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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.
Management is sales volume oriented 4. Consumer determine price. Emphasis on innovation on every existing technology and reducing every sphere. Emphasis is on the product 2. price determines cost 10. All departments of the business integrated manner. Emphasis on consumer needs wants 2. Planning is short-run-oriented in terms of today’s products and markets 5. Views business as consumer producing process satisfying process 7. Company first determines customers needs and wants and then decides out how to deliver a product to satisfy these wants 3.Selling 1. Cost determines Price 10. Selling views customer as a last link in business Marketing 1. Planning is long-run-oriented in today’s products and terms tomorrow’s markets and future growth 5. on providing better costs value to the customer by adopting a superior technology 8. Management is profit oriented 4. Different departments work as in a highly separate water tight compartments 9. . Company Manufactures the product first 3. Stresses needs and wants of buyers 6. Emphasis on staying with existing technology and reducing costs 8. Marketing views the customer last link in business as the very purpose of the business Defining Customer Value and Satisfaction: of new products. the sole purpose being generation of consumer satisfaction 9. Views business as a good producing process 7. Stresses needs of seller 6.
Since then it is known as their 7-S model. to be sure of successful implementation of a strategy. backed by a superior value-de. History The 7-S Framework was first mentioned in "The Art Of Japanese Management" by Richard Pascale and Anthony Athos in 1981. Total customer value is the perceived monetary value of the bundle or economic. It is a subjective exercise but very important for marketer’s point of view.livery system. the results may be lower profits.” but the buyer is promised more than just a safe car. For example. and psychological benefits customers expect from a given market offering. 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. in his Delivering profitable value. They had been investigating how Japanese industry had been so successful. using. it won’t attract enough buyers ( although it will satisfy those who do buy) If marketers raise expectations too high. . a company must design a competitively superior value proposition aimed at a specific market segment. Together these factors determine the way in which a corporation operates. it is more than the core positioning of the offering. obtaining . and disposing of the given marketing officering. Large or small. . and advertisements. Customer Expectation: It is formed on the basis of past buying experiences. Although the customer-centered firm seeks to create high customer satisfaction.tional. The value-delivery system includes all the experiences the customer will have on the way to obtaining and using the offering. other benefits include a long-lasting car. the buyer is likely to be disappointed. if the company sets expectations too low. Managers take into account all seven of these factors. and long warranty period. good service. it won’t attract enough buyers ( although it will satisfy those who do buy) Delivering High Customer Value The key to generating high customer loyalty is to deliver high customer value. If marketers raise expectations too high. if the company sets expectations too low. According to Michael Lanning.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.11 The value proposition consists of the whole cluster of benefits the company promises to deliver. that is not its main goal. However. Origin of the 7-S Framework. advice. Measuring Satisfaction There are no meters to measure it. Volvo’s core positioning is“safety. Total customer cost is the bundle of costs customers expect to incur in evaluating. At around the same time that Tom Peters and Robert Waterman were exploring what made a company excellent. the buyer is likely to be disappointed. and was taken up as a basic tool by the global management consultancy company McKinsey. The Seven S model was born at a meeting of these four authors in 1978. It appeared also in "In Search of Excellence" by Peters and Waterman. func. If the company increases customer satisfaction by lowering its price or increasing its services . However. like thermometer for temperature.
Managers must act on all Ss in parallel and all Ss are interrelated. 3.The meaning of the 7 S 1. recruiting. a holding. competition. 7. Structure The way in which the organization's units relate to each other: centralized. 6. Skills Distinctive capabilities of personnel or of the organization as a whole. . functional divisions (top-down). Systems The procedures. 4. information systems. Strengths of the 7-S Model. Combines rational and hard elements with emotional and soft elements. Strategy Plans for the allocation of a firms scarce resources. What does the organization stands for and what it believes in. over time. to reach identified goals. Style Cultural style of the organization and how key managers behave in achieving the organization's goals. a matrix. a network. promotion and performance appraisal systems. decentralized. customers. Guides organizational change. Shared Values (also called Superordinate Goals). Central beliefs and attitudes. 5. Staff Numbers and types of personnel within the organization. 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. Environment. Benefits • • • • Diagnostic tool for understanding organizations that are ineffective. The interconnecting center of McKinsey's model is: Shared Values. etc. Value Chain Michael Porter of Harvard proposed the value chain as a tool for identifying ways to create more customer value. processes and routines that characterize how the work should be done: financial systems. Compare: Management Styles. Compare: Strategic Intent 2.
public affairs. advertising. Firm Infrastructure. retention and compensation of employees and managers. testing and all other value-creating activities that transform the inputs into the final product. spare parts management. Such as: Research and Development. quality management. Includes technology development to support the value chain activities. Inbound Logistics. packaging. etc. The activities associated with getting buyers to purchase the product. including: channel selection. inventory control. finance. • Operations. Includes receiving. Includes general management. machines. redesign. installation. Service. development (education). assembly. promotion. Procurement of raw materials. etc • • Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Operations Outbound Marketing Service Logistics Logistics and Sales . etc. planning management. or • by reconfiguring the value chain. Human Resource Management.The activities of the Value Chain Primary activities (line function) 1. The activities required to get the finished product at the customers: warehousing. etc. equipment maintenance. Outbound Logistics. storing. Includes machining. • Marketing and Sales. Technology Development. order fulfillment. servicing. spare parts. design. The activities that maintain and enhance the product's value. accounting. 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. distribution management. pricing. . upgrading. overhead) • • Procurement. retail management. transportation planning. transportation. legal. Support activities (Staff functions. repair services. Process automation. buildings. including: customer support. selling. • 3. The activities associated with recruiting. 2. training.
a cost analysis can be performed by assigning costs to the value chain activities. Timing of market entry. 2. 7. The sales. Customer equity is the total of the discounted life. which is responsible. Capacity utilization. Institutional factors (regulation.time values of all of the firm’s customers. and points them all in the same direction. Clearly. Dfferent levels of customers who have strong profit potential. A cost advantage also can be pursued by "Reconfiguring" the value chain. Interrelationships among business units. Basic marketing: The salesperson simply sells the product. "Reconfiguration" means structural changes such as: a new production process. Accountable marketing: The salesperson phones the customer to check whether the product is meeting expectations.person also asks the customer for any product – or service – improvement suggestions and any specific disappointments. 3. 6. has stationed engineers at large utilities to help them produce more power. Porter identified 10 cost drivers related to value chain activities: 1.sources. Economies of scale. taxes. 8. In most large corporations.corporate headquarters is responsible for designing a corporate strategic plan to guide the whole enterprise. Geographic location. or a different sales approach. 4. Reactive marketing: The salesperson sells the product and encourages the customer to call if the or the has questions. 1. and how they will be coordinated. Strategic Planning A strategic business plan describes the overall direction an organization will pursue within its environment and also guides the allocation of re. Learning. 4. new distribution channels. . Degree of vertical integration. Customer Relationship Management The aim of customer relationship management (CRM) is to produce high customer equity. for example. the higher the customer equity. when and where they will be completed. A strategic marketing plan outlines the actions necessary. Once the value chain has been defined. but also by reducing the costs of the support activities. 3. A marketing plan is carried out within the context of a firm’s broader strategic business plan. 10. as well as on which businesses to start or eliminate.A cost advantage can be created by reducing the costs of the primary activities. union activity. 2. Recently there have been many companies that achieved a cost advantage by the clever use of Information Technology.). ( General Electric. 5. it makes decisions on the amount of resources to be allocated to each division. 9. A firm develops a cost advantage by controlling these drivers better than its competitors do. Firm's policy of cost or differentiation. • The Corporate Level. etc. the more loyal the customers. Proactive marketing: The company works continuously with its large customers to help improve their performance. comments. It provides the logic that integrates the perspectives of functional departments and operating units. Linkages among activities. or complains. strategic planning takes place at four levels.
or if the product's market grows faster. Dogs (low growth. brand within the business unit develops a market. because the rewards will be Cash Cows if market share is kept. The Product Level. Therefore they should also generate large amounts of cash. However if needed any attempt should be made to hold your market share in Stars. Eg.ing plan for achieving its objectives in its product market. It was developed in the early 70s by the Boston Consulting Group. high market share) • Profits and cash generation should be high.• The Division Level. • • BOSTON CONSULTING GROUP MODEL The BCG Matrix method is the most well-known portfolio management tool. 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. It is based on product life cycle theory. high market share) • Stars are using large amounts of cash. The units in the marketing division would be Sales. Because of the low growth. • Watch out for expensive ‘rescue plans’. investments which are needed should be low. Public Relations. etc. The Business Level. The Boston Consulting Group Matrix has 2 dimensions: market share and market growth. Stars are leaders in the business. it is better for the company. For example the marketing division would formulate strategies as to how the various units within it would work. Market Intelligence. The basic idea behind it is: if a product has a bigger market share. The BCG Matrix can be used to determine what priorities should be given in the product portfolio of a business unit. low market share) • Avoid and minimize the number of Dogs in a company.each division establishes a division plan covering the allocation of funds to each business unit within the division. 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. • Cash Cows are often the stars of yesterday and they are the foundation of a company.each product line. Promotions.each business unit develops a strategic plan to carry that business unit into a profitable future. . Cash Cows (low growth. • Stars are frequently roughly in balance on net cash flow. To ensure long-term value creation. Advertising.
or invest nothing and generate any cash that you can. or to divest prematurely. or otherwise companies are advised to disinvest. Their management have an easy job. In this way they can never become Cash Cows. Limitations of the BCG Matrix Some limitations of the Boston Consulting Group Matrix include: • • • • • • • • • • It neglects the effects of synergy between business units. These inadequate invested sums of money are a waste of money. The problems of getting data on the market share and market growth. • BCG method is applicable to large companies that seek volume and experience effects. Dogs Business Units are fighting an impossible battle and. • BCG model is helpful for managers to evaluate balance in the firm’s current portfolio of Stars. they are often allowed to reinvest substantial cash amounts in their mature businesses. low market share) • Question Marks have the worst cash characteristics of all.5% for an entire corporation. Increase market share or deliver cash. As a result all Question Marks and Stars receive only mediocre investment funds. Sometimes Dogs can earn even more cash as Cash Cows. Question Marks (high growth. The model uses only two dimensions – market share and growth rate. Other uses and benefits of the BCG Matrix • If a company is able to use the experience curve to its advantage. • The model is simple and easy to understand. Question Marks and Dogs. even worse. such as a generic growth target (9 percent per year) or a generic return on capital of say 9. This may tempt management to emphasize a particular product. There is no clear definition of what constitutes a "market". The executives are often praised anyhow. High market share is not the only success factor. it should be able to manufacture and sell new products at a price that is low enough to get early market share leadership. now and then investments are made. They can then try to get any possible cash from the Question Marks that were not selected. The model neglects small competitors that have fast growing market shares . • If the market share remains unchanged. it is destined to be profitable. Even worse. • Either invest heavily. or sell off. Once it becomes a star. Cash Cows. A high market share does not necessarily lead to profitability all the time.• Dogs must deliver cash. Either these SBUs should receive enough investment funds to enable them to achieve a real market dominance and become Cash Cows (or Stars). 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. These are hopeless attempts to "turn the business around". because they have high cash demands and generate low returns. • It provides a base for management to decide and prepare for future actions. In such a scenario: • • • Cash Cows Business Units will reach their profit target easily. Market growth is not the only indicator for attractiveness of a market. otherwise they must be liquidated. A business with a low market share can be profitable too. Question Marks will simply absorb great amounts of cash. because of their low market share.
The blocks with plain Zone consists of the three diagonal cells from the lower left to the upper right. FACTORS UNDERLYING MARKET ATTRACTIVENESS STRENGTH IN GE MULTIFACTOR PORTFOLIO MODEL 1 . If the enterprise falls in this zone the business is in a favorable position with relatively attractive growth opportunities. A position in the red zone is not attractive. A position in the yellow zone is viewed as having medium attractiveness. the business will not produce outstanding results. BUSINESS STRENGTH • Market share • Share growth • Product quality • Brand reputation • Distribution network • Promotional effectiveness • Productive capacity • Productive efficiency • Unit costs • Material supplies AND BUSINESS . This indicates a “green light” to invest in this product/service. If additional factors are considered. Companies are successful to the extent that they enter attractive markets and possess the required business strengths to succeed in those markets. The nine cells are grouped into three zones: The block with the Lateral Zone consists of the three cells in the upper left corner. 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. 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 . If one of these factors is missing. The above two factors make excellent marketing sense for rating a business. yielding nine cells. The suggested strategy is to seek to maintain share rather than growing or reducing share.THE GENERAL ELECTRIC MODEL An SBU’s appropriate objective cannot be determined solely by its position in the growth-share matrix. Both axes are divided into three segments. The suggested strategy is that management should begin to make plans to exit the industry. The blocks with a Diagonal Zone consists of the three cells in the lower right corner. The model is based on the company’s seven businesses. Organisation must therefore exercise caution when making additional investments in this product/service. General Electric Approach The model to analyze the SBUs has been give by General Electric and it is even known as Market attractiveness and Company strength matrix. the growth-share matrix can be seen as a special case of a multifactor portfolio matrix such as that pioneered by General Electric. Neither a strong company operating in an unattractive market nor a weak company operating in an attractive market will do very well.
cash cows. but once the SBU’s objective and budget are set. The three cells in the upper left corner indicate strong SBUs in which the company should invest or grow. know which products are stars. Marketing contributes to assessing each SBU’s sales and profit potential. and realize they can target broad or narrow customer bases. and dogs. the task of marketing management is to manage demand or revenue to the target level negotiated with corporate management. marketing’job is to carry out the plan efficiently and profitably. Evaluation of Strategic Planning Approaches Many firms assess alternative market opportunities. Making this determination involves analyzing where each product is in its product life cycle as well as expected competitor strategies. Management should also forecast each SBU’s expected position in the next three to five years given the current strategy. The three cells in the lower-right corner indicate SBUs that are low in overall attractiveness. economic events. Rather. the company’s objective is not always to build sales in each SBU. 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. new technologies. recognize what factors affect performance. question marks.• • R & D performance Mangerial personnel STRATEGIES The GE matrix is divided into nine cells. The major strengths of the approaches are that they allow a firm to do the following: . etc. The diagonal cells stretching from the lower left to the upper right indicate SBUs that are medium in overall attractiveness. Thus. understand their industries.
• Compute marketing and other resources needs. • Compare performance with designated goals. • Discover principles for improving performance. • Study various strategy effects. • Focus on meaningful differential advantages. • These techniques only aid planning. 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.• Analyze each of its SBUs and products. • Study competitors’ actions and trends. • They may overvalue market share. The approaches have these weaknesses: • They may be difficult to implement. • They may be too simplistic and omit key factors. market development. • They are arbitrary in defining SBUs and evaluative criteria. • They may not be applicable to all firms and situations. See accompanying figure. firm. and SBUs. and diversification. 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. Current Products Current Markets New Products New Markets .uct development. prod. • They may not adequately consider environmental factors. • Learn the opportunities to pursue and which threats to avoid. • They are often used by staff planners rather than line managers.
a firm seeks greater sales of present products from new markets or new product uses. these new sources may still not deliver the desired sales volume. The company first considers whether it could gain more market with its current products in their current markets(market penetration strategy). 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. INTENSIVE GROWTH. Distribution and promotion orientations are different from those traditionally used by the firm. This can be either based on demographic or geographic or psycho. appeal to segments it is not yet satisfying. and other minor innovations and markets them to loyal consumers. better quality. INTEGRATIVE GROWTH – Often a business’s sales and profits can be increased through backward. reposition products. a firm develops new or modified products to appeal to present markets. • . In that case. especially if they are highly profitable(forward integration). and competitive pricing. 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. management may discover several ways to grow. aggressive promotion. 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. It emphasizes new models. 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.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. the company goes for diversification. forward or horizontal integration within the industry. Then it considers whether it can develop new products of potential interest to its current markets(productdevelopment strategy). They can be either completely new products or existing product extensions. Finally if the company decides to acquire one or more competitors. management must also examine integrative growth opportunities. However. The products may be new to the industry or to the company. a firm seeks to expand the sales of its present products in its present markets through more intensive distribution. 1. Still. Horizontal Diversification Strategy. In market development. In diversification. Ansoff model propounded by Igor Ansoff is a useful framework for detecting new intensive growth opportunities called a “Product-Market Expansion Grid”.corporate management’s first course of action should be a review of whether any opportunities exist for improving its existing businesses’ performance. three strategies have been formulated to overcome this gap.graphic factors. 3. 2. In that case company must consider diversification. It can enter new markets.• In market penetration. even though the new product themselves may appeal to a different group of customers. • • • While the corporations are faced with ever increasing strategic planning gap. and use new distribution methods. Next it considers whether it can find or develop new markets for its current products (market-development strategy). Later it will also review opportunities to develop new products for new markets(diversification strategy). It might acquire some wholesalers or retailers. But here the company should take care as this involves high risk and the firm might loose focus. In product development. a firm becomes involved with new products aimed at new markets. provided that the government does not bar this move(horizontal integration). that growth may not be enough. By examining these three intensive growth strategies.
products or markets. The Porter Generic Strategy Model The Porter generic strategy model identifies two key planning concepts and the alternatives available for each: • • Competitive scope (broad or narrow target). Cost Leadership strategy: This generic strategy calls for being the low cost producer in an industry for a given level of quality. High level of expertise in manufacturing process engineering. The following three basic strategies are identified (see Figure): 1. not fritter away energy and re. Focus—narrow target segment and either low cost position or a unique strategy.• Conglomerate Diversification Strategy – the company might seek new businesses that have no relationship to its current technology. making optimal outsourcing and vertical integration decisions or avoiding some costs altogether. 4. Firms that succeed in cost leadership often have the following internal strengths: • • • Access to the capital required to make a significant investment in production assets. a focus strategy is available to smaller firms.sources trying to salvage hemorrhaging businesses. Cost leadership and differentiation strategies are alternatives for large firms. but must also carefully prune. Differentiation—large market and unique strategy. Some of the ways by which firms acquire cost advantages are by improving process efficiencies. 3. Managers should focus on growth opportunities. harvest or divest tired old businesses in order to release needed resources and reduce costs. . DOWNSIZING OLDER BUSINESSES. this investment represents a barrier to entry that many firms may not overcome. the firm may be able to sustain a competitive advantage based on cost leadership. gaining unique access to large source of lower cost materials. Skill in designing products for efficient manufacturing. 2. 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. Competitive advantage (lower cost or differentiation). If competing firms are unable to lower their costs by a similar amount. Cost leadership—broad market and low cost position.companies must not only develop new businesses. The cost leadership strategy usually targets a broad market.
