles ( Dinesh . is an important of all these groups and we shall discuss it in detail.
in different families may be made either by the husband or wife. His position within each group can be defined in terms of the activities he is expected to perform. Roles: An individual may participate in many groups. The status of a person is projected through various symbols like the dress. If marketers can identify the various groups to which potential consumers belong. This method is called as the psychographics-which is . their influence of the sub – conscious mind still continues to be great.People buy and use products that reflect their status. Thus. However. accessories and possessions. For instance. You are probably a manager. 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. interest and opinions. Children are also beginning to exert their influence on the family’s purchase decisions. personal computers. In our country. different member play different roles. Life Style: Our life styles are reflected in our personalities and self-concepts. There is a method of measuring a consumer’s lifestyle. the latter’s influence is extremely important. Each of these roles influences your purchase decisions. Traditionally. which is the relative prestige accorded by society. these lines of traditional role demarcation have been getting increasingly blurred. where the children are likely to have more updated information about various brands and product attributes. where children continue to live with parents even after attain adulthood. for a holiday. But with the emergence of the working-women. and when in your work situation you play that role. they can successfully market those products and services whose consumption is dictated by the group norms.one is the family of orientation that is the family in which you are born and consists of your parents. The second type of family is the family of procreation consisting of the consumer’s spouse and children. income. clothing and other household sundries.A. It is a person’s mode of living as identified by his or her activities. stereo music systems. experience. or both may have an equal voice.S. We need to know what a life-style is made of. the same decision. beliefs and purchase behavior patterns. The life cycle is an orderly series of stages in which consumer attitude and behavioural tendencies evolve and occur because of developing maturity.individual’s consumption behavior . it has been the wife’s role to purchase food. at home you play the role of spouse and parent. 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. Personal Factors: Age and Life cycle Stage:Like the social class the human life cycle can have a significant impact on consumer behaviour. brothers and sisters. Group norms: Are the norms of a group are the implicit rules of conduct and behavior that are expected of its member. Status is often measured by the degree of influence an individual exerts in the behavior and attitude of others. He may go to Europe or U. It is from parents that we imbibe most of our values. Thus in different social positions you play different roles. same is the case with any consumer. and status. not with standing the terrible heat condition. The profession or the occupation a person is in again has an impact on the products they consume. The concept of lifecycle as applied to marketing will be discussed in more details. attitudes. the norm for office wear includes a full – sleeved shirt and tie. Status: Each role that a person plays has status. Within the family. Marketers often define their target market in terms of the consumers present lifecycle stage. 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. records. The managing director of a company may drive a Mercedes to communicate his status in society. This is especially true in case of products such as television. rather than going to Mussoorie or Ooty. in certain multinational companies in India. etc.
Safety needs These are dealing with achieving of stability and of consistency in a chaotic world. These feelings motivate us to alleviate them as soon as possible to establish homeostasis. However. the wife cannot move to the next level. Love and belongingness have to wait until she is no longer in fear. sociability. goals. Then based upon the combina tions of these dimensions. Motivation: Motivation involves the positive or negative needs. consumers are classified. sex. Hierarchy of Needs .Physiological needs These are the very basic needs such as air. Once they are alleviated. and desires that impel a person to or away from certain actions. When these are not satisfied we may feel sickness. and emotional stability are selected personality traits. MASLOW’S HIERACHY OF NEEDS The Hierarchy of Needs model of Abraham Maslow 1. By appealing to motives (reasons for behavior). etc. These needs are mostly psychological in nature. water. pain. autonomy. sleep. Unlike personality typologies. Hierarchy of Needs . Each person has distinct motives for purchases. we may think about other things. Because she is constantly concerned for her safety. .sure consumer lifestyles.peoples activities. defensiveness. a marketer can generate motivation. adaptability. discomfort. 2. Personality: personality is the sum total of an individual’s enduring internal psychological traits that make him or her unique. 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.the analysis technique used to mea. etc. irritation. dominance. these change by situation and over time. which are difficult to describe measure lifestyle analysis has proven valuable in segmenting and targeting consumers according to their lifestyle classification. interests and opinions. if a family is dysfunctional caused by for example an abusive husband. Self-confidence. Economic and emotional motives are possible. We need the safety of a home and family. food. Many in our society cry out for law and order because they do not feel safe enough to go for a walk in their neighborhood.
Hierarchy of Needs . 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. Dissatisfaction was a result of hygiene factors. Second. Performing artists are appreciating applause. • Motivation factors are needed in order to motivate an employee into higher performance. (Hofstede." People who have everything can maximize their potential. self-fulfillment. Disadvantages • Care should be taken not to stick too rigidly to this hierarchy: • In reality. peace. • In 1968. etc. They are much less structured in the way they satisfy their needs. to become everything that one is capable of becoming. Humans have a desire to belong to groups: clubs. however. 4. etc. Herzberg developed this motivation theory during his investigation of 200 accountants and engineers in the USA. This is similar to the belongingness level. Limitations of the Hierarchy of Needs model. oneness with God. These factors result from internal generators in employees. people don't work necessarily one by one through these levels. (Graves) • Different people with different cultural backgrounds and in different situations may have different hierarchies of need. We need to be needed. affiliation and power.The need for self-actualization This is "the desire to become more and more what one is.Love and belongingness needs These are next on the ladder. there's the attention and recognition that comes from others.Self-Esteem needs There are two types of esteem needs. to be accepted by others. We want to feel loved (non-sexual) by others. who identified needs for achievement. Hierarchy of Needs . wanting admiration is related to the need for power. See McClelland. The first is the self-esteem which is the result from competence or mastery of a task. 5. gangs. Hierarchy of Needs . work groups. They do not cause higher levels of motivation. esthetic experiences. Satisfaction and psychological growth was a factor of motivation factors.3. Early) • Other researchers claim that other needs are also significant or even more significant. but without them there is dissatisfaction. religious groups. They can seek knowledge. Typical Hygiene Factors • • • • • • • • • Working conditions Quality of supervision Salary Status Safety Company Job Company policies and administration Interpersonal relations . The two Factors in the Theory • Hygiene factors are needed to ensure that an employee does not become dissatisfied. family.
The different sights. A situation where the job is exciting and challenging. People are more likely to notice stimuli. Each person recognizes. advertisement and commercials. size. smells.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. fragrance. eyes. organizes and interprets thes3e stimuli in his own individual manner based in his needs. taste of your product. mouth and skin. There are three aspects of perception. values and expectations and this is known as perception. tastes and sensations that we feel are known as stimuli. The job is perceived as a paycheck. and/or • job enrichment. television or any other high value product or services. you suddenly seem to notice more than the usual number of advertisements pertaining to that specific product. feel. sounds. These are selective exposure. generally consumers tend to perceive the quality of performs on the basis of package.. motive and expectations are unique therefore each individual’s perception is unique. ears. Perception can be described as “how we see the world around us”. High Hygiene + Low Motivation: Employees have few complaints but are not highly motivated. brand name. • Herzberg suggests that often work can be arranged and should be arranged in the following ways: • job enlargement • job rotation. Since each individual’s needs. refrigerator. selective distortion and selective retention. the implication is that he has to carefully and accurately identifies his . which are of immediate interest to the marketer. its package. Perception helps to explain the phenomenon of why different individuals respond differently to the same stimulus under the same condition. As a marketing manager. All the time we are receding messages through our five organs viz. Low Hygiene + High Motivation: Employees are motivated but have a lot of complaints. you are providing stimulus to your consumers through the physical shape. For example. which relate to their immediate needs. This is because of your selective exposures. be it camera. color. However the salaries and work conditions are not OK.. Low Hygiene + Low Motivation: The worst situation. price and manufacture’s image. Perception The second major psychological factor that influences consumer behavior is perception. Your interest is to the stimuli so that you can highlight that particular stimulus of combination of stimuli. selects. nose. which evokes the most favorable perception in the maximum number of consumers. Employees are not motivated and have lots of complaints. Selective exposure: you must have noticed that when you are on the look out for purchasing a specific product. For the marketer.
issues. 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. Thus making the consumer ‘learn ‘ that the brand is good and worth patronizing. A housewife has the need is strong enough to propel her to take action it becomes a motive. Having identified the potential customers. neutral. Suppose the housewife buys the pressure cooker and is satisfied with its performance. Much of an adult’s human behavior sis leaned behaviors. which she sees and hears. and in the future may buy another one. using the appropriate stimuli and cues and providing positive reinforcement. Success cannot normally be attained without positive consumer attitudes. a special introductory price offer are all examples of cues which influence a housewife’s response to the motive for buying a pressure cooker. but a five year old clamoring for chocolate or chewing gum is the result of learned behavior. Selective Distortion: let us suppose you have decided to purchase a specific brand “A” of pressure cooker. cues. This is a very significant factor marketer. Attitudes get settled into specific patterns and are difficult to change. A person may believe that a certain coking oil ‘X’ has the lowest fat content and is best for health. the process is known as selective distortion. Since you have already made your decision you would seek only that information which reinforces the correctness of your decision. stimuli. and/or institutions. evaluation and tendency towards a particular idea or object.. was correct. people. Starting from childhood. because it implies that consumers can be made to learn the desired behaviors through in interplay of motives. A belief is a descriptive thought that a person has about something. You are more likely to remember the positive feature of brand ‘A’ pressure cooker since they help reassure you that the decision. or negative feelings about goods. responses and reinforcements. . The marketer must ensure that consumers have relevant and correct information about the brand to facilitate formation of a positive brand image. experience and influence. Cues are minor stimuli that determine when. This belief may be based on some real facts or it may merely be a notion or opinion that the person has. The beliefs constitute the brand image about the brand. Beliefs & Attitudes Attitudes or opinions are positive. The stimuli are the various advertisements about the product. Learning Learning refers to the skill and knowledge gained from past experience that we apply to evaluate future decisions and situations. A newborn infant’s sucking at the feeding bottle is instinctive behavior. a marketer may find that his message is often not received in the intended manner but different consumers twist it in different ways. Positive feedback about pressure cooker from a friend. Attitude is a person’s enduring feeling. The motive is directed towards the stimulus object – a pressure cooker. 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.potential customers since other customers are not at all likely to notice the stimuli. A marketer can build up demand for his brand by associating it with strong motives. where and how the housewife responds. the marketer has to ensure that the stimuli are interesting enough to attract and hold their attention. Thus. The housewife’s response to pressure cookers has been reinforced. Selective retention: people forget much of the stimuli which they receive3 and only retain that information which reinforces their clause and decision. services. seeing it on display in a showwindow. attitude develops over the time with each fresh knowledge input. firms. and then the changes are that she would like to use it as often as possible. which you have made.
he or she will go on to the next step in the decision process. terms. the consumer engages in post-purchase behavior. It consists of the process itself and factors affecting the process. Factors affecting the process are a consumer’s demographic. • Commercial. • Noncommercial. a consumer will make a purchase. A prospective consumer may be exposed to any or all of these types of stimuli. services. The decision process consists of six basic stages (the next six sections). STIMULUS: A stimulus is a cue or drive meant to motivate a person to act. Many consumers are hesitant to react to unfulfilled desires because there are risks and the benefits may be hard to judge.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.As risk increases. The Internet has become a major source for consumer shopping information. Purchase decisions remaining at this stage center on the place of purchase. and ideas. Search can be internal and/or external . it must be determined whether the shortage or unfulfilled desire can be satisfied by any alternative. people. EVALUATION OF ALTERNATIVES: The alternatives are evaluated on the basis of the consumer’s criteria and the relative importance of these criteria. and psychological characteristics. it may be ended. organizations. other times. PROBLEM AWARENESS: During problem awareness. Once the information search is completed. places. only a few steps are utilized At any point in the process. • Physical. the performance of a specific service. or support in return of ownership of a specific good. INFORMATION SEARCH: Information search involves listing alternatives that will solve the problem at hand and a determination of the characteristics of each. Buying one item may lead to the purchase of another. or idea may solve a problem of shortage or unfulfilled desire.The purchase act involves the exchange of money or a promise to pay for a product. Re-evaluation of the . If the above elements are acceptable. the consumer recognizes that the good. the amount of information sought also increases. A stimulus can be any of the following: • Social. POST-PURCHASE BEHAVIOR: Frequently. social. Seven useful sources are provided. They are then ranked and a choice made. all six stages in the process are used. availability. person. Sometimes. and so on. place. PURCHASE . service. If a person is sufficiently stimulated. organization.
