MARKETING MANAGEMENT Introduction Welcome to the wonderful world of marketing!

Marketing is not a new word but evokes feelings of freshness each time it is used. For there is so much happening in this field that even the oldies have something new to learn every day. In your class itself, I am sure that there are quite a few students opting for marketing than any other discipline. Surely, there must be something in this word marketing, that everyone feels attracted to it. Marketing is ancient art. The first marketing trans- action can be perhaps attributed to Adam and Eve. Its emergence as a management discipline is of relatively recent origin. And within this relatively short period, it has gained a great deal of importance. In fact today marketing is regarded as most important of all management functions of business.

Some definitions of Marketing – • Much of marketing is concerned with the problem of profitably disposing of what is produced. • Marketing is the economic process by which goods and services are exchanged between the producer and the consumer and their val- ues determined in terms of money prices. • Marketing originates with the recognition of a need on the part of a consumer and terminates with the satisfaction of that need by the delivery of a usable product at the right time, at the right place and at an acceptable price. • Marketing is so basic that it cannot be con- sidered a separate function. It is really the whole business seen from the point of view of the final result, i.e., from the point of view of the customer. • Marketing is a viewpoint, which looks at the entire business process as a highly integrated effort to discover, create, arouse and satisfy consumer needs. • Marketing is the delivery of a standard of living to society. American Marketing Association – “It is the process of planning & executing the conception, pricing, promotion & distribution of ideas, goods & services to create exchange that satisfy individual & organisational goals” The Chartered Institute of Marketing defines Marketing as “Marketing is the man- agement process for identifying, anticipating & satisfying customer requirements profitably.” Peter Drucker There will always, one can as- sume, be need for some selling. But the aim of marketing is to make selling superfluous. The aim is to know and understand the customers well that the product or service fits him and sells it- self. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available

Core Marketing Concepts – Needs, Wants And Demands: Marketing thinking starts with the fact of human needs and wants. We all have some needs residing in ourselves. These needs exist. Remember that needs can never be created. Needs: Needs are the basic human requirements. People need food, air, water, clothing & shelter to survive. People also have needs for recreation, education and entertainment. Eg: Hunger food. According to Abraham Maslow’s need hierarchy, all the human needs can be categorized as shown in the diagram.

Human need is a state of felt deprivation of some basic satisfaction. Wants are desires for specific satisfiers of these deeper needs. Demands are wants for specific products that are bagged by an ability and willingness to buy them. Marketers do not create the needs. They can influence the demand by making the product appropriate, attractive, affordable and easily avail- able to target customers. Products: Anything that can be offered to satisfy a need or a want, Persons : Singer Places : Goa Activities : Sing in karaoke lounge. Organizations : Health club Ideas : Osho ashram Other terms can be : Offerings, satisfiers or resources.

Eg: A woman is not buying ‘lipstick’, she is buying ‘.hope’. She is confident that she will definitely look good after using that lipstick. And this hope brings her to the shop. A physical object is a means of packaging a service. The marketers’ job is to sell the benefit or services built in to physical products rather than just describe their physical features. Marketing Myopia Sellers who concentrate their thinking on the physical product instead of the customers need are said to suffer from ‘marketing myopia’. Wants: The needs become wants they are directed to specific objects that might satisfy the needs. “Needs Pre-exists” (can’t be created)

Demands: Demands are wants for specific products that are bagged by an ability and willingness to buy them.

Concepts of Marketing Management The philosophy of marketing which has evolved as marketing management has passed through distinct stages. The orientation of the companies have been changing from production to societal through product, sales, marketing. In this lesson we are going to discuss production and product orientations. There are various concepts of marketing that we as marketers have been following. There were times when the focus was on the production of the commodities, then the focus shifted on to the sales and distribution of the products and finally the focus moved to the real NEEDS of the consumers!