Additionally. Firms that succeed in differntiation strategy often have the following internal strengths: • • • • • Access to leading scientific research. Focus Strategy : This strategy focus on narrow segment and within that segment attempts to achieve either a cost advantage or differentiation. even the low cost strategy. The firm hopes that the higher price will more than cover the extra costs incurred in offering the unique product.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. MARKETING INFORMATION SYSTEM A marketing information system (MIS) is a set of procedures and methods designed to generate. 2. analyze. 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. firms pursuing a focus strategy have lower volumes and thus less bargaining power with their suppliers. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. thus eliminating the competitive advantage.• • Efficient distribution channel. Furthermore. Highly skilled and creative product development team. other focusers may be able to carve out sub-segments that they can serve even better. For example. Opportunities may be missed. iDifferentiation Strategy : This strategy calls for the development of a product or service that offers a unique attributes that are valued by the customers and customers perceive to be better than or different from the products of the competition. Additionally various firms pursuing focus strategies may be able to achieve even greater differntiation in their market segments. the competition may be able to leapfrog the production capabilities. Corporate reputation for quality and innovation. continuous basis. it may be fairly easy for a broad-market cost leader to adapte its product in order to compete directly. . several firms follow. disseminate. If research is done this way. other firms may be able to lower their costs as well. Some risks of focus strategy include imitation and changes in the target segment. Because of their narrow market focus. Information should not be approached in an infrequent manner. and store anticipated marketing decision information on a regular. Strong sales team with the ability to successfully communicate the perceives strengths of the product. The risks associated with differentiation strategy include imitation by competitors and changes in customer tastes. A firm using a focus strategy often enjoys a high degree of customer loyalty and this entrenched loyalty discourages other firms from competing directly. firms pursuing a differentiation-focused strategy may be able to pass higher costs on to customers since close substitutes do not exist. a firm could face these risks: 1. Finally. As technology improves. The premise is that the needs of the group can be better serviced by focusing entirely on it. However. There may be a lack of awareness of environmental changes and competitors’ actions. Each generic strategy has its risks.
7. 6.An information system can be used operationally. and store anticipated marketing decision information on a regular. disseminate. . A broad perspective. managerially.3. as well as the information collected through continuous monitoring and marketing research that is kept by the organization. analyze. 3. An avoidance of crises. A marketing information system (MIS) is a set of procedures and methods designed to generate. 4. continuous basis. 2. Marketing plans and decisions may not be properly reviewed. 1. Continuous monitoring is the procedure by which the changing environment is regularly viewed. Previous studies may not be stored in an easy to use format. 4. 5. which contains three components. The storage of important data. Time lags may result if a new study is required. 8. An information system can be used operationally. The total information needs of the marketing department can be specified and satisfied via a marketing intelligence network. An MIS offers many advantages: 1. Data collection may be disjointed. 3. Marketing research is used to obtain information on particular marketing issues. 2. Organized data collection. and strategically for several aspects of marketing. Data warehousing involves the retention of all types of relevant company records. Data collection may be difficult to analyze over several time periods. Actions may be reactionary rather than anticipatory. and strategically for several aspects of marketing. managerially.
It must not be haphazard. 4. It may be applied to any aspect of marketing that requires information to aid decisionmaking. but also areas such as research into new products. this is a very long and involved definition of marketing research. The ability to do a cost-benefit analysis. Marketing research specifies the information required to address these issues. and ideas. and everything to do with the customers. marketing research into the elements of the marketing mix. 8. 5. organizations. Obviously. Here are a couple of definitions: Marketing research is the function that links the consumer. It not only includes ‘market’ research. Several points about marketing research need to be emphasized. ‘Market’ research is simply re. It is a very narrow concept. recording. and analysis. consumer attitude surveys). manages and implements the data collection process.information used to identify and define marketing opportunities and problems. competitors. Research findings and their implications must be communicated to the appropriate decision maker(s) in the firm. MARKET RESEARCH Marketing research is the systematic gathering. Focus groups 4.primary and secondary. 7. Market research and marketing research are often confused. Primary research is conducted from scratch. Secondary research. Sources of Data . We consider some of them: 1. Marketing research is about researching the whole of a company’s marketing process This explanation is far more straightforward i. Diaries . and analyzing of information about specific issues related to the marketing of goods. Projective techniques 5. Mystery shopping 3. designs the methods for collecting information. and evaluate marketing actions. already exists since it has been collected for other purposes. It may get enough data by analyzing internal reports or from informal meetings with customer service personnel.e.search into a specific market. Product tests 6. Data amassed and kept over several time periods. and communicates the findings and their implications. An outside party or the firm itself may undertake such research. recording. Primary Research There are many was to conduct primary research. It involves a sequence of tasks: data gathering. monitor marketing performance. Interviews 2. Speed in obtaining sufficient information to make decisions. services. and improve understanding of marketing as a process. places. 3. people. generate. 1. also known as desk research. refine.Primary and Secondary There are two main sources of data . or a research specialist working for the firm. 2. analyzes. or modes of distribution such as via the Internet. an impartial agency. Coordinated marketing plans. and public to the marketer through information . It is original and collected to solve the problem in hand.. customer. ‘Marketing’ research is much broader. 6. A firm’s decision to use marketing research does not mean it must engage in expensive projects (test marketing.5. markets. Data may be available from different sources: the firm itself.
Telephone interviews are cheaper to conduct than face-to-face interviews (on a per person basis). not potential customers. 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.7. • Telephone Interviews Telephone ownership is very common in developed countries. 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. Omnibus Studies 1. 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. . face-to. or over the Internet. The research will probe and develop points of interest. Other face-to-face interviews are more ‘in depth. It is ideal for collecting data from a geographically dispersed sample. However responses will increase if an incentive is offered such as a free newsletter. Some surveys are very rigid or ‘structured’ and use closed questions.face. Other important data is collected when visitors sign up for membership. Interviews can be telephone. • Some respondents will give biased responses when face-to-face with a researcher. The interviews tend to be very structured and tend to lack depth. Visitors to sites can be asked to complete electronic questionnaires. Data is collected on a survey. or free membership.’ and depend upon more open forms of questioning. Interviews This is the technique most associated with marketing research. • The Internet The Internet can be used in a number of ways to collect primary data. Data is easily compared.
Observers will contemplate how the product is handled. There are many issues surrounding the ethics of such an approach to research. Groups tend to be made up from 10 to 18 participants.depends on very quick (subconscious) responses to words Psycho.drama . travel. by collecting a series of diaries with a number of entries.complete the ‘bubbles’ on a cartoon series Sentence or story completion Word association . 2 Mystery Shopping Companies will set up mystery shopping campaigns on an organizations behalf. opinion. They will generate highly subjective qualitative data. However. and so on. a second mailing to prompt or remind respondents tends to improve response rates. months. Projective techniques Projective techniques are borrowed from the field of psychology. • Mail Survey In many countries. retailing. or purchased. Mail surveys do not tend to generate more than a 5-10% response rate. 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. They are asked to complete a diary that lists and records their purchasing behavior of a period of time (weeks. • Can be very expensive in comparison to other methods 4. and many other customer focused organizations. how much time the consumer spends with the product. Often used in banking.Imagine that you are a product and describe what it is like to be operated. 6 Diaries Diaries are used by a number of specially recruited consumers. cafes and restaurants. the researcher has a reasonable picture of purchasing behavior. or years). Highly experienced researchers work with the focus group to gather in depth qualitative feedback. Mail surveys are less popular with the advent of technologies. Products are displayed in a mall of shopping center. posing as real customers.• • Needs knowledge of software to set up questionnaires and methods of processing data May deter visitors from your website. Complex to organize. They collect data on customer service and the customer experience. They are rare. especially call centers. However. Lists are collated. the mail survey is the most appropriate way to gather primary data. 5 Product tests Product tests are often completed as part of the ‘test’ marketing process. and a pre-designed questionnaire is mailed to a sample of respondents. 3 Focus Groups Focus groups are made up from a number of selected respondents based together in the same room. Potential customers are asked to visit the store and their purchase behavior is observed. how the packing is read. . mystery shoppers will enter. It demands a substantial commitment on the part of the respondent. There are many examples of such approaches including: Inkblot tests .look for images in a series of inkblots Cartoons . or used. Discussion. and beliefs are encouraged. and the research will probe into specific areas that are of interest to the company commission in the research. warn. such as the Internet and telephones. Findings are reported back to the commissioning organization.
the attributes that create value cannot simply be deduced from common knowledge. it already exists. examining secondary data. . THE MARKETING RESEARCH PROCESS The marketing research process consists of a series of activities: defining the issue or problem to be studied. An omnibus survey could include questions from companies in sectors as diverse as heath care and tobacco.e. making recommendations. and implementing findings. data must be collected and analyzed. Secondary Research Secondary (or desk) research uses data that has been collected for other objectives than your own i. Each step is completed in order. There are a number of such sources available to the marketer. and what customers value this year may be quite different from what they value next year. Figure below that presents the complete process. But the perception of value is a subjective one. The organization will be one of many that simply want to a straightforward answer to a simple question. The goal of marketing research is to provide the facts and direction that managers need to make their more important marketing decisions.7 Omnibus Studies An omnibus study is where an organization purchases a single or a few questions on a ‘hybrid’ interview (either face-to-face or by telephone). The research is far cheaper. As such. 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. For example. secondary data are not examined until a firm states the issue or problem to be studied. Rather. generating primary data (if necessary). and commits less time and effort than conducting your own research. and primary data are not generated until secondary data are thoroughly reviewed. analyzing information.
B. B. To ensure that the true decision problem is addressed.The objective of the research should be defined clearly. C.1. 3. 3. 1. Sources A. For example. profit-and-loss statements.ten reports. Diverse sources. 5. ISSUE (PROBLEM) DEFINITION A. small group discussions. They may be obtained . 4. Undisclosed findings. sales figures. Obsolescence. Source credibility. The use of such scenarios can ensure that the purpose of the research is agreed upon before it commences. 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. prior research reports. Secondary data have these general disadvantages: Lack of suitability. 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. B. customer billings. Internal secondary data are available within the company. a decision problem may be whether to launch a new product. EXAMINATION OF SECONDARY DATA A. Low costs. Advantages and Disadvantages A. It is the structured collection and analysis of data pertaining to a specific issue or problem. Unknown methodology. Speed. 6. Unknown reliability. 4. B. Issue (problem) definition is a statement of the topic to be looked into. Helpful for exploratory research. the decision problem is translated into a research problem. Exploratory research is undertaken when the researcher is uncertain about the precise topic to investigate or wants to informally study an issue. 2. also called quantitative research. These data should always be reviewed before primary data collection. Secondary data are those that have been gathered for purposes other than solving the current problem under investigation. Conflicting results. They include budgets. Conclusive research. Secondary data have these general advantages: 1. 5. It is also called qualitative research and may involve in-depth probing. External secondary data are available from sources outside the company. 6. and writ. Thus. inventory records. 2. 2. is used after the problem definition is clarified. and understanding underlying trends. The corresponding research problem might be to assess whether the market would accept the new product . Access to hard-to-obtain data.
2. GENERATION OF PRIMARY DATA A. 1.search) conduct periodic and ongoing studies and make results available to many clients for a fee. Sampling enables the firm to analyze selected people or objects. 2. Secrecy. 2. Precision. Advantages and Disadvantages A. Who collects the data? Data can be collected by the firm itself or by an outside company. Primary data have these general disadvantages: Time consuming. They are necessary if secondary data are insufficient for a proper marketing decision to be made. 1. b. Reliability determined. B. With a non-probability sample. 3. It consists of these eight steps: 1. Primary data have these general advantages: 1. B. members of the population are chosen on . c. a. 3. Books. The way in which people or objects are selected must be decided. 4. every member of the designated population has an equal or known chance of being selected. 7. and other non-regular publications deal with special topics in depth and are compiled on the basis of interest by a target audience. 4. monographs. 6. Who or what should be studied? This is defined as the population. For large and/or dispersed populations. Currency. Primary data consist of information gathered to address a specific issue or problem at hand. What information should be collected? It can be exploratory or conclusive in nature. B. 3. Inability to gather certain types of information. 5. There are three sources of non-government secondary data: a. Research Design A.from government and non-government sources. sampling is usually employed. IMS Health. Limited perspective. 3. Only way to acquire information in some cases. Controlled and known methodology. and Burke Marketing Re. High costs. Commercial research houses (such as A. Regular publications can be broad in scope (such as Business Week) or more specialized (such as the Journal of Advertising).C. No conflicting data. Nielsen. Company limitations. A research design outlines the procedures for collecting and analyzing data. 5. With a probability sample.
It can be disguised or non disguised. How long will the data-collection period be? The total time frame is specified. support staff time. 5. A survey gathers information from respondents by communicating with them. 2. When and where should information be collected? The day and time must be set. 5. How much will the study cost? Costs may include executive time. all others remain constant. computer usage. d. The report must be written for the audience that reads it. 7. B. . C. respondents’ incentives (if any). based on marketing research findings. 6. C.administered questionnaires. supplies. e. the location of data collection must be outlined. An experiment is a type of research in which one or more factors are manipulated under con. respondents write their answers. interviewers record answers. interviewers. postage or phone expenses. Benefits and costs must be compared. With self. It can be conducted in person. Table 4-2 shows the best uses for each kind of primary data collection. Recommendations are suggestions for a firm’s future actions. RECOMMENDATIONS A. special equipment.the basis of convenience or judgment. Simulation is a computer-based method to test the potential effects of various marketing factors via a software program rather than real-world applications. 4. B. c. The semantic differential is a list of bipolar (opposite) adjective scales that provides an overall profile b. Observation is a research method whereby present behavior or the results of past behavior are observed and noted. pre-testing. Responses or observations must be entered correctly. With administered questionnaires. 8. 2. Data analysis consists of the following: 1. Analysis—the evaluation of responses as they pertain to the specific issue or problem under investigation.trolled conditions. Figure 4-11 shows recommendations flowing from completed research. 4. How will the data be collected? Data collection can be administered by research personnel or be self-administered. or by phone or mail. Data Collection A. Just the factor under study is varied. Data are collected. It may be human or mechanical. ANALYSIS OF DATA A. Coding—the process by which each completed data form is numbered and response categories are labeled. printing. In addition. and marketing expenses (such as ads). researcher time. What technique of data collection should be used? a. Tabulation—the calculation of summary data for each response category. Those engaged in data collection must be properly supervised and follow directions exactly.