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,
with a different marketing plan for each. As perception differs from person to person. or products. Differentiated marketing can be achieved without involvement in the majority fallacy. Some companies. there will .g. 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 .should be avoided..TARGET . They have one or more major brands for the mass market and secondary brands geared toward specific segments. Differentiated marketing should enable the firm to achieve several objectives: 1. so do the results of the positioning map e. Costs vary. Per unit profits can be maximized through market segmentation. 1. Differentiated marketing combines the best attributes of undifferentiated marketing and concen trated marketing. use both undifferentiated marketing and concentrated marketing approaches in their multiple-segmentation strategy. but not all segments. Total profits should rise as the number of segments serviced increases. offers a degree of exclusivity. D. Others. what you perceive as quality. Diversification. Two or more sizable and distinct consumer groups are necessary. 3. the greater the opportunity for differentiated marketing. However. A firm must balance revenues obtained from selling to multiple segments against the costs. 2. depending on modifications needed. allows orders to be concen. E. H. A distinct niche can be carved out for a particular brand. It appeals to two or more distinct market segments. etc. because only one segment is sought. G.POSTION process • Positioning is undoubtedly one of the simplest and most useful tools to marketers. C. brands. F. A potentially profitable segment may be one ignored by other firms. Wholesalers and retailers usually find differentiated marketing to be desirable. Recognition as a specialist. E. Company resources and abilities must be able to produce and market two or more different sizes. • Positioning is all about ‘perception’. B. value for money in terms of worth. such as Time Inc. I.trated. The more clusters facing the firm. and Microsoft appeal to two or more segments. Firms such as Maruti-Suzuki use differentiated marketing to attract all segments. 2. G. A company must be careful to maintain product distinctiveness in each consumer segment and to guard its image. and encourages private labels. such as Hyundai. Differentiated Marketing (Multiple Segmentation) A. F. Sales maximization. Total profits are not maximized. because it enables them to reach different consumers. is different to my perception.
For this strategy. However. It refers to a place that the product offering occupies in • consumers’ minds on important attributes. emphasis is placed on the benefits of the particular features or attributes of the destination. 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. Thailand promotes the friendliness of its people with the statement “The world meets in the land of smiles.” Positioning according to the users or class of users In this case.” With this positioning statement Malaysia is appealing not only to the sense of value (more for the money) but also to its natural attractions. a major tourist site in Hong Kong: Fisher Island. Mexico is positioned as “The meeting place for sun worshipers. Cancun.” Positioning with respect to a product class This technique is often used to associate a destination with experiences that are . in the minds of the consumer.” referring to Victoria Peak. 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. or customer benefit.APPROACHES Positioning by attribute. feature. next step will be to position a product within that market. Positioning with respect to use or application Here a destination is positioned based on the reasons for visiting it. send them to the peak. a luxury residen.be similarities in certain cases. How new and current items in the product mix are perceived. positions itself as the place “where people who run things can stop running. positioning features the people who should visit the destination.” Positioning by Price Value International destinations are not usually positioned on the basis of price because lower prices may be perceived as connoting lower quality. • After segmenting a market and then targeting a consumer. therefore re-emphasizing the importance of perception!! New Product—need to communicate benefits POSITIONING ERRORS POSITIONING TYPES.tial development in Florida. relative to competing offerings. For example.
Differentiation goes beyond positioning to spin a complex web of differences characterizing that entity. 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. it is regularly employed in product and services marketing. Positioning vis-à-vis the competition This approach is used when it is necessary to meet the competition head-on. Marketers have identified that the products are capable of higher differentiation than services such as automobile and furniture. Features: they are the characteristics. to bring out differences between destinations. Yet there are diminishing return to higher performance quality so marketers must choose a level suited to the target market and rival performance levels. then determining which would be profitable to add.that is the physical structure. ‘After a day of competition. Example of any product. promotion. the size. given the potential market. The strategic planning institute found a significantly positive correlation between relative product quality and return on investment. cost and price. Differentiation is the process of adding a set of meaningful and valued differences to distinguish the company offering from competitors offerings. Form: Companies can differentiate products on the basis of form. quality. innovation and different service levels.” or holding a convention in Thailand is “Smooth as silk where the sky’s the limit. Durability: D urability in the product me a n s expecting the product to be operating under natural or stressful conditions. location. As Disprin is essentially a commodity. The tools that are used to differentiate products include branding. which the product’s primary characteristics operate. Positioning simplifies what one is thinking of the entity.extraordinary and/ or unique. It is important for products such as vehicles and kitchen appliances to be durable. shape. This strategy is aggressive. image. TYPES OF DIFFERENTIATION Product differentiation In this the marketing mix variable are used to make unique product offer that stands out from the competitors. However. or “If your looking for an ideal meeting place. in this the company is focusing on besting the competition and at the same time they are satisfying the consumers and gaining higher profits. 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. which can be in many forms like Disprin. you deserve a hotel that has none. coating and action time. For example. it can be differentiated by the dosage size. which are very important they are basically there to support the basic functions of the product.” What is Differentiation? The task of positioning is to deliver a central idea about a company or an offering to the target market. Ritz-Carlton Hotels is a little more subtle when they say. here’s one that’s close to heaven” for Israel. product features. Reliability: on reliability basis one is normally ready to pay a premium. Conformance quality: C onformance for quality. Performance quality: is the level. However the extra price must not be excessive and the product must not be subjected to rapid technological obsolescence. This approach is not used frequently in international tourism destination marketing since it may involve negative statements about another country or region. The problem with low conformance quality is that the product will disappoint some buyers. For example. the Principality of Monaco is positioned as “The fairy tale that does not end at midnight. Marketers starts by asking recent buyers about additional features that would improve satisfaction. which is in terms of degree to which all of the produced units are identical and are able to meet the promised specification. packaging. it is basically a . and the shape of the product.
Rite Aid has teamed with drugstore. The designer has to take all of these factors into account Service differentiation: When the physical product cannot be differentiated easily. the Rite aid drugstore chain’s communications program. However. On the Web. Buyers of heavy equipment expect good installation service. Design: as competition intensifies. May tag. design offers a potent way to differentiate and position a company’s products and services. feature development. install. performance. The main service differentiators are: Ordering ease: refers to how easy it is for cusotmer to place an order with the company. durability. Baxter Healthcare has eased the ordering process by supplying hospitals with computer through which they send orders directly to Baxter. For example. covering speed. Maintenance and repair: describes the service program for helping customers keep purchasing products in good working order. use. General Electric not only sells installs expensive X-rays equipment in hospitals. Delivery: it is related to how well the product or service is delivered to the customer. Ideal reparability would exist if users could fix the product them. but also gives extensive training to users of this equipment.without being late once in 18 years. this means the designer has to figure out how much to invest in form. Apple computers. consumers can now order and receive groceries without going to the supermarket business web-based service such as peapod and net grocer. Differentiation by installation is particularly important for companies that offer complex products such as computers. Customer training refers to how the customer’s employees are trained to use the vendor’s equipment properly and efficiently. Godiva chocolate and Harley.selves with little cost or time. To the company. An automobile made with standard parts that are easily replaced has highly reparability. which manufacturers major home appliances. provide customers with research so they can make more educated judgments and fell comfortable asking for help. inc. have an outstanding reputation for creating reliable appliances? Reparability: buyers prefer products that are easy to repair. conformance. strong style does not always means high performance. accuracy and customer care. Style: Style is look and feel of the product to the customer. called the Vitamin Institute. has built an impressive reputation for shipping out its checks one day after receiving an order. reparability and style. Deluxe check printer. Most of the time. Customer consulting refers to data.Davidson motorcycle. reliability. Installation: refers to the work done to make a product operational in its planned location. repair and dispose of. cuistomers are normally willing to pay a premium for products that are attractively styled. a well-designed product is one that is pleasant to look at and easy to open. . Style has the advantage of creating distinctiveness that is difficult to copy. Aesthetics have played a key role in such brands as Absolute vodka. an important consideration for many products. Design is the integrating force that incorporates all of the qualities... the key to competitive success may lie in adding valued services and improving their quality. Reparability is a measure of the ease of fixing a product when it malfunctions or fails.measure of the probability that a product will not malfunction or fail within a specified time period.com to offer even more health-related information. For a company a well-designed product is one that is easy to manufacture and distribute. information system and advising services that the seller offers to buyers.
Well. An effective image establishes the product’s character and value proposition.” What does a buyer think? To a buyer. Channel differentiation Companies can achieve competitive advantage through the way they design their distribution channels’ coverage.trained personnel exhibit six characteristics: competence.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: - . expertise and performance. Frito-Lay. The McDonald’s people are courteous. are better trained and performance more reliability than competitors dealers. credit. Image differentiation Customer will response differently to company and brand image. price is the sum of all the values that consumers exchange for the benefits of having or using the product or service.The amt of money charged for a product or service. courtesy. Caterpillar’s success in the construction –equipment industry is based partly on superior channel development. For the image to work. The sales forces of such companies as General Electric. and Northwestern Mutual life enjoy an excellent reputation.is exchanged for satisfaction or utility. PRICING Price is the amount of money charged for a product or service. or the sum of the values that consumers exchange for the benefits of having or using the product or service. price is the value placed on what is exchanged. media and special events. and when it enter bids on new contract work. responsiveness and communication. credibility. Image is affected by many factors beyond the company’s control. Singapore Airlines enjoys an excellent reputation in large part because of its fight attendants. More broadly. Its dealers are found in more locations. Something of value -usually purchasing power . Setting the Price. whereas image is the way the public perceives the company or its products. For example. “One can define price as that which people have to forego in order to acquire a product or service. Cisco.Pricing Policy: A firm must set a price for the first time when it develops a new product. PRICE. Nike mainstream popularity turns off 12-to24-years-olds. Identity comprises the ways that a company aims to identify or position itself or its product. and wealth. when it introduces its regular product into a new distribution channel or geographical area. Dell computers has also distinguished itself by developing and managing superior direct-marketing channels using telephone and internet sales. the IBM people are professional and the Disney people are upbeat. including logos. it conveys this character in a distinctive way and it delivers emotional power beyond a mental image. who prefers Airwalk and other alternative brands that convey amore extreme sports image. reliability. Purchasing power depends on a buyer’s income. it must be conveyed through every available communication vehicle and brand contact.