Changing Role Of Marketing Simple Trade Era Production Era Sales Era Competition Marketing Dept. Era Marketing Company Era Consumer Focused Era 1950 – 1960 began 1960’s Coordinate & Control Long – run customer satisfaction Prior to 1920’s 1920 – 1930 1930 – 1950 Sell Surplus

Increase Supply Beat


Company Orientations Towards the Market place Production Concept Product Concept Selling Concept Marketing Concept Societal Marketing Consumers prefer products that are widely available and inexpensive Consumers favor products that offer the most quality, performance, or innovative features Consumers will buy products only if the company aggressively promotes or sells these products Focuses on needs/wants of target markets & delivering value better than competitors Focuses on needs/ wants of target Concept markets & delivering value better than competitors that preserves the consumer’s and society’s well-being.

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

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

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

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

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

The basic idea behind it is: if a product has a bigger market share. investments which are needed should be low. Promotions. brand within the business unit develops a market. Stars are leaders in the business. • • BOSTON CONSULTING GROUP MODEL The BCG Matrix method is the most well-known portfolio management tool.each division establishes a division plan covering the allocation of funds to each business unit within the division. • Cash Cows are often the stars of yesterday and they are the foundation of a plan for achieving its objectives in its product market. Advertising. etc. To ensure long-term value creation. Cash Cows (low growth. It is based on product life cycle theory.each business unit develops a strategic plan to carry that business unit into a profitable future. Dogs (low growth. . Because of the low growth. high market share) • Profits and cash generation should be high.• The Division Level. The units in the marketing division would be Sales. • Stars are frequently roughly in balance on net cash flow. low market share) • Avoid and minimize the number of Dogs in a company. it is better for the company. 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. The Product Level. The Business Level. The four segments of the BCG Matrix Placing products in the BCG matrix provides 4 categories in a portfolio of a company: Stars (high growth. Therefore they should also generate large amounts of cash. high market share) • Stars are using large amounts of cash. because the rewards will be Cash Cows if market share is kept. For example the marketing division would formulate strategies as to how the various units within it would work. Public Relations. However if needed any attempt should be made to hold your market share in Stars. It was developed in the early 70s by the Boston Consulting Group.each product line. or if the product's market grows faster. The Boston Consulting Group Matrix has 2 dimensions: market share and market growth. Market Intelligence. The BCG Matrix can be used to determine what priorities should be given in the product portfolio of a business unit. Eg. • Watch out for expensive ‘rescue plans’.

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

Neither a strong company operating in an unattractive market nor a weak company operating in an attractive market will do very well. BUSINESS STRENGTH • Market share • Share growth • Product quality • Brand reputation • Distribution network • Promotional effectiveness • Productive capacity • Productive efficiency • Unit costs • Material supplies AND BUSINESS . If one of these factors is missing. the growth-share matrix can be seen as a special case of a multifactor portfolio matrix such as that pioneered by General Electric. If additional factors are considered. The suggested strategy is that management should begin to make plans to exit the industry. The blocks with plain Zone consists of the three diagonal cells from the lower left to the upper right. The blocks with a Diagonal Zone consists of the three cells in the lower right corner. The above two factors make excellent marketing sense for rating a business. This indicates a “green light” to invest in this product/service. Both axes are divided into three segments. A position in the yellow zone is viewed as having medium attractiveness. MARKET ATTRACTIVENESS • Overall market size • Annual market growth rate • Historical profit margin • Competitive intensity • Technological requirements • Inflationary vulnerability • Energy requirements • Environmental impact • Socioal-political legal 2 . The suggested strategy is to seek to maintain share rather than growing or reducing share. yielding nine cells. 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 business will not produce outstanding results.THE GENERAL ELECTRIC MODEL An SBU’s appropriate objective cannot be determined solely by its position in the growth-share matrix. The nine cells are grouped into three zones: The block with the Lateral Zone consists of the three cells in the upper left corner. Organisation must therefore exercise caution when making additional investments in this product/service. Companies are successful to the extent that they enter attractive markets and possess the required business strengths to succeed in those markets. A position in the red zone is not attractive. It holds that a company can appropriately rate its different businesses for the purpose of strategic planning on the basis of two main parameters – Market Attractiveness and Business Strength. The model is based on the company’s seven businesses. If the enterprise falls in this zone the business is in a favorable position with relatively attractive growth opportunities. FACTORS UNDERLYING MARKET ATTRACTIVENESS STRENGTH IN GE MULTIFACTOR PORTFOLIO MODEL 1 .