Write your final report. Companies spend about $12 billion worldwide (40 percent in the United States) for data gathered by marketing research firms. B. the topical areas in which . 6. Select a sampling method. How will you collect the data that you will analyze to solve your problem? Do we conduct a telephone survey. Do we us a random sample. Once the recommendations are passed on to the proper decision makers. 2. The top 25-research firms (nearly half of which are U. as well as efforts of the compa. For example. B. with more than 1. Conduct the analysis of the data. According to the American Marketing Association. 3. They have broad control over marketing decisions.and institutionsponsored research. Decide upon a budget and a timeframe. or analytic mistakes. Scope of marketing research A.S. How will we analyze any data collected? What software will we use? What degree of accuracy is required? 5. 3. why are sales falling in New Zealand? 2. This is in addition to government. The problem then becomes the focus of the research. tables. or cluster sample? 4. Make sure that you really ‘need’ to know something. Marketing managers are most likely to implement research findings under these conditions: 1. Check for errors. who are responsible for using findings. 10. Go ahead and collect the data. Go back and speak to the managers or clients requesting the research. or do we arrange a focus group? The methods of data collection will be dis.-based) account for $8 billion in yearly revenues. stratified sample. The research report represents feedback to marketing managers. and diagrams that will communicate the results of the research. then move on to step seven. Never conduct research for things that you would ‘like’ to know. It is not uncommon to find errors in sampling. data collection method. Summary of the Marketing research Process – Marketing research is gathered using a systematic approach.cussed in more detail later. This will contain charts. 9. the research report should be warehoused in the marketing intelligence network. 7. Watch out for errors in interpretation. An example of one follows: 1. 6. Define the problem. and hopefully lead to a solution to your problem. Make sure that you agree on the problem! If you gain approval. They have confidence that results are accurate.D. They have input into the research design.nies themselves. IMPLEMENTATION OF FINDINGS A. 8.000 firms accounting for the rest.
On average. Planet Feedback enables consumers to send their feedback to companies quickly and effortlessly. C. a. G. Unrealized promises of anonymity. 1. brand awareness and preference. companies tend to spend about 1 percent of revenue on marketing research. To turn the situation around. Asking overly personal questions. an easy-to-use exchange for purchasers and providers of market research and related marketing services. and the application of single-source data collection.companies are most likely to engage in or sponsor research efforts are industry/market characteristics and trends. 7. and concept development and testing. Selling consumer demographic information for database use without consent. designing and . Selling or fund raising under the guise of research. Yet. Due to technological advances. and the complexities of international marketing research. these practices need to be avoided: 1. international marketing research is taking on greater importance. 5. 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. using search engines. Misrepresenting research projects. In fact. a lot of Americans will not answer a survey. with many firms doing their own studies and others hiring outside specialists. C. False sponsor identification. Five marketing research trends are the rapid increase in customer satisfaction studies. Customer satisfaction research is being sponsored much more than ever before. Firms deciding how to market to the hundreds of millions of consumers in Eastern Europe and Central Asia increasingly do market research there. segmentation studies. With more and more firms striving to expand their foreign endeavors. spending for online marketing research has grown from $3. B. market-share analyses. b. 2. 6. Marketing Info offers The Marketplace. 3. 8. Many businesspeople start their research by checking out competitors’ Web sites. Observational studies without informed consent. Over the last few years. c. Due to unethical practices of some firms. Misportraying research findings in ads and other communications. ethical considerations. product satisfaction. The extent of such research has more than doubled in recent years. many potential respondents are “turned off” to participating in marketing research projects. 2. Here are examples of how the research is being used. purchase intentions. F. and accessing online annual reports and trade publications. 4.5 million in 1996 to $255 million in 2000. the use of the Internet.
people have never been surveyed before. Many times. especially phone services. Communications systems.conducting research is hard. 2. may be below Western standards. . 3. 1. 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.
income. education. or groups of people sharing the same geographical location. close friends. Growing up. the “youth culture” or “club culture” has quite distinct values and buying characteristics from the much older “gray generation” Similarly. colleagues and co. Culture is the most basic cause of a person’s wants and behavior. In a group. social class is not just determined by income. 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. Sub-cultures can include nationalities. differences in social class can create customer groups. In fact. children learn basic values. ready meals and direct marketing service busi. Sometimes a sub-culture will create a substantial and distinctive market segment of its own. perception and wants from the family and other important groups.nesses such as telephone banking and insurance. The typical roles in such a group decision can be summarized as follows: Reference groups As a consumer. but also by the people around the customer with whom he interact and the various social groups to which you belong. the official six social classes in the UK are widely used to profile and predict different customer behavior. Marketers are always trying to spot “cultural shifts” which might point to new products that might be wanted by customers or to increased demand. Each culture contains “sub-cultures” – groups of people with share values. religions. neighbors. Similarly the increased desire for “leisure time” has resulted in increased demand for convenience products and services such as microwave ovens. wealth and other variables Social factors: A customer’s buying behavior is also influenced by social factors. In the UK’s socioeconomic classification scheme.workers are examples of primary . is influenced not only by psychological factors. the decision to purchase and use certain products and services. For example. 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. such as the groups to which the customer belongs and social status. racial groups. For example. family.Consumer Behavior Factors affecting consumer behavior Each of these factors is discussed in more detail in the following sections on buyer behavior. several individuals may interact to influence the purchase decision. personality and lifestyle. Cultural factors: Cultural factors have a significant impact on customer behavior.
as a unit. Primary. All workers in a factory qualify for membership to the labor union. iv) Formal shopping groups. Colgate and Forhans tooth. 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. Film stars and sports heroes are the most popular celebrities. specific roles and authority positions and specific goals. Soft drink (Thums up). an informal group is loosely defined and may have no specified roles and goals. 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. social clubs and societies are other types of formal groups to which individuals may belong. Graviera) are advertised using celebrities from the sports and film fields. shaving cream (Palmolive). but is not likely to be received as a member. Secondary groups are those with which an individual interacts only occasionally and does not consider their opinion very important. which use the expert reference groups appeal for promotion. Jaycees are some of the well – known social groups in our society. II) Formal and informal groups: Rotary. A symbolic group is one which an individual aspires to belong to. The three types of reference groups appeals most commonly used are: a) Celebrities. group situation with which potential customers can identify are used to promote products and services. iii) Formal social groups. The family. There are i) The family ii) Friendship groups. The family. Experts such as doctors. TV stars. 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. III) Membership and symbolic groups: A membership group is one to which a person belongs or qualifies for membership. 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. which exert a significant influence on consumer’s. lions. as I unit. accountants and authors are used for establishing the benefits of the product. It demonstrates to the prospective customer that demonstrates just like him uses and is satisfied with the product. Hidden in this appeal is the subtle inducement to the customer to identify himself with the user the product in question. attitudes and behavior. purchase decisions and behavior can be classified into six categories. lawyer. formal or reference group is a very wide one and includes both direct and indirect or group influences. whether small or large. is an important consumer for many products which are purchased for consumption by all family members. b) Experts. informal and small groups exert the maximum influence on consumers and are of great interest for marketers. such as film stars. Another reference group appeal is that which uses the testimonials of a satisfied customer.pastes are examples of products. Indirect reference groups comprise those individuals or groups with whom an individual dews not have any direct face to face contact. Reference groups are used in advertising to appeal to different market segments. sportsman. In contrast. is an important of all these groups and we shall discuss it in detail. It is a source of major influence on the individual members’ buying behavior. Family: The family is the most important of all these groups and we shall discuss it in detail. We can identify two families which shape an . v) Consumer action groups. textiles ( Dinesh . toilet soaps (Lux) . vi) Work groups. Different kinds of groups. politicians. Labor unions.groups. Direct reference groups.
and status. Status is often measured by the degree of influence an individual exerts in the behavior and attitude of others. in different families may be made either by the husband or wife. Status: Each role that a person plays has status. 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. same is the case with any consumer. 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. accessories and possessions. different member play different roles. He may go to Europe or U.one is the family of orientation that is the family in which you are born and consists of your parents. The life cycle is an orderly series of stages in which consumer attitude and behavioural tendencies evolve and occur because of developing maturity.A. it has been the wife’s role to purchase food. It is a person’s mode of living as identified by his or her activities. If marketers can identify the various groups to which potential consumers belong. experience. stereo music systems. beliefs and purchase behavior patterns. interest and opinions. etc. for a holiday. Group norms: Are the norms of a group are the implicit rules of conduct and behavior that are expected of its member. rather than going to Mussoorie or Ooty.S. not with standing the terrible heat condition. at home you play the role of spouse and parent. Each of these roles influences your purchase decisions. brothers and sisters. You are probably a manager. The profession or the occupation a person is in again has an impact on the products they consume. This method is called as the psychographics-which is . Thus in different social positions you play different roles. For instance. the norm for office wear includes a full – sleeved shirt and tie. in certain multinational companies in India. The managing director of a company may drive a Mercedes to communicate his status in society. where the children are likely to have more updated information about various brands and product attributes. Traditionally. We need to know what a life-style is made of. and when in your work situation you play that role. the same decision. personal computers. Children are also beginning to exert their influence on the family’s purchase decisions. The second type of family is the family of procreation consisting of the consumer’s spouse and children. It is from parents that we imbibe most of our values. the latter’s influence is extremely important. income. However. they can successfully market those products and services whose consumption is dictated by the group norms. Personal Factors: Age and Life cycle Stage:Like the social class the human life cycle can have a significant impact on consumer behaviour. In our country. clothing and other household sundries. these lines of traditional role demarcation have been getting increasingly blurred. There is a method of measuring a consumer’s lifestyle. Roles: An individual may participate in many groups. Life Style: Our life styles are reflected in our personalities and self-concepts. The concept of lifecycle as applied to marketing will be discussed in more details. This is especially true in case of products such as television.People buy and use products that reflect their status. 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. their influence of the sub – conscious mind still continues to be great. or both may have an equal voice. Long after an individual has ceased to live with his parents. Marketers often define their target market in terms of the consumers present lifecycle stage. attitudes. The status of a person is projected through various symbols like the dress. Within the family. where children continue to live with parents even after attain adulthood.individual’s consumption behavior . But with the emergence of the working-women. His position within each group can be defined in terms of the activities he is expected to perform. which is the relative prestige accorded by society. Thus. records. while the husband played a dominant role in the purchased of automobiles and life insurance.
sleep. goals.peoples activities. Self-confidence.the analysis technique used to mea. food. Economic and emotional motives are possible. By appealing to motives (reasons for behavior). interests and opinions. However. which are difficult to describe measure lifestyle analysis has proven valuable in segmenting and targeting consumers according to their lifestyle classification.Physiological needs These are the very basic needs such as air. . and desires that impel a person to or away from certain actions. When these are not satisfied we may feel sickness. if a family is dysfunctional caused by for example an abusive husband. These needs are mostly psychological in nature. pain. water. and emotional stability are selected personality traits. 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. defensiveness. Once they are alleviated. adaptability. Motivation: Motivation involves the positive or negative needs. Hierarchy of Needs . a marketer can generate motivation. Hierarchy of Needs .Safety needs These are dealing with achieving of stability and of consistency in a chaotic world. etc. discomfort. sex. Because she is constantly concerned for her safety. 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. these change by situation and over time. sociability. irritation. Love and belongingness have to wait until she is no longer in fear. We need the safety of a home and family. etc. Unlike personality typologies. autonomy.sure consumer lifestyles. MASLOW’S HIERACHY OF NEEDS The Hierarchy of Needs model of Abraham Maslow 1. dominance. the wife cannot move to the next level. Then based upon the combina tions of these dimensions. 2. we may think about other things. Personality: personality is the sum total of an individual’s enduring internal psychological traits that make him or her unique. consumers are classified. Each person has distinct motives for purchases. These feelings motivate us to alleviate them as soon as possible to establish homeostasis.
affiliation and power. religious groups. They do not cause higher levels of motivation. Disadvantages • Care should be taken not to stick too rigidly to this hierarchy: • In reality. They are much less structured in the way they satisfy their 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. Typical Hygiene Factors • • • • • • • • • Working conditions Quality of supervision Salary Status Safety Company Job Company policies and administration Interpersonal relations . See McClelland. people don't work necessarily one by one through these levels. who identified needs for achievement." People who have everything can maximize their potential. etc.3. They can seek knowledge. peace. Early) • Other researchers claim that other needs are also significant or even more significant. 5. Limitations of the Hierarchy of Needs model. (Graves) • Different people with different cultural backgrounds and in different situations may have different hierarchies of need. wanting admiration is related to the need for power. This is similar to the belongingness level. 4. Humans have a desire to belong to groups: clubs.Self-Esteem needs There are two types of esteem needs. Second. work groups. Performing artists are appreciating applause. but without them there is dissatisfaction. there's the attention and recognition that comes from others. family. gangs. These factors result from internal generators in employees. • In 1968. We need to be needed. The two Factors in the Theory • Hygiene factors are needed to ensure that an employee does not become dissatisfied. The first is the self-esteem which is the result from competence or mastery of a task. oneness with God.The need for self-actualization This is "the desire to become more and more what one is. however. We want to feel loved (non-sexual) by others. Hierarchy of Needs . (Hofstede. to be accepted by others. Hierarchy of Needs . self-fulfillment.Love and belongingness needs These are next on the ladder. Dissatisfaction was a result of hygiene factors. Herzberg developed this motivation theory during his investigation of 200 accountants and engineers in the USA. to become everything that one is capable of becoming. Satisfaction and psychological growth was a factor of motivation factors. etc. • Motivation factors are needed in order to motivate an employee into higher performance. Hierarchy of Needs . esthetic experiences.
For example. Low Hygiene + Low Motivation: The worst situation. generally consumers tend to perceive the quality of performs on the basis of package. tastes and sensations that we feel are known as stimuli. advertisement and commercials. These are selective exposure. selects. Low Hygiene + High Motivation: Employees are motivated but have a lot of complaints. Selective exposure: you must have noticed that when you are on the look out for purchasing a specific product. • Herzberg suggests that often work can be arranged and should be arranged in the following ways: • job enlargement • job rotation. the implication is that he has to carefully and accurately identifies his . be it camera. Perception The second major psychological factor that influences consumer behavior is perception. selective distortion and selective retention. Employees are not motivated and have lots of complaints. Since each individual’s needs. The different sights..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. feel. price and manufacture’s image. color. smells. Perception can be described as “how we see the world around us”. As a marketing manager. which evokes the most favorable perception in the maximum number of consumers. Each person recognizes. All the time we are receding messages through our five organs viz. High Hygiene + Low Motivation: Employees have few complaints but are not highly motivated. Perception helps to explain the phenomenon of why different individuals respond differently to the same stimulus under the same condition. refrigerator. motive and expectations are unique therefore each individual’s perception is unique. nose. For the marketer. mouth and skin.. This is because of your selective exposures. values and expectations and this is known as perception. size. television or any other high value product or services. There are three aspects of perception. A situation where the job is exciting and challenging. Your interest is to the stimuli so that you can highlight that particular stimulus of combination of stimuli. fragrance. you are providing stimulus to your consumers through the physical shape. ears. sounds. you suddenly seem to notice more than the usual number of advertisements pertaining to that specific product. its package. eyes. and/or • job enrichment. However the salaries and work conditions are not OK. which relate to their immediate needs. which are of immediate interest to the marketer. taste of your product. People are more likely to notice stimuli. The job is perceived as a paycheck. brand name. organizes and interprets thes3e stimuli in his own individual manner based in his needs.