cash flow or rate of return on investment. They estimate the demand and costs associated with alternative prices and choose the price that produces maximum current profit. A company can pursue any of five major objectives through pricing: survival. the firm needs to determine demand. They set the lowest price. the company stays in business. This strategy assumes that the firm has knowledge of its demand and cost functions. the easier it is to set price. maximum current profit. assuming the market is price sensitive. maximum market share. Many companies try to set a price that will maximize current profits. Production and distribution costs fall with accumulated production experience. or product-quality leadership. They believe that a higher sales volume will lead to lower unit costs and higher long-run profit. In the normal case. Survival is a short-run objective: in the long run. a low price discourages actual and potential competition Companies unveiling a new technology favor setting high prices to “skim” the market. or changing consumer wants. the firm must learn how to add value or face extinction. demand .Following the identification of objectives.Selecting the pricing Objective The company first decides where it wants to position its marketing offering. Some companies want to maximize their market share. Sony is a frequent practitioner of market skimming pricing. Companies pursue survival. in reality these are difficult to estimate. and a low price stimulates market growth. The following conditions favor setting a low price The market is highly price sensitive. The clearer a firm’s objectives. Each price will lead to a different level of demand and therefore have a different impact on a company’s marketing objectives. as their major objective if they are plagued with overcapacity intense competition. Determining the demand . 2. maximum market skimming. As long as prices cover variable costs and some fixed costs.
competitors’ prices provide an in be. They are also less price-sensitive when price is only a small part of the total cost of obtaining. prices and offers is also important factor in setting prices . the firm must take the competitor’s costs. However if the price is too high. .Demand sets a ceiling on the price the company can charge for its product. Selecting a pricing method - .tween point you must consider in setting prices.and price are inversely related: the higher the price. These c o s t s r e l a t e with pricing. then you will have to price close to the competitor or lose sales. engineers and purchasing agents to reduce them. If your product or service is similar to a major competitor’s product or service. Estimating and analyzing demand curve iii. Average cost is the cost per unit at the level of production. Estimating Costs .Costs change as a result of a concentrated effort by designers.In the case of prestige goods. There are different costs of organization. A seller can charge a higher price than competitors and still get the business if the company can convince the customer that it offers the lowest total cost of ownership (TCO). it is equal to total costs divided by production. Estimating Price sensitivity of market ii. They deduct the desired profit margin from this price. TARGET COSTING . These costs tend to be constant per unit produced. Company should also be aware that competitors might even change their prices in response to your price. The Japanese use a method called target costing. While demand sets a ceiling and costs set a floor to pricing. Within the range of possible prices determined by market demand and company costs. Determining price elasticity of demand. A company’s cost take two forms. Also ask customers how they perceive the price and quality of each competitor’s product or service. If your product or service is inferior. prices and possible price reactions into account. the level of demand may fall. Learn the price and quality of each competitor’s product or service by sending out comparison shoppers to price and compare. The process of estimating demand therefore leads to i. They are called variable because their total varies with the number of units produced. Variable costs vary directly with the level of production. given its appeal and competitor’s prices. To price intelligently. management needs to know how its costs vary with different levels of produc tion. Then they determine the price at which the product will sell. fixed and variable. salaries and so on. 4. E. interest.g. 5. A company must pay bills each month for rent heat. 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. prices and offers A nalyzing competitor’s costs. Acquire competitors’ price lists and buy competitors’ products and analyze them. They use market research to establish a new product’s desired functions. Total and variable costs for any given level of production. the lower the demand . Regardless of output. operating and servicing the product over its lifetime. Perfume Company raised its price and sold more perfume rather than less! Some consumers take the higher price to signify a better product. Analyzing competitor ’s costs. the demand curve sometimes slopes upward. 3. Fixed costs (also known as overhead) are costs that do not vary with production or sales revenue. and this leaves the target cost they must achieve. you will not be able to charge as much as the competitor.
only known to client and not to the other parties tendering for the service). Like full cost pricing. with less attention paid to its own costs or to demand. the firm bases its price largely on competitors’ prices.There are three pricing methods that can be employed by a firm: 1. this method will include a profit margin in the final price. The risk here is that other customers who paid the full price may find out about the discounted offer and complain. machinery etc) will remain unaffected whether one unit or one thousand units are produced. Cost Oriented Pricing 2. In selecting that price. 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. For new products.Many contracts are won or lost on the basis of competitive bidding. These remaining seats may be offered at a discount so that some contribution is made to the flight expenses. Competitive Bidding . price will depend upon positioning. firms bid for jobs.Companies often use cost oriented pricing methods when setting prices. . the company must consider additional factors. The most usual process is the drawing up of detailed specifications for a product and putting the contract out for tender. aircraft seats or hotel rooms lie idle. Potential suppliers quote a price. including psychological pricing. 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.sion is dependent on other earlier decisions in the marketing planning process. Marketing Oriented Pricing . distribution and product benefits. company –pricing policies. 6. The is an almost impossible prediction. which are likely to increase as output increases.Pricing methods narrow the range from which the company must select its final price.gic objectives. Competitor Oriented Pricing 3. 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. which is confidential to themselves and the buyer. Competition-based approach . or less than its major competitors. The firm might charge the same. Direct cost approach is useful when pricing services for example. This method focuses upon the internal costs of the firm as opposed to the prospective customers’ willingness to pay. if they are unused on a flight then the revenue is lost. promotion. strategy. Direct costs then. and the impact of price on other parties. Two methods are normally used Full cost pricing . indicate the lowest price at which it is sensible to take business if the alternative is to let machinery. the influence of other marketing –mix elements on price. Selecting the final Price . and for existing products price will be affected by strate. Indirect or fixed costs (plant. Consider aircraft seats.Here the firm determines the direct and fixed costs for each unit of product.e. with the firms basing the price on what it thinks other firms will be bidding rather than on its own costs or demand. Marketing Oriented Pricing Cost Oriented Pricing . In sealed-bid pricing (i.This involves the calculation of only those costs. gain and risk pricing. Direct (or marginal) Cost Pricing .Going-Rate Pricing In going-rate pricing. All other things being equal the buyer will select the supplier that offers the lowest price. The way around this problem is to recognize that the pricing deci. more.The price of a product should be set in line with the marketing strategy. 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. strategic objectives. The first problem with Full-cost pricing is that it leads to an increase in price as sales fall.
For example. Counter trade may account for 15 to 25 percent of world trade and takes several forms: barter. equipment. American compa nies are often forced _o engage in counter trade if they want the business. Discounting is common in many industries . Barter: The direct exchange of goods.DIFFERENT PRICING STRATEGIES 1. a practice known as counter trade. . The trouble is that.The role of discount Offering discounts can be a useful tactic in response to aggressive competition by a competitor. 2. 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. Geographical pricing (cash. Price discounts and allowances . 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. A British aircraft manufacturer sold planes to Brazil for 70 percent cash and the rest in coffee. buyback agreements. 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.in some it is so endemic as to render normal price lists practically meaningless. all too often. This is not to say that there is anything particularly wrong with price dis. discounting can be dangerous un. Customers in different locations and countries. For example. However.Geographical pricing involves the’ company in deciding how to price its products to different. or technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment. A US. Barter) . Chemical company built a plant for an Indian company and accepted partial payment in cash and the remainder in chemicals manufactured at the plant.counting provided that you are getting something specific that you want in return. Counter trade. compensation deals. This issue is critical when buyers lack sufficient hard currency to pay for their purchases. 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. companies get themselves embroiled in a complex structure of cash. Buyback arrangement: The seller sells a plant. Many buyers want to offer other items in payment. quantity and other discounts. whilst getting absolutely nothing in return except a lower profit margin. and offset.less carefully controlled and conceived as part of your overall marketing strategy.
Special-event pricing: Sellers will establish special prices in certain seasons to draw in more cus. Warranties and service contracts: Companies can promote sales by adding a free or low.tomers Cash rebates: Auto companies and other consumer-goods companies offer cash rebates to Encour.ments above will apply to you. stretch loans over longer periods and thus lower the monthly payments. locations.cost warranty or service contract.age purchase of the manufacturers’ products within a specified time period. whether they are effective. and so on. 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. Promotional Pricing .e. as in the following cases: . and how long they are expected to last. 3. If they work. In third-degree price discrimination. Discriminatory pricing . the company can offer customers lowinterest financing. In second-degree price discrimination. Manufacturers have tried to restrain intermediaries from loss leader pricing through lobbying for retail-price -maintenance laws.Companies can use several pricing techniques to stimulate early pur. Rebates can help clear inventories without cutting the stated list price. In part your ability to minimize discounts. the seller charges different amounts to different classes of buyers. especially mortgage banks and auto companies. Automakers have even announced no-interest financing to attract Customers. will depend on the non-price benefits of your product. whatever business you are in. In general. 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. products. the seller charges less to buyers who buy a larger volume. they waste money that could have been put into other marketing tools.chase: Loss-leader pricing: Supermarkets and department stores often drop the price on wellKnown brands to stimulate additional store traffic. Low-interest financing: Instead of cutting its price. the interest rate) of a loan and more about whether they can afford the monthly payment. Consumers often worry less about the cost (i. competitors Copy them and they lose their effectiveness. This pays if the revenue on the additional sales compensates for the lower margins on the) boss-leader items. 4. In first. But.degree price discrimination. Longer payment terms: Sellers.Clearly the role of discounts will vary from one type of business to another and not all of the com.. such as building up product quality and service or strengthening product image through advertising. but these laws have been revoked. or eliminate them altogether.Companies often adjust their basic price to accommodate differences in customers. keep standard discounts low to retain maximum flexibility and ensure that they are consistent with your overall marketing and pricing strategy. 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. you should always ask yourself what your discounts are supposed to achieve. the seller charges a separate price to each customer depending on the intensity of his or her demand.
cial users by time of day and weekend versus weekday. Product line Pricing: Companies normally develop product lines rather than single products and introduce price steps. Restaurants charge less to “early bird” customers. the market must be segment able and the segments must show different intensities of demand. Pricing is difficult because the various products have demand and cost interrelationships and are subject to different degrees of competition. In this case. senior citizen). Hotels and airlines use yield pricing. optional-feature pricing.200. For instance. Time pricing: Prices are varied by season. First. by which they offer lower rates on unsold inventory just before it expires. and price it at Rest. military. New software applications. museums often charge a lower admission fee to students and senior citizens.price segment. a fast-food restaurant. by-product pricing. competitors must not be able to undersell the firm in the higher-price segment.ences at. depending on the seat. the cost of segmenting and policing the market must not exceed the extra revenue derived from price discrimination. or a vending machine. 50. In many lines of trade. and so on. are also allowing buyers to discrimi. competitors have increased their use of discrimina. the firm searches for a set of prices that maximizes profits on the total mix.tomize offers and prices. the time of day (morning or night coach). However. day. Airlines charge different fares to passengers on the same flight.Price-setting logic must be modified when. Third.Customer-segment pricing: Different customer groups are charged different prices for the same product or service. Fourth. certain conditions must exist. Product-mix pricing . the practice must not breed customer resentment and ill will.ing class. Must not be able to resell the product to the higherprice segment. the product is part of a product mix. past business. members in the lower. A perfume manufacturer can put the perfume in one bottle. Airlines are using yield pricing to capture as much revenue as possible. the particular form of price discrimi. 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. give it a name and image. customers so disliked the idea that Coke abandoned it. Sixth. Fifth. Computer technology is making it easier for sellers to practice discriminatory pricing. and product-bundling pricing. and lowering the price on cold days. For example. Of status (youth. Public utilities vary energy rates to commer. As a result of deregulation in several industries. the day of the week (workday or weekend). the person’s company. they can use software that monitors customers’ movements over the Web and allows them to cus. sellers use well-established price . We can distinguish six situations involving product-mix pricing: product-line pricing. Second. how-ever. 5. Coca-Cola considered raising its vending machine soda prices on hot days using wireless technology. A theater varies its seat prices according to audience preferences for different locations.nation must not be illegal. two-part pricing.nate between sellers by comparing prices instantaneously. It can put the same perfume in another bottle with a different name and image and price it at Rs. For price discrimination to work. the season.tory pricing. Hotels charge less’ on weekends. Channel pricing: Coca-Cola carries a different price depending on whether it is purchased ill a fine restaurant. captive-product pricing. Location pricing: The same product is priced differently at different locations even though the cost of offering at each location is the same. or hour.