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

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

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

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

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

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

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

• The Internet The Internet can be used in a number of ways to collect primary data.7. Interviews This is the technique most associated with marketing research. Visitors to sites can be asked to complete electronic questionnaires. • Telephone Interviews Telephone ownership is very common in developed countries.’ and depend upon more open forms of questioning. Advantages of face-to-face interviews • They allow more ‘depth’ • Physical prompts such as products and pictures can be used • Body language can emphasize responses • Respondents can be ‘observed’ at the same time Disadvantages of face-to-face interviews • Interviews can be expensive • It can take a long period of time to arrange and conduct. However responses will increase if an incentive is offered such as a free newsletter. not potential customers. or over the Internet.face. Omnibus Studies 1. Data is easily compared. 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. It is ideal for collecting data from a geographically dispersed sample. Interviews can be telephone. . The interviews tend to be very structured and tend to lack depth. Telephone interviews are cheaper to conduct than face-to-face interviews (on a per person basis). The research will probe and develop points of interest. or free membership. Other important data is collected when visitors sign up for membership. 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. Other face-to-face interviews are more ‘in depth. Some surveys are very rigid or ‘structured’ and use closed questions. Data is collected on a survey. face-to. • Some respondents will give biased responses when face-to-face with a researcher.

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

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

C. 3. a decision problem may be whether to launch a new product. 6. inventory records. 2. Helpful for exploratory research. Source credibility. It is the structured collection and analysis of data pertaining to a specific issue or problem. They include budgets. Issue (problem) definition is a statement of the topic to be looked into. To ensure that the true decision problem is addressed. Secondary data are those that have been gathered for purposes other than solving the current problem under investigation. 2. 6. small group discussions. also called quantitative research. Sources A. 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. Thus. Obsolescence. 3. Low costs. B. Conflicting results. B. Unknown methodology. 1. Exploratory research is undertaken when the researcher is uncertain about the precise topic to investigate or wants to informally study an issue. The use of such scenarios can ensure that the purpose of the research is agreed upon before it commences. 2. Secondary data have these general disadvantages: Lack of suitability. and understanding underlying trends. Access to hard-to-obtain data. 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. prior research reports. profit-and-loss statements. 5.1. Advantages and Disadvantages A. Conclusive research. Unknown reliability. Speed. External secondary data are available from sources outside the company. 5. sales figures. the decision problem is translated into a research problem. ISSUE (PROBLEM) DEFINITION A. is used after the problem definition is clarified. Internal secondary data are available within the company. customer billings. The corresponding research problem might be to assess whether the market would accept the new product . EXAMINATION OF SECONDARY DATA A. Undisclosed findings. and writ. Diverse sources. They may be obtained . These data should always be reviewed before primary data collection. 4. 4. B.ten reports.The objective of the research should be defined clearly. Secondary data have these general advantages: 1. It is also called qualitative research and may involve in-depth probing. B. For example.