firms.. which you have made. 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. stimuli. Thus. issues. responses and reinforcements. You are more likely to remember the positive feature of brand ‘A’ pressure cooker since they help reassure you that the decision. Thus making the consumer ‘learn ‘ that the brand is good and worth patronizing. 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. cues. Selective Distortion: let us suppose you have decided to purchase a specific brand “A” of pressure cooker. Attitude is a person’s enduring feeling. The marketer must ensure that consumers have relevant and correct information about the brand to facilitate formation of a positive brand image. Starting from childhood. where and how the housewife responds. Positive feedback about pressure cooker from a friend. The housewife’s response to pressure cookers has been reinforced. Success cannot normally be attained without positive consumer attitudes. or negative feelings about goods. . and in the future may buy another one. services. A marketer can build up demand for his brand by associating it with strong motives. but a five year old clamoring for chocolate or chewing gum is the result of learned behavior. evaluation and tendency towards a particular idea or object. The stimuli are the various advertisements about the product. This belief may be based on some real facts or it may merely be a notion or opinion that the person has. the process is known as selective distortion. A housewife has the need is strong enough to propel her to take action it becomes a motive. was correct. neutral. Selective retention: people forget much of the stimuli which they receive3 and only retain that information which reinforces their clause and decision. Attitudes get settled into specific patterns and are difficult to change. the marketer has to ensure that the stimuli are interesting enough to attract and hold their attention. which she sees and hears. Cues are minor stimuli that determine when. people. attitude develops over the time with each fresh knowledge input. a marketer may find that his message is often not received in the intended manner but different consumers twist it in different ways. and/or institutions. a special introductory price offer are all examples of cues which influence a housewife’s response to the motive for buying a pressure cooker. Since you have already made your decision you would seek only that information which reinforces the correctness of your decision. seeing it on display in a showwindow.potential customers since other customers are not at all likely to notice the stimuli. This is a very significant factor marketer. and then the changes are that she would like to use it as often as possible. The beliefs constitute the brand image about the brand. Suppose the housewife buys the pressure cooker and is satisfied with its performance. experience and influence. Having identified the potential customers. A person may believe that a certain coking oil ‘X’ has the lowest fat content and is best for health. Learning Learning refers to the skill and knowledge gained from past experience that we apply to evaluate future decisions and situations. 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. using the appropriate stimuli and cues and providing positive reinforcement. Beliefs & Attitudes Attitudes or opinions are positive. A newborn infant’s sucking at the feeding bottle is instinctive behavior. Much of an adult’s human behavior sis leaned behaviors. The motive is directed towards the stimulus object – a pressure cooker.
services. the amount of information sought also increases. • Commercial. Buying one item may lead to the purchase of another. It consists of the process itself and factors affecting the process. place. availability.The purchase act involves the exchange of money or a promise to pay for a product.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. Many consumers are hesitant to react to unfulfilled desires because there are risks and the benefits may be hard to judge. A prospective consumer may be exposed to any or all of these types of stimuli. only a few steps are utilized At any point in the process. he or she will go on to the next step in the decision process. the performance of a specific service. PURCHASE . terms. or support in return of ownership of a specific good. Factors affecting the process are a consumer’s demographic. Sometimes. it may be ended. organizations. Purchase decisions remaining at this stage center on the place of purchase. or idea may solve a problem of shortage or unfulfilled desire. service. The Internet has become a major source for consumer shopping information. STIMULUS: A stimulus is a cue or drive meant to motivate a person to act. Once the information search is completed. a consumer will make a purchase. A stimulus can be any of the following: • Social. They are then ranked and a choice made. and psychological characteristics. other times. EVALUATION OF ALTERNATIVES: The alternatives are evaluated on the basis of the consumer’s criteria and the relative importance of these criteria. Re-evaluation of the . If the above elements are acceptable. INFORMATION SEARCH: Information search involves listing alternatives that will solve the problem at hand and a determination of the characteristics of each. If a person is sufficiently stimulated. it must be determined whether the shortage or unfulfilled desire can be satisfied by any alternative. the consumer recognizes that the good. and ideas. organization. PROBLEM AWARENESS: During problem awareness. POST-PURCHASE BEHAVIOR: Frequently. Search can be internal and/or external . places. person. people.As risk increases. Seven useful sources are provided. social. the consumer engages in post-purchase behavior. The decision process consists of six basic stages (the next six sections). and so on. • Physical. all six stages in the process are used. • Noncommercial.
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,
Firms such as Maruti-Suzuki use differentiated marketing to attract all segments. F. I. Total profits are not maximized. such as Hyundai. Differentiated marketing should enable the firm to achieve several objectives: 1. F.trated. The more clusters facing the firm. A distinct niche can be carved out for a particular brand. because only one segment is sought. They have one or more major brands for the mass market and secondary brands geared toward specific segments.TARGET . what you perceive as quality. A firm must balance revenues obtained from selling to multiple segments against the costs. 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. Diversification. It appeals to two or more distinct market segments. 2. Costs vary. brands. 3. etc. because it enables them to reach different consumers. Some companies. with a different marketing plan for each. Differentiated marketing combines the best attributes of undifferentiated marketing and concen trated marketing. Differentiated Marketing (Multiple Segmentation) A. 2. G. Differentiated marketing can be achieved without involvement in the majority fallacy. E. Company resources and abilities must be able to produce and market two or more different sizes. and encourages private labels. there will . E. However. and Microsoft appeal to two or more segments.POSTION process • Positioning is undoubtedly one of the simplest and most useful tools to marketers. B. such as Time Inc. depending on modifications needed.. the greater the opportunity for differentiated marketing. or products. 1. D. Recognition as a specialist. allows orders to be concen. Per unit profits can be maximized through market segmentation. use both undifferentiated marketing and concentrated marketing approaches in their multiple-segmentation strategy. Sales maximization. • Positioning is all about ‘perception’. A company must be careful to maintain product distinctiveness in each consumer segment and to guard its image. As perception differs from person to person. is different to my perception. Total profits should rise as the number of segments serviced increases. H. offers a degree of exclusivity. G. Others. but not all segments. so do the results of the positioning map e. value for money in terms of worth. C. A potentially profitable segment may be one ignored by other firms. Two or more sizable and distinct consumer groups are necessary. Wholesalers and retailers usually find differentiated marketing to be desirable.g.
However. therefore re-emphasizing the importance of perception!! New Product—need to communicate benefits POSITIONING ERRORS POSITIONING TYPES. a luxury residen. Thailand promotes the friendliness of its people with the statement “The world meets in the land of smiles. 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. Positioning with respect to use or application Here a destination is positioned based on the reasons for visiting it. Mexico is positioned as “The meeting place for sun worshipers. value offered to visitors can be effectively utilized as exemplified by Malaysia which claims “Malaysia gives more natural value.” Positioning by Price Value International destinations are not usually positioned on the basis of price because lower prices may be perceived as connoting lower quality. send them to the peak. feature.” With this positioning statement Malaysia is appealing not only to the sense of value (more for the money) but also to its natural attractions.be similarities in certain cases. emphasis is placed on the benefits of the particular features or attributes of the destination. It refers to a place that the product offering occupies in • consumers’ minds on important attributes. or customer benefit. • After segmenting a market and then targeting a consumer. next step will be to position a product within that market.” referring to Victoria Peak. How new and current items in the product mix are perceived. positioning features the people who should visit the destination.tial development in Florida.” Positioning with respect to a product class This technique is often used to associate a destination with experiences that are . positions itself as the place “where people who run things can stop running. a major tourist site in Hong Kong: Fisher Island.APPROACHES Positioning by attribute. Cancun. in the minds of the consumer. Hong Kong appeals to the incentive travel market with the statement ‘When they’ve reached the top. For example. relative to competing offerings. For this strategy.” Positioning according to the users or class of users In this case.
it is basically a . However.” What is Differentiation? The task of positioning is to deliver a central idea about a company or an offering to the target market. given the potential market. or “If your looking for an ideal meeting place. it can be differentiated by the dosage size. Reliability: on reliability basis one is normally ready to pay a premium. you deserve a hotel that has none. to bring out differences between destinations. the Principality of Monaco is positioned as “The fairy tale that does not end at midnight. The problem with low conformance quality is that the product will disappoint some buyers. coating and action time. quality. in this the company is focusing on besting the competition and at the same time they are satisfying the consumers and gaining higher profits. Positioning vis-à-vis the competition This approach is used when it is necessary to meet the competition head-on. This strategy is aggressive. The strategic planning institute found a significantly positive correlation between relative product quality and return on investment. ‘After a day of competition. Features: they are the characteristics. For example. This approach is not used frequently in international tourism destination marketing since it may involve negative statements about another country or region. which is in terms of degree to which all of the produced units are identical and are able to meet the promised specification. here’s one that’s close to heaven” for Israel. Form: Companies can differentiate products on the basis of form. Conformance quality: C onformance for quality. Marketers starts by asking recent buyers about additional features that would improve satisfaction. Marketers have identified that the products are capable of higher differentiation than services such as automobile and furniture. which are very important they are basically there to support the basic functions of the product. product features. Durability: D urability in the product me a n s expecting the product to be operating under natural or stressful conditions. which can be in many forms like Disprin. Ritz-Carlton Hotels is a little more subtle when they say.that is the physical structure. innovation and different service levels. 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. location. The tools that are used to differentiate products include branding. Example of any product.extraordinary and/ or unique. TYPES OF DIFFERENTIATION Product differentiation In this the marketing mix variable are used to make unique product offer that stands out from the competitors. It is important for products such as vehicles and kitchen appliances to be durable.” or holding a convention in Thailand is “Smooth as silk where the sky’s the limit. shape. the size. packaging. Differentiation is the process of adding a set of meaningful and valued differences to distinguish the company offering from competitors offerings. cost and price. which the product’s primary characteristics operate. Performance quality: is the level. it is regularly employed in product and services marketing. Positioning simplifies what one is thinking of the entity. However the extra price must not be excessive and the product must not be subjected to rapid technological obsolescence. Differentiation goes beyond positioning to spin a complex web of differences characterizing that entity. image. 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. promotion. 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. For example. As Disprin is essentially a commodity. and the shape of the product.
The designer has to take all of these factors into account Service differentiation: When the physical product cannot be differentiated easily. consumers can now order and receive groceries without going to the supermarket business web-based service such as peapod and net grocer. Installation: refers to the work done to make a product operational in its planned location.. use. the key to competitive success may lie in adding valued services and improving their quality. has built an impressive reputation for shipping out its checks one day after receiving an order. Godiva chocolate and Harley. durability. Style has the advantage of creating distinctiveness that is difficult to copy. called the Vitamin Institute. Maintenance and repair: describes the service program for helping customers keep purchasing products in good working order. For example. General Electric not only sells installs expensive X-rays equipment in hospitals. . install.Davidson motorcycle. On the Web. the Rite aid drugstore chain’s communications program. strong style does not always means high performance. The main service differentiators are: Ordering ease: refers to how easy it is for cusotmer to place an order with the company.com to offer even more health-related information. However. Baxter Healthcare has eased the ordering process by supplying hospitals with computer through which they send orders directly to Baxter. Ideal reparability would exist if users could fix the product them. May tag. design offers a potent way to differentiate and position a company’s products and services.without being late once in 18 years. reparability and style. Delivery: it is related to how well the product or service is delivered to the customer. Most of the time. conformance. Design is the integrating force that incorporates all of the qualities. Style: Style is look and feel of the product to the customer.. Customer consulting refers to data. this means the designer has to figure out how much to invest in form. feature development. repair and dispose of. performance. covering speed. An automobile made with standard parts that are easily replaced has highly reparability. Reparability is a measure of the ease of fixing a product when it malfunctions or fails. a well-designed product is one that is pleasant to look at and easy to open. an important consideration for many products. information system and advising services that the seller offers to buyers. have an outstanding reputation for creating reliable appliances? Reparability: buyers prefer products that are easy to repair. but also gives extensive training to users of this equipment. Differentiation by installation is particularly important for companies that offer complex products such as computers. cuistomers are normally willing to pay a premium for products that are attractively styled. accuracy and customer care. inc. Aesthetics have played a key role in such brands as Absolute vodka. To the company. Design: as competition intensifies. Apple computers. Rite Aid has teamed with drugstore. Buyers of heavy equipment expect good installation service. Customer training refers to how the customer’s employees are trained to use the vendor’s equipment properly and efficiently. For a company a well-designed product is one that is easy to manufacture and distribute.measure of the probability that a product will not malfunction or fail within a specified time period. Deluxe check printer. reliability. which manufacturers major home appliances.selves with little cost or time. provide customers with research so they can make more educated judgments and fell comfortable asking for help.
credibility. According to Kotler an organization goes through the following steps in setting its pricing policy: - . The McDonald’s people are courteous. PRICE. Well. Setting the Price. The sales forces of such companies as General Electric. courtesy. including logos. Singapore Airlines enjoys an excellent reputation in large part because of its fight attendants.Personnel differentiation Companies can gain a strong competitive advantage through having better-trained people. Nike mainstream popularity turns off 12-to24-years-olds.is exchanged for satisfaction or utility. responsiveness and communication. Channel differentiation Companies can achieve competitive advantage through the way they design their distribution channels’ coverage. who prefers Airwalk and other alternative brands that convey amore extreme sports image. and when it enter bids on new contract work. For the image to work. Its dealers are found in more locations. Caterpillar’s success in the construction –equipment industry is based partly on superior channel development. More broadly.Pricing Policy: A firm must set a price for the first time when it develops a new product. Purchasing power depends on a buyer’s income. PRICING Price is the amount of money charged for a product or service. and wealth. media and special events.trained personnel exhibit six characteristics: competence. it conveys this character in a distinctive way and it delivers emotional power beyond a mental image. “One can define price as that which people have to forego in order to acquire a product or service. when it introduces its regular product into a new distribution channel or geographical area. and Northwestern Mutual life enjoy an excellent reputation. reliability. price is the value placed on what is exchanged. 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. it must be conveyed through every available communication vehicle and brand contact.” What does a buyer think? To a buyer. expertise and performance. credit. Frito-Lay. For example. are better trained and performance more reliability than competitors dealers. the IBM people are professional and the Disney people are upbeat. Identity comprises the ways that a company aims to identify or position itself or its product. Dell computers has also distinguished itself by developing and managing superior direct-marketing channels using telephone and internet sales. An effective image establishes the product’s character and value proposition. or the sum of the values that consumers exchange for the benefits of having or using the product or service. Cisco. whereas image is the way the public perceives the company or its products. Something of value -usually purchasing power . Image is affected by many factors beyond the company’s control.The amt of money charged for a product or service.
Determining the demand .Following the identification of objectives. As long as prices cover variable costs and some fixed costs. assuming the market is price sensitive. or product-quality leadership. Sony is a frequent practitioner of market skimming pricing. maximum current profit. the easier it is to set price. They set the lowest price.Selecting the pricing Objective The company first decides where it wants to position its marketing offering. Production and distribution costs fall with accumulated production experience. 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. cash flow or rate of return on investment. A company can pursue any of five major objectives through pricing: survival. Survival is a short-run objective: in the long run. They estimate the demand and costs associated with alternative prices and choose the price that produces maximum current profit. This strategy assumes that the firm has knowledge of its demand and cost functions. The following conditions favor setting a low price The market is highly price sensitive. in reality these are difficult to estimate. the firm needs to determine demand. demand . 2. and a low price stimulates market growth. Companies pursue survival. the company stays in business. In the normal case. a low price discourages actual and potential competition Companies unveiling a new technology favor setting high prices to “skim” the market. maximum market share. or changing consumer wants. They believe that a higher sales volume will lead to lower unit costs and higher long-run profit. the firm must learn how to add value or face extinction. maximum market skimming. Many companies try to set a price that will maximize current profits. Some companies want to maximize their market share.
engineers and purchasing agents to reduce them. Selecting a pricing method - . There are different costs of organization. then you will have to price close to the competitor or lose sales. prices and possible price reactions into account.g. TARGET COSTING . fixed and variable. Regardless of output. 4. Fixed costs (also known as overhead) are costs that do not vary with production or sales revenue. interest. To price intelligently. Within the range of possible prices determined by market demand and company costs. Variable costs vary directly with the level of production. E. prices and offers A nalyzing competitor’s costs. the demand curve sometimes slopes upward.and price are inversely related: the higher the price.Costs change as a result of a concentrated effort by designers. it is equal to total costs divided by production. Acquire competitors’ price lists and buy competitors’ products and analyze them. Average cost is the cost per unit at the level of production. the level of demand may fall. you will not be able to charge as much as the competitor. operating and servicing the product over its lifetime. If your product or service is similar to a major competitor’s product or service. The Japanese use a method called target costing. 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). Also ask customers how they perceive the price and quality of each competitor’s product or service. given its appeal and competitor’s prices. salaries and so on. management needs to know how its costs vary with different levels of produc tion. Total and variable costs for any given level of production. Analyzing competitor ’s costs. Then they determine the price at which the product will sell. Estimating Price sensitivity of market ii. prices and offers is also important factor in setting prices . 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. Learn the price and quality of each competitor’s product or service by sending out comparison shoppers to price and compare. Estimating and analyzing demand curve iii. 3. A company must pay bills each month for rent heat. the lower the demand . and this leaves the target cost they must achieve. 5.Demand sets a ceiling on the price the company can charge for its product. competitors’ prices provide an in be. Company should also be aware that competitors might even change their prices in response to your price. the firm must take the competitor’s costs. They use market research to establish a new product’s desired functions. Perfume Company raised its price and sold more perfume rather than less! Some consumers take the higher price to signify a better product. While demand sets a ceiling and costs set a floor to pricing. These c o s t s r e l a t e with pricing. If your product or service is inferior. They are also less price-sensitive when price is only a small part of the total cost of obtaining. They are called variable because their total varies with the number of units produced. . These costs tend to be constant per unit produced. A company’s cost take two forms.tween point you must consider in setting prices. Estimating Costs . Determining price elasticity of demand. They deduct the desired profit margin from this price.In the case of prestige goods. The process of estimating demand therefore leads to i. However if the price is too high.