A theater company will price a season subscription at less than the cost of buying all the performances separately.points for the products in their line.Some products requires the use of ancillary. Many restaurants price their liquor high and their food low. The seller’s task is to establish perceivedquality differences that justify the price differences. a firm can also initiate to increase the price. the seller normally charges less for the bundle than if the items were purchased separately. By-product pricing . Amusement parks charge an admission fee plus fees for rides over a certain minimum.1500. An auto manufacturer might offer an option package at less than the cost of buying all the options separately. and other chemi. light dimmers. Pure bundling occurs when a firm only offers its products as a bundle. Two-part pricing . products. Rs. petroleum products. the profit can then be made on the usage fees. PRICE CHANGES Companies often face situations where they may need to cut or raise prices. and the liquor produces the profit. Initiating price increases Like price cuts . Other restaurants price their liquor low and food high to draw in a drinking crowd.Sellers often bundle products and features. respectively. The automobile buyer can order electric window controls.meats. they should be priced on their value. and Rs. When offering a mixed bundle. The key issues associated with initiating price changes are the circumstances that may lead a company to raise or lower prices. or captive. the tactics that can be used. The service firm faces a problem sin1ilar to captive product pricing-namely. automobiles companies must decide which items to include in the price and which to offer as options. Optional-feature pricing ‘Many companies offer optional products. Customers will associate low-. and high-quality suits with the three price points. A men’s clothing store might carry men’s suits at three price levels: Rs800. Telephone users pay a minimum monthly fee plus charges for calls beyond the minimum number. A cellular service operator may give a cellular phone free if the person commits to buying two years of phone service.Service firms often engage in two-part pricing. If the by-products have value to a customer group. The food revenue covers costs. and estimating competitor reactions. A successful price increase . how much to charge for the basic service and how much for the variable usage. defoggers.cals—often results in by-products.facturers of razors and cameras often price them low and set high markups on razor blades and film. the savings on the price bundle must be substantial enough to induce them to buy the bundle. 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. This explains why servers often press hard to get customers to order drinks.4500. Captive-product pricing . Product-Bundling pricing . Pricing is a sticky problem. Because customers may not have planned to buy all the components. Customers can often order liquor in addition to the meal. Manu. consisting of a fixed fee plus a variable usage fee. average-. and an extended warranty. Restaurants face a similar pricing problem. The fixed fee should be low enough to induce purchase of the ser-vice. the seller offers goods both individually and in bun-dles. Any income earned on the by-products will make it easier for the company to charge a lower price on its main product if competition forces it to do so. features. and services along with their main product. In mixed bundling.The production of certain goods.
in anticipation of further inflation and govt. When an automaker signs up independent dealers to sell its automobiles. in a practice called anticipatory pricing. Rising costs un. such as free delivery or installation. Escalator clauses are found in contracts for major industrial projects. In addition. The firm’s sales force and advertising decisions depend on how much training and motivation dealers need. The channels chosen intimately affect all the other marketing decisions. . if the company’s profit margin is 3% of sales. They can be shifted among channel members. ration supplies to its customers. like aircraft con. a 1% increase will increase profits by 33% if sales volume is unaffected. and deliver its offerings Marketing channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption! Marketing-channel decisions are among the most critical decisions facing management. Escalator clauses: The company requires paying today’s price and all or part of any inflation in. This pricing is prevalent in industries with long production lead times. such as industrial construction and heavy equipment. augment.quality boutiques. The company’s pricing depends on whether it uses mass-merchandisers or high. An escalator clause bases price increases on some specified price index.crease that takes place before delivery. Over demand: when a company cannot supply all of its customers. price controls. The circumstances provoking price increases are generally as follows: Cost inflation: A major circumstance provoking price increases is cost inflation. Company -owned outlets.can raise profits considerably. 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. Unbundling: The Company maintains its price but removes or prices separately one or more ele. the automaker cannot buy them out the next day and replace them with. We define a value network as follows: A value network is a system of partnerships and alliances that a firm creates to source. 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. Reduction of discounts: The company instructs its sales force not to offer its normal cash and quantity discounts. For example. Distribution Channel Function: All channel functions have three things in common: • • • They use up scarce resources. They can often be performed better through specialization. Companies often raise their prices by more than cost increase. it can raise its prices.ments that were part of the former offer. the company’s channel decisions involve relatively long-term commitments to other firms. or both.matched by productivity gains squeeze profit margins and lead companies to regular rounds of price increases.struction and bridge building.
2. repairs) provided by the channel.put levels under competitive conditions. Identify Major Channel Alternatives Companies can choose from a wide variety of channels for reaching customers-from .vided by the-marketing channel.tomers prefer a greater assortment because more choices increase the chance of finding what they need. cus.DITRIBUTION CHANNEL FUCTION DAIGRAM CHANNEL DESIGN DECISIONS: Following four steps help design a channel system :1. Products requiring installation or maintenance services. Channels produce five service outputs Lot size : The number of units the channel permits a typical customer to purchase on one occasion. are sold directly by company sales representatives. Perishable products require more direct marketing. delivery.sired by target customers. the greater the work provided by the channel. Analyzing customer needs 2. customers normally prefer fast delivery channels. Establishing channel objectives 3. Evaluating major channel alternatives 1. such as custom-built machinery and specialized business forms. Normally. Waiting time : The average time customers of that channel wait for receipt of the goods. Channel objectives vary with product characteristics. Identifying major channel alternatives 4.ping distance and the amount of handling. Establish Objectives and Constraints Channel objectives should be stated in terms of targeted service out. Spatial convenience : The degree to which the marketing channel makes it easy for customers to purchase the product Product variety: The assortment breadth pro. the marketer must understand the service output levels de. Service backup: The add-on services (credit. Effective planning requires determining which market segments to serve and the best channels to use in each case. 3. installation. several market segments that desire differing service output levels can be identified. channel institutions should arrange their functional tasks to minimize total channel costs with respect to desired levels of service outputs Usually. The greater the service backup. such as building materials. Non standardized products. Analyze Customers’ Desired Service Output Levels It is imperative to understand that in designing the marketing channel. Bulky products. require channels that minimize the ship.
Each channel has unique strengths as well as weaknesses. Exclusive distribution 2. Sales forces can handle complex products and trans. but it cannot handle complex products. The problem is further complicated by the fact that most companies now use a mix of channels. Conditions of sale 3. but they are expensive. dealers. 4. Price policy 2. Selective distribution 4. but the company loses direct contact with customers. • the number of intermediaries needed. image parameters particularly) Economic criteria—sales versus costs Control and adaptive criteria—degree of intermediary commitment Channel Management Decision: Channel management calls for selecting particular middlemen and motivating them with a cost. Intensive distribution the terms and responsibilities of each channel member. Distributors’ territorial rights 4. 1. telemarketing. 2.effective trade relations mix. cost. there is usually channel conflict and excessive cost. Evaluate the Major Alternatives (time.actions. Selecting Channel Members Training Channel Members Motivating Channel Members Evaluating Channel Members Modifying Channel Arrangements . The aim is to build a “partnership” feeling and joint distribution programming. The Internet is much less expensive. direct mail. When this does not hap. Exclusive dealing 3. distributors. A channel alternative is described by three elements • The types of available business intermediaries. Distributors can create sales. and 1. 3. 5. 1. and the Internet.sales forces to agents.pen. Each channel hopefully reaches a different segment of buyers and delivers the right products to each at the least cost.
be. Producers should set up functional discounts in which they pay specified amounts for the trade channel’s performance of each agreed-upon ser. 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. Selecting channel members would therefore involve evaluate experience.cause they will be viewed as the company by end users . inefficient. Selecting Channel Members Companies need to select their channel members carefully. and cooperation in promotional and training programs. and other capability-building programs to improve intermediaries’ performance. number of lines carried. Evaluating channel members Producers must periodically evaluate intermediaries’ performance against such standards as sales-quota attainment.vice. . Consider the negative impression you would get of McDonald’s. Under performers need to be counseled. or terminated. They prepare the channel member employees to perform more effectively and efficiently The com. average inventory levels. retrained. 3. and reputation 2. or Hyundai if one or more of their outlets or dealers consistently appeared dirty. cooperativeness. re motivated. It needs-to determine intermediaries’ needs and construct a channel positioning such that its. 3. Company needs to view its intermediaries in the same way it views its end users.1. customer delivery time treatment of damaged and lost goods. the channels are the company. . market research programs. channel offering is tailored to provide superior value to these intermediaries Producers vary in their ability to attract intermediaries . growth and profit record solvency.pany should provide training programs. Motivating channel members A. A producer will occasionally discover that it is paying too much to particular intermediaries for what they are actually doing. or unpleasant. To customers. One manufacturer that was compensating a distributor for holding inventories found that the inventories were actual held in a public warehouse at its expense. Training channel members Companies need to plan and implement careful training programs for their intermediaries.
They are evaluated on the following parameters sales quota attainment. average inventory levels. Therefore the system will require periodic modi. Contractual VMS . Modifying channel arrangements A producer must periodically review and modify its channel arrangement. Channel Dynamics: A. wholesalers. the mar. VMS achieve economies through size. consumer buying patterns change. A. cooperation in promotional and training programs 4.fication to meet new conditions in the market. Modification becomes necessary when the „ „ „ „ „ distribution channel is not working as planned. Vertical Marketing System A distribution channel structure in which producers. 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. and the product moves into later stage in the product life cycle. and elimination of duplicated ser-vices. treatment of damaged and lost goods.ket expands new competition arises. and retailers each a separate business seeking to maximize its own profits even at the expense of profits for the system as a whole . Corporate VMS 2. Administered VMS 3. and retailers act as a unified system. One channel member owns the others. innovative distribution channels emerge. or has so much power that they all cooperate. has contracts with them. Conventional Marketing System A channel consisting of one or more independent producers. customer delivery time. VMS s arose as. wholesalers. bargaining power. Vertical marketing system comprises of 1.
not through common ownership or contractual ties. technology. ii. ii.ties. Planning channel architecture (companies thinking through their channel architecture— which are efficient and not. Retailer cooperatives c. i. 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. Product lines 3. strivers. 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. marketing resources or other variables to take on the venture alone iii. Administered VMS A vertical marketing system that coordinates successive stages of production and distribution. customized selling ii. Horizontal Marketing Systems A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity. Amount of service A Self-service retailers Customers are willing to self-serve to save money . Amount of service 2. Types of Retailing. and developing new means) iii.i. lower cost. outside innovators) What is Retailing? Retailing includes all the activities involved in selling goods or services directly to final consumers for personal. iii. complementers. Each firm lacks the capital. but through the size and power of one of the par. non business use. Roles of individual firms in a multi channel system: (insiders. Contractual VMS could have the following forms a Wholesaler-sponsored voluntary chains b.sources or programs. Manufacturer-sponsored retailer franchise or manufacturer-sponsored wholesaler franchise C. Can be permanent or temporary D. i. transients. A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing. Two or more unrelated firms put together re. Multi channel marketing—single firm uses two or more marketing channels to reach one or more customer segments—advantages: increased coverage. Organizational approach 1. 1. Franchise organizations d. Corporate VMS A vertical marketing system that combines successive stages of production and distribution under single ownership—channel leadership is established through common ownership. Relative prices 4.
nonfood. Superstores Food. Supermarkets D. Category killers Giant specialty stores 3. Convenience stores Limited line E. 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. 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 . Product lines A Specialty stores Narrow product lines with deep assortments B Department stores Wide variety of product lines C.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. and services F.