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

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

Conduct the analysis of the data. This will contain charts. The problem then becomes the focus of the research. tables. Go ahead and collect the data. The research report represents feedback to marketing managers. then move on to step seven. 6.-based) account for $8 billion in yearly revenues. 8. 6.Write your final report. They have input into the research design. How will you collect the data that you will analyze to solve your problem? Do we conduct a telephone survey. Select a sampling method. Watch out for errors in interpretation. B. B. They have broad control over marketing decisions.nies themselves. This is in addition to government.cussed in more detail later. Once the recommendations are passed on to the proper decision makers. 10. They have confidence that results are accurate. Go back and speak to the managers or clients requesting the research. 3. Companies spend about $12 billion worldwide (40 percent in the United States) for data gathered by marketing research firms. For example. An example of one follows: 1. why are sales falling in New Zealand? 2.000 firms accounting for the rest. the topical areas in which . Decide upon a budget and a timeframe. and hopefully lead to a solution to your problem. Define the problem. Do we us a random sample. According to the American Marketing Association. and diagrams that will communicate the results of the research. or cluster sample? 4. Marketing managers are most likely to implement research findings under these conditions: 1. Make sure that you really ‘need’ to know something. Check for errors. The top 25-research firms (nearly half of which are U. with more than 1. It is not uncommon to find errors in sampling. How will we analyze any data collected? What software will we use? What degree of accuracy is required? 5.S. Make sure that you agree on the problem! If you gain approval. Summary of the Marketing research Process – Marketing research is gathered using a systematic approach.D. stratified sample. as well as efforts of the compa. Scope of marketing research A. 9. 7. Never conduct research for things that you would ‘like’ to know. the research report should be warehoused in the marketing intelligence network. who are responsible for using findings.and institutionsponsored research. 3. data collection method. IMPLEMENTATION OF FINDINGS A. 2. or analytic mistakes. or do we arrange a focus group? The methods of data collection will be dis.

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

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

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

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

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

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

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

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

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

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

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,

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

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

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

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

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

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

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

6. In selecting that price. Competitor Oriented Pricing 3. and for existing products price will be affected by strate. firms bid for jobs. Direct cost approach is useful when pricing services for example. Potential suppliers quote a price. indicate the lowest price at which it is sensible to take business if the alternative is to let machinery. including psychological pricing. which are likely to increase as output increases. Marketing Oriented Pricing Cost Oriented Pricing . Cost Oriented Pricing 2. 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 first problem with Full-cost pricing is that it leads to an increase in price as sales fall. Direct (or marginal) Cost Pricing . Selecting the final Price . price will depend upon positioning. 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. strategy. and the impact of price on other parties. Competitive Bidding . The firm might charge the same. Marketing Oriented Pricing . Where the products offered by firms in a certain industry are very similar the public often finds difficulty in perceiving which firm meets there needs best. For new products.There are three pricing methods that can be employed by a firm: 1.The price of a product should be set in line with the marketing strategy. The way around this problem is to recognize that the pricing deci.Companies often use cost oriented pricing methods when setting prices. Like full cost pricing. The is an almost impossible prediction. with the firms basing the price on what it thinks other firms will be bidding rather than on its own costs or demand. distribution and product benefits.sion is dependent on other earlier decisions in the marketing planning process.This involves the calculation of only those costs. which is confidential to themselves and the buyer.Pricing methods narrow the range from which the company must select its final price. aircraft seats or hotel rooms lie idle. Two methods are normally used Full cost pricing . gain and risk pricing. This method focuses upon the internal costs of the firm as opposed to the prospective customers’ willingness to pay. more. only known to client and not to the other parties tendering for the service). with less attention paid to its own costs or to demand.e. company –pricing policies. if they are unused on a flight then the revenue is lost.Here the firm determines the direct and fixed costs for each unit of product. machinery etc) will remain unaffected whether one unit or one thousand units are produced. Indirect or fixed costs (plant. In sealed-bid pricing (i. the company must consider additional factors.Going-Rate Pricing In going-rate pricing.Many contracts are won or lost on the basis of competitive bidding. All other things being equal the buyer will select the supplier that offers the lowest price. or less than its major competitors. Direct costs then. The risk here is that other customers who paid the full price may find out about the discounted offer and complain. The most usual process is the drawing up of detailed specifications for a product and putting the contract out for tender. the firm bases its price largely on competitors’ prices. . strategic objectives. The danger is that if price is viewed in isolation (as would be the case with full cost pricing) with no reference to other marketing decisions such as positioning. These remaining seats may be offered at a discount so that some contribution is made to the flight expenses.gic objectives. Consider aircraft seats. Competition-based approach . the influence of other marketing –mix elements on price. promotion. this method will include a profit margin in the final price.