In selecting that price. price will depend upon positioning. 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. The risk here is that other customers who paid the full price may find out about the discounted offer and complain.Companies often use cost oriented pricing methods when setting prices.Pricing methods narrow the range from which the company must select its final price. strategy. Marketing Oriented Pricing Cost Oriented Pricing . more. This method focuses upon the internal costs of the firm as opposed to the prospective customers’ willingness to pay. 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. this method will include a profit margin in the final price. and for existing products price will be affected by strate.Many contracts are won or lost on the basis of competitive bidding. 6. Like full cost pricing. Indirect or fixed costs (plant. if they are unused on a flight then the revenue is lost. which is confidential to themselves and the buyer. 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.The price of a product should be set in line with the marketing strategy. Consider aircraft seats. .This involves the calculation of only those costs. The first problem with Full-cost pricing is that it leads to an increase in price as sales fall. Competitor Oriented Pricing 3.Going-Rate Pricing In going-rate pricing. These remaining seats may be offered at a discount so that some contribution is made to the flight expenses. Cost Oriented Pricing 2. promotion. with the firms basing the price on what it thinks other firms will be bidding rather than on its own costs or demand. which are likely to increase as output increases. including psychological pricing. and the impact of price on other parties. firms bid for jobs. only known to client and not to the other parties tendering for the service). The way around this problem is to recognize that the pricing deci. Selecting the final Price .Here the firm determines the direct and fixed costs for each unit of product. All other things being equal the buyer will select the supplier that offers the lowest price. Direct cost approach is useful when pricing services for example. The most usual process is the drawing up of detailed specifications for a product and putting the contract out for tender. Competitive Bidding .sion is dependent on other earlier decisions in the marketing planning process. The firm might charge the same. 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. Direct (or marginal) Cost Pricing . the influence of other marketing –mix elements on price. For new products. The is an almost impossible prediction. the firm bases its price largely on competitors’ prices.e. Marketing Oriented 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. distribution and product benefits. machinery etc) will remain unaffected whether one unit or one thousand units are produced. strategic objectives. company –pricing policies.gic objectives. with less attention paid to its own costs or to demand. or less than its major competitors. In sealed-bid pricing (i. aircraft seats or hotel rooms lie idle. the company must consider additional factors. Direct costs then. Competition-based approach . Potential suppliers quote a price. gain and risk pricing.There are three pricing methods that can be employed by a firm: 1.
Counter trade may account for 15 to 25 percent of world trade and takes several forms: barter. all too often. However. Chemical company built a plant for an Indian company and accepted partial payment in cash and the remainder in chemicals manufactured at the plant. This is not to say that there is anything particularly wrong with price dis. Many buyers want to offer other items in payment. a practice known as counter trade.less carefully controlled and conceived as part of your overall marketing strategy. A British aircraft manufacturer sold planes to Brazil for 70 percent cash and the rest in coffee. equipment. 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. 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. discounting can be dangerous un. Buyback arrangement: The seller sells a plant.The role of discount Offering discounts can be a useful tactic in response to aggressive competition by a competitor. Geographical pricing (cash. whilst getting absolutely nothing in return except a lower profit margin.DIFFERENT PRICING STRATEGIES 1. For example. A US.Geographical pricing involves the’ company in deciding how to price its products to different. compensation deals. 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. quantity and other discounts.in some it is so endemic as to render normal price lists practically meaningless. and offset. Price discounts and allowances .counting provided that you are getting something specific that you want in return. Counter trade. Customers in different locations and countries. For example. or technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment. The trouble is that. 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. This issue is critical when buyers lack sufficient hard currency to pay for their purchases. companies get themselves embroiled in a complex structure of cash. Barter: The direct exchange of goods. American compa nies are often forced _o engage in counter trade if they want the business. Discounting is common in many industries . Barter) .
Automakers have even announced no-interest financing to attract Customers. competitors Copy them and they lose their effectiveness. keep standard discounts low to retain maximum flexibility and ensure that they are consistent with your overall marketing and pricing strategy. In second-degree price discrimination. 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. Rebates can help clear inventories without cutting the stated list price. Low-interest financing: Instead of cutting its price. In first.ments above will apply to you. In third-degree price discrimination.degree price discrimination.. Longer payment terms: Sellers.Companies can use several pricing techniques to stimulate early pur. Consumers often worry less about the cost (i.tomers Cash rebates: Auto companies and other consumer-goods companies offer cash rebates to Encour. products.Clearly the role of discounts will vary from one type of business to another and not all of the com. the seller charges a separate price to each customer depending on the intensity of his or her demand. whatever business you are in.Companies often adjust their basic price to accommodate differences in customers. as in the following cases: . such as building up product quality and service or strengthening product image through advertising. whether they are effective. will depend on the non-price benefits of your product. In general. 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. the company can offer customers lowinterest financing. 3.e. the interest rate) of a loan and more about whether they can afford the monthly payment. 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. But. the seller charges less to buyers who buy a larger volume. Promotional Pricing . If they do not work. or eliminate them altogether. but these laws have been revoked. This pays if the revenue on the additional sales compensates for the lower margins on the) boss-leader items. Warranties and service contracts: Companies can promote sales by adding a free or low.chase: Loss-leader pricing: Supermarkets and department stores often drop the price on wellKnown brands to stimulate additional store traffic. Special-event pricing: Sellers will establish special prices in certain seasons to draw in more cus. especially mortgage banks and auto companies. 4. and so on. stretch loans over longer periods and thus lower the monthly payments. locations. Manufacturers have tried to restrain intermediaries from loss leader pricing through lobbying for retail-price -maintenance laws. and how long they are expected to last. they waste money that could have been put into other marketing tools. In part your ability to minimize discounts. Discriminatory pricing .cost warranty or service contract. the seller charges different amounts to different classes of buyers.age purchase of the manufacturers’ products within a specified time period. you should always ask yourself what your discounts are supposed to achieve. If they work.
by-product pricing. a fast-food restaurant.nate between sellers by comparing prices instantaneously. the product is part of a product mix. optional-feature pricing.Price-setting logic must be modified when. and product-bundling pricing. the cost of segmenting and policing the market must not exceed the extra revenue derived from price discrimination. the person’s company. Airlines charge different fares to passengers on the same flight. For instance. certain conditions must exist.nation must not be illegal. 50. the firm searches for a set of prices that maximizes profits on the total mix. Of status (youth.tomize offers and prices. 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. For example. New software applications. In this case.tory pricing. competitors must not be able to undersell the firm in the higher-price segment. are also allowing buyers to discrimi. 5. A perfume manufacturer can put the perfume in one bottle. they can use software that monitors customers’ movements over the Web and allows them to cus. or a vending machine. Hotels and airlines use yield pricing.ences at. the market must be segment able and the segments must show different intensities of demand. Location pricing: The same product is priced differently at different locations even though the cost of offering at each location is the same. and price it at Rest. Airlines are using yield pricing to capture as much revenue as possible. by which they offer lower rates on unsold inventory just before it expires. Restaurants charge less to “early bird” customers. Fourth. the time of day (morning or night coach). the particular form of price discrimi. However. First. give it a name and image.200. and so on. Product line Pricing: Companies normally develop product lines rather than single products and introduce price steps. Hotels charge less’ on weekends. Computer technology is making it easier for sellers to practice discriminatory pricing. We can distinguish six situations involving product-mix pricing: product-line pricing. or hour. It can put the same perfume in another bottle with a different name and image and price it at Rs.price segment. sellers use well-established price . members in the lower. A theater varies its seat prices according to audience preferences for different locations.ing class. military. customers so disliked the idea that Coke abandoned it. depending on the seat. Product-mix pricing . captive-product pricing. Channel pricing: Coca-Cola carries a different price depending on whether it is purchased ill a fine restaurant. For price discrimination to work.cial users by time of day and weekend versus weekday. Sixth. and lowering the price on cold days. the practice must not breed customer resentment and ill will. Time pricing: Prices are varied by season. past business. how-ever. two-part pricing. senior citizen). museums often charge a lower admission fee to students and senior citizens. Must not be able to resell the product to the higherprice segment. Coca-Cola considered raising its vending machine soda prices on hot days using wireless technology. Fifth. Public utilities vary energy rates to commer. In many lines of trade. Third. the season. competitors have increased their use of discrimina. the day of the week (workday or weekend). As a result of deregulation in several industries. day. Pricing is difficult because the various products have demand and cost interrelationships and are subject to different degrees of competition. Second.Customer-segment pricing: Different customer groups are charged different prices for the same product or service.
automobiles companies must decide which items to include in the price and which to offer as options. Rs. When offering a mixed bundle. A men’s clothing store might carry men’s suits at three price levels: Rs800. Product-Bundling pricing . and Rs.Some products requires the use of ancillary. Telephone users pay a minimum monthly fee plus charges for calls beyond the minimum number. The seller’s task is to establish perceivedquality differences that justify the price differences. Captive-product pricing .Service firms often engage in two-part pricing. Customers can often order liquor in addition to the meal.4500. petroleum products. An auto manufacturer might offer an option package at less than the cost of buying all the options separately. consisting of a fixed fee plus a variable usage fee.The production of certain goods. The food revenue covers costs. Optional-feature pricing ‘Many companies offer optional products. the seller normally charges less for the bundle than if the items were purchased separately. how much to charge for the basic service and how much for the variable usage. defoggers. A cellular service operator may give a cellular phone free if the person commits to buying two years of phone service. The key issues associated with initiating price changes are the circumstances that may lead a company to raise or lower prices. The automobile buyer can order electric window controls. and services along with their main product. and estimating competitor reactions. Amusement parks charge an admission fee plus fees for rides over a certain minimum. or captive. and the liquor produces the profit. products. average-. and other chemi.facturers of razors and cameras often price them low and set high markups on razor blades and film. Manu. Pure bundling occurs when a firm only offers its products as a bundle. If the by-products have value to a customer group. a firm can also initiate to increase the price. The fixed fee should be low enough to induce purchase of the ser-vice. Other restaurants price their liquor low and food high to draw in a drinking crowd. Pricing is a sticky problem. the tactics that can be used. respectively. and an extended warranty. they should be priced on their value.meats.points for the products in their line. 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. Initiating price increases Like price cuts . the seller offers goods both individually and in bun-dles. light dimmers. Restaurants face a similar pricing problem. Because customers may not have planned to buy all the components.Sellers often bundle products and features. In mixed bundling. A theater company will price a season subscription at less than the cost of buying all the performances separately. Customers will associate low-. The service firm faces a problem sin1ilar to captive product pricing-namely. Any income earned on the by-products will make it easier for the company to charge a lower price on its main product if competition forces it to do so. A successful price increase . features. Two-part pricing . By-product pricing . PRICE CHANGES Companies often face situations where they may need to cut or raise prices. the savings on the price bundle must be substantial enough to induce them to buy the bundle.1500.cals—often results in by-products. and high-quality suits with the three price points. Many restaurants price their liquor high and their food low. the profit can then be made on the usage fees. This explains why servers often press hard to get customers to order drinks.
They can often be performed better through specialization. We define a value network as follows: A value network is a system of partnerships and alliances that a firm creates to source. it can raise its prices. The company’s pricing depends on whether it uses mass-merchandisers or high.matched by productivity gains squeeze profit margins and lead companies to regular rounds of price increases. if the company’s profit margin is 3% of sales. 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. or both. 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. like aircraft con. When an automaker signs up independent dealers to sell its automobiles. This pricing is prevalent in industries with long production lead times. and deliver its offerings Marketing channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption! Marketing-channel decisions are among the most critical decisions facing management. Escalator clauses are found in contracts for major industrial projects. For example. Company -owned outlets.quality boutiques. They can be shifted among channel members. such as industrial construction and heavy equipment. In addition.crease that takes place before delivery. Escalator clauses: The company requires paying today’s price and all or part of any inflation in. Distribution Channel Function: All channel functions have three things in common: • • • They use up scarce resources. An escalator clause bases price increases on some specified price index. in anticipation of further inflation and govt. a 1% increase will increase profits by 33% if sales volume is unaffected.struction and bridge building. Over demand: when a company cannot supply all of its customers.ments that were part of the former offer. Rising costs un. The channels chosen intimately affect all the other marketing decisions. Reduction of discounts: The company instructs its sales force not to offer its normal cash and quantity discounts. the company’s channel decisions involve relatively long-term commitments to other firms. . the automaker cannot buy them out the next day and replace them with. Unbundling: The Company maintains its price but removes or prices separately one or more ele. in a practice called anticipatory pricing. ration supplies to its customers. The firm’s sales force and advertising decisions depend on how much training and motivation dealers need.can raise profits considerably. augment. Companies often raise their prices by more than cost increase. price controls. The circumstances provoking price increases are generally as follows: Cost inflation: A major circumstance provoking price increases is cost inflation. such as free delivery or installation.
tomers prefer a greater assortment because more choices increase the chance of finding what they need. Normally. Spatial convenience : The degree to which the marketing channel makes it easy for customers to purchase the product Product variety: The assortment breadth pro. Evaluating major channel alternatives 1. Channel objectives vary with product characteristics.vided by the-marketing channel. Waiting time : The average time customers of that channel wait for receipt of the goods.put levels under competitive conditions. Analyzing customer needs 2. such as building materials. cus. Non standardized products. repairs) provided by the channel. Products requiring installation or maintenance services. Perishable products require more direct marketing. The greater the service backup. Analyze Customers’ Desired Service Output Levels It is imperative to understand that in designing the marketing channel. such as custom-built machinery and specialized business forms. Service backup: The add-on services (credit. Identify Major Channel Alternatives Companies can choose from a wide variety of channels for reaching customers-from . the greater the work provided by the channel.sired by target customers. Channels produce five service outputs Lot size : The number of units the channel permits a typical customer to purchase on one occasion. require channels that minimize the ship. Identifying major channel alternatives 4. delivery. the marketer must understand the service output levels de. Effective planning requires determining which market segments to serve and the best channels to use in each case. are sold directly by company sales representatives. Bulky products. channel institutions should arrange their functional tasks to minimize total channel costs with respect to desired levels of service outputs Usually. Establishing channel objectives 3. 2.DITRIBUTION CHANNEL FUCTION DAIGRAM CHANNEL DESIGN DECISIONS: Following four steps help design a channel system :1.ping distance and the amount of handling. installation. several market segments that desire differing service output levels can be identified. customers normally prefer fast delivery channels. 3. Establish Objectives and Constraints Channel objectives should be stated in terms of targeted service out.
dealers. telemarketing. Selective distribution 4. Distributors’ territorial rights 4. 5. Each channel has unique strengths as well as weaknesses. 4.sales forces to agents. Sales forces can handle complex products and trans. Evaluate the Major Alternatives (time. cost. When this does not hap.effective trade relations mix. Conditions of sale 3. Selecting Channel Members Training Channel Members Motivating Channel Members Evaluating Channel Members Modifying Channel Arrangements . Exclusive distribution 2. The problem is further complicated by the fact that most companies now use a mix of channels. A channel alternative is described by three elements • The types of available business intermediaries. but they are expensive. 1. there is usually channel conflict and excessive cost.pen. Exclusive dealing 3. Each channel hopefully reaches a different segment of buyers and delivers the right products to each at the least cost.actions. and 1. but it cannot handle complex products. 1. 2. • the number of intermediaries needed. and the Internet. direct mail. Intensive distribution the terms and responsibilities of each channel member. but the company loses direct contact with customers. The aim is to build a “partnership” feeling and joint distribution programming. The Internet is much less expensive. 3. 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. Distributors can create sales. Price policy 2. distributors.