Service mix and Store’s atmosphere The retailers must also decide on the service mix to offer customers Pre-purchase services. window and interior display . alterations and tailoring . 2.gift wrapping .Retail Marketing decisions Various marketing decisions affecting the retail business :Target marketing and positioning Product assortment. the retailer cannot make consistent decisions on product assortment . trade ins. restaurants . engraving.breadth and depth . Most retailers will put low prices on some items to serve as traffic builders or loss leaders. parking .installations. Post purchase include – shipping and delivery . advertising messages and media. repairs etc. Product assortment. and service levels. Until the target market is defined and profiled . The retailer has to decide on product assortment. retailing too is concerned with defining its target market. check cashing . Promotion methods include :Ads Special sales Money saving coupons Sample distribution etc. store décor. 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. store’s atmosphere Price Promotion Place (location) 1. Target Marketing and Positioning Like other marketing activities. shopping hours. fashion shows.accepting telephone and mail orders. . price. 4. advertising. They will run storewide sales. All retailers would like to achieve high volumes and high gross margins. 5. Price Prices are a key positioning factor and must be decided in relation to the target market. They will plan marks down on slower –moving merchandise . The retailer’s product assortment must match the target market’s shopping expectations. fitting rooms . adjustments and returns. The challenge is to develop a product-different ion strategy. Service mix. Ancillary services –general information . Retailers must also pay attention to pricing tactics. the product and service assortment mix and competition. Promotion Retailers use a wide range of promotion tools to generate traffic and purchases.
New retail forms and combinations 2 . While the middle class may not be as big as expected.5 billion. space and rentals are proving to be the largest constraints to development of large formats in metropolitan cities. Besides. you ought to be in retailing. Place Location is often described as the most successful strategy for retailing. these modern formats are showing robust growth as several retail chains have established a base in metropolitan cities. 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. since retailers are aiming the prime .7 billion. Global presence of major retailers 6. The concept of retailing chain stores is at a very nascent stage in India. a regional shopping center . Growing investment in technology 5 . Retail Infrastructure In 2001. However. the country is also dotted with low-cost kiosks and pushcarts. the retail sector is the second largest employer after agriculture. organised retail trade in India was worth Rs11. Selling an experience.039. Or you’re miss.tail outlets in the country. Retailers can locate their stores in the central business district. owner-managed shops. Growth of intertype competition. chemist shops. it could still add up to say the sizeable number. a billion people in overall population leads to very large numbers. department stores and even changing the traditional looks of book. The share was 62. The retailing sector in India is highly fragmented and predominantly consists of small independent.228. There are no hypermarkets in the country as yet.stores.6. especially in south India. This trend towards larger outlets is leading to a rise in average retail space. More and more players are coming into the retail business in India to introduce new formats like malls. Organized retailing represent a small fraction of the Indian retail market. not just goods Retailing in India: Are you game for it!!!!! They say ‘If you aren’t in IT or entertainment. Growth of giant retail 4 .7% in 2001. worth approximately Rs7.ing the boom times altogether.2 million re. Total retail sales area in India was estimated at 328 million sq m in 2001.’ In India. there were an estimated 11. How. There are some 12 million retail outlets in India.ever.comes of the middle class households. supermarkets. and are spreading all over India at a rapid pace. Food sales constitute a high proportion of total retail sales.4 sq m per outlet.food sales were worth Rs4189. There has been a boom in retail trade in India owing to a gradual increase in the disposable in. However. discount stores.2 billion in 2001 while non. 3 . the non-food retailing sector registered faster year-on-year growth than food sales. with an average selling space of 29. In 2001. More so. and furnishing stores.
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. More and more women are also turning to corporate jobs. each retail business at the time of writing was run as a separate entity. There is also a strong trend in favour of onestop shops like supermarkets and department stores.stores. The anchor is expected to attract a variety of con.tailing sector is not permitted yet. Bata is synony. Retail Forecasts The retail business is expected to reach Rs19. in.sumers and hence is the key to increasing foot traffic. With almost a monopolistic presence in the organised footwear market until the 1980s. Shoppers Stop. families are experiencing growth in income and dearth of time. The lobby is based on the premise that modern retail will impact the livelihood of millions of small family-run businesses. Another strong retailer is Subhiksha. Health & Glow.endowed malls and shopping centres. with further growth of organised retailing. with a mar. Key Developments in Retailing 100% foreign direct investment (FDI) in the re. music stores and the beauty and health chain. whose discounters and chemists/druggist chain is very popular in South India.3 billion by 2006. However. There is a strong lobby of small traders that has been vocal on the issue of not permitting FDI into retail. The turnover from private labels by major retail chains was estimated at around Rs 1200 million in 2001. Spencer & Co Ltd another large retail group in the country. Competitive Environment Bata India Ltd is one of the largest retailer.locations. well. Rising incomes has led to increasing demand for better quality products while lack of time has led a demand for convenience and service. is the second largest fascia in the country with retail sales of Rs2. They have big label stores as well as in. Shopping malls is set to one of the most visible faces of the Indian retail scene by the end of 2002. airy and equipped with modern amenities.keting arrangement with Lotto and Nike as well. In urban India. The number of large mega-malls is expected to increase significantly as India is now experiencing a “mall boom”. It has also acquired the Crossword chain of book. especially in the metropolitan and large cities in India. ready-to-eat food has been on the rise.house eateries and entertainment zones. The demand for frozen. The real estate development group has converted its retailing operation into an Indian success story. while Health & Glow by RPG Group.kets Ltd. in order to protect the interests of the small retailers. The stores retail mainly Bata products. The mid 1990s marked the arrival of new. ready-to-cook.stant. Foodworld is operated by Foodworld Supermar. The trend to market private labels by a specific retail chain is catching on in India as it helps to improve margins. . The K Raheja-run department store chain. with 1600 footwear stores spread across the country. which are spacious.7 billion in 2001. According to estimates apart from the metropolitan and larger cities.069. and a retail turnover of Rs6 billion in 2001. Each mall typically has an anchor. in both food and non-food segments.mous with footwear in middleclass India. The proportion of sales through organised retailing is estimated to increase to around 6% by 2010. which occupies a sizeable percentage of the total usable area. with interests in supermarkets.
the more successful ones will be those that provide faster service. in both food and nonfood sectors. promotion. or mill supply houses and fall into two categories: full service and limited service. In the future. it is predicted that the time available for shopping will go down. make deliveries. but at the same time.There is already a strong trend in favour of large format retail outlets. Wholesalers who fail to carry adequate assortments and inventory and provide satisfactory ser. This would continue more strongly in the forecast pe. pricing.riod. as people are showing preference for one-stop shops. Full-Service Wholesalers: Carry stock. In such a scenario. There are two types of full-service wholesalers (1) Wholesale merchants sell primarily to retailers and provide a full range of service . with more dual income families. Merchant Wholesalers: Independently owned businesses that take title to the merchandise they handle.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. distributors. 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. the retailers will have to increasingly develop shopping as an experience and at the same time. 1. offer credit. and place. Selling and promoting Buying and assortment building Bulk breaking Warehousing Transportation Financing Risk bearing Market information Management services and counseling Types of Wholesaling. Wholesaler Marketing Decisions Wholesalers also must make decisions on their target market. offering credit. product assortment and services. .vice are likely to be bypassed by manufacturers. maintain a sales force. Following are the functions performed by wholesalers.General-merchandise wholesalers carry several merchandise lines.General-line wholesalers carry one or two lines. and providing delivery. Customers are also looking for ambience and convenience in shopping. They are called jobbers. adapt marketing concepts and streamline their costs of doing business. and provide management assistance. on the other hand. . the consumer ability to spend will increase. Target Market Product Assortment and Services .
but the title will remain with the producer.g. They sell on to a wholesaler that will store it and eventually resell to a retailer.ages for resale by a retailer. Many produce their own brochures and use their own telesales operations. electrical wholesalers. They do not tend to take title to the goods.selves e. A wholesaler will often take on the some of the marketing responsibilities. 4. will store the stock. and Jumbo in Portugal. Retailers will often offer credit to the customer e. the Internet. Scottish Salmon direct from an Inverness fishery. customer service costs. This approach is used where goods need to get into a market soon after the order is placed e. Products and services are promoted and merchandised by the retailer. cheese manufacturers seldom wait for their product to mature. Ross and Wall-Mart in the USA. There is a paradigm shift in commerce and consumption which benefits distribution via the Internet. . direct marketing (from manufacturer to user without an intermediary). or sales force costs. Channel Intermediaries .Internet The Internet has a geographically disperse market. They are difficult to keep control of due to the physical distances involved. An agent will typically secure an order for a producer and will take a commission. 1. They provide storage facilities. The main benefit of the Internet is that niche products reach a wider audience e. Channel Intermediaries . a ‘stockist agent’ will hold consignment stock (i. Channel Intermediaries . There are low barriers low barriers to entry as set up costs are low. The main modes of distribution will be looked at in more detail. 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. agents.g. They are difficult to motivate. For example. A consumer will expect to be ex. The retailer will hold several other brands and products. Channel Intermediaries .g.Retailers Retailers will have a much stronger personal relationship with the consumer. 2. They buy from producers and resell to retailers. foodstuffs).g.g. retailers.e.Wholesalers They break down ‘bulk’ into smaller pack. and many others. Agents can be very expensive to train. The retailer will give the final selling price to the product. However. They take ownership or ‘title’ to goods whereas agents do not (see below). Retailers often have a strong ‘brand’ them.tact cost between the producer and consumer e. and Alisuper. Modelo. 3. This means that capital is not tied up in goods. over. or travel agents.osed to many products.Agents Agents are mainly used in international markets.seas distributors.
how to say it. groups. and feedback. Two represent the major parties in a communication – sender and receiver.The marketer can be seeking a cognitive. groups. Determine the communication objectives . or organisations to di. That is. The last element in the system is noise (random and competing messages that may interfere with the intended com. when to say it. deconding. Four represent major communication function – encoding. Developing an Effective Communications 1. and to whom to say it. They must transmit the message through media that reach the target audience and develop feedback channels. To monitor the responses.one interested in purchasing a new computer would talk to others. or remind target market members. 2. see television ads. Two represent the major communication tools – message and media. the more effective the message is likely to be. Identify the target audience -The process must start with a clear target audience in mind: potential buyers of the company’s products. response.ucts. Marketers also need to understand the fundamental elements of effective communications.rectly or indirectly facilitate exchanges by in. read articles. persuade. or behavioral response. affective. They must encode their messages so that the target audience can decode them. some. Definition: Promotion is communication about an organization and its products that is intended to inform. The target audience is a critical influence on the communicator’s decisions on what to say. The more the sender’s field of experience overlaps with that of the receiver. cur. and observe computers in a store. individuals. or influencers. look for information on the Internet. Promotion’s role is to communicate with individuals. or the general public. deciders. Senders must know what audiences they want to reach and what responses they want to get. Figure above shows a communication model with nine elements.PROMOTION.munication). Marketers need to assess which experiences and impressions will have the most influence at each stage of the buying process. .INTEGRATED MARKETING COMMUNICATION Marketing communications which is one of the four major elements of the company’s marketing mix. THE COMMUNICATION PROCESS: The whole marketing mix must be integrated to deliver a consistent message and strategic positioning. The model emphasizes the key factors in effective communication. For example. the marketer might want to put something into the consumer’s mind. A promotion mix (sometimes called a marketing communications mix) is the particular combination of promotional methods a firm uses to reach a target market. The starting point is an audit of all the potential interactions target customers may have with the product and the company. This understanding will help them allocate communications dollars more efficiently. particular publics.forming and persuading one or more of the audiences to accept an organisation’s prod.rent users. where to say it.