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

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

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

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

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

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

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

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

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

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

Supermarkets D.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. Convenience stores Limited line E. Superstores Food. Category killers Giant specialty stores 3. Organizational approach A Corporate chain stores Commonly owned / controlled B Voluntary chains Wholesaler-sponsored groups of independent retailers C Retailer cooperatives Groups of independent retailers who buy in bulk D Franchise organizations Based on something unique E Merchandising conglomerates Diversified retailing lines and forms under central ownership . and services F. Relative prices A Discount stores Low margins are offset by high volume B Off-price retailers C Independent off-price retailers D Factory outlets E Warehouse clubs 4. Product lines A Specialty stores Narrow product lines with deep assortments B Department stores Wide variety of product lines C. nonfood.

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

7 billion. discount stores. In 2001. Selling an experience. The concept of retailing chain stores is at a very nascent stage in India. There are no hypermarkets in the country as yet.comes of the middle class sales were worth Rs4189. space and rentals are proving to be the largest constraints to development of large formats in metropolitan cities.7% in 2001. However. 3 .4 sq m per outlet.2 million re. Global presence of major retailers 6. you ought to be in retailing. Growth of giant retail 4 .6. More and more players are coming into the retail business in India to introduce new formats like malls. the retail sector is the second largest employer after agriculture. Retailers can locate their stores in the central business district. owner-managed shops. Besides. it could still add up to say the sizeable number. The share was 62.5 billion. This trend towards larger outlets is leading to a rise in average retail space. chemist shops. the non-food retailing sector registered faster year-on-year growth than food sales. since retailers are aiming the prime .2 billion in 2001 while non. Or you’re miss. and are spreading all over India at a rapid pace. There has been a boom in retail trade in India owing to a gradual increase in the disposable in. Place Location is often described as the most successful strategy for retailing.228. New retail forms and combinations 2 . and furnishing stores. 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. How. a billion people in overall population leads to very large numbers.ever. a regional shopping center . However. Growing investment in technology 5 . department stores and even changing the traditional looks of book. especially in south India. There are some 12 million retail outlets in India. Food sales constitute a high proportion of total retail sales. More so. Retail Infrastructure In 2001. with an average selling space of 29.’ In India. these modern formats are showing robust growth as several retail chains have established a base in metropolitan cities.tail outlets in the country. not just goods Retailing in India: Are you game for it!!!!! They say ‘If you aren’t in IT or entertainment. Total retail sales area in India was estimated at 328 million sq m in the boom times altogether. organised retail trade in India was worth Rs11. Growth of intertype competition. supermarkets. worth approximately Rs7. The retailing sector in India is highly fragmented and predominantly consists of small independent.039. there were an estimated 11. Organized retailing represent a small fraction of the Indian retail market.stores. While the middle class may not be as big as expected. the country is also dotted with low-cost kiosks and pushcarts.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Almost every company as had spectacular failures. and the composition of the market. 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. . ‘The PLC concept can be applied to a product category (perfumes). buyer behavior.PRODUCT LIFE CYCLE “The product life cycle (PLC) depicts a products sales history through 4 stages: (1) Introduction 2) Growth (3) Maturity and (4) Decline One thing should be clear that adjustment and changes must be made in the product’s marketing mix as it moves through its life cycle because of changes in the competitive environment. Even a brand that has achieved acceptance in other markets will require introduction in new markets. even for a skillful marketer. 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. Introducing new product is always a risky venture.