. 3. One manufacturer that was compensating a distributor for holding inventories found that the inventories were actual held in a public warehouse at its expense. It needs-to determine intermediaries’ needs and construct a channel positioning such that its. customer delivery time treatment of damaged and lost goods. Consider the negative impression you would get of McDonald’s. and cooperation in promotional and training programs.pany should provide training programs. Under performers need to be counseled. be. 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. . or unpleasant. average inventory levels. Producers should set up functional discounts in which they pay specified amounts for the trade channel’s performance of each agreed-upon ser. Selecting channel members would therefore involve evaluate experience. Evaluating channel members Producers must periodically evaluate intermediaries’ performance against such standards as sales-quota attainment.cause they will be viewed as the company by end users . Motivating channel members A. Selecting Channel Members Companies need to select their channel members carefully. To customers. or terminated. cooperativeness. Company needs to view its intermediaries in the same way it views its end users. number of lines carried. market research programs. and reputation 2. Training channel members Companies need to plan and implement careful training programs for their intermediaries. They prepare the channel member employees to perform more effectively and efficiently The com. A producer will occasionally discover that it is paying too much to particular intermediaries for what they are actually doing. retrained. the channels are the company. or Hyundai if one or more of their outlets or dealers consistently appeared dirty. growth and profit record solvency. and other capability-building programs to improve intermediaries’ performance. inefficient. 3. channel offering is tailored to provide superior value to these intermediaries Producers vary in their ability to attract intermediaries .1. re motivated.vice.
They are evaluated on the following parameters sales quota attainment. B. has contracts with them. wholesalers. bargaining power. average inventory levels. Channel Dynamics: A. Administered VMS 3. wholesalers. or has so much power that they all cooperate. innovative distribution channels emerge.fication to meet new conditions in the market. Modifying channel arrangements A producer must periodically review and modify its channel arrangement. Contractual VMS . VMS achieve economies through size.place . and the product moves into later stage in the product life cycle. Vertical Marketing System A distribution channel structure in which producers. result of strong channel members’ attempts to control channel behavior and eliminate the conflict that results when independent members pursue their own objectives. and retailers each a separate business seeking to maximize its own profits even at the expense of profits for the system as a whole . Therefore the system will require periodic modi. VMS s arose as. Vertical marketing system comprises of 1. Modification becomes necessary when the „ „ „ „ „ distribution channel is not working as planned. A. One channel member owns the others. treatment of damaged and lost goods. consumer buying patterns change. customer delivery time. and retailers act as a unified system.ket expands new competition arises. cooperation in promotional and training programs 4. Corporate VMS 2. and elimination of duplicated ser-vices. Conventional Marketing System A channel consisting of one or more independent producers. the mar.
Organizational approach 1. Retailer cooperatives c. Relative prices 4. Amount of service 2. lower cost. A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing. non business use. Contractual VMS could have the following forms a Wholesaler-sponsored voluntary chains b. ii. 1. Product lines 3. Types of Retailing. Horizontal Marketing Systems A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity. Can be permanent or temporary D.ties. technology. outside innovators) What is Retailing? Retailing includes all the activities involved in selling goods or services directly to final consumers for personal. and developing new means) iii. i. ii. Two or more unrelated firms put together re.sources or programs. Manufacturer-sponsored retailer franchise or manufacturer-sponsored wholesaler franchise C. 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. Roles of individual firms in a multi channel system: (insiders. marketing resources or other variables to take on the venture alone iii. iii. transients. Administered VMS A vertical marketing system that coordinates successive stages of production and distribution. 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. customized selling ii. Multi channel marketing—single firm uses two or more marketing channels to reach one or more customer segments—advantages: increased coverage. but through the size and power of one of the par. Corporate VMS A vertical marketing system that combines successive stages of production and distribution under single ownership—channel leadership is established through common ownership. Franchise organizations d.i. Each firm lacks the capital. Amount of service A Self-service retailers Customers are willing to self-serve to save money . complementers. not through common ownership or contractual ties. strivers. i. Planning channel architecture (companies thinking through their channel architecture— which are efficient and not.
nonfood. Superstores Food. 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. Category killers Giant specialty stores 3. and services F. Convenience stores Limited line E. 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 . Supermarkets D. 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.
. The challenge is to develop a product-different ion strategy. Ancillary services –general information .gift wrapping . Service mix and Store’s atmosphere The retailers must also decide on the service mix to offer customers Pre-purchase services.accepting telephone and mail orders.breadth and depth . Retailers must also pay attention to pricing tactics. Most retailers will put low prices on some items to serve as traffic builders or loss leaders. trade ins. Service mix. Promotion Retailers use a wide range of promotion tools to generate traffic and purchases. fitting rooms . advertising messages and media. The retailer has to decide on product assortment. advertising. Post purchase include – shipping and delivery . retailing too is concerned with defining its target market. store’s atmosphere Price Promotion Place (location) 1. adjustments and returns. 2. Product assortment.Retail Marketing decisions Various marketing decisions affecting the retail business :Target marketing and positioning Product assortment. Promotion methods include :Ads Special sales Money saving coupons Sample distribution etc. They will run storewide sales. window and interior display . 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. Target Marketing and Positioning Like other marketing activities. Until the target market is defined and profiled . check cashing . the retailer cannot make consistent decisions on product assortment . The retailer’s product assortment must match the target market’s shopping expectations.installations. parking . and service levels. 4. restaurants . fashion shows. store décor. price. shopping hours. All retailers would like to achieve high volumes and high gross margins. Price Prices are a key positioning factor and must be decided in relation to the target market. the product and service assortment mix and competition. engraving. They will plan marks down on slower –moving merchandise . alterations and tailoring . repairs etc. 5.
stores.ing the boom times altogether. there were an estimated 11. This trend towards larger outlets is leading to a rise in average retail space.7% in 2001. owner-managed shops. the country is also dotted with low-cost kiosks and pushcarts.4 sq m per outlet.comes of the middle class households.039. Besides.2 million re. the retail sector is the second largest employer after agriculture. The concept of retailing chain stores is at a very nascent stage in India. space and rentals are proving to be the largest constraints to development of large formats in metropolitan cities.228.ever. Selling an experience. since retailers are aiming the prime . Organized retailing represent a small fraction of the Indian retail market. There are no hypermarkets in the country as yet. Total retail sales area in India was estimated at 328 million sq m in 2001. The share was 62. Growing investment in technology 5 . not just goods Retailing in India: Are you game for it!!!!! They say ‘If you aren’t in IT or entertainment. New retail forms and combinations 2 . these modern formats are showing robust growth as several retail chains have established a base in metropolitan cities.2 billion in 2001 while non. Growth of intertype competition. a regional shopping center . However.tail outlets in the country. 3 .5 billion.food sales were worth Rs4189. Place Location is often described as the most successful strategy for retailing. Or you’re miss. chemist shops. There has been a boom in retail trade in India owing to a gradual increase in the disposable in. the non-food retailing sector registered faster year-on-year growth than food sales. especially in south India. organised retail trade in India was worth Rs11.7 billion. supermarkets. Retailers can locate their stores in the central business district. In 2001.’ In India. and furnishing stores. There are some 12 million retail outlets in India. with an average selling space of 29. it could still add up to say the sizeable number.6. Global presence of major retailers 6. While the middle class may not be as big as expected. and are spreading all over India at a rapid pace. worth approximately Rs7. discount stores. However. How. 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. Food sales constitute a high proportion of total retail sales. department stores and even changing the traditional looks of book. More and more players are coming into the retail business in India to introduce new formats like malls. The retailing sector in India is highly fragmented and predominantly consists of small independent. you ought to be in retailing. More so. a billion people in overall population leads to very large numbers. Growth of giant retail 4 . Retail Infrastructure In 2001.
in. airy and equipped with modern amenities. ready-to-eat food has been on the rise.tailing sector is not permitted yet. well. in both food and non-food segments. They have big label stores as well as in.7 billion in 2001.keting arrangement with Lotto and Nike as well. The anchor is expected to attract a variety of con. Another strong retailer is Subhiksha.sumers and hence is the key to increasing foot traffic. Spencer & Co Ltd another large retail group in the country. music stores and the beauty and health chain. The number of large mega-malls is expected to increase significantly as India is now experiencing a “mall boom”. families are experiencing growth in income and dearth of time. whose discounters and chemists/druggist chain is very popular in South India. The K Raheja-run department store chain. in order to protect the interests of the small retailers. as many as 50 new malls will be coming up by 2005 in the smaller cities as well. According to estimates apart from the metropolitan and larger cities. The trend to market private labels by a specific retail chain is catching on in India as it helps to improve margins. With almost a monopolistic presence in the organised footwear market until the 1980s. However. The real estate development group has converted its retailing operation into an Indian success story. and a retail turnover of Rs6 billion in 2001. Foodworld is operated by Foodworld Supermar. There is a strong lobby of small traders that has been vocal on the issue of not permitting FDI into retail. The proportion of sales through organised retailing is estimated to increase to around 6% by 2010. More and more women are also turning to corporate jobs.house eateries and entertainment zones. each retail business at the time of writing was run as a separate entity. with further growth of organised retailing. with 1600 footwear stores spread across the country.stores. while Health & Glow by RPG Group. The turnover from private labels by major retail chains was estimated at around Rs 1200 million in 2001. ready-to-cook. Each mall typically has an anchor.endowed malls and shopping centres. which occupies a sizeable percentage of the total usable area. The mid 1990s marked the arrival of new. which is adding to the family income but making lifestyles extremely busy. with interests in supermarkets.mous with footwear in middleclass India. It has also acquired the Crossword chain of book.069. There is also a strong trend in favour of onestop shops like supermarkets and department stores. Retail Forecasts The retail business is expected to reach Rs19. Bata is synony.kets Ltd.stant. Shopping malls is set to one of the most visible faces of the Indian retail scene by the end of 2002.locations. is the second largest fascia in the country with retail sales of Rs2.3 billion by 2006. Competitive Environment Bata India Ltd is one of the largest retailer. Rising incomes has led to increasing demand for better quality products while lack of time has led a demand for convenience and service. The lobby is based on the premise that modern retail will impact the livelihood of millions of small family-run businesses. The stores retail mainly Bata products. The demand for frozen. especially in the metropolitan and large cities in India. Health & Glow. with a mar. Key Developments in Retailing 100% foreign direct investment (FDI) in the re. In urban India. Shoppers Stop. . which are spacious.
There are two types of full-service wholesalers (1) Wholesale merchants sell primarily to retailers and provide a full range of service .General-line wholesalers carry one or two lines. the consumer ability to spend will increase. and provide management assistance. pricing. promotion. offer credit. in both food and nonfood sectors. on the other hand. Merchant Wholesalers: Independently owned businesses that take title to the merchandise they handle. In the future. Wholesalers who fail to carry adequate assortments and inventory and provide satisfactory ser. offering credit. They are called jobbers. as people are showing preference for one-stop shops. Full-Service Wholesalers: Carry stock. or mill supply houses and fall into two categories: full service and limited service. adapt marketing concepts and streamline their costs of doing business. and providing delivery. 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. Progressive wholesalers. product assortment and services.Specialty wholesalers carry only part of a line (2) Industrial distributors sell to manufacturers rather than to retailers and provide several services—carrying stock. Target Market Product Assortment and Services . This would continue more strongly in the forecast pe. In such a scenario. Customers are also looking for ambience and convenience in shopping. . distributors. maintain a sales force. make deliveries. Selling and promoting Buying and assortment building Bulk breaking Warehousing Transportation Financing Risk bearing Market information Management services and counseling Types of Wholesaling. .vice are likely to be bypassed by manufacturers. Wholesaler Marketing Decisions Wholesalers also must make decisions on their target market. but at the same time. Following are the functions performed by wholesalers. the retailers will have to increasingly develop shopping as an experience and at the same time. with more dual income families.There is already a strong trend in favour of large format retail outlets. it is predicted that the time available for shopping will go down. 1. the more successful ones will be those that provide faster service.General-merchandise wholesalers carry several merchandise lines. and place.riod.
g. The main modes of distribution will be looked at in more detail. Channel Intermediaries . Agents can be very expensive to train.g. Wholesalers offer reduce the physical con. Products and services are promoted and merchandised by the retailer. or sales force costs.selves e.Retailers Retailers will have a much stronger personal relationship with the consumer. They sell on to a wholesaler that will store it and eventually resell to a retailer. The retailer will give the final selling price to the product. or travel agents. They do not tend to take title to the goods. They take ownership or ‘title’ to goods whereas agents do not (see below). Many produce their own brochures and use their own telesales operations.seas distributors. Retailers often have a strong ‘brand’ them. 4.Internet The Internet has a geographically disperse market.osed to many products. The main benefit of the Internet is that niche products reach a wider audience e. a ‘stockist agent’ will hold consignment stock (i. Ross and Wall-Mart in the USA. The retailer will hold several other brands and products. and Alisuper. retailers. However. but the title will remain with the producer. This approach is used where goods need to get into a market soon after the order is placed e. Retailers will often offer credit to the customer e. There are low barriers low barriers to entry as set up costs are low.g. An agent will typically secure an order for a producer and will take a commission.tact cost between the producer and consumer e.Price Decision Promotion Decision Place Decision Types of Channel Intermediaries And Their Functions There are many types of intermediaries such as wholesalers.g. agents. electrical wholesalers. and many others. 1.ages for resale by a retailer. and Jumbo in Portugal. They are difficult to keep control of due to the physical distances involved. 3. over. They provide storage facilities.Wholesalers They break down ‘bulk’ into smaller pack. .Agents Agents are mainly used in international markets. Channel Intermediaries . foodstuffs). There is a paradigm shift in commerce and consumption which benefits distribution via the Internet. Channel Intermediaries . 2. Scottish Salmon direct from an Inverness fishery. direct marketing (from manufacturer to user without an intermediary). For example. Modelo. A wholesaler will often take on the some of the marketing responsibilities. the Internet.g.e. This means that capital is not tied up in goods. They buy from producers and resell to retailers. Channel Intermediaries . cheese manufacturers seldom wait for their product to mature. will store the stock. customer service costs. A consumer will expect to be ex. They are difficult to motivate.
They must transmit the message through media that reach the target audience and develop feedback channels. Marketers also need to understand the fundamental elements of effective communications. 2. This understanding will help them allocate communications dollars more efficiently. cur. and to whom to say it.PROMOTION. Four represent major communication function – encoding. see television ads. the marketer might want to put something into the consumer’s mind. or organisations to di. Definition: Promotion is communication about an organization and its products that is intended to inform. Identify the target audience -The process must start with a clear target audience in mind: potential buyers of the company’s products. where to say it.ucts. The target audience is a critical influence on the communicator’s decisions on what to say. They must encode their messages so that the target audience can decode them. For example. or influencers. The last element in the system is noise (random and competing messages that may interfere with the intended com. That is. how to say it. particular publics. persuade. The model emphasizes the key factors in effective communication. Promotion’s role is to communicate with individuals.rectly or indirectly facilitate exchanges by in.INTEGRATED MARKETING COMMUNICATION Marketing communications which is one of the four major elements of the company’s marketing mix. individuals.The marketer can be seeking a cognitive. Two represent the major communication tools – message and media. THE COMMUNICATION PROCESS: The whole marketing mix must be integrated to deliver a consistent message and strategic positioning. To monitor the responses. groups. some. 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. and observe computers in a store. and feedback. Figure above shows a communication model with nine elements. Senders must know what audiences they want to reach and what responses they want to get. deconding. or behavioral response.forming and persuading one or more of the audiences to accept an organisation’s prod. Determine the communication objectives . response. . read articles. look for information on the Internet. The more the sender’s field of experience overlaps with that of the receiver. Marketers need to assess which experiences and impressions will have the most influence at each stage of the buying process.one interested in purchasing a new computer would talk to others.munication). the more effective the message is likely to be. groups. affective.rent users. when to say it. or the general public. or remind target market members. deciders. Developing an Effective Communications 1. Two represent the major parties in a communication – sender and receiver.