management searches for an appeal. arouse desire.) how to say it logically ( message structure ). the communicator has to decide on headline. Ideally. texture. idea. Message content: In determining message content. gestures. copy. size. the communicator moves to developing an effective message.Having defined the desired response. how to say it symbolically ( message format). and color. and elicit action Formulating the message will require solving four problems: what to say ( message content. voice qualities. and hairstyle. Hold interest. the communicator has to pay attention to color. all these elements plus body language ( nonverbal clues) have to be planned. illustration. This is why advertisers often use celebrities . and moral.3. posture.What is important is the spokesperson’s credibility. The “sound” of an announcer promoting a used automobile has to be different from one promoting a new Cadillac. the message should gain attention. theme. If the message is carried by the product or its packaging. There are three types of appeals: rational. Presenters have to pay attention to facial expressions. or unique selling proposition ( USP). . the communicator has to choose words. If the message is to be carried on television or in person. Anti drug crusaders will use ex-drug addicts because they have higher credibility for students than teachers do. emotional. and shape Message source Message delivered by attractive or popular sources achieve higher attention and recall. Message structure Effectiveness depends on structure as well as content Message format The message format needs to be strong. and vocalizations. scent. For a radio message. dress. In a print ad. Pharmaceutical companies what doctors to testify about product benefits because doctors have high credibility. Design the message . and who should say it (message source).
and direct marketing. special interest magazines. Deciding on the marketing communications mix . A major goal of integrated marketing communications is to send a consistent message to customers. C. and even telemarketing. Here is how one company touches several bases. sending direct mail ( including audio and videotapes ). “ know that half of my advertising is wasted. pharmaceutical company salespeople can rarely wrest more than five minutes’ time from a busy physician. and voice broadcasts.What factors underlie source credibility? The three most often identified are expertise.Companies must allocate the pro. This approach fosters long-term customer relationships and the efficient use of promotional resources. sales force. Their presentation must be crisp. Database marketing is also allowing marketers to be more precise in targeting individual customers. the Internet. CD ROMS.The communicator must select efficient channels to carry the message.motion budget over the give promotional tools – advertising. but I don’t know which half. This makes pharmaceutical sales calling extremely expensive. trustworthiness. such as cable TV. attractive. The concept of integrated marketing communications has been increasingly accepted for a number of reasons. These include placing ads in medical journals. Mass media advertising is used less today because of its high costs and less predictable audience sizes. . For example. public relations and publicity.One of the most difficult marketing decisions is determining how much to spend on promotion. Establish the total marketing communication budget . 5. direct mail. 4. Marketers can now take advantage of more precisely targeted promotional tools. Integrated marketing communications is the coordination of promotion efforts to ensure the maximum informational persuasive impact on customers. John Wanamaker. D. and likability.store magnate. passing out free samples. quick. B.” 6. Select the communication channels . and convincing. once said.ness. the department. The industry has had to expand its battery of communication channels. sales promotion. What Is Integrated Marketing Communications? A.
Advertising objectives can be classified according to whether their aim is to in. goods. market positioning. is a far cry from these early efforts.uct image building and tend to under spend There are five specific factors to consider when setting the advertising budget: . and the Phoenicians painted pictures promoting their wares on large rocks along parade routes. and marketing mix. 2.” Comparative advertising works best when it elicits cognitive and affective motivations simultaneously. Some persuasive advertising uses comparative advertising.The advertising objectives must flow from prior decisions on target market. however. persuade. Deciding on the advertising budget . which makes an explicit comparison of the attributes of two or more brands. Modern advertising. setting the advertising budget. developing advertising strategy (message decisions and media decisions). Informative advertising aims to create awareness and knowledge of new products or new features of existing products.form. Advertising can be traced back to the very beginnings of recorded history. and purchase of a product or service. DEVELOPINGADVERTISEMENT PROGRAM Marketers must make four important decisions when developing an advertising program. Setting the advertising objectives . Ex. preference. The Romans painted walls to announce gladiator fights. or services by an identified sponsor. Persuasive advertising aims to create liking.Any paid form of non personal presentation and promotion of ideas. conviction. setting advertising objectives.Define Advertising Advertising. 1.pensive. Reminder advertising aims to stimulate re. Automobile ads often depict satisfied customers enjoying special features of their new car. and that industrial companies underestimate the power of company and prod. remind. Archaeologists working in the countries around the Mediterranean Sea have dug up signs announcing various events and offers. four-color Coca-Cola ads in magazines are intended to remind people to pur.. and evaluating advertising campaigns. or reinforce.Some critics charge that large.chase Coca-Cola Reinforcement advertising aims to convince current purchasers that they made the right choice.peat purchase of products and services. consumer packaged-goods firms tend to overspend on advertising as a form of insurance against not spending enough.
and believability Message execution The message’s impact depends not only on what is said. frequency.New products typically receive large advertising budgets to build awareness and to gain consumer trial. coffee. 3. Some ads aim for rational positioning and other for emotional positioning. Choosing the advertising message: Message generation: advertising people have proposed different theories for creating an effective message.ness. Evaluating advertising effectiveness .In a market with a large number of competitions and high advertising spending. Most marketers work hard to communicate openly and honestly with consumers. Even simple cluster from advertisements not directly competitive to the brand creates a need for heavier advertising. 3.Good planning and control of advertising depend on measures of advertising effectiveness. Competition and cluster .quire heavy advertising to establish a differential image. Advertising frequency: The number of repetitions needed to put across the brand’s mes. 4. Stage in the product life cycle . Product substitutability: Brands in a commodity class ( cigarettes.ket size requires larger expenditures. abuses occur. Message execution can be decisive for highly similar products. DIFFERENTADVERTISING MEDIA The advertising media are the various forms of communication through which advertising reaches its audience. Market share and consumer base . To build share by increasing mar. Yet the amount of fundamental research on effectiveness is appallingly small. the advertiser’s next task is to choose media to carry it. and vodka. and public policy makers have developed a substantial body of laws and regulations to govern advertising. beer. . Deciding on media and measuring effectiveness After choosing the message. The steps here are deciding on desired reach.market-share brands usually require less advertising expenditure as a percentage of sales to maintain share.High. Still.sage to consumers has an important impact on the advertising budget. soft drinks ) re. deciding on media timing. 5. Then the results of these decisions need to be evaluated 5. Dik Twedt suggested that messages be rated on desirability. Social responsibility review advertisers and their agencies must be sure their “creative” advertising does not overstep social and legal norms. but often more important. cigarettes. Established brands usually are supported with lower advertising budgets as a ratio to sales. a brand must advertise more heavily to be heard. 4. Advertising is also important when a brand can offer unique physical benefits or features.1. Newspaper advertising accounts for almost one-fourth of all advertising expenditures. and impact. and deciding on geographical media allocation. exclusive. selecting specific media vehicles. on how it is said.per-impression basis. such as detergents. Message evaluation and selection a good ad normally focuses on one core selling proposition. On a cost. Newspapers. it is less expensive to reach consumers of a widely used brand than to reach consumers of lowshare brands. choosing among major media types. 2.
which provide advertisers with geographic flexibility. It is also timely. and it provides highquality color reproduction. Ads are usually read once and then discarded. and signs. Marketers cannot target specific markets through newspaper ads. Outdoor advertising consists of short promotional messages on bill. IV. Some organizations are using direct e-mail. the message must be limited to a few words.. Magazines. There are some drawbacks to newspaper advertising It has a short life span. Direct Mail. Direct mail is the most selective medium: Mailing lists are available (or can be compiled) to reach almost any target audience. . advertising dollars are not wasted in reaching people who are outside the market area. posters. Direct-mail advertising is promotional material mailed directly to individuals. The major disadvantages of magazine advertising are high cost and lack of timeliness. 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. Because it provides only local coverage. III. A direct-mail campaign may fail if the mailing list is outdated and the mailing does not reach the right people. because most outdoor advertising is directed at a mobile audience. Magazine advertising is more prestigious than newspaper advertising. Color reproduction is usually poor. A number of magazines like Time and Cosmopolitan publish regional editions. The medium is especially suitable for products that lend themselves to pictorial display.pared to other media. The advertising revenues of magazines have been climbing. II. Outdoor Advertising. However. and it is fairly inexpensive.Newspaper advertising is used extensively by retailers because it is relatively inexpensive com. Sign and billboard advertising allow the marketer to focus on a particular geographic area. Advertisers can reach very specific market segments through ads in special-interest magazines.boards. Magazine advertisements have a longer life span.
and impact Media selection is finding the most cost-effective media to deliver the desired number and type of exposures to the target audience. Button ads are small squarish ads appearing at the bottom of a web page. Sponsorship (or co-branded) ads integrate a company’s brand with editorial comment. among other things. Internet. radio advertising offers selectivity. Television advertising is the primary medium for larger firms whose objective is to reach national or regional markets. Actual rates depend on geographic coverage. Television advertising rates are based on the number of people expected to be watching when a commercial is aired. frequency . link a specific ad to text or subject matter that an information seeker may enter. Advertisers 8 percent of total expenditures. Advertisers may sponsor an entire show. Choosing among major media types selecting specific media vehicles. a target level of product trial. and impact. Both national and local firms may buy local time on a single station that covers a particular geographic selling area. The Internet is the newest advertising medium and is growing in popularity. on level . 30-. Radio can be less expensive than other media. television advertising has a short life. Interstitial ads (in-your-face ads) pop up to display a product ad when viewers click on a web site. Deciding on media timing. Thereare five types of Internet advertisements. VI. Infomercial. Unlike magazine advertising. the number of commercials contracted for. Even small retailers are able to afford radio advertisements. DECIDING ON MEDIA AND MEASURING EFFECTIVENESS The steps here are Deciding on desired reach. An infomercial is a program-length (usually a half-hour) televised commercial message resembling an entertainment or consumer affairs programs.V. Presumably. featured primarily on Internet search engines. Keyword ads. or they may buy spot time for a single 10-. A national advertiser may buy network time. they may select their audience by choosing the day of the week and the time of day when their ads will be shown. or both. the advertiser is seeking a specified advertising objective and response from the target audience – for example. Radio. frequency. Television. on radio advertising Like magazine ad vertising. which means that its message usually will be broadcast by hundreds of local affiliated stations. 20-. or 60-second commercial during or between programs. Television ranks number one in total revenue. the time period specified. FM. and perhaps like newspaper ads. Banner ads are rectangular graphics appearing at the top of most consumer web sites. they contain only a corporate or brand name. To an extent. and whether the station broadcasts on AM. and Evaluatiing Effectivness (i) Deciding on reach. The rate of product trial will depend. VII.