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

At times man. It is basically because of Competitions that the product forms and brands enter into the decline stage. Sales and profits decline rapidly and competitors become more cost conscious.. frequent inventory re-adjustments. stages while product categories last longer. Thus Sanifresh is still a leading toilet cleaner though its powdered form is less popular than liquids. companies need to pay attention to their dying products. Product forms and brands typically enter into decline. Or it may decide to ‘re-position the product in the hope of moving it back to the growth phase in a new avatar . There are hidden costs in terms of management time. and advertising changes.Decline Stage Now the company reaches to the final stage of the life cycle. Brands with strong acceptance by some customer segments may continue to produce profits. sales force attention. For these reasons.agement may decide to maintain its brand without changes in the hope that some competitors will leave the market.

The Adoption & Diffusion Process – The PLC concept is related to the adoption and diffusion processes. Early adopters tend to be educated opinion leaders and represent about 13.those who avoid change and may not adopt a new product until traditional alternatives no longer are available.5% to adopt the product. early adopters then begin to purchase the product.based on the positive response of innovators. Innovators . The early majority represents 34% of consumers. The late majority represents about 34% of consumers. The adoption process is the series of stages a prospective buyer goes through in deciding to buy and make regular use of the product. Early majority – they are people who are careful consumers who tend to avoid risk.resent the first 2.5% of consumers. the early majority adopts the product once it has been proven by the early adopters. 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 .dations from others who have experience with the product. (3) Early majority (4) Late majority and (5) Laggards.well-informed risk-takers who are willing to try an unproven product. Laggards represent about 16% of consumers. The five categories of adopters (1) Innovators (2) Early adopters. They rely on recommen. . Innovators rep.somewhat skeptical consumers who acquire a product only after it has become commonplace. But if innovators and early adopters do not adopt. The adoption process affects the length of a products life cycle. the product is doomed D failure. Late majority . Laggards .

however. government reports. Idea Screening: -The purpose of idea generation is to create a large pool of ideas. This is different again from a product image. market research firms. Against these. One of Pillsbury’s four cake mix lines and several variations of another came directly from Bake-Off win. 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. can often pass on information about new develop. About 30% of new product ideas come from analysis of competitors’ products. Finally. advertising agencies and new product consultants. and companies can benefit by finding these products and putting them on the market like Pillsbury gets promising new products from its annual Bake-off. a word or a picture may be suffi. For some concept tests. 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. press releases and write-ups in the press about their activities. The company . a product concept is a detailed version of the idea stated in meaningful consumer terms. Companies like 3M and Toyota have put in special incentive programs or their employees to come up with workable ideas. After being exposed to the concept. competitors. customers. these need to be tested with con. which is the consumers’ perception of an actual or potential product.ners’ recipes. Almost 55% of all new product ideas come from internal sources according to one study.An attractive idea has to be developed into a Product concept. The Major sources of new product ideas include internal sources. Resellers and others who are close to the market. Customers: even create new products on their own.ments. New Product Development starts with idea generation A company has to generate many ideas in order to find one that is worth pursuing. Concept Development and Testing . It. shows and seminars. Almost 28% of new product ideas come from watching and listening to customers.cient. The purpose of this stage is to pare these down to those that are genuinely worth pursuing.sumers either symbolically or physically. The company can watch competitors’ ads. Once the concepts are developed. Companies also buy competitors information and pay for industrial espionage. a physical presentation will increase the reliability of the concept test. Other sources are trade magazines. the management can obtain an overall rating of the company’s ability to launch the product successfully. management can assess how well the idea fits with the company’s marketing skills and experience and other capabilities.New Product Development Process – Figure will show the complete process of new product development lets discuss them one by one. distributors and suppliers. Companies have different methods for doing this from product review committees to formal market research. As opposed to a product idea that is an idea for a product that the company can see itself marketing to customers.

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

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

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

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

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

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

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

Sign up to vote on this title
UsefulNot useful