Hold interest. Anti drug crusaders will use ex-drug addicts because they have higher credibility for students than teachers do. and hairstyle. management searches for an appeal.) how to say it logically ( message structure ).What is important is the spokesperson’s credibility. and vocalizations. the communicator moves to developing an effective message. posture. Message structure Effectiveness depends on structure as well as content Message format The message format needs to be strong. and who should say it (message source). There are three types of appeals: rational. If the message is to be carried on television or in person.3. gestures. idea. theme. all these elements plus body language ( nonverbal clues) have to be planned. voice qualities. emotional. the message should gain attention. the communicator has to decide on headline. dress.Having defined the desired response. texture. scent. The “sound” of an announcer promoting a used automobile has to be different from one promoting a new Cadillac. In a print ad. and elicit action Formulating the message will require solving four problems: what to say ( message content. how to say it symbolically ( message format). copy. . or unique selling proposition ( USP). Ideally. Pharmaceutical companies what doctors to testify about product benefits because doctors have high credibility. and color. the communicator has to choose words. If the message is carried by the product or its packaging. the communicator has to pay attention to color. This is why advertisers often use celebrities . illustration. For a radio message. Design the message . and moral. and shape Message source Message delivered by attractive or popular sources achieve higher attention and recall. Message content: In determining message content. size. arouse desire. Presenters have to pay attention to facial expressions.
sales force. Mass media advertising is used less today because of its high costs and less predictable audience sizes. John Wanamaker. Deciding on the marketing communications mix . The concept of integrated marketing communications has been increasingly accepted for a number of reasons. sales promotion. pharmaceutical company salespeople can rarely wrest more than five minutes’ time from a busy physician.Companies must allocate the pro. “ know that half of my advertising is wasted. 5. and likability. The industry has had to expand its battery of communication channels.What factors underlie source credibility? The three most often identified are expertise. sending direct mail ( including audio and videotapes ). CD ROMS. Marketers can now take advantage of more precisely targeted promotional tools. public relations and publicity. and voice broadcasts. 4. attractive. B. Here is how one company touches several bases.” 6. This makes pharmaceutical sales calling extremely expensive. and even telemarketing. C. but I don’t know which half. special interest magazines. A major goal of integrated marketing communications is to send a consistent message to customers.One of the most difficult marketing decisions is determining how much to spend on promotion. .ness. trustworthiness. For example. quick. Their presentation must be crisp. Establish the total marketing communication budget . passing out free samples. the department. D. These include placing ads in medical journals. This approach fosters long-term customer relationships and the efficient use of promotional resources.motion budget over the give promotional tools – advertising. the Internet. such as cable TV. Database marketing is also allowing marketers to be more precise in targeting individual customers. and convincing.The communicator must select efficient channels to carry the message.store magnate. Integrated marketing communications is the coordination of promotion efforts to ensure the maximum informational persuasive impact on customers. direct mail. and direct marketing. Select the communication channels . once said. What Is Integrated Marketing Communications? A.
Any paid form of non personal presentation and promotion of ideas. Advertising can be traced back to the very beginnings of recorded history. Archaeologists working in the countries around the Mediterranean Sea have dug up signs announcing various events and offers. or reinforce. Advertising objectives can be classified according to whether their aim is to in.Define Advertising Advertising. Reminder advertising aims to stimulate re.” Comparative advertising works best when it elicits cognitive and affective motivations simultaneously. setting the advertising budget. and marketing mix.Some critics charge that large. Modern advertising. preference. setting advertising objectives.The advertising objectives must flow from prior decisions on target market.peat purchase of products and services. and evaluating advertising campaigns. market positioning. Ex. four-color Coca-Cola ads in magazines are intended to remind people to pur. Setting the advertising objectives . 1. and that industrial companies underestimate the power of company and prod. and purchase of a product or service. is a far cry from these early efforts. and the Phoenicians painted pictures promoting their wares on large rocks along parade routes. developing advertising strategy (message decisions and media decisions). persuade. goods. Some persuasive advertising uses comparative advertising. DEVELOPINGADVERTISEMENT PROGRAM Marketers must make four important decisions when developing an advertising program. consumer packaged-goods firms tend to overspend on advertising as a form of insurance against not spending enough. Persuasive advertising aims to create liking. or services by an identified sponsor.chase Coca-Cola Reinforcement advertising aims to convince current purchasers that they made the right choice.form. which makes an explicit comparison of the attributes of two or more brands.pensive. Informative advertising aims to create awareness and knowledge of new products or new features of existing products. conviction.. 2. The Romans painted walls to announce gladiator fights. remind. Automobile ads often depict satisfied customers enjoying special features of their new car. Deciding on the advertising budget .uct image building and tend to under spend There are five specific factors to consider when setting the advertising budget: . however.
Dik Twedt suggested that messages be rated on desirability. 4. 5. cigarettes.New products typically receive large advertising budgets to build awareness and to gain consumer trial. DIFFERENTADVERTISING MEDIA The advertising media are the various forms of communication through which advertising reaches its audience. and impact. the advertiser’s next task is to choose media to carry it. 3. deciding on media timing. . 4. Evaluating advertising effectiveness . Some ads aim for rational positioning and other for emotional positioning. Advertising frequency: The number of repetitions needed to put across the brand’s mes.market-share brands usually require less advertising expenditure as a percentage of sales to maintain share. Most marketers work hard to communicate openly and honestly with consumers. soft drinks ) re. exclusive. Market share and consumer base . Yet the amount of fundamental research on effectiveness is appallingly small.High. Deciding on media and measuring effectiveness After choosing the message.ness. Stage in the product life cycle . it is less expensive to reach consumers of a widely used brand than to reach consumers of lowshare brands. and believability Message execution The message’s impact depends not only on what is said. selecting specific media vehicles. The steps here are deciding on desired reach.1. choosing among major media types. Then the results of these decisions need to be evaluated 5. Choosing the advertising message: Message generation: advertising people have proposed different theories for creating an effective message. Established brands usually are supported with lower advertising budgets as a ratio to sales. and public policy makers have developed a substantial body of laws and regulations to govern advertising. coffee.per-impression basis. and vodka. To build share by increasing mar. Still. Product substitutability: Brands in a commodity class ( cigarettes. Newspapers. Message evaluation and selection a good ad normally focuses on one core selling proposition. On a cost. 2. but often more important. and deciding on geographical media allocation. a brand must advertise more heavily to be heard. beer. Message execution can be decisive for highly similar products. 3. Even simple cluster from advertisements not directly competitive to the brand creates a need for heavier advertising. Competition and cluster .In a market with a large number of competitions and high advertising spending. on how it is said. Advertising is also important when a brand can offer unique physical benefits or features. Newspaper advertising accounts for almost one-fourth of all advertising expenditures.Good planning and control of advertising depend on measures of advertising effectiveness. frequency.sage to consumers has an important impact on the advertising budget.ket size requires larger expenditures. Social responsibility review advertisers and their agencies must be sure their “creative” advertising does not overstep social and legal norms.quire heavy advertising to establish a differential image. such as detergents. abuses occur.
The advertising revenues of magazines have been climbing. IV. There are some drawbacks to newspaper advertising It has a short life span. because most outdoor advertising is directed at a mobile audience. which provide advertisers with geographic flexibility.Newspaper advertising is used extensively by retailers because it is relatively inexpensive com. Some organizations are using direct e-mail. The medium is especially suitable for products that lend themselves to pictorial display. The effectiveness of direct-mail advertising can be measured because the advertiser has a record of who received the advertisement and can track who responds. Magazine advertisements have a longer life span. Magazines. II. A number of magazines like Time and Cosmopolitan publish regional editions.pared to other media. Because it provides only local coverage. Direct Mail. Direct mail is the most selective medium: Mailing lists are available (or can be compiled) to reach almost any target audience.boards. Sign and billboard advertising allow the marketer to focus on a particular geographic area. Outdoor Advertising. Color reproduction is usually poor. advertising dollars are not wasted in reaching people who are outside the market area.. It is also timely. Advertisers can reach very specific market segments through ads in special-interest magazines. III. posters. Ads are usually read once and then discarded. However. Direct-mail advertising is promotional material mailed directly to individuals. Marketers cannot target specific markets through newspaper ads. The major disadvantages of magazine advertising are high cost and lack of timeliness. . and signs. A direct-mail campaign may fail if the mailing list is outdated and the mailing does not reach the right people. Outdoor advertising consists of short promotional messages on bill. Magazine advertising is more prestigious than newspaper advertising. and it is fairly inexpensive. the message must be limited to a few words. and it provides highquality color reproduction.
Internet. Banner ads are rectangular graphics appearing at the top of most consumer web sites. Even small retailers are able to afford radio advertisements. DECIDING ON MEDIA AND MEASURING EFFECTIVENESS The steps here are Deciding on desired reach. Keyword ads. the advertiser is seeking a specified advertising objective and response from the target audience – for example. radio advertising offers selectivity. among other things. frequency . and impact. Deciding on media timing. and Evaluatiing Effectivness (i) Deciding on reach. Choosing among major media types selecting specific media vehicles. or 60-second commercial during or between programs. A national advertiser may buy network time. VII. television advertising has a short life. frequency. or they may buy spot time for a single 10-. Television ranks number one in total revenue. Advertisers 8 percent of total expenditures. Button ads are small squarish ads appearing at the bottom of a web page. on level . which means that its message usually will be broadcast by hundreds of local affiliated stations. Both national and local firms may buy local time on a single station that covers a particular geographic selling area. Unlike magazine advertising. FM. An infomercial is a program-length (usually a half-hour) televised commercial message resembling an entertainment or consumer affairs programs. Radio. and whether the station broadcasts on AM. and perhaps like newspaper ads. 20-. Interstitial ads (in-your-face ads) pop up to display a product ad when viewers click on a web site.V. VI. Actual rates depend on geographic coverage. Sponsorship (or co-branded) ads integrate a company’s brand with editorial comment. Television advertising rates are based on the number of people expected to be watching when a commercial is aired. Thereare five types of Internet advertisements. The rate of product trial will depend. To an extent. link a specific ad to text or subject matter that an information seeker may enter. 30-. on radio advertising Like magazine ad vertising. Infomercial. they may select their audience by choosing the day of the week and the time of day when their ads will be shown. Advertisers may sponsor an entire show. they contain only a corporate or brand name. Television. Television advertising is the primary medium for larger firms whose objective is to reach national or regional markets. Presumably. Radio can be less expensive than other media. the number of commercials contracted for. or both. the time period specified. a target level of product trial. featured primarily on Internet search engines. The Internet is the newest advertising medium and is growing in popularity. and impact Media selection is finding the most cost-effective media to deliver the desired number and type of exposures to the target audience.
Many advertising agencies use a computer program to select the initial media and then make further improvements based on subjective factors. What counts is the cost-per-thousand exposures. Women’s dresses are best shown in color magazines . Yet some year ago. Other soft drink manufactures started to do the same. The advertiser who decides to buy 30 seconds of Audience size has several possible measures: Circulation: The number of physical units carrying the advertising. and Polaroid cameras are best demonstrated on television.drink manufacturer put more money into off-season advertising. This resulted in increased non seasonal consumption of its brand. and impact: Reach : The number of different persons or households exposed to a particular media schedule at least once during a specified time period. Effective ad-exposed audience: The number of people with target audience characteristics who actually saw the ad. . while not hurting seasonal consumption. Media planners are increasingly using more sophisticated measures of effectiveness and employing them in mathematical models to arrive at the best media mix. 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). radio and television are the most effective media for reaching teenagers. or to be constant throughout the year. Product characteristics: Media types have different potentials for demonstration. visualization. and impact.In choosing media. or newspaper. frequency. A message announcing a major sale tomorrow will require radio. Most firms pursue a seasonal policy. and the result was a more balanced consumption patters. the advertiser faced both a macroscheduling and a micro scheduling problem involves scheduling the advertising in relation to seasons and the business cycle. frequency. believability.of brand awareness. The effect of exposures on audience awareness depends on the exposures’ reach. (If the vehicle has pass-on readership. The firm can vary its advertising expenditures to following the seasonal pattern. (iii) Selecting specific vehicles The media planner must search for the most costeffective vehicles within each chosen media type. Media planners make their choice among media categories by considering the following variables: Target-audience media habits: For example . (iv) Deciding on media timing. (ii) Choosing among major media types The media planner has to know the capacity of the major media types to deliver reach. explanation. Audience: The number of people exposed to the vehicle. Message Characteristics: Timeliness and information content will influence media choice. whereas newspaper advertising is relatively inexpensive. A message containing a great deal of technical data might require specialized magazines or mailings. to oppose the seasonal pattern. TV. then the audience is larger than circulation) Effective audience: The number of people with target audience characteristics exposed to the vehicle. Suppose 70 percent of a product’s sales occur between June and September. and color. a soft. Cost: Television is very expensive.
Counseling: Advertising management about public issues and com.tion through internal and external communications. but it must also relate to a large number of interested publics. Lobbying: Dealing with legislators and government officials to pro. Corporate communication: Promoting understanding of the organiza. suppliers. and dealers. public relations would mean . Simply speaking . 4. business cards. and news releases.mote or defeat legislation and regulation.” and handling or heading off unfavorable rumors. PR Tools: In brief one can summarize the tools as follows :• Public relations professionals prepare written materials such as brochures. 5 . stories. Public Relations perform the following five functions: 1 .building good relations with the company’s various publics by obtaining favorable publicity. Sponsoring special events is an effective way for an organization to increase brand recognition and receive media coverage with relatively little investment. com.public relations. and events. Public relations (PR) involves a variety of programs designed to promote or protect a company’s image or its individual products. Not only must the company relate constructively to customers. • Event sponsorship is a public relations tool in which a company pays for all or part of a special event such as a concert. 3 . and stationery are also public relations tools. • Corporate identity material such as logos. or play.tion in the most positive light. a. building up a good corporate image. newsletters. and events. Product publicity: Sponsoring efforts to publicize specific products.pany magazines. annual reports. sports competition. Press relations: Presenting news and information about the organiza. 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. stories.pany positions and image during good times and crises. building up a good “corporate image. A public is any group that has an actual or potential interest in or impact on a company’s ability to achieve its objectives. 2 . signs. festival.PUBLIC RELATIONS Another major mass-promotion tool is. and handling or heading off unfavorable rumors. .
2. sales promotion offers reasons to buy now. Captioned photograph–a picture accompanied by a brief explanation d . • • • Advertising and personal selling Sales promotion can be directed at: The ultimate consumer (a “pull strategy” encouraging purchase) The distribution channel (a “push strategy” encouraging the channels to stock the product). Sales promotion is commonly referred to as “Below the Line” promotion. Publicity is communication in news story form about an organization. 3 . • Some public relations tools are associated specifically with publicity. Press conference–a meeting at which invited media personnel hear important news announce. Significance of the news item Sales promotion Short-term incentives to encourage the purchase or sale of a product or service. It is not designed to be informative – a role which advertising is much better suited to. its products. 1. It is about stimulating customers to buy a product.000 words) prepared by an organization for inclusion in a particular publication c. This is usually known as “selling into the trade” Sales Promotion Methods. Feature article–a piece (of up to 3.niques either for consumer sales or for trade sales. such as grand openings. or both. Publicity-based public relations tools include: a . You would agree that more than any other element of the promotional mix. a. whereas advertising and personal selling offer reasons to buy a product or service.. . Response of media personnel c.ments and receive supplementary textual materials and photographs • The specific types of public relations tools chosen depend on several factors. Composition of the target audience b. News release–a typed page of about 300 words provided by an organization to the media as a form of publicity b . Public relations personnel sometimes organize events.b. A number of factors enter into marketing decisions about which and how many sales promotion methods to use. A consumer sales promotion method attracts consumers to particular retail stores and motivates them to purchase certain new or established products. sales promotion is about “action”. Most sales promotional methods can be classified as promotion tech. Sales promotion consists of short-term incentives to encourage purchase or sales of a product or service. to create news about a company. A trade sales promotion method encourages wholesalers and retailers to stock and actively promote a manufacturer’s products.
and in shelf dispensers in the store.fully targeted individual consumers to obtain an immediate response. A buying allowance may serve as an incentive to resellers to handle new products. magazines. These coupons may be worth anywhere from a few cents to a few dollars. and easily administered. Frequent-user incentives build customer loyalty. • Cooperative Advertising. either with or without an additional purchase of the product. • Coupons. They can easily be copied by competitors. Coupons may also offer free merchandise. Usually the rebate is offered by the producer to consumers who send in a coupon along with a specific proof of purchase.chase of items in large quantities. A coupon reduces the retail price of a particular product by a stated amount at the time of purchase. A sample is a free product given to customers to encourage trial. It may actually hold merchandise or inform customers of what the product offers and encourage them to buy it. Samples are the most expensive sales promotion technique. Direct marketing is the use of consumer-direct (CD) channels to reach and deliver goods . or in stores. • Trade Shows. An airline’s frequent-flyer program is one example of a frequent-user incentive. online. Cooperative advertising is an arrangement whereby a manufac. direct mail. Most point-of-purchase displays are prepared and set up by manufacturers and wholesalers.You must be familiar with many of the following sales promotion methods:• Rebates. stimulate pur. • Samples. A premium is a gift that a producer offers the customer in return for using its product. A buying allowance is a temporary price reduction to resellers for pur.chasing specified quantities of a product. Frequent-user incentives are programs developed to reward customers who engage in repeat (frequent) purchases. Direct communications with care. direct mail.ers to show their latest lines to retailers. straightforward. • Point-of-Purchase Displays. • Premiums. A rebate is a return of part of the purchase price of a product. • Frequent-User Incentives. • Buying Allowances. They are made available to customers through newspapers. 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 may be offered via online coupons. Some trade shows are organized exclusively for dealers–to permit manufacturers and wholesal. A trade show is an industry wide exhibit at which many sellers display their products.turer agrees to pay a certain amount of the retailer’s media costs for advertising the manufacturer’s product. Others are promotions designed to stimulate consumer awareness and interest. A point-of-purchase display is promotional material placed within a retail store. Rebating is a relatively low-cost promotional method. Buying allowances are simple. - - - - - Direct Marketing Direct marketing has been defined by the Institute of Direct Marketing as: The planned recording.