or to be constant throughout the year. 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). (ii) Choosing among major media types The media planner has to know the capacity of the major media types to deliver reach. the advertiser faced both a macroscheduling and a micro scheduling problem involves scheduling the advertising in relation to seasons and the business cycle. to oppose the seasonal pattern. or newspaper. and Polaroid cameras are best demonstrated on television. frequency. frequency. (iv) Deciding on media timing. Yet some year ago. (iii) Selecting specific vehicles The media planner must search for the most costeffective vehicles within each chosen media type. Suppose 70 percent of a product’s sales occur between June and September. and impact: Reach : The number of different persons or households exposed to a particular media schedule at least once during a specified time period. and the result was a more balanced consumption patters. What counts is the cost-per-thousand exposures. believability. Media planners make their choice among media categories by considering the following variables: Target-audience media habits: For example . A message containing a great deal of technical data might require specialized magazines or mailings. whereas newspaper advertising is relatively inexpensive. Women’s dresses are best shown in color magazines . Other soft drink manufactures started to do the same.drink manufacturer put more money into off-season advertising. TV. The advertiser who decides to buy 30 seconds of Audience size has several possible measures: Circulation: The number of physical units carrying the advertising.of brand awareness. and impact. Many advertising agencies use a computer program to select the initial media and then make further improvements based on subjective factors. Audience: The number of people exposed to the vehicle. while not hurting seasonal consumption. and color. radio and television are the most effective media for reaching teenagers. Media planners are increasingly using more sophisticated measures of effectiveness and employing them in mathematical models to arrive at the best media mix. The effect of exposures on audience awareness depends on the exposures’ reach. explanation.In choosing media. . Most firms pursue a seasonal policy. Effective ad-exposed audience: The number of people with target audience characteristics who actually saw the ad. visualization. Product characteristics: Media types have different potentials for demonstration. A message announcing a major sale tomorrow will require radio. a soft. (If the vehicle has pass-on readership. then the audience is larger than circulation) Effective audience: The number of people with target audience characteristics exposed to the vehicle. Message Characteristics: Timeliness and information content will influence media choice. Cost: Television is very expensive. The firm can vary its advertising expenditures to following the seasonal pattern. This resulted in increased non seasonal consumption of its brand.
com. A public is any group that has an actual or potential interest in or impact on a company’s ability to achieve its objectives.pany positions and image during good times and crises. or play. • 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 Another major mass-promotion tool is.tion through internal and external communications. stories. annual reports. a. and handling or heading off unfavorable rumors. Press relations: Presenting news and information about the organiza. Product publicity: Sponsoring efforts to publicize specific products.” and handling or heading off unfavorable rumors. . suppliers. stories. Sponsoring special events is an effective way for an organization to increase brand recognition and receive media coverage with relatively little investment. and news releases. 2 . Lobbying: Dealing with legislators and government officials to pro. Public Relations perform the following five functions: 1 . building up a good “corporate image. Public relations (PR) involves a variety of programs designed to promote or protect a company’s image or its individual products. signs. Corporate communication: Promoting understanding of the organiza. building up a good corporate image.tion in the most positive light. newsletters. PR Tools: In brief one can summarize the tools as follows :• Public relations professionals prepare written materials such as brochures. Counseling: Advertising management about public issues and com.mote or defeat legislation and regulation. and stationery are also public relations tools. but it must also relate to a large number of interested publics. 4. and dealers. festival. 3 . sports competition. • Corporate identity material such as logos.pany magazines. and events.public relations. Not only must the company relate constructively to customers.building good relations with the company’s various publics by obtaining favorable publicity. 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. Simply speaking . public relations would mean . and events. business cards. 5 .
This is usually known as “selling into the trade” Sales Promotion Methods. Captioned photograph–a picture accompanied by a brief explanation d . Publicity-based public relations tools include: a . 1. A consumer sales promotion method attracts consumers to particular retail stores and motivates them to purchase certain new or established products. sales promotion offers reasons to buy now..ments and receive supplementary textual materials and photographs • The specific types of public relations tools chosen depend on several factors. 3 . Significance of the news item Sales promotion Short-term incentives to encourage the purchase or sale of a product or service. Press conference–a meeting at which invited media personnel hear important news announce. You would agree that more than any other element of the promotional mix. It is not designed to be informative – a role which advertising is much better suited to. • • • 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). A number of factors enter into marketing decisions about which and how many sales promotion methods to use. its products.niques either for consumer sales or for trade sales. Sales promotion is commonly referred to as “Below the Line” promotion. a. sales promotion is about “action”. 2. Feature article–a piece (of up to 3.000 words) prepared by an organization for inclusion in a particular publication c. Composition of the target audience b. or both. News release–a typed page of about 300 words provided by an organization to the media as a form of publicity b . . whereas advertising and personal selling offer reasons to buy a product or service. such as grand openings. • Some public relations tools are associated specifically with publicity. Publicity is communication in news story form about an organization. Public relations personnel sometimes organize events. 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 about stimulating customers to buy a product. A trade sales promotion method encourages wholesalers and retailers to stock and actively promote a manufacturer’s products. Response of media personnel c.b. Most sales promotional methods can be classified as promotion tech.
online.You must be familiar with many of the following sales promotion methods:• Rebates. Most point-of-purchase displays are prepared and set up by manufacturers and wholesalers. It may actually hold merchandise or inform customers of what the product offers and encourage them to buy it. These coupons may be worth anywhere from a few cents to a few dollars. A sample is a free product given to customers to encourage trial. Some trade shows are organized exclusively for dealers–to permit manufacturers and wholesal. • Point-of-Purchase Displays. • Premiums. direct mail. Others are promotions designed to stimulate consumer awareness and interest. A point-of-purchase display is promotional material placed within a retail store.fully targeted individual consumers to obtain an immediate response. Rebating is a relatively low-cost promotional method. Frequent-user incentives build customer loyalty. and easily administered. Direct marketing is the use of consumer-direct (CD) channels to reach and deliver goods . either with or without an additional purchase of the product.chase of items in large quantities. A rebate is a return of part of the purchase price of a product. stimulate pur.turer agrees to pay a certain amount of the retailer’s media costs for advertising the manufacturer’s product. or in stores. magazines. An airline’s frequent-flyer program is one example of a frequent-user incentive. Samples are the most expensive sales promotion technique. Samples may be offered via online coupons. straightforward. • Frequent-User Incentives. A buying allowance may serve as an incentive to resellers to handle new products. A trade show is an industry wide exhibit at which many sellers display their products. 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. • Samples. and in shelf dispensers in the store. • Trade Shows. • Buying Allowances. A coupon reduces the retail price of a particular product by a stated amount at the time of purchase. A premium is a gift that a producer offers the customer in return for using its product. Usually the rebate is offered by the producer to consumers who send in a coupon along with a specific proof of purchase. Buying allowances are simple. Coupons may also offer free merchandise. • Coupons. A buying allowance is a temporary price reduction to resellers for pur. direct mail. • Cooperative Advertising. Cooperative advertising is an arrangement whereby a manufac.ers to show their latest lines to retailers. They are made available to customers through newspapers. - - - - - Direct Marketing Direct marketing has been defined by the Institute of Direct Marketing as: The planned recording. They can easily be copied by competitors.chasing specified quantities of a product. Direct communications with care. Frequent-user incentives are programs developed to reward customers who engage in repeat (frequent) purchases.
Britannia. • India was the fastest growing market in 2000 in terms of revenues from direct selling. Direct Marketing in India: • In India. Marico.vices to customers without using marketing middlemen. cookware and healthfood. • • • • Amway is the largest player in India with annual sales exceeding Rs5bn Other major players are Avon Beauty Products (I) Pvt Ltd. Mass-market penetration is now catching up within the Rs 1. Nestle. Tupperware India Pvt Ltd. Total sales through direct selling route in 2002 was Rs. Dabur. direct selling is growing at a fast pace. 90% of goods sold by the direct sellers in India are sourced from goods manufactured within the country. Godrej and Tata Tea.723. DIRECT MARKETING BENEFITS . and direct selling majors such as Amway. Tupperware and Avon now seem to be following the path charted by FMCG giants such as Hindustan Lever.7 crore. Oriflame India Pvt Ltd. All major players in India are affiliated to IDSA. • Most of the Direct Selling companies operating in India today are in the field of cosmetics.1. LB Publishers and Distributors Pvt Ltd and DK Family Learning The Indian Direct Selling Association is an association of companies engaged in the business of direct selling in India. household products. personal products.and ser.800-crore direct selling industry as well. Lotus Learning Pvt Ltd. registering a 54% yoy growth.
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.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. 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. buyer behavior. ‘The PLC concept can be applied to a product category (perfumes). and the composition of the market. Almost every company as had spectacular failures. Introducing new product is always a risky venture. . even for a skillful marketer.
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. it gives up current profit and hopes to make it up in the next stage. promotion. At this point of time company need to add new dealers and distributors. the market expands. new pack sizes may need to be introduced. .tures still exist. and brands exist in the maturity stage. In this stage you will find that many products may appear unchanged. In doing so h owever. Competition intensifies and industry profits begin to decline at the end of the growth stage.Growth Stage At a growth stage where the company has successfully launched its product. as new customers enter the market and old customers make repeat purchases. 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. Thus price competition develops along with heavy promotions of whatever unique brand fea. It is during this stage that marketers are focusing effort on extending the lives of their existing brands. By spending a lot of money on product development. 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. the company faces a trade-off between high market share and high current profit. Rivals copy product features of successful brands and they become more alike. There is little growth potential for the product.duce their own brands. product and marketing mix. Maturity Stage At this stage company will find greater number of competitors. New product forms and brands enter. competitive product forms. This is the stage of peak profits. but total industry sales are still rising. the sales have begun to increase rapidly in this stage. Most of the times it will find that the sales are repeat sales to earlier buyers. and distribution. company will find decline in industry profits accelerates further. the company can capture a dominant position. Middlemen often intro. They should consider modifying the market. which makes the competition even tougher. In this phase. As new customers are attracted.
Sales and profits decline rapidly and competitors become more cost conscious. For these reasons. and advertising changes. frequent inventory re-adjustments. There are hidden costs in terms of management time.agement may decide to maintain its brand without changes in the hope that some competitors will leave the market. Thus Sanifresh is still a leading toilet cleaner though its powdered form is less popular than liquids.. It is basically because of Competitions that the product forms and brands enter into the decline stage. Or it may decide to ‘re-position the product in the hope of moving it back to the growth phase in a new avatar . At times man.Decline Stage Now the company reaches to the final stage of the life cycle. sales force attention. Product forms and brands typically enter into decline. Brands with strong acceptance by some customer segments may continue to produce profits. stages while product categories last longer. companies need to pay attention to their dying products.
the product is doomed D failure. Innovators . Innovators rep. Late majority . Early adopters .5% to adopt the product. . The adoption process affects the length of a products life cycle.well-informed risk-takers who are willing to try an unproven product.somewhat skeptical consumers who acquire a product only after it has become commonplace. The early majority represents 34% of consumers. They rely on recommen. Early majority – they are people who are careful consumers who tend to avoid risk.resent the first 2. The five categories of adopters (1) Innovators (2) Early adopters. The late majority represents about 34% of consumers.5% of consumers. early adopters then begin to purchase the product.based on the positive response of innovators. the early majority adopts the product once it has been proven by the early adopters. Laggards . (3) Early majority (4) Late majority and (5) Laggards.those who avoid change and may not adopt a new product until traditional alternatives no longer are available. 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 represent about 16% of consumers.dations from others who have experience with the product. But if innovators and early adopters do not adopt. Early adopters tend to be educated opinion leaders and represent about 13.The Adoption & Diffusion Process – The PLC concept is related to the adoption and diffusion processes. The adoption process is the series of stages a prospective buyer goes through in deciding to buy and make regular use of the product.
About 30% of new product ideas come from analysis of competitors’ products. The Major sources of new product ideas include internal sources. Almost 55% of all new product ideas come from internal sources according to one study. advertising agencies and new product consultants. After being exposed to the concept. however. these need to be tested with con.New Product Development Process – Figure will show the complete process of new product development lets discuss them one by one. The company can watch competitors’ ads. market research firms. One of Pillsbury’s four cake mix lines and several variations of another came directly from Bake-Off win. shows and seminars. Finally. a product concept is a detailed version of the idea stated in meaningful consumer terms. The company . The purpose of this stage is to pare these down to those that are genuinely worth pursuing. Customers: even create new products on their own. customers. a word or a picture may be suffi. government reports. 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. Other sources are trade magazines. Once the concepts are developed. It. New Product Development starts with idea generation A company has to generate many ideas in order to find one that is worth pursuing. competitors. the management can obtain an overall rating of the company’s ability to launch the product successfully. For some concept tests. Resellers and others who are close to the market. a physical presentation will increase the reliability of the concept test. which is the consumers’ perception of an actual or potential product.An attractive idea has to be developed into a Product concept.ners’ recipes.sumers either symbolically or physically. press releases and write-ups in the press about their activities. Companies have different methods for doing this from product review committees to formal market research. As opposed to a product idea that is an idea for a product that the company can see itself marketing to customers. Companies like 3M and Toyota have put in special incentive programs or their employees to come up with workable ideas. Idea Screening: -The purpose of idea generation is to create a large pool of ideas. can often pass on information about new develop.ments. Almost 28% of new product ideas come from watching and listening to customers. Concept Development and Testing . distributors and suppliers. This is different again from a product image. Companies also buy competitors information and pay for industrial espionage. 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. management can assess how well the idea fits with the company’s marketing skills and experience and other capabilities. Against these. 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.cient.
This is the next step in new product development. the planned product positioning and the sales. Business Analysis . the product can move to the product development stage. profit goals. The second part outlines the product’s planned price. The third part of the marketing strategy statement describes the planned long-run sales. If they do. costs and profits to find out whether they satisfy a company’s objectives.Once the management has decided on the marketing strategy. and the marketing mix strategy. distribution.can then project these findings to the full market to estimate sales volume. it can evaluate the attractiveness of the business proposal. market share and profit goals for the first few years. . Marketing Strategy Development .egy statement consists of three parts: the first part describes the target market. The strat. and marketing budget for the first year. Business analysis involves the review of projected sales.
ucts (it is basically how you perceive and buy the products) not on the differences in the products themselves. This step calls for a large investment. Hence.1. The system works because many consumers behave alike in buying a given type of product. The classification is based on differences in the buying behavior of the people who buy the prod. R&D will develop prototypes that will satisfy and excite customers and that can be produced quickly and at budgeted costs.introducing the product to the market-it will face high costs for manufacturing and advertising and promotion. Four classes of consumer products are (1) Convenience products (2) Shop. It gives you a brief description of consumer goods. First. at times. Test Marketing . or blades and matchboxes. the next step is test marketing: the stage at which the product and the marketing program are introduced to a more realistic market settings. toffee. Costs of test marketing can be enormous and it can also allow competitors to launch a “me.If the product passes the functional tests. Test marketing gives the marketer an opportunity to tweak the marketing mix before the going into the expense of a product launch. Three subclasses are: . This helps marketers in making generalizations to guide development of their marketing mixes. See Figure 10. They are basically low-priced. they must be tested. 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. Classification of Products The most common basis for classifying consumer products is based on buyer behavior.Here. and (4) Unsought products. It will show whether the product idea can be developed into a full. When the prototypes are ready. management may decide to do away with this stage and proceed straight to the next one: If the company goes ahead with commercialization . They are widely available at many outlets. nationally advertised items like cigarettes. national or international). The amount of test marketing varies with the type of product. Functional tests are then conducted under laboratory and field conditions to ascertain whether the product performs safely and effectively.fledged workable product.Product Development . The company will have to decide on the timing of the launch (seasonality) and the location (whether regional.too” product or even sabotage the testing so that the marketer gets skewed results. This depends a lot on the ability of the company to bear risk and the reach of its distribution network.ping products (3) Specialty products. R&D or engineering develops the product concept into a physical product.
For these products consumers have strong convictions as to brand. distance from stations and so on.standardized. cars. Just suppose a couple is searching for a flat may spend a lot of time comparing decor. 2. toffees and chocolates (placed at a child’s eye-level) are examples of impulse products. Marketers try to create specialty status for their products with advertising phrases like “accept no substitutes”. Once they find the right one. The desire to buy impulse is a result of the shopping trip. Consumers shop for the best price quality combination. Doctors. they probably will lease it. butter which are bought routinely because the family regularly consumes them. But specialty product can be less intensively distributed than a convenience or shopping product because buyers will search to find it. Thus sellers tend to engage in price competition. The decision to buy these products is programmed after the first time when the consumer puts them on his list of regular items. jewellery. you are aware that most of the brands are very similar then you will limit your shopping effort to price comparisons. 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. This is why impulse products are located where they can be easily noticed. 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. If the rent is reasonable compared to the alternatives.1. which are considered to be alike. Using price to compare clothing. Specialty Special Products In this case you as a consumers will make a special effort to buy specialty products. 1.Emergency Products: Purchases of emergency products result from urgent and compelling needs. or type. There is no Comparison Shopping. Just suppose you want to buy a colour television. Lawyers and Accountants who enjoy a large following are selling specialty products.Homogeneous Shopping Products: they are products. Often a consumer pays more than if this need had been anticipated. cost and effort to compare because they perceive a higher risk in buying these products. style. Shoppers spend more time. Stardust and Savvy magazines.Heterogeneous Shopping Products they are product that are considered to be unlike or non. eggs. floor plans. 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. They build customer loyalty when consumers consider their brands to be specialty products. . bread. 2. Shopping products can be homogeneous or heterogeneous. furniture and apartments is tough because quality and style vary within each product class. A retailer might advertise that the Color TV’s price includes 6 months or free interest financing.Ban glasses. Consumers will go out of their way to locate and buy these products because they perceive quality and other benefits in owning them. The desire to buy staple products may cause the consumer to go shopping. 3. Mitsubishi Lancers. Staple Products: this includes milk. Ray. One might set up service centers to differentiate its product from rivals. and so on. “‘insist on the real thing”. Price often is secondary to style and quality when price comparisons are difficult to make. price becomes important. Shopping Shopping Products These products involve price and quality comparisons. Leica Cameras and Johnny Walker Scotch Whisky are examples.Impulse Products: Purchases of Impulse products are absolutely unplanned exposure to the product triggers the want.
There are two types: regularly unsought products and new unsought products. Chicago). 7UP. although they may eventually purchase them. Rin detergent powder. Brand names simplify shopping. 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. Rin. guarantee a certain level of quality and allow for self-expres. words and numbers. These are basically existing products but the consumers do not want to buy this product now. Rexona.symbol . Marketers face a tough challenge in persuading consumers to buy their new unsought products. a lawyer’s services in contesting a will. Lifebuoy. a wreath and a doctor’s services in an emergency are regularly unsought products. Oral polio vaccine was once a new unsought product. maturing and declining productst. BRANDING . But heavy promotion and acceptance of the product practically eradicated polio. A brand is defined: “As a name. When we are discussing about a typical large multi-product firm’s product mix includes new. i. including letters. are part of its soaps line. marketing and or production considerations.e. Like Life Insurance.sion. • Brand name is that part that can be spoken. term. A brand differentiates these products from those of competitors” (American Marketing Association. • Brand mark-elements of the brand that cannot not be spoken.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. Wheel. and Surf Ultra are part of Lever’s detergents line and Le Sancy. The marketer’s task here is to inform target consumers of the products existence and stimulate demand for it. Rin Solarox. 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. PRODUCT AND PRODUCT MIX Any organization is marketing more than one product then it has a product mix.e. i. Lux. Surf. sign.
which govern a producer.000 trademarks registered. A change in condition may occur and production of the service may or may not be closely associated with a physical product. Attributes of Brand Values: The values. research. Because of the imagery associated with the brands they actually have the power to enhance or limit a consumer’s perceived image or selfimage. insurance. Then there are services which are provided by professionals but consumed for reasons not of business.• Trade Character i. fine arts. MRF suggests a muscle man and Rin suggests a lighting flash. Personality: A brand projects a personality. Ford. These users correspond to the values.1990. entertainment and fulfillment of other psychological and emotional needs such as education. Ronald McDonald. We know that Sunny is for teenagers. Had the brand been an animal or an object or a person. We expect a Mercedes to be driven by an executive or a top-class businessman. are reflected by the brand. culture and personality of the brand. Culture: A brand also represents a certain culture. which involves some interaction with customer or with property in their possession. fair price and so on. Coke is an icon of American culture. It includes a wide variety of services.g. There are the business and professional services such as advertising. Sometimes a brand may take on the personality of an actual person. e. while Shilpa Bindis are typically Indian. rather for leisure. recreation.” . and that are not necessarily tied to the sale of a product or another service. 56. Pillsbury Doughboy • Trade mark-legal designation that the owner has exclusive rights to the brand or part of a brand.J Stanton “Services as fulfilling certain wants and states that. User: The brand suggests its own target audience. es. • Trade name-The full legal name of the organization. We know what a Garden Woman is. I.e. US Patent & Trademark Office had 680.g.. what would come to our mind? Like Videocon suggests a lion.sentially intangible activities which provide want-satisfaction.515 new in that year. not the name for a specific product. “services are those separately identifiable. etc. SERVICE MAREKTING A service is an activity which has some element of intangibility associated with it.e. banking. marketing. computer-programming.. thus Tata stand for quality. legal and medical advice. e. W. Charlie Chaplin and Cherry Blossom. and does not result in a transfer of ownership.
touched or seen in the same way as goods. or spare berths on a train. Inseparability . and new service concepts can therefore easily be copied by competitors.turned. Services cannot be patented legally. A person who possesses a particular skill provides Service. or re. Because services are perform In most cases services cannot be separated from the person or firm providing it. Yet resort owners have the same number of rooms to sell Yetround. but little demand in July. stored. tasted. there is tremendous demand for resort accommodations in XYZ in February. which is lost forever. and therefore fluctuations in demand are often difficult to manage. resold. A plumber has to be physically present to provide the service. For example.It basically refers to the fact that services cannot be saved. an hour of a lawyer’s time. Intangibility actually presents several marketing challenges: Services cannot be inventoried. unsold seats in a cinema hall represent service capacity. A seat on an airplane or in a restaurant. Teaching is an intangible service. Services cannot be felt. or telephone line capacity not used cannot be reclaimed and used or resold at a later time.The most basic and universally cited. 1. the beautician has to be available to perform the massage Perishability . difference between goods and services is intangibility.Characteristics of services. A car mechanic who has no cars to repair today. .
This is in contrast to goods that can be stored in inventory or resold another day. the other dimension of this. or even re-turned if the consumer is unhappy. certain train routes are always more heavily booked than others.Apart from the fact that service is not fully utilised represents a total loss. There is a peak demand time for buses in morning and evening (office hours). .
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