Oriflame India Pvt Ltd. Nestle.7 crore. personal products.vices to customers without using marketing middlemen. household products. 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. Mass-market penetration is now catching up within the Rs 1. cookware and healthfood. registering a 54% yoy growth. Lotus Learning Pvt Ltd. • Most of the Direct Selling companies operating in India today are in the field of cosmetics. Dabur. direct selling is growing at a fast pace. Godrej and Tata Tea. 90% of goods sold by the direct sellers in India are sourced from goods manufactured within the country. All major players in India are affiliated to IDSA. Total sales through direct selling route in 2002 was Rs. • • • • Amway is the largest player in India with annual sales exceeding Rs5bn Other major players are Avon Beauty Products (I) Pvt Ltd. • India was the fastest growing market in 2000 in terms of revenues from direct selling.800-crore direct selling industry as well. Tupperware and Avon now seem to be following the path charted by FMCG giants such as Hindustan Lever. and direct selling majors such as Amway.723. Marico. Direct Marketing in India: • In India. DIRECT MARKETING BENEFITS . Britannia.1. Tupperware India Pvt Ltd.and ser.
and the composition of the market. A new product category requires a longer introductory period because primary demand (demand for the product category as opposed to the demand for a specific brand) must be stimulated.PRODUCT LIFE CYCLE “The product life cycle (PLC) depicts a products sales history through 4 stages: (1) Introduction 2) Growth (3) Maturity and (4) Decline One thing should be clear that adjustment and changes must be made in the product’s marketing mix as it moves through its life cycle because of changes in the competitive environment. buyer behavior. Even a brand that has achieved acceptance in other markets will require introduction in new markets. Introducing new product is always a risky venture. Almost every company as had spectacular failures. ‘The PLC concept can be applied to a product category (perfumes). 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. . even for a skillful marketer.
Middlemen often intro. promotion. the market expands. Thus price competition develops along with heavy promotions of whatever unique brand fea.duce their own brands. new pack sizes may need to be introduced. which makes the competition even tougher. and brands exist in the maturity stage. In this stage you will find that many products may appear unchanged. the company faces a trade-off between high market share and high current profit. it gives up current profit and hopes to make it up in the next stage. the most successful ones are actually evolving to meet changing consumer needs. Rivals copy product features of successful brands and they become more alike. competitive product forms.tures still exist. company will find decline in industry profits accelerates further. In this phase. Competition intensifies and industry profits begin to decline at the end of the growth stage. and distribution. . the sales have begun to increase rapidly in this stage. product and marketing mix. attracting competitors who copy and improve on the features of the new product. At this point of time company need to add new dealers and distributors. They should consider modifying the market. By spending a lot of money on product development.Growth Stage At a growth stage where the company has successfully launched its product. It is during this stage that marketers are focusing effort on extending the lives of their existing brands. 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. but total industry sales are still rising. Most of the times it will find that the sales are repeat sales to earlier buyers. This is the stage of peak profits. There is little growth potential for the product. In doing so h owever. as new customers enter the market and old customers make repeat purchases. New product forms and brands enter. As new customers are attracted. 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. Maturity Stage At this stage company will find greater number of competitors. the company can capture a dominant position.
sales force attention. 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. Product forms and brands typically enter into decline. and advertising changes. It is basically because of Competitions that the product forms and brands enter into the decline stage. At times man. Thus Sanifresh is still a leading toilet cleaner though its powdered form is less popular than liquids. Or it may decide to ‘re-position the product in the hope of moving it back to the growth phase in a new avatar . Brands with strong acceptance by some customer segments may continue to produce profits.. Sales and profits decline rapidly and competitors become more cost conscious. frequent inventory re-adjustments. For these reasons. companies need to pay attention to their dying products.Decline Stage Now the company reaches to the final stage of the life cycle. stages while product categories last longer.
somewhat skeptical consumers who acquire a product only after it has become commonplace.5% of consumers. The late majority represents about 34% of consumers.based on the positive response of innovators.dations from others who have experience with the product. Laggards . The early majority represents 34% of consumers. Innovators .well-informed risk-takers who are willing to try an unproven product. Early adopters . the early majority adopts the product once it has been proven by the early adopters. They rely on recommen. . Innovators rep. Early adopters tend to be educated opinion leaders and represent about 13. The five categories of adopters (1) Innovators (2) Early adopters.The Adoption & Diffusion Process – The PLC concept is related to the adoption and diffusion processes. (3) Early majority (4) Late majority and (5) Laggards. But if innovators and early adopters do not adopt. A new product that has been adopted by innovators and early adopters still has 84% of its potential customers in the ton-adopter category. early adopters then begin to purchase the product.5% to adopt the product. The adoption process is the series of stages a prospective buyer goes through in deciding to buy and make regular use of the product. Laggards represent about 16% of consumers.resent the first 2.those who avoid change and may not adopt a new product until traditional alternatives no longer are available. the product is doomed D failure. Late majority . Early majority – they are people who are careful consumers who tend to avoid risk. The adoption process affects the length of a products life cycle.
which is the consumers’ perception of an actual or potential product. The Major sources of new product ideas include internal sources. 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.ments. Companies have different methods for doing this from product review committees to formal market research. Finally. New Product Development starts with idea generation A company has to generate many ideas in order to find one that is worth pursuing. a word or a picture may be suffi. and companies can benefit by finding these products and putting them on the market like Pillsbury gets promising new products from its annual Bake-off. Companies also buy competitors information and pay for industrial espionage. shows and seminars. a physical presentation will increase the reliability of the concept test. however. This is different again from a product image. competitors. For some concept tests.ners’ recipes. One of Pillsbury’s four cake mix lines and several variations of another came directly from Bake-Off win. Companies like 3M and Toyota have put in special incentive programs or their employees to come up with workable ideas. government reports. It.cient. advertising agencies and new product consultants. can often pass on information about new develop. the management can obtain an overall rating of the company’s ability to launch the product successfully. Almost 55% of all new product ideas come from internal sources according to one study. Other sources are trade magazines.An attractive idea has to be developed into a Product concept. The company can watch competitors’ ads. Customers: even create new products on their own. As opposed to a product idea that is an idea for a product that the company can see itself marketing to customers. Almost 28% of new product ideas come from watching and listening to customers. Against these. The purpose of this stage is to pare these down to those that are genuinely worth pursuing.New Product Development Process – Figure will show the complete process of new product development lets discuss them one by one. these need to be tested with con. distributors and suppliers. a product concept is a detailed version of the idea stated in meaningful consumer terms. After being exposed to the concept. press releases and write-ups in the press about their activities. management can assess how well the idea fits with the company’s marketing skills and experience and other capabilities. market research firms. Once the concepts are developed.sumers either symbolically or physically. 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. Concept Development and Testing . Resellers and others who are close to the market. customers. About 30% of new product ideas come from analysis of competitors’ products. The company . Idea Screening: -The purpose of idea generation is to create a large pool of ideas.
egy statement consists of three parts: the first part describes the target market. Marketing Strategy Development . costs and profits to find out whether they satisfy a company’s objectives. .can then project these findings to the full market to estimate sales volume. and the marketing mix strategy. and marketing budget for the first year. The strat. it can evaluate the attractiveness of the business proposal. The second part outlines the product’s planned price. the planned product positioning and the sales. Business Analysis . If they do. Business analysis involves the review of projected sales. The third part of the marketing strategy statement describes the planned long-run sales.Once the management has decided on the marketing strategy. the product can move to the product development stage. market share and profit goals for the first few years. distribution. profit goals.This is the next step in new product development.
Classification of Products The most common basis for classifying consumer products is based on buyer behavior. The classification is based on differences in the buying behavior of the people who buy the prod. Test Marketing .If the product passes the functional tests. This depends a lot on the ability of the company to bear risk and the reach of its distribution network. management may decide to do away with this stage and proceed straight to the next one: If the company goes ahead with commercialization . they must be tested. Four classes of consumer products are (1) Convenience products (2) Shop. toffee. national or international). It will show whether the product idea can be developed into a full. nationally advertised items like cigarettes. The system works because many consumers behave alike in buying a given type of product.Here. the next step is test marketing: the stage at which the product and the marketing program are introduced to a more realistic market settings. at times. This helps marketers in making generalizations to guide development of their marketing mixes.introducing the product to the market-it will face high costs for manufacturing and advertising and promotion.fledged workable product. See Figure 10.1. They are basically low-priced. When the prototypes are ready. R&D or engineering develops the product concept into a physical product. It gives you a brief description of consumer goods.ucts (it is basically how you perceive and buy the products) not on the differences in the products themselves.Product Development . and (4) Unsought products. Functional tests are then conducted under laboratory and field conditions to ascertain whether the product performs safely and effectively. Costs of test marketing can be enormous and it can also allow competitors to launch a “me.too” product or even sabotage the testing so that the marketer gets skewed results. or blades and matchboxes. Test marketing gives the marketer an opportunity to tweak the marketing mix before the going into the expense of a product launch. This step calls for a large investment. They are widely available at many outlets. First. R&D will develop prototypes that will satisfy and excite customers and that can be produced quickly and at budgeted costs. Hence. The company will have to decide on the timing of the launch (seasonality) and the location (whether regional. 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. Three subclasses are: .ping products (3) Specialty products. The amount of test marketing varies with the type of product.
price becomes important. 2. Specialty Special Products In this case you as a consumers will make a special effort to buy specialty products. 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. eggs. Just suppose a couple is searching for a flat may spend a lot of time comparing decor. Shoppers spend more time. cars. Ray. distance from stations and so on. There is no Comparison Shopping. Leica Cameras and Johnny Walker Scotch Whisky are examples. 1. they probably will lease it. . They build customer loyalty when consumers consider their brands to be specialty products. style.Heterogeneous Shopping Products they are product that are considered to be unlike or non. Marketers try to create specialty status for their products with advertising phrases like “accept no substitutes”. The decision to buy these products is programmed after the first time when the consumer puts them on his list of regular items. jewellery. butter which are bought routinely because the family regularly consumes them. cost and effort to compare because they perceive a higher risk in buying these products. bread. But specialty product can be less intensively distributed than a convenience or shopping product because buyers will search to find it. 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.Emergency Products: Purchases of emergency products result from urgent and compelling needs. If the rent is reasonable compared to the alternatives.Homogeneous Shopping Products: they are products.Impulse Products: Purchases of Impulse products are absolutely unplanned exposure to the product triggers the want. Using price to compare clothing. furniture and apartments is tough because quality and style vary within each product class. This is why impulse products are located where they can be easily noticed. Shopping Shopping Products These products involve price and quality comparisons.Ban glasses. and so on. Thus sellers tend to engage in price competition. A retailer might advertise that the Color TV’s price includes 6 months or free interest financing. Consumers will go out of their way to locate and buy these products because they perceive quality and other benefits in owning them. 2. floor plans. Shopping products can be homogeneous or heterogeneous. “‘insist on the real thing”. 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.standardized. Consumers shop for the best price quality combination. toffees and chocolates (placed at a child’s eye-level) are examples of impulse products.1. which are considered to be alike. One might set up service centers to differentiate its product from rivals. you are aware that most of the brands are very similar then you will limit your shopping effort to price comparisons. Lawyers and Accountants who enjoy a large following are selling specialty products. 3. The desire to buy staple products may cause the consumer to go shopping. Mitsubishi Lancers. Price often is secondary to style and quality when price comparisons are difficult to make. The desire to buy impulse is a result of the shopping trip. Staple Products: this includes milk. For these products consumers have strong convictions as to brand. or type. Often a consumer pays more than if this need had been anticipated. Just suppose you want to buy a colour television. Once they find the right one. Stardust and Savvy magazines. Doctors.
Lux. But heavy promotion and acceptance of the product practically eradicated polio. Surf. When we are discussing about a typical large multi-product firm’s product mix includes new. and Surf Ultra are part of Lever’s detergents line and Le Sancy. Rexona. A brand differentiates these products from those of competitors” (American Marketing Association. Wheel. There are two types: regularly unsought products and new unsought products. Chicago).e. Brand names simplify shopping. term. PRODUCT AND PRODUCT MIX Any organization is marketing more than one product then it has a product mix. 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. BRANDING . 7UP. A brand is defined: “As a name. sign. i. a wreath and a doctor’s services in an emergency are regularly unsought products. a lawyer’s services in contesting a will. guarantee a certain level of quality and allow for self-expres. The marketer’s task here is to inform target consumers of the products existence and stimulate demand for it. „ 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. i. marketing and or production considerations. Like Life Insurance.symbol . Rin. including letters. Lifebuoy. • Brand name is that part that can be spoken. words and numbers. Rin Solarox. • Brand mark-elements of the brand that cannot not be spoken. Marketers face a tough challenge in persuading consumers to buy their new unsought products. maturing and declining productst.e. Rin detergent powder. These are basically existing products but the consumers do not want to buy this product now. growing. Oral polio vaccine was once a new unsought product. although they may eventually purchase them.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. are part of its soaps line.sion.
We know what a Garden Woman is. Coke is an icon of American culture.g. “services are those separately identifiable. Pillsbury Doughboy • Trade mark-legal designation that the owner has exclusive rights to the brand or part of a brand. US Patent & Trademark Office had 680. what would come to our mind? Like Videocon suggests a lion. es. W. insurance. marketing. computer-programming. not the name for a specific product. recreation. e. We expect a Mercedes to be driven by an executive or a top-class businessman. Personality: A brand projects a personality. There are the business and professional services such as advertising. MRF suggests a muscle man and Rin suggests a lighting flash. which govern a producer. Had the brand been an animal or an object or a person. It includes a wide variety of services.J Stanton “Services as fulfilling certain wants and states that.000 trademarks registered. are reflected by the brand. e. Culture: A brand also represents a certain culture.1990. and does not result in a transfer of ownership. Charlie Chaplin and Cherry Blossom.• Trade Character i. Sometimes a brand may take on the personality of an actual person.515 new in that year.. banking. We know that Sunny is for teenagers.g.e. thus Tata stand for quality. 56. etc. which involves some interaction with customer or with property in their possession. Because of the imagery associated with the brands they actually have the power to enhance or limit a consumer’s perceived image or selfimage. • Trade name-The full legal name of the organization. SERVICE MAREKTING A service is an activity which has some element of intangibility associated with it. Attributes of Brand Values: The values.. while Shilpa Bindis are typically Indian.” . These users correspond to the values.sentially intangible activities which provide want-satisfaction. fair price and so on. User: The brand suggests its own target audience. Ford. A change in condition may occur and production of the service may or may not be closely associated with a physical product.e. rather for leisure. I. research. Then there are services which are provided by professionals but consumed for reasons not of business. fine arts. entertainment and fulfillment of other psychological and emotional needs such as education. Ronald McDonald. culture and personality of the brand. and that are not necessarily tied to the sale of a product or another service. legal and medical advice.
Services cannot be felt.Characteristics of services. which is lost forever. and therefore fluctuations in demand are often difficult to manage. or telephone line capacity not used cannot be reclaimed and used or resold at a later time. an hour of a lawyer’s time. A seat on an airplane or in a restaurant. Intangibility actually presents several marketing challenges: Services cannot be inventoried. Services cannot be patented legally. stored. there is tremendous demand for resort accommodations in XYZ in February. . and new service concepts can therefore easily be copied by competitors. Because services are perform In most cases services cannot be separated from the person or firm providing it. resold. 1.The most basic and universally cited. unsold seats in a cinema hall represent service capacity.turned. For example. A person who possesses a particular skill provides Service. Yet resort owners have the same number of rooms to sell Yetround. tasted. touched or seen in the same way as goods. A plumber has to be physically present to provide the service. difference between goods and services is intangibility. or re. or spare berths on a train. Teaching is an intangible service. Inseparability . A car mechanic who has no cars to repair today. the beautician has to be available to perform the massage Perishability . but little demand in July.It basically refers to the fact that services cannot be saved.
certain train routes are always more heavily booked than others. There is a peak demand time for buses in morning and evening (office hours). This is in contrast to goods that can be stored in inventory or resold another day. . the other dimension of this.Apart from the fact that service is not fully utilised represents a total loss. or even re-turned if the consumer is unhappy.
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